As filed with the Securities and Exchange
Commission on February 26, 1998.
Registration No. 811-5670
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
REGISTRATION STATEMENT UNDER THE INVESTMENT /X/
COMPANY ACT OF 1940
AMENDMENT NO. 13 /X/
OPPENHEIMER WORLD BOND FUND
(formerly "Oppenheimer Multi-Government Trust")
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(Exact Name of Registrant as Specified in Charter)
Two World Trade Center, New York, New York 10048-0203
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(Address of Principal Executive Offices)
212-323-0200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
<PAGE>
FORM N-2
OPPENHEIMER WORLD BOND FUND
(formerly "Oppenheimer Multi-Government Trust")
Cross Reference Sheet
Part A of
Form N-2
Item No. Prospectus Heading
1 *
2 *
3 *
4 *
5 *
6 *
7 *
8 General Description of the Registrant
9 Management
10 Capital Stock, Long-Term Debt, and Other Securities
11 *
12 *
13 See Item 15 of the Statement of Additional Information
Part B of
Form N-2
Item No. Heading In Statement of Additional Information
14 Cover Page
15 Table of Contents
16 *
17 See Item 8 of the Prospectus
18 Management
19 Control Persons and Principal Holders of Securities
20 See Item 9 of the Prospectus
21 Brokerage Allocation and Other Practices
22 See Item 10 of the Prospectus
23 Financial Statements
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* Not applicable or negative answer.
<PAGE>
OPPENHEIMER WORLD BOND FUND
(formerly "Oppenheimer Multi-Government Trust")
PART A
February 26, 1997
INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Outside Front Cover.
Inapplicable.
Item 2. Inside Front and Outside Back Cover Page.
Inapplicable.
Item 3. Fee Table and Synopsis.
Inapplicable.
Item 4. Financial Highlights.
Inapplicable.
Item 5. Plan of Distribution.
Inapplicable.
Item 6. Selling Shareholders.
Inapplicable.
Item 7. Use of Proceeds.
Inapplicable.
Item 8. General Description of the Registrant.
1. Organization. Oppenheimer World Bond Fund, formerly named "Oppenheimer
Multi-Government Trust" (the "Fund" or "Registrant") is a closed-end diversified
management investment company organized as a Massachusetts business trust on
October 5, 1988.
2, 3 and 4. Objectives. The Fund's primary investment objective is high
current income consistent with preservation of capital. Its secondary objective
is capital appreciation, which it may pursue by seeking to take advantage of
changes in currency exchange and interest rates and by investing in convertible
securities. The Fund's investment policies and practices are not "fundamental"
policies (as defined below) unless a particular policy is identified as
fundamental. The Fund's Board of Trustees may change non-fundamental investment
policies without shareholder approval. The Fund's investment objectives are
fundamental policies.
At a meeting held on October 9, 1997, the Board of Trustees of the Fund
determined that it was in the best interests of the shareholders to convert the
Fund to an open-end fund. Accordingly, the Board approved the submission to the
shareholders of a proposal to convert the Fund from a closed-end investment
company to an open-end investment company (the "Conversion"). In connection with
the Conversion, the Trustees also considered and approved an amendment of the
Fund's sub-classification under the Investment Company Act of 1940 (the "Act")
from a closed- end management investment company to an open-end management
investment company and the amendment and restatement of the Fund's Declaration
of Trust to provide for such Conversion. The Board of Trustees also considered
and approved new contractual arrangements for the management and distribution of
the Fund as an open-end investment company. Each of the foregoing is subject to
approval by the shareholders at a meeting schedule for April 16, 1998.
At that meeting, shareholders of the Fund are also being asked to approve
changes to certain of the Fund's fundamental investment policies, including the
Fund's investment objectives, to give the Fund further investment flexibility.
If approved by shareholders, the Fund would change its investment objectives to
a primary investment objective of seeking total return, and a secondary
investment objective of seeking income when consistent with total return. Other
proposed changes are explained below.
Investment Policies and Strategies. In seeking its objectives, as a matter of
non-fundamental policy, the Fund will invest at least 65% of its total assets in
bonds (defined, for purposes of this
non-fundamental investment policy, to be debt securities and structured notes),
and will invest at least 50% of its net assets in foreign securities. Also, as a
matter of non-fundamental policy, the Fund will not make any purchase that will
cause 25% or more of its total assets to be invested in Foreign Government
Securities and foreign corporate securities of any one country (other than the
United States). Foreign Government Securities are debt instruments issued or
guaranteed by foreign governments, or their political subdivisions, agencies or
instrumentalities, including supranational entities. The Fund may also invest in
U.S. Government Securities, which are debt instruments issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
In addition to investment in U.S. Government Securities and Foreign
Government Securities, the Fund may invest in fixed-income securities of
domestic and foreign corporations, including short-term money market
instruments. Other securities and investments which may be held by the Fund
include put and call options, common stock acquired upon the exercise of options
or conversion of convertible securities, and futures contracts and related
options. The Fund is designed for long-term investment and investors should not
consider it as a trading vehicle although the Fund itself may at times have a
relatively high turnover rate.
The Fund's investment adviser, OppenheimerFunds, Inc. (the "Adviser"),
will adjust the duration of the Fund's investment in debt securities from time
to time, depending on its assessment of relative yields of securities of
different maturities and its expectations of future changes in interest rates.
The Fund measures its portfolio duration on a "dollar-weighted" basis.
"Effective portfolio duration" refers to the expected percentage change in the
value of a bond resulting from a change in general interest rates (measured by
each 1% change in the rates on U.S. Treasury securities). For example, if a bond
has an effective duration of three years, a 1% increase in general interest
rates would be expected to cause the bond to decline about 3%. It is a measure
of portfolio volatility.
U.S. Government Securities are considered among the most creditworthy of
fixed-income investments. Because of this, the yields available from U.S.
Government Securities are generally lower than the yields available from
corporate debt securities. Nevertheless, the values of U.S. Government
Securities (like those of fixed-income securities generally) will change as
interest rates fluctuate. Despite guarantees as to the timely payment of
principal and interest on U.S. Government Securities and Foreign Government
Securities, such guarantees do not extend to the value or yield of such
securities nor do they extend to the value of shares of the Fund.
o Special Risks - High Yield Securities. The debt instruments in which the
Fund may invest may be unrated or, if rated, in any rating category, provided,
that, investments in securities rated lower than investment grade ("Baa" by
Moody's Investors Service, Inc. ("Moody's") or "BBB" by Standard & Poor's
Corporation ("Standard & Poor's")or Duff & Phelps, Inc. (Duff & Phelps) or
another nationally recognized statistical rating organization) may not exceed
50% of the Fund's total assets, with no more than 30% of the Fund's total assets
being invested in non- investment grade: (1) Foreign Government Securities, (2)
securities issued by foreign corporations or (3) securities denominated in
non-U.S. currencies. Notwithstanding the foregoing, the Fund may not invest more
than 5% of its total assets, measured at the time of purchase, in securities
which are rated "C" or "D" by either Moody's, Duff & Phelps or Standard &
Poor's. Those securities may be considered highly speculative and may be in
default. The Appendix to this Prospectus describes these rating categories.
The primary advantage of lower-rated, high yield securities is their
relatively higher investment return. High yield bonds offer a higher yield to
maturity than bonds with higher ratings, as compensation for holding an
obligation that may be subject to greater risk. During periods of falling
interest rates, the values of outstanding fixed-income securities generally
rise. Conversely, during periods of rising interest rates, the values of such
securities generally decline. The magnitude of these fluctuations will generally
be greater for securities with longer maturities. Those changes will affect the
values of the Fund's portfolio securities, and therefore its net asset value per
share. Further, because of their high coupon rates, high yield securities are
generally less price sensitive to changes in interest rates than U.S. Treasury
Securities. However, high yield securities, whether rated or unrated, may be
subject to greater market fluctuations and risks of loss of income and principal
and have less liquidity than lower yielding, higher-rated fixed-income
securities.
Some of the principal risks of high yield securities include: (i) limited
liquidity and secondary market support, (ii) substantial market price volatility
resulting from changes in prevailing interest rates, (iii) subordination of the
holder's claims to the prior claims of banks and other senior lenders in
bankruptcy proceedings, (iv) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest rates, whereby
the holder might receive redemption proceeds at times when only lower-yielding
portfolio securities are available for investment, (v) the possibility that
earnings of the issuer may be insufficient to meet its debt service, and (vi)
the issuer's low creditworthiness and potential for insolvency during periods of
rising interest rates and economic downturn. Some high yield bonds pay interest
in kind rather than in cash.
As a result of the limited liquidity of high yield securities, their
prices have at times experienced significant and rapid decline when a
significant number of holders of high yield securities simultaneously decided to
sell them. A decline is also likely in the high yield bond market during an
economic downturn. An economic downturn or an increase in interest rates could
severely disrupt the market for high yield securities and adversely affect the
value of outstanding securities and the ability of the issuers to repay
principal and interest.
o Interest Rate Risks. Although U.S. Government Securities involve little
credit risk, their market values will fluctuate until they mature, depending on
prevailing interest rates. When prevailing interest rates go up, the market
value of already issued debt securities tends to go down. When interest rates go
down, the market value of already issued debt securities tends to go up. The
magnitude of those fluctuations generally will be greater when the average
maturity of the Fund's portfolio securities is longer. Certain of the Fund's
investments, such as I/Os, P/Os and mortgage-backed securities such as CMOs, can
be very sensitive to interest rate changes and their values can be quite
volatile.
|X| Credit Risks. Debt securities are also subject to credit risks. Credit
risk relates to the ability of the issuer of a debt security to make interest or
principal payments on the security as they become due. Generally,
higher-yielding, lower-rated bonds (which are some of the type of bonds the Fund
seeks to invest in) are subject to greater credit risk than higher-rated bonds.
Securities issued or guaranteed by the U.S. Government are subject to little, if
any, credit risk if they are backed by the "full faith and credit of the U.S.
Government," which in general terms means that the U.S. Treasury stands behind
the obligation to pay interest and principal. While the Adviser may rely to some
extent on credit ratings by nationally recognized statistical rating agencies,
including, but not limited to Standard & Poor's, Duff & Phelps or Moody's, in
evaluating the credit risk of securities selected for the Fund's portfolio, it
may also use its own research and analysis or that provided by other sources.
However, many factors affect an issuer's ability to make timely payments, and
there can be no assurance that the credit risks of a particular security will
not change over time or that the credit risk will be correctly analyzed by the
Adviser, by nationally recognized rating agencies, or by other sources.
o Foreign Securities. The Fund may invest in equity and debt securities
(which may either be denominated in U.S. dollars or in non-U.S. currencies),
issued or guaranteed by foreign corporations, certain supranational entities
(described below), and foreign governments or their agencies or
instrumentalities, and in debt obligations issued by U.S. corporations
denominated in non-U.S. currencies. All such securities are referred to as
"foreign securities."
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers, including the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. If the Fund's portfolio securities are held abroad, the countries in
which they may be held and the sub-custodians or depositories holding them must
be approved by the Corporation's Board of Directors to the extent that approval
is required under applicable rules of the Securities and Exchange Commission.
o Risks of Foreign Investing. Investments in foreign securities present
special additional risks and considerations not typically associated with
investments in domestic securities: reduction of income by foreign taxes;
fluctuation in value of foreign portfolio investments due to changes in currency
rates and control regulations (e.g., currency blockage); transaction charges for
currency exchange; lack of public information about foreign issuers; lack of
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic issuers; less volume on foreign exchanges than on
U.S. exchanges; greater volatility and less liquidity on foreign markets than in
the U.S.; less regulation of foreign issuers, stock exchanges and brokers than
in the U.S.; greater difficulties in commencing lawsuits and obtaining judgments
in foreign courts; higher brokerage commission rates than in the U.S.; increased
risks of delays in settlement of portfolio transactions or loss of certificates
for portfolio securities; possibilities in some countries of expropriation,
confiscatory taxation, political, financial or social instability or adverse
diplomatic developments; and unfavorable differences between the U.S. economy
and foreign economies. In the past, U.S. Government policies have discouraged
certain investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be re-imposed.
o Special Risks of Emerging Market Countries. Investments in emerging
market countries may involve further risks in addition to those identified above
for investments in foreign securities. Securities issued by emerging market
countries and by companies located in those countries may be subject to extended
settlement periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset value could be affected. There may be a lack
of liquidity for emerging market securities; interest rates and foreign currency
exchange rates may be more volatile; sovereign limitations on foreign
investments may be more likely to be imposed; there may be significant balance
of payment deficits; and their economies and markets may respond in a more
volatile manner to economic changes than those of developed countries.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S. dollar
will result in a change in the U.S. dollar value of the Fund's assets and the
Fund's income available for distribution. In addition, although a portion of the
Fund's investment income may be received or realized in foreign currencies, the
Fund will be required to compute and distribute its income in U.S. dollars, and
absorb the cost of currency fluctuations. The Fund may engage in foreign
currency exchange transactions for hedging purposes to protect against changes
in future exchange rates.
o U.S. Government Securities.
U.S. Government Securities are debt obligations issued or guaranteed by
the United States Government or its agencies or instrumentalities. Obligations
of U.S. Government agencies or instrumentalities may or may not be guaranteed or
supported by the "full faith and credit" of the United States. Some are backed
by the right of the issuer to borrow from the U.S. Treasury; others, by
discretionary authority of the U.S. Government to purchase the agencies'
obligations; while others are supported only by the credit of the
instrumentality. All U.S. Treasury obligations are backed by the full faith and
credit of the United States. If the securities are not backed by the full faith
and credit of the United States, the owner of the securities must look
principally to the agency issuing the obligation for repayment and may not be
able to assert a claim against the United States in the event that the agency or
instrumentality does not meet its commitment. U.S.
Government Securities include the following:
o U.S. Treasury Obligations. These include Treasury Bills (which have
maturities of one year or less when issued), Treasury Notes (which have
maturities of two to ten years when issued) and Treasury Bonds (which have
maturities generally greater than ten years when issued). U.S. Treasury
obligations are backed by the full faith and credit of the United States.
o Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These are obligations that are supported by any of the
following: (a) the full faith and credit of the U.S. Government, such as
Government National Mortgage Association ("Ginnie Mae") modified pass-through
certificates as described below, (b) the right of the issuer to borrow an amount
limited to a specific line of credit from the U.S. Government such as bonds
issued by Federal National Mortgage Association ("Fannie Mae"), (c) the
discretionary authority of the U.S. Government to purchase the obligations of
the agency or instrumentality, or (d) the credit of the instrumentality, such as
obligations of Federal Home Loan Mortgage Corporation ("Freddie Mac"). Agencies
and instrumentalities the securities of which are supported by the discretionary
authority of the U.S. Government to purchase such securities and which the Fund
may purchase under (c) above include: Federal Land Banks, Farmers Home
Administration, Central Bank for Cooperatives, Federal Intermediate Credit
Banks, Freddie Mac and Fannie Mae.
o Zero Coupon Treasury Securities. "Zero coupon" Treasury securities are:
(i) U.S. Treasury notes or bonds which have been stripped of their unmatured
interest coupons and receipts; or (ii) certificates representing interests in
such stripped debt obligations or coupons. The Fund will not invest in
certificates which are issued by private issuers. Because a zero coupon security
pays no interest to its holder during its life, the Fund will invest in such
securities for capital appreciation purposes. Such securities usually trade at a
deep discount from their face or par value and will be subject to greater
fluctuations of market value in response to changing interest rates than debt
obligations of comparable maturities which make current distribution of
interest. Current Federal tax law requires that a holder of a zero coupon
security accrue a portion of the discount at which the security was purchased as
income each year even though the holder received no interest payment in cash on
the security during the year. The Fund will not invest more than 10% of its
total assets at the time of purchase in zero coupon Treasury securities.
o Mortgage-Backed Securities and CMOs. The Fund may invest in securities
that represent participation interests in pools of residential mortgage loans,
including collateralized mortgage obligations (CMOs). Some CMOs may be issued or
guaranteed by agencies or instrumentalities of the U.S. Government (for example,
Ginnie Maes, Freddie Macs and Fannie Maes). Other CMOs are issued by private
issuers, such as commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other secondary market
issuers. Such securities differ from conventional debt securities which provide
for periodic payment of interest in fixed amounts (usually semi-annually) with
principal payments at maturity or specified call dates. Mortgage- backed
securities provide monthly payments which are, in effect, a "pass-through" of
the monthly interest and principal payments (including any prepayment made by
the individual borrowers on the pooled mortgage loans). Principal prepayments
result from the sale of the underlying property or the refinancing or
foreclosure of underlying mortgages or other factors.
The price and yields to maturity of CMOs are, in part, determined by
assumptions about cash-flows from the rate of payments of underlying mortgages.
However, changes in prevailing interest rates may cause the rate of prepayments
of underlying mortgages to change. In general, prepayments on fixed rate
mortgage loans increase during periods of falling interest rates and decrease
during periods of rising interest rates. Faster than expected prepayments of
underlying mortgages will reduce the market value and yield to maturity of
issued CMOs. If prepayments of mortgages underlying a short-term or
intermediate-term CMO occur more slowly than anticipated because of rising
interest rates, the CMO effectively may become a longer-term security. The
prices of long-term debt securities generally fluctuate more widely than those
of shorter-term securities in response to changes in interest rates which, in
turn, may result in greater fluctuations in the Fund's share prices.
The effective maturity of a mortgage-backed security may be shortened by
unscheduled or early payment of principal and interest on the underlying
mortgages, which may affect the effective yield of such securities. The
principal that is returned may be invested in instruments having a higher or
lower yield than the prepaid instruments, depending on then-current market
conditions. Such securities therefore may be less effective as a means of
"locking in" attractive long-term interest rates and may have less potential for
appreciation during periods of declining interest rates than conventional bonds
with comparable stated maturities. If the Fund buys mortgage-backed securities
at a premium, prepayments of principal and foreclosures of mortgages may result
in some loss of the Fund's principal investment to the extent of the premium
paid.
The Fund may invest in collateralized mortgage obligations ("CMOs") that
are issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (or by a private issuer), or that are collateralized by a
portfolio of mortgages or mortgage-related securities guaranteed by such an
agency or instrumentality (or by a private issuer). CMOs issued by such private
issuers are not issued or guaranteed by the U.S. Government or its agencies and
are, therefore, also subject to credit risks. Credit risk relates to the ability
of the issuer or a debt security to make interest or principal payments on the
security as they become due. Securities issued or guaranteed by the U.S.
Government are subject to little, if any, credit risk because they are backed by
the "full faith and credit of the U.S. Government", which in general terms means
that the U.S. Treasury stands behind the obligation to pay interest and
principal. Payment of the interest and principal generated by the pool of
mortgages for a CMO is passed through to the holders as the payments are
received by the issuer of the CMO. CMOs may be issued in a variety of classes or
series ("tranches") that may have different maturities and other different
characteristics. For example, the principal value of certain CMO tranches may be
more volatile than other types of mortgage-related securities, because of the
possibility that the principal value of the CMO may be prepaid earlier than the
maturity of the CMO as a result of prepayments of the underlying mortgage loans
by the borrowers.
The Fund may invest in "stripped" mortgage-backed securities or CMOs or
other securities issued by agencies or instrumentalities of the U.S. Government.
Stripped mortgage-backed securities usually have two classes. The classes
receive different proportions of the interest and principal distributions on the
pool of mortgage assets that act as collateral for the security. In certain
cases, one class will receive all of the interest payments (and is known as an
"I/O"), while the other class will receive all of the principal value on
maturity (and is known as a "P/O").
The yield to maturity on the class that receives only interest is extremely
sensitive to the rate of payment of the principal on the underlying mortgages.
Principal prepayments increase that sensitivity. Stripped securities that pay
"interest only" are therefore subject to greater price volatility when interest
rates change, and they have the additional risk that if the underlying mortgages
are prepaid, the Fund will lose the anticipated cash flow from the interest on
the prepaid mortgages. That risk is increased when general interest rates fall,
and in times of rapidly falling interest rates, the Fund might receive back less
than its investment.
The value of "principal only" securities generally increases as interest
rates decline and prepayment rates rise. The price of these securities is
typically more volatile than that of coupon- bearing bonds of the same maturity.
Stripped securities are generally purchased and sold by institutional
investors through investment banking firms. At present, established trading
markets have not yet developed for these securities. Therefore, some stripped
securities may be deemed "illiquid." If the Fund holds illiquid stripped
securities, the amount it can hold will be subject to the Fund's investment
policy limiting investments in illiquid securities to 10% of the Fund's assets.
The Fund may also enter into "forward roll" transactions with banks or
other buyers that provide for future delivery of the mortgage-backed securities
in which the Fund may invest. The Fund would be required to segregate liquid
assets of any type, including equity and debt securities of any grade to its
custodian bank in an amount equal to its purchase payment obligation under the
roll.
o GNMA Certificates. Certificates of the Government National Mortgage
Association ("GNMA Certificates") are mortgage-backed securities which evidence
an undivided interest in a pool or pools of mortgages. The GNMA Certificates
that the Fund may purchase are of the "modified pass-through" type, which
entitle the holder to receive timely payment of all interest and principal
payments due on the mortgage pool, net of fees paid to the "issuer" and GNMA,
regardless of whether the mortgagor actually makes the payment.
The National Housing Act authorizes GNMA to guarantee the timely payment
of principal and interest on securities backed by a pool of mortgages insured by
the Federal Housing Administration ("FHA") or guaranteed by the Veterans
Administration ("VA"). The GNMA guarantee is backed by the full faith and credit
of the U.S. Government. GNMA is also empowered to borrow without limitation from
the U.S. Treasury if necessary to make any payments required under its
guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayment of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that the Fund has
purchased the certificates at a premium in the secondary market.
o FHLMC Securities. The Federal Home Loan Mortgage Corporation ("FHLMC")
was created to promote development of a nationwide secondary market for
conventional residential mortgages. FHLMC issues two types of mortgage
pass-through securities ("FHLMC Certificates"): mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). PCs resemble
GNMA Certificates in that each PC represents a pro rata share of all interest
and principal payments made and owned on the underlying pool. FHMLC guarantees
timely monthly payment of interest on PCs and the ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of mortgages. However,
these instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. The expected average life of these securities is
approximately ten years. The FHLMC guarantee is not backed by the full faith and
credit of the U.S. Government.
o FNMA Securities. The Federal National Mortgage Association ("FNMA") was
established to create a secondary market in mortgages insured by the FHA. FNMA
issues guaranteed mortgage pass-through certificates ("FNMA Certificates"). FNMA
Certificates resemble GNMA Certificates in that each FNMA Certificates
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool FNMA guarantees timely payment of interest and principal
on FNMA Certificates. The FNMA guarantee is not backed by the full faith and
credit of the U.S. Government.
o Other Securities.
o Corporate Securities
The corporate fixed-income securities in which the Fund may invest include
securities issued by domestic and foreign corporations and issuers and may be
denominated in U.S. dollars or in non-U.S. currencies. These investments may
include non-convertible debt obligations such as bonds, debentures and notes.
The corporate fixed-income investments of the Fund may also include preferred
and convertible preferred stocks of domestic corporations and issuers.
Investment in foreign securities involves considerations and risks not
associated with investment in securities of U.S. issuers.
o Preferred Stocks. Preferred stocks, like common stocks, represent
ownership interests in a corporation. However, unlike common stock, preferred
stock offers a stated dividend rate payable from a corporation's earnings.
Dividends on some preferred stocks may be "cumulative" if stated dividends from
prior periods have not been paid. Preferred stock also generally has a
preference over common stock on the distribution of a corporation's assets in
the event of liquidation of the corporation, and may be "participating," which
means that it may be entitled to a dividend exceeding the stated dividend in
certain cases. The rights of preferred stocks are generally subordinate to
rights associated with a corporation's debt securities.
o Convertible Securities. Convertible fixed-income securities may include
convertible debt obligations and preferred stocks, and can provide a potential
for current income through interest and dividend payments and at the same time
provide an opportunity for capital appreciation by virtue of their
convertibility into common stock.
Convertible securities rank senior to common stock in a corporation's
capital structure and, therefore, may entail less risk than the corporation's
common stock. The value of a convertible security is a function of its
"investment value" (its value without considering its conversion privilege) and
its "conversion value" (the security's worth if it were to be exchanged pursuant
to its conversion privilege for the underlying security at the market value of
the underlying security). Convertible securities generally offer lower interest
or dividend yields than non-convertible debt securities of similar quality.
To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise as with other fixed-income securities
(the credit standing of the issuer and other factors may also have an effect on
the convertible security's value). If the conversion value exceeds the
investment value, the price of the convertible security will rise above its
investment value and, in addition, will sell at some premium over its conversion
value, which represents the price investors are willing to pay for the privilege
of purchasing a fixed-income security with a possibility of capital appreciation
due to the conversion privilege. At such times the price of the convertible
security will tend to fluctuate directly with the price of the underlying equity
security. Convertible securities may be purchased by the Fund at varying price
levels above their investment values and/or their conversion values in keeping
with the Fund's objectives.
o Money Market Instruments
The Fund may invest in U.S. dollar-denominated debt obligations maturing in
one year or less to maintain liquidity deemed necessary by the Adviser for
investment purposes. In addition, the Fund may invest in such instruments for
defensive purposes, to minimize the impact of fluctuating interest rates on the
net asset value of the Fund during periods of adverse market conditions. These
obligations include:
(1) U.S. Government Securities: Debt instruments of the type described
under "U.S. Government Securities" above. Instruments in money market
instruments will be viewed by the Fund as U.S. Government Securities to the
extent that the securities or, in the case of repurchase agreements, the
securities collateralizing the agreements, are U.S. Government Securities.
(2) Bank Obligations and Instruments Secured Thereby: The bank obligations
the Fund may invest in include time deposits, certificates of deposit, and
bankers' acceptances if they are: (i) obligations of a domestic bank with total
assets of at least $1 billion or (ii) obligations of a foreign bank with total
assets of at least U.S. $1 billion. The Fund may also invest in instruments
secured by such obligations (e.g., debt which is guaranteed by the bank). For
purposes of this section, the term "bank" includes commercial banks, savings
banks, and savings and loan associations which may or may not be members of the
Federal Deposit Insurance Corporation.
Time deposits are non-negotiable deposits in a bank for a specified period
of time at a stated interest rate, whether or not subject to withdrawal
penalties. However, time deposits that are subject to withdrawal penalties,
other than those maturing in seven days or less, are subject to the limitation
on investments by the Fund in illiquid investments, set forth above in the
section entitled "Illiquid and Restricted Securities."
Banker's acceptances are marketable short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are deemed
"accepted" when a bank guarantees their payment at maturity.
(3) Commercial Paper: Obligations rated "A-1", "A-2" or "A-3" by Standard
& Poor's or Prime-1, Prime-2 or Prime-3 by Moody's or if not rated, issued by a
corporation or a foreign government, subdivision, agency or instrumentality
having an existing debt security rated "A" or better by Standard & Poor's or
Moody's.
(4) Corporate Obligations: Corporate debt obligations (including master
demand notes but not including commercial paper) if they are issued by domestic
corporations and are rated "A" or better by Standard & Poor's or Moody's or
unrated securities which are of comparable quality in the opinion of the
Adviser.
(5) Other Obligations: Obligations other than those listed in (1) through
(4) above, but not satisfying the standards set forth therein, if they are: (i)
subject to repurchase agreements; or (ii) guaranteed as to principal and
interest by a domestic or foreign bank having total assets in excess of $1
billion, by a corporation whose commercial paper may be purchased by the Fund,
or by a foreign government, subdivision, agency or instrumentality having an
existing debt security rated "A" or better by Standard & Poor's, Duff & Phelps
or Moody's.
(6) Board Approved Instruments: Other short-term investments of a type
which the Board determines presents minimal credit risks and which are of "high
quality" as determined by any major rating service or, in the case of an
instrument that is not rated, of comparable qualify as determined by the Board.
Appendix B to the Prospectus dated November 23, 1988 contains a general
description of securities ratings.
Bankers' acceptances are marketable short-term credit instruments used to
finance the import, export, transfer or storage of goods. They are deemed
"accepted" when a bank guarantees their payment at maturity.
Bank time deposits may be non-negotiable until expiration and may impose
penalties for early withdrawal. Master demand notes are corporate obligations
which permit the investment of fluctuating amounts by the Fund at varying rates
of interest pursuant to direct arrangements between the Fund, as lender, and the
borrower. They permit daily changes in the amounts borrowed. The Fund has the
right to increase the amount under the note at any time up to the full amount
provided by the note agreement, or to decrease the amount, and the borrower may
repay up to the full amount of the note without penalty. These notes may or may
not be backed by bank letters of credit. Because these notes are direct lending
arrangements between the lender and borrower, it is not generally contemplated
that they will be traded, and there is no secondary market for them, although
they are redeemable (and thus immediately repayable by the borrower) at
principal amount, plus accrued interest, at any time. The Fund has no
limitations on the type of issuer from whom these notes will be purchased;
however, in connection with such purchase and on an ongoing basis, subject to
policies established by the Board of Trustees, the Adviser will consider the
earning power, cash flow and other liquidity ratios of the issuer, and its
ability to pay principal and interest on demand, including a situation in which
all holders of such notes made demand simultaneously. Investments in bank time
deposits and master demand notes are subject to the 15% investment limitation on
securities that are not readily marketable as set forth below.
o Asset-Backed Securities The Fund may invest in securities that represent
undivided fractional interests in pools of consumer loans, similar in structure
to the mortgage-backed securities in which the Fund may invest described above.
Payments of principal and interest are passed through to holders of asset-backed
securities and are typically supported by some form of credit enhancement, such
as a letter of credit, surety bond, limited guarantee by another entity or
having a priority to certain of the borrower's other obligations. The degree of
credit enhancement varies and generally applies, until exhausted, to only a
fraction of the asset-backed security's par value. If the credit enhancement of
any asset- backed security held by the Fund has been exhausted, and if any
required payments of principal and interest are not made with respect to the
underlying loans, the Fund may then experience losses or delays in receiving
payment and a decrease in the value of the asset-backed security.
The value of asset-backed securities is affected by changes in the
market's perception of the asset backing the security, the creditworthiness of
the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also affected if
any credit enhancement is exhausted. The risks of investing in asset-backed
securities are ultimately dependent upon payment of the underlying consumer
loans by the individuals, and the Fund would generally have no recourse to the
entity that originated the loans in the event of default by a borrower. The
underlying loans are subject to prepayments that shorten the weighted average
life of asset-backed securities and may lower their return in the same manner as
described above for prepayments of a pool of mortgage loans underlying
mortgage-backed securities.
o Participation Interests
The Fund may acquire participation interests in loans that are made to U.S.
or foreign companies or to foreign governments (the "borrower"). They may be
interests in, or assignments of, the loan and are acquired from banks or brokers
that have made the loan or are members of the lending syndicate. No more than 5%
of the Fund's net assets can be invested in participation interest of the same
borrower. The Adviser has set certain creditworthiness standards for issuers of
loan participations, and monitors their creditworthiness. The value of loan
participation interests depends primarily upon the creditworthiness of the
borrower, and its ability to pay interest and principal. Borrowers may have
difficulty making payments. If a borrower fails to make scheduled interest or
principal payments, the Fund could experience a decline in the net asset value
of its shares. Some borrowers may have senior securities rated as low as "C" by
Moody's or "D" by Standard & Poor's or Duff & Phelps, but may be deemed
acceptable credit risks. Participation interests are subject to the Fund's
limitations on investments in illiquid securities.
Other Investment Techniques and Strategies. In pursuing its investment
objectives, the Fund may engage in the following special investment techniques.
o Direct Placements and Other Illiquid Securities. The Fund may invest up
to 10% of its total assets in restricted and illiquid securities, which are
those securities that are not readily marketable. These include securities
purchased in direct placements and securities subject to statutory or
contractual restrictions and delays on resale (restricted securities). This
policy does not limit the acquisition of restricted securities eligible for
resale pursuant to Rule 144A under the Securities Act of 1933 that are
determined to be liquid by the Board of Trustees or the Adviser under
Board-approved guidelines. Such guidelines take into account trading activity
for such securities and the availability of reliable pricing information, among
other factors. If there is a lack of trading interest in particular Rule 144A
securities, the Fund's holdings of those securities may be illiquid. Restricted
securities may generally be resold only in privately-negotiated transactions
with a limited number of purchasers or in a public offering registered under the
Securities Act of 1933 and are, therefore, unlike securities which are traded in
the open market and can be expected to be sold immediately if the market demand
is adequate. If restricted securities are substantially comparable to registered
securities of the same issuer which are readily marketable, the Fund may not
purchase them unless they are offered at a discount from the market price of the
registered securities. No restricted securities will be purchased unless the
issuer has agreed to register the securities at its expense within a specific
time period. Adverse conditions in the public securities market at certain times
may preclude a public offering of an issuer's unregistered securities. There may
be undesirable delays in selling restricted securities at prices representing
fair value. Illiquid securities include repurchase agreements maturing in more
than seven days, or certain participation interests other than those with puts
exercisable within seven days.
Other illiquid securities in which the Fund may invest include bank time
deposits, master demand notes and certain puts and calls which are traded in the
over-the-counter markets.
o Repurchase Agreements. In order to increase income, any of the
securities permissible for purchase may be acquired by the Fund subject to
repurchase agreements with commercial banks with total assets in excess of $1
billion or securities dealers with a net worth in excess of $50 million. In a
repurchase transaction, at the time the Fund acquires a security, it
simultaneously resells it to the vendor and must deliver that security to the
vendor on a specific future date. The repurchase price exceeds the purchase
price by an amount that reflects an agreed-upon interest rate effective for the
period during which the repurchase agreement is in effect. The majority of these
transactions run from day to day, and delivery pursuant to the resale typically
will occur within one to five days of the purchase. The Fund will not enter into
a repurchase transaction of more than seven days. Repurchase agreements are
considered "loans" under the Investment Company Act of 1940 (the "1940 Act"),
collateralized by the underlying security. The Fund's repurchase agreements will
require that at all times while the repurchase agreement is in effect, the
collateral's value must equal or exceed the repurchase price to collateralize
the loan fully. The Adviser will monitor the collateral daily and, in the event
its value declines below the repurchase price, will immediately demand
additional collateral be deposited. If such demand is not met within one day,
the existing collateral will be sold. Additionally, the Adviser will consider
the creditworthiness of the vendor. If the vendor fails to pay the agreed-upon
resale price on the delivery date, the Fund's risks in such event may include
any decline in value of the collateral to an amount which is less than 100% of
the repurchase price, any costs of disposing of such collateral, and loss from
any delay in foreclosing on the collateral. There is no limit on the amount of
the Fund's assets that may be subject to repurchase agreements.
o When-Issued and Delayed Delivery Transactions. The Fund may purchase
mortgage-backed securities, municipal bonds and other debt securities on a
"when-issued" basis, and may purchase or sell such securities on a "delayed
delivery" basis. "When-issued" or "delayed delivery" refers to securities whose
terms and indenture are available and for which a market exists, but which are
not available for immediate delivery. Although the Fund will enter into such
transactions for the purpose of acquiring securities for its portfolio for
delivery pursuant to option contracts it has entered into, the Fund may dispose
of a commitment prior to settlement. The Fund does not intend to make such
purchases for speculative purposes. When such transactions are negotiated, the
price (which is generally expressed in yield terms) is fixed at the time the
commitment is made, but delivery and payment for the securities take place at a
later date. During the period between commitment by the Fund and settlement
(generally between two months and 120 days), no payment is made for the
securities purchased, and no interest accrues to the Fund from the transaction.
Such securities are subject to market fluctuations; the value at delivery may be
less than the purchase price. The Fund will maintain a segregated account with
its custodian, consisting of liquid assets of any type, including equity and
debt securities of any grade at least equal to the value of purchase commitments
until payment is made. Such securities may bear interest at a lower rate than
longer term securities. The commitment to purchase a security for which payment
will be made on a future date may be deemed a separate security and involve a
risk of loss if the value of the security declines prior to the settlement date,
which risk is in addition to the risk of decline of the Fund's other assets.
o Hedging. The Fund may certain kinds of futures contracts; forward
contracts; call and put options on securities, futures, indices and foreign
currencies; and enter into interest rate swap agreements These are referred to
as "Hedging Instruments". Hedging Instruments may be used to attempt to protect
against possible declines in the market value of the Fund's portfolio from
downward trends in securities markets (generally due to a rise in interest
rates), to protect the Fund's unrealized gains in the value of its securities
which have appreciated, to facilitate selling securities for investment reasons,
to establish a position in the securities markets as a temporary substitute for
purchasing particular securities, or to reduce the risk of adverse currency
fluctuations. The Fund's strategy of hedging with Futures and options on Futures
will be incidental to the Fund's activities in the underlying cash market.
Covered calls and puts may also be written on securities to attempt to increase
the Fund's income. A call or put may be purchased only if, after such purchase,
the value of all call and put options held by the Fund would not exceed 5% of
the Fund's total assets. The Hedging Instruments the Fund may use are described
below. As of the date of this Registration Statement, the Fund does not intend
to enter into Futures, Forward Contracts and options on Futures if after any
such purchase, the sum of margin deposits on Futures and premiums paid on
Futures options would exceed 5% of the value of the Fund's total assets.
o Futures. The Fund may buy and sell futures contracts that relate to (1)
stock indices (referred to as Stock Index Futures), (2) other securities indices
(together with Stock Index Futures, refereed to as Financial Futures), (3)
interest rates (referred to as Interest Rate Futures), (4) foreign currencies
(referred to as Forward Contracts), or (5) commodities (referred to as commodity
futures.) An Interest Rate Future obligates the seller to deliver and the
purchaser to take a specific type of debt security at a specific future date for
a fixed price. That obligation may be satisfied by actual delivery of the debt
security or by entering into an offsetting contract. A bond index assigns
relative values to the bonds included in that index and is used as a basis for
trading long-term Bond Index Futures contracts. Bond Index Futures reflect the
price movements of bonds included in the index. They differ from Interest Rate
Futures in that settlement is made in cash rather than by delivery; or
settlement may be made by entering into an offsetting contract.
o Put and Call Options. The Fund may buy and sell exchange- traded and
over-the-counter put and call options, including index options, securities
options, currency options, commodities options, and options on the other types
of futures described in "Futures," above. A call or put may be purchased only
if, after the purchase, the value of all call and put options held by the Fund
will not exceed 5% of the Fund's total assets.
If the Fund sells (that is, writes) a call option, it must be "covered."
That means the Fund must own the security subject to the call while the call is
outstanding, or, for other types of written calls, the Fund must segregate
liquid assets to enable it to satisfy its obligations if the call is exercised.
Up to 25% of the Fund's total assets may be subject to calls.
The Fund may buy puts whether or not it holds the underlying investment in
the portfolio. If the Fund writes a put, the put must be covered by segregated
liquid assets. The Fund will not write puts if more than 50% of the Fund's net
assets would have to be segregated to cover put options.
o Foreign Currency Options. The Fund may purchase and write puts and calls
on foreign currencies that are traded on a securities or commodities exchange or
quoted by major recognized dealers in such options, for the purpose of
protecting against declines in the dollar value of foreign securities and
against increases in the dollar cost of foreign securities to be acquired. If a
rise is anticipated in the dollar value of a foreign currency in which
securities to be acquired are denominated, the increased cost of such securities
may be partially offset by purchasing calls or writing puts on that foreign
currency. If a decline in the dollar value of a foreign currency is anticipated,
the decline in value of portfolio securities denominated in that currency may be
partially offset by writing calls or purchasing puts on that foreign currency.
However, in the event of currency rate fluctuations adverse to the Fund's
position, it would either lose the premium it paid and incur transaction costs,
or purchase or sell the foreign currency at a disadvantageous price.
o Forward Contracts. The Fund may enter into foreign currency exchange
contracts ("Forward Contracts"), which obligate the seller to deliver and the
purchaser to take a specific foreign currency at a specific future date for a
fixed price. The Fund may enter into a Forward Contract in order to "lock in"
the U.S. dollar price of a security denominated in a foreign currency which it
has purchased or sold but which has not yet settled, or to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and a foreign currency. There is a risk that use of Forward
Contracts may reduce the gain that would otherwise result from a change in the
relationship between the U.S. dollar and a foreign currency. Forward contracts
include standardized foreign currency futures contracts which are traded on
foreign exchanges and are subject to procedures and regulations applicable to
other Futures. The Fund may also enter into a Forward Contract to sell a foreign
currency denominated in a currency other than that in which the underlying
security is denominated. This is done in the expectation that there is a greater
correlation between the foreign currency of the Forward Contract and the foreign
currency of the underlying investment than between the U.S. dollar and the
currency of the underlying investment. This technique is referred to as "cross
hedging". The success of cross hedging is dependent on many factors, including
the ability of the Adviser to correctly identify and monitor the correlation
between foreign currencies and the U.S. dollar. To the extent that the
correlation is not identical, the Fund may experience losses or gains on both
the underlying security and the cross currency hedge.
The Fund will not speculate in foreign currency exchange contracts. There
is no limitation as to the percentage of the Fund's assets that may be committed
to foreign currency exchange contracts. The Fund does not enter into such
Forward Contracts or maintain a net exposure in such contracts to the extent
that the Fund would be obligated to deliver an amount of foreign currency in
excess of the value of the Fund's assets denominated in that currency or enter
into a "cross-hedge" unless it is denominated in a currency or currencies that
the Adviser believes will have price movements that tend to correlate closely
with the currency.
o Interest Rate Swaps. In an interest rate swap, the Fund and another
party exchange their right to receive or their obligation to pay interest on a
security. For example, they may swap a right to receive floating rate payments
for fixed rate payments. The Fund enters into swaps only on securities it owns.
The Fund may not enter into swaps with respect to more than 25% of its total
assets. Also, the Fund will segregate liquid assets of any type, including
equity and debt securities of any grade to cover any amounts it could owe under
swaps that exceed the amounts it is entitled to receive, and it will adjust that
amount daily, as needed.
Hedging instruments can be volatile investments and may involve special
risks. The use of hedging instruments requires special skills and knowledge of
investment techniques that are different than what is required for normal
portfolio management. If the Adviser uses a hedging instrument at the wrong time
or judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other investments or
if it could not close out a position because of an illiquid market for the
future or option.
Options trading involves the payment of premiums and has special tax
effects on the Fund. There are also special risks in particular hedging
strategies. If a covered call written by the Fund is exercised on a security
that has increased in value, the Fund will be required to sell the security at
the call price and will not be able to realize any profit if the security has
increased in value above the call price. For example, the use of forward
contracts may reduce the gain that would otherwise result from a change in the
relationship between the U.S. dollar and a foreign currency. To limit its
exposure in foreign currency exchange contracts, the Fund limits its exposure to
the amount of its assets denominated in the foreign currency. Interest rate
swaps are subject to credit risks (if the other party fails to meet its
obligations) and also to interest rate risks. The Fund could be obligated to pay
more under its swap agreements than it receives under them, as a result of
interest rate changes.
o Derivative Investments. The Fund can invest in a number of different
kinds of "derivative investments." In general, a "derivative investment" is a
specially designed investment whose performance is linked to the performance of
another investment or security, such as an option, future, index or currency. In
the broadest sense, derivative investments include exchange-traded options and
futures contracts. The risks of investing in derivative investments include not
only the ability of the company issuing the instrument to pay the amount due on
the maturity of the instrument, but also the risk that the underlying investment
or security might not perform the way the Adviser expected it to perform. The
performance of derivative investments may also be influenced by interest rate
changes in the U.S. and abroad. All of this can mean that the Fund will realize
less principal and/or income than expected. Certain derivative investments held
by the Fund may trade in the over-the-counter market and may be illiquid.
Examples of derivative investments the Fund may invest in include, among
others, "index-linked" notes which are debt securities of companies that call
for interest payments and/or payment on the maturity of the note in different
terms than the typical note where the borrower agrees to make fixed interest
payments and pay a fixed sum on the maturity of the note. The principal and/or
interest payments on maturity of an index-linked note depends on the performance
of one or more market indices, such as the S & P 500 Index. Further examples of
derivative investments the Fund may invest in include "debt exchangeable for
common stock" of an issuer or "equity-linked debt securities" of an issuer. At
maturity, the principal amount of the security is exchanged for common stock of
the issuer or is payable in an amount based on the issuer's common stock price
at the time of maturity. In either case there is a risk that the amount payable
at maturity will be less than the principal amount of the debt.
The Fund may also invest in currency-indexed securities. Typically these
are short-term or intermediate-term debt securities having a value at maturity,
and/or interest rates determined by reference to one or more specified foreign
currencies. Certain currency-indexed securities purchased by the Fund may have a
payout factor tied to a multiple of the movement of the U.S. dollar (or the
foreign currency in which the security is denominated) against the movement in
the U.S. dollar, the foreign currency, another currency, or an index. Such
securities may be subject to increased principal risk and increased volatility
than comparable securities without a payout factor in excess of one, but the
Adviser believes the increased yield justifies the increased risk.
o Loans of Portfolio Securities. To attempt to increase its income, the
Fund may lend its portfolio securities if, after any loan, the value of the
securities loaned does not exceed 25% of the total value of its assets. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the value of the
loaned securities and must consist of cash, bank letters of credit or U.S.
Government Securities. To be acceptable as collateral, letters of credit must
obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. Such terms and the issuing bank must be satisfactory to the
Fund. The Fund receives an amount equal to the dividends or interest on loaned
securities and also receives one or more of (a) negotiated loan fees, (b)
interest on securities used as collateral, or (c) interest on short-term debt
securities purchased with such loan collateral; either type of interest may be
shared with the borrower. The Fund may also pay reasonable finder's, custodian
and administrative fees. The terms of the Fund's loans must meet certain tests
under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"
or the "Code"), and permit the Fund to reacquire loaned securities on five days'
notice or in time to vote on any important matter. The Fund will make such loans
only to banks and securities dealers with whom it may enter into repurchase
transactions. If the borrower fails to return the loaned security the Fund's
risks include: (1) any costs in disposing of the collateral; (2) loss from a
decline in value of the collateral to an amount less than 100% of the securities
loaned; (3) being unable to exercise its voting or consent rights with respect
to the security; and (4) any loss arising from the Fund being unable to timely
settle a sale of such securities.
o Borrowing. From time to time, the Fund may increase its ownership of
securities by borrowing up to 10% of the value of its net assets from banks and
investing the borrowed funds (on which the Fund will pay interest). After any
such borrowing, the Fund's total assets, less its liabilities other than
borrowings, must remain equal to at least 300% of all borrowings, as set forth
in the Investment Company Act. Interest on borrowed money is an expense the Fund
would not otherwise incur, so that it may have substantially reduced net
investment income during periods of substantial borrowings. The Fund's ability
to borrow money from banks subject to the 300% asset coverage requirement is a
fundamental policy. Subject to the 10% limit (which is a fundamental policy),
the Fund may also borrow to finance repurchases and/or tenders of its shares and
may also borrow for temporary purposes in an amount not exceeding 5% of the
value of the Fund's total assets. Any investment gains made with the proceeds
obtained from borrowings in excess of interest paid on the borrowings will cause
the net income per share or the net asset value per share of the Fund's Shares
to be greater than would otherwise be the case. On the other hand, if the
investment performance of the securities purchased fails to cover their cost
(including any interest paid on the money borrowed) to the Fund, then the net
income per share or net asset value per share of the Fund's Shares will be less
than would otherwise have been the case. This speculative factor is known as
"leverage." Although such borrowings would therefore involve additional risk to
the Fund, the Fund will only borrow if such additional risk of loss of principal
is considered by the Adviser to be appropriate in relation to the Fund's primary
investment objective of high current income consistent with preservation of
capital. The Adviser will make this determination by examining both the market
for securities in which the Fund invests and interest rates in general to
ascertain that the climate is sufficiently stable to warrant borrowing. Because
the Fund will limit its borrowings to finance repurchases of and/or tenders for
its Shares to 10% of the value of its net assets, the Fund may not be able to
purchase as many Shares as it would have if its borrowing power extended to the
maximum limit allowed under the 1940 Act.
o Defensive Strategies. There may be times when, in the Adviser's
judgment, conditions in the securities markets would make pursuing the Fund's
primary investment strategy inconsistent with the best interests of its
shareholders. At such times, the Fund may employ alternative strategies
primarily seeking to reduce fluctuations in the value of the Fund's assets. In
implementing these defensive strategies, the Fund may increase the portion of
its assets invested in U.S. Government Securities up to 100% and/or
nonconvertible high-grade debt securities up to 35%. The Fund may also hold up
to 100% of its assets in cash or cash equivalents. It is impossible to predict
when, or for how long, alternative strategies will be utilized.
Other Investment Restrictions. The Fund has adopted the following
investment restrictions, which together with its investment objective, are
fundamental policies changeable only with the approval of the holders of a
"majority" of the Fund's outstanding voting securities, defined in the
Investment Company Act of 1940 as the affirmative vote of the lesser of (a) more
than 50% of the outstanding Shares of the Fund, or (b) 67% or more of the Shares
present or represented by proxy at a meeting if more than 50% of the Fund's
outstanding Shares are represented at the meeting in person or by proxy. Unless
it is specifically stated that a percentage restriction applies on an ongoing
basis, it applies only at the time the Fund makes an investment, and the Fund
need not sell securities to meet the percentage limits if the value of the
investment increases in proportion to the size of the Fund. Other investment
restrictions are listed in the Statement of Additional Information. Under these
restrictions, the Fund will not do any of the following:
o As to 75% of its total assets, the Fund cannot invest in securities
of any one issuer (other than the United States Government, its
agencies or instrumentalities) if after any such investment either
(a) more than 5% of the Fund's total assets would be invested in the
securities of that issuer, or (b) the Fund would then own more than
10% of the voting securities of that issuer;
o The Fund cannot concentrate investments to the extent of 25% or more
of its total assets in securities of issuers in the same industry;
provided that this limitation shall not apply with respect to
investments in U.S. Government Securities;
o The Fund cannot make loans except through (a) the purchase of debt
securities in accordance with its investment objectives and
policies; (b) the lending of portfolio securities as described
above; or (c) the acquisition of securities subject to repurchase
agreements;
At the shareholder meeting, shareholders of the Fund are being asked to approve
that this fundamental investment policy be deleted and replaced with a new
fundamental investment policy that would read as follows:
o The Fund cannot make loans, except that the Fund may purchase debt
securities and enter into repurchase agreements or when-issued, delayed delivery
or similar securities transactions, and may lend its portfolio securities.
o The Fund cannot borrow money, except in conformity with the restrictions
stated above under "Borrowing"; At the shareholder meeting, shareholder of the
Fund are being asked that the various borrowing policies detailed above under
"Borrowing" be deleted, and replaced with the maximum borrowing limit permitted
under the Investment Company Act. This new borrowing policy would also be a
fundamental policy, as required by sections 8(b)(1) and 13(a)(2) of the
Investment Company Act. The Investment Company Act currently requires that after
any borrowing by an open-end fund, the fund's total assets, less its liabilities
other than borrowings, must be maintained at least equal to 300% of all
borrowings. Interest on borrowed money is an expense the Fund would not
otherwise incur, so that it may have substantially reduced net investment income
during periods of substantial borrowings. Any investment gains made with the
proceeds obtained from borrowings in excess of interest paid on the borrowings
will cause the net income per share or the net asset value per share of the
Fund's shares to be greater than would otherwise be the case. On the other hand,
if the investment performance of the securities purchased fails to cover their
cost to the Fund (including any interest paid on the money borrowed), then the
net income per share or net asset value per share of the Fund's shares will be
less than would otherwise have been the case. This speculative factor is known
as "leverage."
This new policy would read as follows:
o The Fund may borrow money from banks on an unsecured basis to buy
securities, and may borrow for temporary, emergency purposes or under other
unusual circumstances, subject to the limits set forth in the Investment Company
Act.
o The Fund cannot pledge, hypothecate, mortgage or otherwise encumber its
assets, except to secure permitted borrowings or for the escrow arrangements
contemplated in connection with the use of Hedging Instruments;
At the shareholder meeting, shareholders of the Fund are being asked to approve
that this fundamental policies be amended to allow the Fund to enter into
escrow, collateral and margin arrangements in connection not only with its
hedging instruments, but also with any of its permitted investments. The revised
fundamental investment policies would read as follows:
o The Fund cannot mortgage, pledge or hypothecate the Fund's assets; for
purposes of this policy escrow, collateral and margin arrangements involved with
any of its investments are not considered to involve a mortgage, hypothecation
or pledge.
o The Fund cannot participate on a joint or joint and several basis in any
securities trading account;
At the shareholder meeting, shareholders of the Fund are being asked to approve
that this restriction be removed. This restriction might be interpreted as
preventing the Fund from participating in the joint account available to the
other Oppenheimer funds under an Exemptive Order issued by the SEC. This joint
account is used for the pooling of excess cash of the participating Oppenheimer
funds for the purchase of overnight repurchase agreements. Each fund's liability
on any repurchase agreement purchased by the joint account is limited to its
interest in such repurchase agreement. The joint account provides a convenient
and efficient way of aggregating what otherwise would be the one or more
individual transactions for each fund necessary to manage the daily uninvested
cash balances of each fund.
o The Fund cannot invest in companies for the purpose of exercising control
or management thereof;
o The Fund cannot make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or by virtue of ownership of other securities has the
right, without payment of any further consideration, to obtain an equal amount
of the securities sold short ("short sales against the box"); short sales may be
made to defer realization of gain or loss for Federal income tax purposes;
o The Fund cannot invest in (a) real estate, except that it may purchase
and sell securities of companies which deal in real estate or interests therein;
(b) commodities or commodity contracts (except that the Fund may purchase and
sell Hedging Instruments whether or not they are considered to be a commodity or
commodity contract); or (c) interests in oil, gas or other mineral exploration
or development programs;
At the shareholder meeting, shareholders of the Fund are being asked to approve
a change to subsection (b) which prohibits the Fund from trading in physical
commodities. The Fund does not seek permission to trade physical commodities.
However, this investment policy could be read to prohibit the Fund from buying
or selling options, futures, securities or other instruments backed by, or the
investment return from which is linked to changes in the price of, physical
commodities, including "commodity-linked" notes unless they are hedging
instruments. To resolve any ambiguity as to whether the Fund may invest in those
instruments shareholders of the Fund are being asked to approve that this
fundamental investment policy be deleted and replaced with a new policy that is
also fundamental, as required by sections 8(b)(1) and 13(a)(2) of the Investment
Company Act of 1940. The new fundamental policy would read as follows:
o The Fund cannot invest in physical commodities or physical commodity
contracts; however, the Fund may: (i) buy and sell hedging instruments permitted
by any of its other investment policies, and (ii) buy and sell options, futures,
securities or other instruments backed by, or the investment return from which
is linked to changes in the price of, physical commodities.
o The Fund cannot act as an underwriter of securities, except insofar as
the Fund might be deemed to be an underwriter for purposes of the Securities Act
of 1933 in the resale of any securities held for its own portfolio; or
o The Fund cannot purchase securities on margin, except that the Fund may
make margin deposits in connection with any of the Hedging Instruments it may
use.
At the shareholder meeting, shareholders of the Fund are being asked to approve
that this fundamental policies be amended to allow the Fund to enter into
escrow, collateral and margin arrangements in connection not only with its
hedging instruments, but also with any of its permitted investments. The revised
fundamental investment policies would read as follows:
o The Fund cannot purchase securities on margin; however, the Fund may make
margin deposits in connection with any of its other investments.
5. The shares of beneficial interest of the Fund, $.01 par value per share
(the "Shares"), are listed and traded on The New York Stock Exchange (the
"NYSE"). The following table sets forth for the Shares for the periods
indicated: (a) the per Share high sales price on the NYSE, the net asset value
per Share as of the last day of the week immediately preceding the day for which
the high sales price on the NYSE is reported, and the premium or discount
(expressed as a percentage of net asset value) represented by the difference
between such high sales price and the corresponding net asset value and (b) the
per Share low sales price on the NYSE, the net asset value per Share as of the
last day of the week immediately preceding the day for which the low sales price
on the NYSE is reported, and the premium or discount (expressed as a percentage
of net asset value) represented by the difference between such low sales price
and the corresponding net asset value.
Market Price High;(1) Market Price Low;(1)
NAV and Premium/ NAV and Premium/
Ended (Discount) That Day(2) (Discount) That Day(2)
- ----- --------------------- ---------------------
1/31/95 Market: $7.25 Market: $6.625
NAV: $7.86 NAV: $7.84
Premium/(Discount): (7.76)% Premium/(Discount): (15.50)%
4/30/95 Market: $7.375 Market: $6.5
NAV: $7.58 NAV: $7.68
Premium/(Discount): (2.70)% Premium/(Discount): (15.36)%
7/31/95 Market: $7.25 Market: $6.5
NAV: $7.85 NAV: $7.84
Premium/(Discount): (7.64)% Premium/(Discount): (17.09)%
10/31/95 Market: $7.125 Market: $6.625
NAV: $7.87 NAV: $7.87
Premium/(Discount): (9.47)% Premium/(Discount): (15.82)%
1/31/96 Market: $7.375 Market: $6.75
NAV: $8.04 NAV: $7.91
Premium/(Discount): (8.27)% Premium/(Discount): (14.66)%
4/30/96 Market: $7.63 Market: $7.00
NAV: $8.11 NAV: $7.93
Premium/(Discount): (5.89)% Premium/(Discount): (11.73)%
7/31/96 Market: $7.25 Market: $7.00
NAV: $8.10 NAV: $7.97
Premium/(Discount): (10.49)% Premium/(Discount): (12.17)%
10/31/96 Market: $7.63 Market: $7.00
NAV: $8.31 NAV: $8.11
Premium/(Discount): (8.24)% Premium/(Discount): (13.69)%
1/31/97 Market: $7.50 Market: $7.13
NAV: $8.42 NAV:$8.29
Premium/(Discount):(10.93)% Premium/(Discount): (14.05)%
4/30/97 Market: $7.88 Market: $7.13
NAV: $8.43 NAV:$8.30
Premium/(Discount):(6.58)% Premium/(Discount): (14.16)%
7/31/97 Market: $8.00 Market: $7.25
NAV: $8.43 NAV:$8.29
Premium/(Discount):(5.10)% Premium/(Discount): (12.55)%
10/31/97 Market: $8.25 Market: $7.56
NAV: $8.42 NAV:$8.42
Premium/(Discount):(2.02)% Premium/(Discount): (10.18)%
1/31/98 Market: $8.06 Market: $7.81
NAV: $8.29 NAV:$8.22
Premium/(Discount):(2.74)% Premium/(Discount): (4.96)%
- --------------
(1)As reported by the NYSE.
(2)The Fund's computation of net asset value (NAV) is as of the close of trading
on the last day of the week immediately preceding the day for which the high and
low market price is reported and the premium or discount (expressed as a
percentage of net asset value) is calculated based on the difference between the
high or low market price and the corresponding net asset value for that day,
divided by the net asset value.
The Board of Trustees of the Fund has determined that it may be in the
interests of Fund shareholders for the Fund to take action to attempt to reduce
or eliminate a market value discount from net asset value. To that end, the Fund
may, from time to time, either repurchase Shares in the open market or, subject
to conditions imposed from time to time by the Board, make a tender offer for a
portion of the Fund's Shares at their net asset value per Share. Subject to the
Fund's fundamental policy with respect to borrowings, the Fund may incur debt to
finance repurchases and/or tenders. Interest on any such borrowings will reduce
the Fund's net income. In addition, the acquisition of Shares by the Fund will
decrease the total assets of the Fund and therefore will have the effect of
increasing the Fund's expense ratio. If the Fund must liquidate portfolio
securities to purchase Shares tendered, the Fund may be required to sell
portfolio securities for other than investment purposes and may realize gains
and losses.
In addition to open-market Share purchases and tender offers, the Board
could also seek shareholder approval to convert the Fund to an open-end
investment company if the Fund's Shares trade at a substantial discount. If the
Fund's Shares have traded on the NYSE at an average discount from net asset
value of more than 10%, determined on the basis of the discount as of the end of
the last trading day in each week during the period of 12 calendar weeks ending
October 31 in such year, the Trustees will consider recommending to shareholders
a proposal to convert the Fund to an open-end company. If during a year in which
the Fund's Shares trade at the average discount stated, and for the period
described, in the preceding sentence the Fund also receives written requests
from the holders of 10% or more of the Fund's outstanding Shares that a proposal
to convert to an open end company be submitted to the Fund's shareholders,
within six months the Trustees will submit a proposal to the Fund's
shareholders, to the extent consistent with the 1940 Act, to amend the Fund's
Declaration of Trust to convert the Fund from a closed-end to an open-end
investment company. If the Fund converted to an open-end investment company, it
would be able continuously to issue and offer its Shares for sale, and each
Share of the Fund could be tendered to the Fund for redemption at the option of
the shareholder, at a redemption price equal to the current net asset value per
Share. To meet such redemption request, the Fund could be required to liquidate
portfolio securities. Its Shares would no longer be listed on the NYSE. The Fund
cannot predict whether any repurchase of Shares made while the Fund is a
closed-end investment company would decrease the discount from net asset value
at which the Shares trade. To the extent that any such repurchase decreased the
discount from net asset value to an amount below 10% during the measurement
period described above, the Fund would not be required to submit to shareholders
a proposal to convert the Fund to an
open-end investment company. At a meeting held on October 9, 1997, the Board of
Trustees of the Fund determined that it was in the best interests of the
shareholders to convert the Fund to an open-end fund. Accordingly, the Board
approved the submission to the shareholders of a proposal to convert the Fund
from a closed-end investment company to an open-end investment company (the
"Conversion"). In connection with the Conversion, the Trustees also considered
and approved an amendment of the Fund's sub-classification under the Investment
Company Act of 1940 (the "Act") from a closed- end management investment company
to an open-end management investment company and the amendment and restatement
of the Fund's Declaration of Trust to provide for such Conversion. The Board of
Trustees also considered and approved new contractual arrangements for the
management and distribution of the Fund as an open-end investment company. Each
of the foregoing is subject to approval by the shareholders at a meeting
schedule for April 16, 1998.
Item 9. Management
1(a). The Fund is governed by a Board of Trustees, which is responsible
under Massachusetts law for protecting the interests of shareholders. The
Trustees meet periodically throughout the year to oversee the Fund's activities,
review its performance, and review the actions of the Adviser. The Fund is
required to hold annual shareholder meetings for the election of trustees and
the ratification of its independent auditors. The Fund may also hold shareholder
meetings from time to time for other important matters, and shareholders have
the right to call a meeting to remove a Trustee or to take other action
described in the Fund's Declaration of Trust.
1(b). The Adviser, a Colorado corporation with its principal offices at
Two World Trade Center, New York, New York 10048-0203, acts as investment
manager for the Fund under an investment advisory agreement (the "Advisory
Agreement") under which it provides ongoing investment advice and conducts the
investment operations of the Fund, including purchases and sales of its
portfolio securities, under the general supervision and control of the Trustees
of the Fund. The Adviser also acts as accounting agent for the Fund.
The Adviser has operated as an investment company adviser since April 30,
1959. It and its affiliates currently manage investment companies with assets in
excess of $75 billion as of December 31, 1997, and held in more than 3.5 million
shareholder accounts. The Adviser is owned by Oppenheimer Acquisition Corp., a
holding company owned in part by senior management of the Adviser, and
ultimately controlled by Massachusetts Mutual Life Insurance Company.
The Adviser provides office space and investment advisory services for the
Fund and pays all compensation of those Trustees and officers of the Fund who
are affiliated persons of the Adviser. Under the Advisory Agreement, the Fund
pays the Adviser an advisory
fee computed and paid weekly at an annual rate of .65 of 1% of the net assets of
the Fund at the end of that week. The Fund also pays the Adviser an annual fee
of $18,000, plus out-of-pocket costs and expenses reasonably incurred, for
performing limited accounting services for the Fund. During the fiscal years
ended October 31, 1995, 1996 and 1997, the Fund paid management fees to the
Adviser of $332,730, $346,262 and $359,532, respectively. The Fund incurred
approximately $15.011 in expenses for the fiscal year ended October 31, 1997 for
services provided by Shareholder Financial Services, Inc. ("SFSI").
Under the Advisory Agreement, the Fund pays certain of its other costs not
paid by the Adviser, including (a) brokerage and commission expenses, (b)
Federal, state, local and foreign taxes, including issue and transfer taxes,
incurred by or levied on the Fund, (c) interest charges on borrowings, (d) the
organizational and offering expenses of the Fund, whether or not advanced by the
Adviser, (e) fees and expenses of registering the Shares of the Fund under the
appropriate Federal securities laws and of qualifying Shares of the Fund under
applicable state securities laws, (f) fees and expenses of listing and
maintaining the listings of the Fund's Shares on any national securities
exchange, (g) expenses of printing and distributing reports to shareholders, (h)
costs of shareholder meetings and proxy solicitation, (i) charges and expenses
of the Fund's Administrator, custodian and Registrar, Transfer and Dividend
Disbursing Agent, (j) compensation of the Fund's Trustees who are not affiliated
persons of the Adviser, (k) legal and auditing expenses, (l) the cost of
certificates representing the Fund's Shares, (m) costs of stationery and
supplies, and (n) insurance premiums. The Adviser has advanced certain of the
Fund's organizational and offering expenses, which were repaid by the Fund.
There is no expense limitation provision.
The management services provided to the Fund by the Adviser, and the
services provided by the Distributor the Transfer Agent to shareholders, depend
on the smooth functioning of their computer systems. Many computer software
systems in use today cannot distinguish the year 2000 from the year 1900 because
of the way dates are encoded and calculated. That failure could have a negative
impact on handling securities trades, pricing and account
services. The Adviser and Transfer Agent have been actively working on necessary
changes to their computer systems to deal with the year 2000 and expect that
their systems will be adapted in time for that event, although there cannot be
assurance of success.
1(c). The Portfolio Managers of the Fund are Thomas Reedy and Ashwin
Vasan, who also serve as Vice Presidents of the Fund and of the Adviser, and are
officers of certain mutual funds managed by the Adviser ("Oppenheimer Funds").
Messrs. Reedy and Vasan have been the persons principally responsible for the
day-to-day management of the Fund's portfolio since August 1993. Mr. Reedy has
served as an officer of other Oppenheimer funds; and prior to August 1993, Mr.
Reedy served as a securities analyst for the Adviser; Mr. Vasan has served as an
officer of other Oppenheimer funds and prior to August 1993 served as a
securities Analyst for the Adviser.
1(d). The Administrator for the Fund is Mitchell Hutchins Asset Management
Inc. (the "Administrator"), a Delaware corporation with principal offices at
1285 Avenue of the Americas, New York, New York 10019 and an affiliate of Paine
Webber Incorporated.
Because of the services rendered to the Fund by the Administrator and the
Adviser, the Fund itself requires no employees other than its officers, none of
whom receives compensation from the Fund and all of whom are employed by the
Adviser or the Administrator. In connection with its responsibilities as
Administrator and in consideration of its administrative fee, subject to the
supervision of the Board of Trustees the Administrator will: (i) prepare all
quarterly, semi-annual and annual reports required to be sent to Fund
shareholders, and arrange for the printing and dissemination of such reports to
shareholders; (ii) assemble and file all reports required to be filed by the
Fund with the Securities and Exchange Commission ("SEC") on Form N-SAR, or such
other form as the SEC may substitute for Form N-SAR; (iii) review the provision
of services by the Fund's independent accountants, including but not limited to
the examination by such accountants of financial statements of the Fund and the
review of the Fund's Federal, state and local tax returns; and make such reports
and recommendations to the Board of Trustees concerning the performance of the
independent accountants as the Board reasonably requests or as it deems
appropriate; (iv) file with the appropriate authorities all required Federal,
state and local tax returns; (v) arrange for the dissemination to shareholders
of the Fund's proxy materials, and oversee the tabulation of proxies by the
Fund's transfer agent; (vi) negotiate the terms and conditions under which
custodian services will be provided to the Fund and the fees to be paid by the
Fund in connection therewith; (vii) recommend an accounting agent (which may or
may not be the Fund's custodian or its affiliate) to the Board, which agent
would be responsible for computing the Fund's net asset value in accordance with
the Fund's registration statement under the 1940 Act and the Securities Act of
1933, as amended; (vii) negotiate the terms and conditions under which such
accounting agent would compute the Fund's net asset value, and the fees to be
paid by the Fund in connection therewith; review the provision of such
accounting services to the Fund and make such reports and recommendations to the
Board concerning the provisions of such services as the Board reasonably
requests or the Administrator deems appropriate; (ix) negotiate the terms and
conditions under which the transfer agency and dividend disbursing services will
be provided to the Fund, and the fees to be paid by the Fund in connection
therewith; review the provision of transfer agency and dividend disbursing
services to the Fund; and make such reports and recommendations to the Board
concerning the performance of the Fund's transfer and dividend disbursing agent
as the Board reasonably requests or the Administrator deems appropriate; (x)
establish the accounting policies of the Fund; reconcile accounting issues which
may arise with respect to the Fund's operations; consult with the Fund's
independent accountants, legal counsel, custodian, accounting agent and transfer
and dividend disbursing agent as necessary in connection therewith; (xi)
determine the amounts available for distribution as dividends and distributions
to shareholders; prepare and arrange for the printing of dividend notices to the
shareholders; and provide the Fund's transfer and dividend disbursing agent and
custodian with such information as is required for such parties to effect the
payment of dividends and distributions and to implement the Fund's dividend
reinvestment plan; (xii) review the Fund's bills and authorize payments of such
bills by the Fund's custodian; and (xiii) if requested by the Board, designate
one of its employees to serve as an officer of the Fund, and such person shall
not be compensated by the Fund for so serving.
For the services rendered to the Fund and related expenses borne by the
Administrator, the Fund pays the Administrator a fee, calculated and paid
weekly, at the annualized rate of .20% of the Fund's net assets at the end of
that week. During the fiscal years ended October 31, 1995, 1996 and 1997, the
Fund paid administration fees to the Administrator of $102,379, $106,520 and
$110,613, respectively.
1(e). The Bank of New York, 48 Wall Street, New York, New York, acts as
the custodian (the "Custodian") for the Fund's assets held in the United States.
The Adviser and its affiliates have banking relationships with the Custodian.
The Adviser has represented to the Fund that its banking relationships with the
Custodian have been and will continue to be unrelated to and unaffected by the
relationship between the Fund and the Custodian. It will be the practice of the
Fund to deal with the Custodian in a manner uninfluenced by any banking
relationship the Custodian may have with the Adviser and its affiliates. Rules
adopted under the 1940 Act permit the Fund to maintain its securities and cash
in the custody of certain eligible banks and securities depositories. Pursuant
to those Rules, the Fund's portfolio of securities and cash, when invested in
foreign securities, will be held in foreign banks and securities depositories
approved by the Trustees of the Fund in accordance with the rules of the
Securities and Exchange Commission.
SFSI, a subsidiary of the Adviser, acts as primary transfer agent,
shareholder servicing agent and dividend paying agent for the Fund. Fees paid to
SFSI are based on the number of shareholder accounts and the number of
shareholder transactions, plus out-of-pocket costs and expenses. United Missouri
Trust Company of New York acts as co-transfer agent and co-registrar with SFSI
to provide such services as SFSI may request.
1(f). See 1(b) above.
1(g). Inapplicable.
2. Inapplicable.
3. None as of February 20, 1997.
Item 10. Capital Stock, Long-Term Debt, and Other Securities.
1. The Fund is authorized to issue an unlimited number of Shares of
beneficial interest, $.01 par value. The Fund's Shares have no preemptive,
conversion, exchange or redemption rights. Each Share has equal voting,
dividend, distribution and liquidation rights. All Shares outstanding are, and,
when issued, those offered hereby will be, fully paid and nonassessable.
Shareholders are entitled to one vote per Share. All voting rights for the
election of Trustees are noncumulative, which means that the holders of more
than 50% of the Shares can elect 100% of the Trustees then nominated for
election if they choose to do so and, in such event, the holders of the
remaining Shares will not be able to elect any Trustees. Under the rules of the
NYSE applicable to listed companies, the Fund is required to hold an annual
meeting of shareholders in each year.
Under Massachusetts law, under certain circumstances shareholders could be
held personally liable for the obligations of the Fund. However, the Declaration
of Trust disclaims shareholder liability for actions or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund. The Declaration
of Trust provides for indemnification by the Fund for all losses and expenses of
any shareholder held personally liable for obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund would be unable to meet
its obligations. The likelihood of such circumstances is remote.
Pursuant to the Trust's Dividend Reinvestment and Cash Purchase Plan (the
"Plan"), all dividends and capital gains distributions ("Distributions")
declared by the Trust will be automatically reinvested in additional full and
fractional shares of the Trust ("Shares") unless (i) a shareholder elects to
receive cash or (ii) Shares are held in nominee name, in which event the nominee
should be consulted as to participation in the Plan. Shareholders that
participate in the Plan ("Participants") may, at their option, make additional
cash investments in Shares, semi-annually in amounts of at least $100, through
payment to Shareholder Financial Services, Inc., the agent for the Plan (the
"Agent"), and a service fee of $.75.
Depending upon the circumstances hereinafter described, Plan Shares will
be acquired by the Agent for the Participant's account through receipt of newly
issued Shares or the purchase of outstanding Shares on the open market. If the
market price of Shares on the relevant date (normally the payment date) equals
or exceeds their net asset value, the Agent will ask the Trust for payment of
the Distribution in additional Shares at the greater of the Trust's net asset
value determined as of the date of purchase or 95% of the then-current market
price. If the market price is lower than net asset value, the Distribution will
be paid in cash, which the Agent will use to buy Shares on The New York Stock
Exchange (the "NYSE"), or otherwise on the open market to the extent available.
If the market price exceeds the net asset value before the Agent has completed
its purchases, the average purchase price per Share paid by the Agent may exceed
the net asset value, resulting in fewer Shares being acquired than if the
Distribution had been paid in Shares issued by the Trust.
Participants may elect to withdraw from the Plan at any time and thereby
receive cash in lieu of Shares by sending appropriate written instructions to
the Agent. Elections received by the Agent will be effective only if received
more than ten days prior to the record date for any Distribution; otherwise,
such termination will be effective shortly after the investment of such
Distribution with respect to any subsequent Distribution. Upon withdrawal from
or termination of the Plan, all Shares acquired under the Plan will remain in
the Participant's account unless otherwise requested. For full Shares, the
Participant may either: (1) receive without charge a share certificate for such
Shares; or (2) request the Agent (after receipt by the Agent of signature
guaranteed instructions by all registered owners) to sell the Shares acquired
under the Plan and remit the proceeds less any brokerage commissions and a $2.50
service fee. Fractional Shares may either remain in the Participant's account or
be reduced to cash by the Agent at the current market price with the proceeds
remitted to the Participant. Shareholders who have previously withdrawn from the
Plan may rejoin at any time by sending written instructions signed by all
registered owners to the Agent.
There is no direct charge for participation in the Plan; all fees of the
Agent are paid by the Trust. There are no brokerage charges for Shares issued
directly by the Trust. However, each Participant will pay a pro rata share of
brokerage commissions incurred with respect to open market purchases of Shares
to be issued under the Plan. Participants will receive tax information annually
for their personal records and to assist in Federal income tax return
preparation. The automatic reinvestment of Distributions does not relieve
Participants of any income tax that may be payable on Distributions.
The Plan may be terminated or amended at any time upon 30 days' prior
written notice to Participants which, with respect to a Plan termination, must
precede the record date of any Distribution by the Trust. Additional information
concerning the Plan may be obtained by shareholders holding Shares registered
directly in their names by writing the Agent, Shareholder Financial Services,
Inc., P.O. Box 173673, Denver, CO, 80217-3673 or by calling 1-800-647-7374.
Shareholders holding Shares in nominee name should contact their brokerage firm
or other nominee for more information.
The Fund presently has provisions in its Declaration of Trust and By-Laws
(together, the "Charter Documents") which could have the effect of limiting (i)
the ability of other entities or persons to acquire control of the Fund, (ii)
the Fund's freedom to engage in certain transactions or (iii) the ability of the
Fund's Trustees or shareholders to amend the Charter Documents or effect changes
in the Fund's management. Those provisions of the Charter Documents may be
regarded as "anti-takeover" provisions. Specifically, under the Fund's
Declaration of Trust, the affirmative vote of the holders of not less than two
thirds (66-2/3%) of the Fund's Shares outstanding and entitled to vote is
required to authorize the consolidation of the Fund with another entity, a
merger of the Fund with or into another entity (except for certain mergers in
which the Fund is the successor), a sale or transfer of all or substantially all
of the Fund's assets, the dissolution of the Fund, the conversion of the Fund to
an open-end company, and any amendment of the Fund's Declaration of Trust that
would affect any of the other provisions requiring a two-thirds vote. However, a
"majority" shareholder vote, as defined in the Charter Documents, shall be
sufficient to approve any of the foregoing transactions that have been
recommended by two-thirds of the Trustees. Notwithstanding the foregoing, if a
corporation, person or entity is directly, or indirectly through its affiliates,
the beneficial owner of more than 5% of the outstanding shares of the Fund, the
affirmative vote of 80% (which is higher than that required under the 1940 Act)
of the outstanding Shares of the Fund is required generally to authorize any of
the following transactions or to amend the provisions of the Declaration of
Trust relating to transactions involving: (i) a merge or consolidation of the
Fund with or into any such corporation or entity, (ii) the issuance of any
securities of the Fund to any such corporation, person or entity for cash; (iii)
the sale, lease or exchange of all or any substantial part of the assets of the
Fund to any such corporation, entity or person (except assets having an
aggregate market value of less than $1,000,000); or (iv) the sale, lease or
exchange to the Fund, in exchange for securities of the Fund, of any assets of
any such corporation, entity or person (except assets having an aggregate fair
market value of less than $1,000,000). If two- thirds of the Board of Trustees
has approved a memorandum of understanding with such beneficial owner, however,
a majority shareholder vote will be sufficient to approve the foregoing
transactions. Reference is made to the Charter Documents of the Fund, on file
with the Securities and Exchange Commission, for the full text of these
provisions.
2. Inapplicable.
3. Inapplicable.
4. The Fund qualified for treatment as, and elected to be, a regulated
investment company ("RIC") under Subchapter M of the Internal Revenue Code for
its taxable year ended October 31, 1997, and intends to continue to qualify as a
RIC for each subsequent taxable year. However, the Fund reserves the right not
to qualify under Subchapter M as a RIC in any year or years.
For each taxable year that the Fund qualifies for treatment as a RIC, the
Fund (but not its shareholders) will not be required to pay Federal income tax.
Shareholders will normally have to pay Federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions derived from net investment income or
short-term capital gains are taxable to the shareholder as ordinary dividend
income regardless of whether the shareholder receives such distributions in
additional Shares or in cash. Since the Fund's income is expected to be derived
primarily from interest rather than dividends, only a small portion, if any, of
such dividends and distributions is expected to be eligible for the Federal
dividends-received deduction available to corporations. The Fund does not
anticipate that any portion of its dividends or distributions will qualify for
pass-through treatment as "exempt-interest dividends" since less than 50% of its
assets is permitted to be invested in municipal obligations.
Long-term or short-term capital gains may be generated by the sale of
portfolio securities and by transactions in options and futures contracts.
Distributions of long-term capital gains, if any, are taxable to shareholders as
long-term capital gains regardless of how long a shareholder has held the Fund's
shares and regardless of whether the distribution is received in additional
shares or in cash. For Federal income tax purposes, if a capital gain
distribution is received with respect to Shares held for six months or less, any
loss on a subsequent sale or exchange of such Shares will be treated as
long-term capital loss to the extent of such long-term capital gain
distribution. Capital gains distributions are not eligible for the
dividends-received deduction.
Any dividend or capital gains distribution received by a shareholder from
an investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
dividends are subject to Federal income taxes. If the net asset value of the
Shares should be reduced below a shareholder's cost as a result of the payment
of dividends or realized long-term capital gains, such payment would be a return
of the shareholder's investment capital to the extent of such reduction below
the shareholder's cost, but nonetheless could be fully taxable.
The tax treatment of listed put and call options written or purchased by
the Fund on debt securities and of future contracts entered into by the Fund
will be governed by Section 1256 of the Internal Revenue Code. Absent a tax
election to the contrary, each such position held by the Fund will be
marked-to-market (i.e., treated as if it were closed out) on the last business
day of each taxable year of the Fund, and all gain or loss associated with
transactions in such positions will be treated as 60% long-term capital gain or
loss and 40% short-term capital gain or loss. Positions of the Fund which
consist of at least one debt security and at least one option or futures
contract which substantially diminishes the Fund's risk of loss with respect of
such debt security could be treated as "mixed straddles" which are subject to
the straddle rules of Section 1092 of the Code, the operation of which may cause
deferral of losses, adjustments in the holding periods of debt securities and
conversion of short-term capital losses into long-term capital losses. Certain
tax elections exist for mixed straddles which reduce or eliminate the operation
of the straddle rules. The Fund will monitor its transactions in options and
futures contracts and may make certain tax elections in order to mitigate the
effect of these rules and prevent disqualification of the Fund as a regulated
investment company under Subchapter M of the Code. Such tax election may result
in an increase in distribution of ordinary income (relative to long-term capital
gains) to shareholders.
The Internal Revenue Code requires that a holder (such as the Fund) of a
zero coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the Fund receives no interest payment
in cash on the security during the year. As an investment company, the Fund must
pay out substantially all of its net investment income each year. Accordingly,
the Fund may be required to pay out as an income distribution each year an
amount which is greater than the total amount of cash interest the Fund actually
received. Such distributions will be made from the cash assets of the Fund or by
liquidation of portfolio securities, if necessary. If a distribution of cash
necessitates the liquidation of portfolio securities, the Adviser will select
which securities to sell. The Fund may realize a gain or loss from such sales.
In the event the Fund realizes net capital gains from such transactions, its
shareholders may receive a larger capital gain distribution than they would in
the absence of such transactions.
It is the Fund's present policy, which may be changed by the Board of
Trustees, to pay monthly dividends to shareholders from net investment income of
the Fund. The Fund intends to distribute all of its net investment income on an
annual basis. The Fund will distribute all of its net realized long-term and
short-term capital gains, if any, at least once per year. The Fund may, but is
not required to, make such distributions on a more frequent basis to the extent
permitted by applicable law and regulations.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute a specified minimum percentage (currently 98%) of its taxable
investment income earned from January 1 through December 31 of that year and 98%
of its capital gains realized in the period from November 1 of the prior year
through October 31 of that year, or else the Fund must pay an excise tax on
amounts not distributed. While it is presently anticipated that the Fund will
meet those requirements, the Fund's Board and the Adviser might determine in a
particular year it would be in the best interests of the Fund not to make such
distributions at the mandated level and to pay the excise tax which would reduce
the amount available for distributions to shareholders. If the Fund pays a
dividend in January which was declared in the previous December to shareholders
of record on a date in December, then such dividend or distribution will be
treated for tax purposes as being paid in December and will be taxable to
shareholders as if received in December.
Under the Plan, all of the Fund's dividends and distributions to
shareholders will be reinvested in full and fractional Shares. With respect to
distributions made in Shares issued by the Fund pursuant to the Plan, the amount
of the distribution for tax purposes is the fair market value of the Shares
issued on the reinvestment date. In the case of Shares purchased on the open
market, a participating shareholder's tax basis in each Share is its cost. In
the case of Shares issued by the Fund, the shareholder's tax basis in each Share
received is its fair market value on the reinvestment date.
Distributions of investment company taxable income to shareholders who are
nonresident alien individuals or foreign corporations will generally be subject
to a 30% United States withholding tax under provisions of the Internal Revenue
Code applicable to foreign individuals and entities, unless a reduced rate of
withholding or a withholding exemption is provided under an applicable treaty.
Under Section 988 of the Code, foreign currency gain or loss with respect
to foreign currency-denominated debt instruments and other foreign
currency-denominated positions held or entered into by the Fund will be ordinary
income or loss. In addition, foreign currency gain or loss realized with respect
to certain foreign currency "hedging" transactions will be treated as ordinary
income or loss.
5. The following information is provided as of February 20, 1998:
(1) (2) (3) (4)
Amount Amount
Held by Outstanding
Registrant Exclusive of
Amount or for its Amount Shown
Title of Class Authorized Account Under (3)
- -------------- ---------- ---------- ------------
Shares of Beneficial Unlimited None 6,615,505
Interest, $.01 par value
Item 11. Defaults and Arrears on Senior Securities.
Inapplicable.
Item 12. Legal Proceedings.
Inapplicable.
Item 13. Table of Contents of the Statement of Additional Information.
Reference is made to Item 15 of the Statement of Additional Information.
-1-
<PAGE>
APPENDIX A
Descriptions of Ratings Categories
Municipal Bonds
|X| Moody's Investor Services, Inc. The ratings of Moody's Investors Service,
Inc. ("Moody's") for Municipal Bonds are Aaa, Aa, A, Baa, Ba, B, Caa, Ca and C.
Municipal Bonds rated "Aaa" are judged to be of the "best quality." The rating
of Aa is assigned to bonds which are of "high quality by all standards," but as
to which margins of protection or other elements make long-term risks appear
somewhat larger than "Aaa" rated Municipal Bonds. The "Aaa" and "Aa" rated bonds
comprise what are generally known as "high grade bonds." Municipal Bonds which
are rated "A" by Moody's possess many favorable investment attributes and are
considered "upper medium grade obligations." Factors giving security to
principal and interest of A rated bonds are considered adequate, but elements
may be present which suggest a susceptibility to impairment at some time in the
future. Municipal Bonds rated "Baa" are considered "medium grade" obligations.
They are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds which are rated "Ba" are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bonds
which are rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Bonds which are rated
"Caa" are of poor standing. Such issues may be in default or there may be
present elements of danger with respect to principal or interest. Bonds which
are rated "Ca" represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings. Bonds which
are rated "C" are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Those bonds in the Aa, A, Baa, Ba and B groups which
Moody's believes possess the strongest investment attributes are designated Aa1,
A1, Baa1, Ba1 and B1 respectively.
In addition to the alphabetic rating system described above, Municipal
Bonds rated by Moody's which have a demand feature that provides the holder with
the ability to periodically tender ("put") the portion of the debt covered by
the demand feature, may also have a short-term rating assigned to such demand
feature. The short-term rating uses the symbol VMIG to distinguish
characteristics which include payment upon periodic demand rather than fund or
scheduled maturity dates and potential reliance upon external liquidity, as well
as other factors. The highest investment quality is designated by the VMIG 1
rating and the lowest by VMIG 4.
|X| Standard & Poor's Corporation. The ratings of Standard & Poor's Corporation
("S&P") for Municipal Bonds are AAA (Prime), AA (High Grade), A (Good Grade),
BBB (Medium Grade), BB, B, CCC, CC, and C (speculative grade). Bonds rated in
the top four categories (AAA, AA, A, BBB) are commonly referred to as
"investment grade." Municipal Bonds rated AAA are "obligations of the highest
quality." The rating of AA is accorded issues with investment characteristics
"only slightly less marked than those of the prime quality issues." The rating
of A describes "the third strongest capacity for payment of debt service."
Principal and interest payments on bonds in this category are regarded as safe.
It differs from the two higher ratings because, with respect to general
obligations bonds, there is some weakness, either in the local economic base, in
debt burden, in the balance between revenues and expenditures, or in quality of
management. Under certain adverse circumstances, any one such weakness might
impair the ability of the issuer to meet debt obligations at some future date.
With respect to revenue bonds, debt service coverage is good, but not
exceptional. Stability of the pledged revenues could show some variations
because of increased competition or economic influences on revenues. Basic
security provisions, while satisfactory, are less stringent. Management
performance appears adequate. The BBB rating is the lowest "investment grade"
security rating. The difference between A and BBB ratings is that the latter
shows more than one fundamental weakness, or one very substantial fundamental
weakness, whereas the former shows only one deficiency among the factors
considered. With respect to revenue bonds, debt coverage is only fair. Stability
of the pledged revenues could show variations, with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger. Bonds rated "BB" have less
near-term vulnerability to default than other speculative issues. However, it
faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions which would lead to inadequate capacity to meet timely
interest and principal payments. Bonds rated "B" have a greater vulnerability to
default, but currently has the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. Bonds rated
"CCC" have a current identifiable vulnerability to default, and is dependent
upon favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. Bonds noted "CC" typically are
debt subordinated to senior debt which is assigned on actual or implied "CCC"
debt rating.
Bonds rated "C" typically are debt subordinated to senior debt which is
assigned an actual or implied "CCC-" debt rating. The "C" rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued. Bonds rated "D" are in payment default. The "D" rating
category is used when interest payments or principal payments are not made on
the date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during the grace period. The "D" rating
also will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
The ratings from AA to CCC may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
|X| Fitch. The ratings of Fitch Investors Service, Inc. for Municipal Bonds are
AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD, and D. Municipal Bonds rated AAA
are judged to be of the "highest credit quality." The rating of AA is assigned
to bonds of "very high credit quality." Municipal Bonds which are rated A by
Fitch are considered to be of "high credit quality." The rating of BBB is
assigned to bonds of "satisfactory credit quality." The A and BBB rated bonds
are more vulnerable to adverse changes in economic conditions than bonds with
higher ratings. Bonds rated AAA, AA, A and BBB are considered to be of
investment grade quality. Bonds rated below BBB are considered to be of
speculative quality. The ratings of "BB" is assigned to bonds considered by
Fitch to be "speculative." The rating of "B" is assigned to bonds considered by
Fitch to be "highly speculative." Bonds rated "CCC" have certain identifiable
characteristics which, if not remedied, may lead to default. Bonds rated "CC"
are minimally protected. Default in payment of interest and/or principal seems
probable over time. Bonds rated "C" are in imminent default in payment of
interest or principal. Bonds rated "DDD", "DD" and "D" are in default on
interest and/or principal payments. DDD represents the highest potential for
recovery on these bonds, and D represents the lowest potential for recovery.
o Duff & Phelps. The ratings of Duff & Phelps are as follows: AAA which are
judged to be the "highest credit quality". The risk factors are negligible,
being only slightly more than for risk-free US Treasury debt. AA+, AA & AA- High
credit quality protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions. A+, A & A-Protection
factors are average but adequate. However, risk factors are more variable and
greater in periods of economic stress. BBB+, BBB & BBB- Below average protection
factors but still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles. BB+, BB & BB- Below investment grade
but deemed to meet obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently within the category.
B+, B & B- Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade. CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal interest or preferred
dividends. Protection factors are narrow and risk can be substantial with
unfavorable economic industry conditions, and/or with unfavorable company
developments. DD Defaulted debt obligations issuer failed to meet scheduled
principal and/or interest payments. DP Preferred stock with dividend averages.
Municipal Notes
|X| Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG"). Notes bearing the
designation MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for financing. Notes bearing the designation
"MIG-2" are of high quality with ample margins of protection, although not as
large as notes rated "MIG." Such short-term notes which have demand features may
also carry a rating using the symbol VMIG as described above, with the
designation MIG-1/VMIG 1 denoting best quality, with superior liquidity support
in addition to those characteristics attributable to the designation MIG-1.
|X| S&P's rating for Municipal Notes due in three years or less are SP-1,
SP-2, and SP-3. SP-1 describes issues with a very strong capacity to pay
principal and interest and compares with bonds rated A by S&P; if modified by a
plus sign, it compares with bonds rated AA or AAA by S&P. SP-2 describes issues
with a satisfactory capacity to pay principal and interest, and compares with
bonds rated BBB by S&P. SP-3 describes issues that have a speculative capacity
to pay principal and interest.
|X| Fitch's rating for Municipal Notes due in three years or less are F-1+,
F-1, F-2, F-3, F-S and D. F-1+ describes notes with an exceptionally strong
credit quality and the strongest degree of assurance for timely payment. F-1
describes notes with a very strong credit quality and assurance of timely
payment is only slightly less in degree than issues rated F-1+. F-2 describes
notes with a good credit quality and a satisfactory assurance of timely payment,
but the margin of safety is not as great for issues assigned F-1+ or F-1
ratings. F-3 describes notes with a fair credit quality and an adequate
assurance of timely payment, but near-term adverse changes could cause such
securities to be rated below investment grade. F-S describes notes with weak
credit quality. Issues rated D are in actual or imminent payment default.
Corporate Debt
The "other debt securities" included in the definition of temporary
investments are corporate (as opposed to municipal) debt obligations.
The Moody's, S&P and Fitch corporate debt ratings shown do not differ
materially from those set forth above for Municipal Bonds.
Commercial Paper
|X| Moody's The ratings of commercial paper by Moody's are Prime-1,
Prime-2, Prime-3 and Not Prime. Issuers rated Prime-1 have a superior capacity
for repayment of short-term promissory obligations. Issuers rated Prime-2 have a
strong capacity for repayment of short-term promissory obligations. Issuers
rated Prime-3 have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime rating
categories.
|X| S&P The ratings of commercial paper by S&P are A-1, A-2, A-3, B, C,
and D. A-1 indicates that the degree of safety regarding timely payment is
strong. A-2 indicates capacity for timely payment is satisfactory. However, the
relative degree of safety is not as high as for issues designated A-1. A-3
indicates an adequate capacity for timely payments. They are, however, more
vulnerable to the adverse effects of changes in circumstances than obligations
carrying the higher designations. B indicates only speculative capacity for
timely payment. C indicates a doubtful capacity for payment. D is assigned to
issues in default.
|X| Fitch The ratings of commercial paper by Fitch are similar to its
ratings of Municipal Notes, above.
-2-
<PAGE>
Oppenheimer World Bond Fund
(formerly "Oppenheimer Multi-Government Trust")
Two World Trade Center, New York, New York 10048-0203
1-800-525-7048
Statement of Additional Information dated February 26, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 26, 1998. It should be read
together with the Prospectus, and the Registration Statement on Form N-2, of
which the Prospectus and this Statement of Additional Information are a part,
can be inspected and copied at public reference facilities maintained by the
Securities and Exchange Commission (the "SEC") in Washington, D.C. and certain
of its regional offices, and copies of such materials can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, SEC, Washington, D.C., 20549.
TABLE OF CONTENTS
Page
Investment Objective and Policies*
Management..............................................................
Control Persons and Principal Holders of Securities.....................
Investment Advisory and Other Services*
Brokerage Allocation and Other Practices................................
Tax Status*
Financial Statements....................................................
- --------------------
*See Prospectus
-3-
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 14. Cover Page.
Reference is made to the preceding page.
Item 15. Table of Contents.
Reference is made to the preceding page and to Items 16 through 23 of the
Statement of Additional Information set forth below.
Item 16. General Information and History.
Inapplicable.
Item 17. Investment Objective and Policies.
Reference is made to Item 8 of the Prospectus.
Item 18. Management.
-4-
<PAGE>
1. and 2. The Fund's Trustees and officers and their principal occupations
and business affiliations during the past five years are set forth below. The
address for each Trustee and officer is Two World Trade Center, New York, New
York 10048-0203, unless another address is listed below. All of the Trustees are
also trustees or directors of Oppenheimer Enterprise Fund, Oppenheimer Growth
Fund, Oppenheimer Global Fund, Oppenheimer Municipal Bond Fund, Oppenheimer
Money Market Fund, Inc., Oppenheimer Capital Appreciation Fund, Oppenheimer U.S.
Government Trust, Oppenheimer New York Municipal Fund, Oppenheimer California
Municipal Fund, Oppenheimer Multi-State Municipal Trust, Oppenheimer Multiple
Strategies Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer Global
Growth & Income Fund, Oppenheimer Discovery Fund, Oppenheimer International
Small Company Fund, Oppenheimer International Growth Fund, Oppenheimer
Developing Markets Fund, Oppenheimer Series Fund, Inc., and Oppenheimer Multi-
Sector Income Trust (collectively, the "New York-based Oppenheimer funds"),
except that Ms. Macaskill is not a director of Oppenheimer Money Market Fund,
Inc. Ms. Macaskill and Messrs. Spiro, Donohue, Bishop, Bowen, Farrar and Zack
hold the same respective offices with the New York-based Oppenheimer funds as
with the Fund. As of February 20, 1998, the Trustees and officers of the Fund as
a group owned less than 1% of the Fund's outstanding shares. That statement does
not include ownership of shares held of record by an employee benefit plan for
employees of the Adviser (one of the Trustees of the Fund listed below, Ms.
Macaskill, and one of the officers, Mr. Donohue, are trustees of that plan)
other than the shares beneficially owned under that plan by the officers of the
Fund listed above.
Leon Levy, Chairman of the Board of Trustees; Age: 72
31 West 52nd Street, New York, NY 10019
General Partner of Odyssey Partners, L.P. (investment
partnership)(since 1982) and Chairman of Avatar Holdings, Inc.
(real estate development).
Robert G. Galli, Trustee; Age: 64
19750 Beach Road, Jupiter Island, FL 33469
Formerly he held the following positions: Vice Chairman of OppenheimerFunds,
Inc. (the "Manager") (October 1995 to December 1997), Vice President (June 1990
to March 1994) and Counsel of Oppenheimer Acquisition Corp. ("OAC"), the
Manager's parent holding company; Executive Vice President (December 1977 to
October 1995), General Counsel and a director (December 1975 to October 1993) of
the Manager; Executive Vice President and a director of OppenheimerFunds
Distributor, Inc. (the "Distributor") (July 1978 to October 1993); Executive
Vice President and a director of HarbourView Asset Management Corporation
("HarbourView") (April 1986 to October 1995), an investment adviser subsidiary
of the Manager; Vice President and a director (October 1988 to October
1993) and Secretary (March 1981 to September 1988) of Centennial Asset
Management Corporation ("Centennial"), an investment adviser subsidiary of the
Manager; A director (November 1989 to October 1993) and Executive Vice President
(November 1989 to January 1990) of Shareholder Financial Services, Inc.
("SFSI"), a transfer agent subsidiary of the Manager; a director of Shareholder
Services, Inc. ("SSI") (August 1984 to October 1993), a transfer agent
subsidiary of the Manager; an officer of other Oppenheimer funds.
Benjamin Lipstein, Trustee; Age: 74
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business
Administration, New York University; a director of Sussex
Publishers, Inc (Publishers of Psychology Today and Mother Earth
News) and of Spy Magazine, L.P.
Bridget A. Macaskill, President and Trustee*; Age: 49 President (since June
1991), Chief Executive Officer (since September 1995) and a Director (since
December 1994) of the Adviser; President and director (since June 1991) of
HarbourView; Chairman and a director of SSI (since August 1994), and SFSI
(September 1995); President (since September 1995) and a director (since October
1990) of OAC; President (since September 1995) and a director (since November
1989) of Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of
the Adviser; a director of Oppenheimer Real Asset Management, Inc. (since July
1996); President and a director (since October 1997) of OppenheimerFunds
International Ltd., an offshore fund adviser subsidiary of the Adviser ("OFIL")
and Oppenheimer Millennium Funds plc (since October 1997); President and a
director of other Oppenheimer funds; a director of the NASDAQ Stock Market, Inc.
and of Hillsdown Holdings plc (a U.K. food company); formerly an Executive Vice
President of the Adviser.
Elizabeth B. Moynihan, Trustee; Age: 68
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery
of Art (Smithsonian Institution), the Institute of Fine Arts (New
York University), National Building Museum; a member of the
Trustees Council, Preservation League of New York State, and of the
Indo-U.S. Sub-Commission on Education and Culture.
Kenneth A. Randall, Trustee; Age: 70
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company),
Dominion Energy, Inc. (electric power and oil & gas producer), Texas
Cogeneration Company (cogeneration company), Prime Retail, Inc. (real estate
investment trust); formerly President and Chief Executive Officer of The
Conference Board, Inc.
(international economic and business research) and a director of Lumbermens
Mutual Casualty Company, American Motorists Insurance Company and American
Manufacturers Mutual Insurance Company.
Edward V. Regan, Trustee; Age: 67
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior
Fellow of Jerome Levy Economics Institute, Bard College; a member of the U.S.
Competitiveness Policy Council; a director of GranCare, Inc. (health care
provider); a director of River Bank America (real estate manager); Trustee,
Financial Accounting Foundation (FASB and GASB); formerly New York State
Comptroller and trustee, New York State and Local Retirement Fund.
Russell S. Reynolds, Jr., Trustee; Age: 66
8 Sound Shore Drive, Greenwich, Connecticut 06830
Founder Chairman of Russell Reynolds Associates, Inc. (executive
recruiting); Chairman of Directorship Inc. (corporate governance
consulting); a director of Professional Staff Limited (U.K); a
trustee of Mystic Seaport Museum, International House and
Greenwich Historical Society.
Donald W. Spiro, Vice Chairman and Trustee*; Age: 72
Chairman Emeritus (since August 1991) and a director (since January
1969) of the Adviser; formerly Chairman of the Adviser and the
Distributor.
Pauline Trigere, Trustee; Age: 85
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of Trigere, Inc. (design and
sale of women's fashions).
Clayton K. Yeutter, Trustee; Age: 67
1325 Merrie Ridge Road, McLean, Virginia 22101
Of Counsel, Hogan & Hartson (a law firm); a director of B.A.T.
Industries, Ltd. (tobacco and financial services), Caterpillar,
Inc. (machinery), ConAgra, Inc. (food and agricultural products),
Farmers Insurance Company (insurance), FMC Corp. (chemicals and
machinery) and Texas Instruments, Inc. (electronics); formerly (in
descending chronological order) Counsellor to the President (Bush)
for Domestic Policy, Chairman of the Republican National Committee,
Secretary of the U.S. Department of Agriculture, and U.S. Trade
Representative.
Andrew J. Donohue, Secretary; Age: 47
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Adviser; Executive Vice
President (since September 1993) and a director (since January 1992) of the
Distributor; Executive Vice President, General Counsel and a director of
HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings, Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
a director of OFIL and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
George C. Bowen, Treasurer; Age: 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Adviser; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991)and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); a trustee or director and an officer of
other Oppenheimer funds.
Thomas P. Reedy, Vice President and Portfolio Manager; Age 36 Vice President of
the Adviser; an officer of other Oppenheimer funds; formerly a Securities
Analyst of the Adviser.
Ashwin Vasan, Vice President and Portfolio Manager; Age 35 Vice President of the
Adviser; and officer of other Oppenheimer funds; formerly, a Securities Ananlyst
of the Adviser(since January 1992).
Robert J. Bishop, Assistant Treasurer; Age: 39 6803 South Tucson Way, Englewood,
Colorado 80112 Vice President of the Adviser/Mutual Fund Accounting (since May
1996); an officer of other Oppenheimer funds; formerly an Assistant Vice
President of the Adviser/Mutual Fund Accounting (April 1994-May 1996), and a
Fund Controller for the Adviser.
Scott T. Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Adviser/Mutual Fund Accounting (since May
1996); Assistant Treasurer of Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds; formerly an Assistant Vice
President of the Adviser/Mutual Fund Accounting (April 1994-May 1996), and a
Fund Controller for the Adviser.
Robert G. Zack, Assistant Secretary; Age: 49 Senior Vice President (since May
1985) and Associate General Counsel (since May 1981) of the Adviser, Assistant
Secretary of SSI (since May 1985), and SFSI (since November 1989); Assistant
Secretary of Oppenheimer Millennium Funds plc (since October 1997);
an officer of other Oppenheimer funds.
The Board of Trustees does not have an executive or investment committee.
The Trustees of the Fund have appointed a study committee consisting of Mr.
Lipstein (Chairman), Mrs. Moynihan and Mr. Galli, none of whom is an "affiliated
person" of the Adviser or the Fund. The study committee's function is to report
to the Board on matters that include (i) legal and regulatory developments, (ii)
periodic renewals of the Advisory Agreement, (iii) review of the transfer agent
and registrar agreement, (iv) review of the administrative services provided by
Mitchell Hutchins Asset Management, Inc., (v) portfolio management, (vi)
valuation of portfolio securities, (vii) custodian relationships and use of
foreign subcustodians, (viii) code of ethics matters, policy on use of insider
information, (ix) consideration of tender offers and other repurchases of fund
shares and possible conversion to open-end status, and (x) indemnification and
insurance of the Fund's officers and trustees.
3. Inapplicable.
4. The officers of the Fund and certain Trustees of the Fund (Ms.
Macaskill and Mr. Spiro) who are affiliated with the Adviser receive no salary
or fee from the Fund. Mr. Galli received no salary or fee prior to January 1,
1998. The remaining Trustees of the Fund received the compensation shown below.
The compensation from the Fund was paid during its fiscal year ended October 31,
1997. The compensation from all of the New York-based Oppenheimer funds includes
the Fund and is compensation received as a director, trustee or member of a
committee of the Board during the 1997 calendar year.
Retirement Total
Aggregate Benefits Compensation
Compensation Accrued as From All New
From Fund(1) Part of Fund York based
Expenses Oppenheimerfunds(3)
Name and
Position
Leon Levy, $0 $80 $158,500
Chairman and Trustee
Benjamin Lipstein $0 $69 $137,000
Study Committee
Chairman, Audit
Committee Member
and Trustee(2)
Elizabeth B. Moynihan $0 $49 $96,500
Study Committee
Member and Trustee
Kenneth A. Randall $0 $45 $88,500
Audit Committee
Chairman and Trustee
Edward V. Regan $0 $44 $87,500
Proxy Committee
Chairman, Audit
Committee Member
and Trustee
Russell S. Reynolds, Jr. $0 $33 $65,500
Proxy Committee
Member and Trustee
Pauline Trigere,
Trustee $0 $30 $58,500
Clayton K. Yeutter $0 $33 $65,500
Proxy Committee
Member and Trustee
- ----------------------
(1)For the fiscal year ended October 31, 1997.
(2)Committee position held during a portion of the period shown.
(3)For the 1997 calendar year.
The Fund has adopted a retirement plan that provides for payment to a
retired Trustee of up to 80% of the average compensation paid during the
Trustee's five years of service in which the highest compensation was received.
A Trustee must serve in that capacity for any of the New York-based Oppenheimer
funds
for at least 15 years to be eligible for the maximum payment. Because each
Trustees retirement benefits will depend on the amount of the Trustee's future
compensation and length of service, the amount of those benefits cannot be
determined at this time, nor can the Fund estimate the number of years of
credited services that will be used to determine those benefits.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation Plan for disinterested trustees that enables them to elect to defer
receipt of all or a portion of the annual fees they are entitled to receive from
the Fund. Under the plan, the compensation deferred by a Trustee is periodically
adjusted as though an equivalent amount had been invested in shares of one or
more Oppenheimer funds selected by the Trustee. The amount paid to the Trustee
under the plan will be determined based upon the performance of the selected
funds. Deferral of Trustees' fees under the plan will not materially affect the
Fund's assets, liabilities or net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
Item 19. Control Persons and Principal Holders of Securities.
1. Inapplicable.
2. As of February 20, 1998, no person owned of record or was known by the
Fund to own beneficially 5% or more of the outstanding Shares except Paine
Webber Incorporated, 1000 Harbor Boulevard, 6th Floor, Union City, New Jersey
07087-6727, which owned of record 1,567,359 shares for the benefit of their
customers(23.69% of the shares) and Smith Barney, Inc., 388 Greenwich Street,
30th Floor, New York, New York 10013-2375, which owned 452,306 shares for the
benefit of their customers (6.84% of the shares):
3. As of February 20, 1998, the trustees and officers of the Fund as a
group owned less than 1% of the outstanding Shares.
Item 20. Investment Advisory and Other Services.
Reference is made to Item 9 of the Prospectus.
Item 21. Brokerage Allocation and Other Practices.
1 and 2. The Fund paid brokerage commissions during the fiscal years ended
October 31, 1995, 1996 and 1997 in the amounts of $1,333, $4,239 and $5,477,
respectively. The Fund will not effect portfolio transactions through any broker
(i) which is an affiliated person of the Fund, (ii) which is an affiliated
person of such affiliated person or (iii) an affiliated person of which is an
affiliated person of the Fund or its Adviser. There is no principal underwriter
of shares of the Fund. As most purchases of portfolio securities made by the
Fund are principal transactions at net prices, the Fund incurs little or no
brokerage costs. The Fund deals directly with the selling or purchasing
principal or market maker without incurring charges for the services of a broker
on its behalf unless it is determined that a better price or execution may be
obtained by using the services of a broker. Purchases of portfolio securities
from underwriters include a commission or concession paid by the issuer to the
underwriter, and purchases from dealers include a spread between the bid and
asked price. Transactions in foreign securities markets generally involve the
payment of fixed brokerage commissions, which are usually higher than those in
the United States. The Fund seeks to obtain prompt execution of orders at the
most favorable net price.
3. The Advisory Agreement between the Fund and the Adviser (the "Advisory
Agreement") contains provisions relating to the selection of brokers, dealers
and futures commission merchants (collectively referred to as "brokers") for the
Fund's portfolio transactions. The Adviser is authorized by the Advisory
Agreement to employ brokers as may, in its best judgment based on all relevant
factors, implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" (prompt and reliable execution at the most favorable price
obtainable) of such transactions. The Adviser need not seek competitive bidding
but is expected to minimize the commissions paid to the extent consistent with
the interests and policies of the Fund.
Certain other investment companies advised by the Adviser and its
affiliates have investment objectives and policies similar to those of the Fund.
If possible, concurrent orders to purchase or sell the same security by more
than one of the accounts managed by the Adviser or its affiliates are combined.
The transactions effected pursuant to such combined orders are averaged as to
price and allocated in accordance with the purchase or sale orders actually
placed for each account. If transactions on behalf of more than one fund during
the same period increase the demand for securities being purchased or the supply
of securities being sold, there may be an adverse effect on price or quantity.
When the Fund engages in an option transaction, ordinarily the same broker will
be used for the purchase or sale of the option and any transactions in the
security to which the option relates.
Under the Advisory Agreement, if brokers are used for portfolio
transactions, the Adviser may select brokers for their execution and/or research
services, on which no dollar value can be placed. Information received by the
Adviser for those other accounts may or may not be useful to the Fund. The
commissions paid to such dealers may be higher than another qualified dealer
would have charged if a good faith determination is made by the Adviser that the
commission is reasonable in relation to the services provided. Subject to
applicable regulations, sales of shares of the Fund and/or investment companies
advised by the Adviser or its affiliates may also be considered as a factor in
directing transactions to brokers, but only in conformity with the price,
execution and other considerations and practices discussed above.
Such research, which may be provided by a broker through a third party,
includes information on particular companies and industries as well as market,
economic or institutional activity areas. It serves to broaden the scope and
supplement the research activities of the Adviser, to make available additional
views for consideration and comparisons, and to enable the Adviser to obtain
market information for the valuation of securities held in the Fund's portfolio
or being considered for purchase.
4. During the fiscal year ended October 31, 1997, $595 was paid in
commissions related to brokerage transactions that were directed to brokers
because of research provided.
5. Inapplicable.
Item 22. Tax Status.
Reference is made to Item 10 of the Prospectus.
Item 23. Financial Statements.
1. Statement of Investments
2. Statement of Assets and Liabilities
3. Statement of Operations
4. Statements of Changes in Net Assets
5. Financial Highlights
6. Notes to Financial Statements
7. Independent Auditors' Report
8. Independent Auditors' Consent
-5-
<PAGE>
INDEPENDENT AUDITORS' REPORT
Oppenheimer World Bond Fund
The Board of Trustees and Shareholders of
Oppenheimer World Bond Fund:
We have audited the accompanying statements of investments and assets and
liabilities of Oppenheimer World Bond Fund as of October 31, 1997, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the years in the two-year period then ended
and the financial highlights for each of the years in the five-year period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers; and where
confirmations were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer World Bond Fund as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
November 21, 1997
<PAGE>
STATEMENT OF INVESTMENTS October 31, 1997
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS -- 18.6%
GOVERNMENT AGENCY -- 15.1%
FHLMC/FNMA/Sponsored -- 8.8%
Federal Home Loan Mortgage Corp.:
Collateralized Mtg. Obligations, Gtd. Multiclass Mtg. Participation
Certificates, Series 1343, Cl. LA, 8%, 8/15/22 . . . . . . . . . . . $ 229,000 $
252,188
Government National Mortgage Assn., Gtd. Multiclass Mtg.
Participation Certificates, Series 26, Cl. B, 6%, 5/25/15(2) . . . . 2,403,999
2,342,857
Interest-Only Stripped Mtg.-Backed Security, Series 177,
Cl. B, 9.554%-10.045%, 7/1/26(3) . . . . . . . . . . . . . . . . . . 2,275,396
704,306
Mtg.-Backed Certificates:
11.50%, 1/1/18 . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,466 87,357
13%, 5/1/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404,681 479,718
Federal National Mortgage Assn.:
7%, 11/25/27(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220,000 220,688
Gtd. Real Estate Mtg. Investment Conduit Pass-Through
Certificates:
Trust 1992-162, Cl. C, 7%, 10/25/21 . . . . . . . . . . . . . . . . 350,000
355,796
Trust 1997-27, Cl. J, 7.50%, 4/18/27 . . . . . . . . . . . . . . . . 109,540
116,706
Trust 1997-5, Cl. B, 7%, 9/18/17 . . . . . . . . . . . . . . . . . . 232,000
236,899
Sr. Unsub. Medium-Term Nts., 6.50%, 7/10/02(AUD) . . . . . . . . . . . . 40,000
29,011
-----------
4,825,526
-----------
GNMA/Guaranteed -- 6.3%
Government National Mortgage Assn.:
11%, 10/20/19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122,727 140,715
7.50%, 1/15/26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502,789 514,434
7.50%, 11/1/27(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,556,250
7.50%, 5/15/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,110 56,525
Collateralized Mtg. Obligations, Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates, Series 1994-5, Cl. PQ, 7.493%,
7/16/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 159,377
-----------
3,427,301
-----------
PRIVATE -- 3.5%
Commercial -- 2.1%
Asset Securitization Corp., Commercial Mtg. Pass-Through
Certificates, Series 1996-MD6, Cl. A5, 6.957%, 11/13/26(5) . . . . . . 200,000
209,406
Commercial Mortgage Acceptance Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 1996-C1, Cl. X-2, 0.981%, 12/25/20(3)(6)(7)
6,208,300 180,429
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-C1, Cl. E, 7.51%, 2/15/28(5)(6) . . . . . . . 553,342
538,298
Resolution Trust Corp., Commercial Mtg. Pass-Through Certificates,
Series 1995-C1, Cl. F, 6.90%, 2/25/27 . . . . . . . . . . . . . . . . . 153,799
144,319
</TABLE>
3
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
Commercial (continued)
Structured Asset Securities Corp., Multiclass Pass-Through
Certificates, Series 1995-C4, Cl. E, 8.776%, 6/25/26(5)(6) . . . . . . $ 100,000
$ 104,250
-----------
1,176,702
-----------
Multi-Family -- 0.4%
Mortgage Capital Funding, Inc., Multifamily Mtg. Pass-Through
Certificates, Series 1996-MC1, Cl. G, 7.15%, 6/15/06(8) . . . . . . . . 250,000
241,250
-----------
Residential -- 1.0%
CS First Boston Mortgage Securities Corp., Mtg. Pass-Through
Certificates, Series 1997-C1, Cl. E, 7.50%, 3/1/11(6) . . . . . . . . . 190,000
193,325
First Chicago/Lennar Trust 1, Commercial Mtg. Pass-Through
Certificates, Series 1997-CHL1, 8.134%, 7/25/06(5)(6) . . . . . . . . . 200,000
206,812
First Union-Lehman Brothers Commercial Mortgage Trust, Interest-
Only Stripped Mtg.-Backed Security, Series 1997-C1, 6.772%,
4/18/27(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 883,995 70,461
Salomon Brothers, Inc., Series 1997-TZH, Cl. D, 7.902%, 3/25/22(6) . . . . 50,000
53,219
-----------
523,817
-----------
Total Mortgage-Backed Obligations (Cost $9,909,465) . . . . . . . . . . . .
10,194,596
-----------
U.S. GOVERNMENT OBLIGATIONS -- 15.1%
U.S. Treasury Bonds, STRIPS, Zero Coupon, 6.52%, 8/15/22(9) . . . . . . . .
1,000,000 213,432
U.S. Treasury Nts.:
6.125%, 8/31/98(2) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,247,000 2,257,534
6.25%, 2/15/03(10) . . . . . . . . . . . . . . . . . . . . . . . . . . 707,000 722,024
6.375%, 8/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,331,000 1,365,524
7.50%, 10/31/99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,000 201,764
7.75%, 1/31/00(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,385,000 2,488,600
9.25%, 8/15/98(10) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,028,126
-----------
Total U.S. Government Obligations (Cost $8,188,685) . . . . . . . . . . . .
8,277,004
-----------
FOREIGN GOVERNMENT OBLIGATIONS -- 33.0%
Argentina -- 1.2%
Argentina (Republic of) Bonds, 5%, 12/20/02 (JPY) . . . . . . . . . . . . . 65,000,000
499,384
Argentina (Republic of) Floating Rate Bonds, Series L, 6.688%,
3/31/05(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,000 142,800
-----------
642,184
-----------
Australia -- 1.9%
Queensland Treasury Corp. Exchangeable Gtd. Nts.:
8%, 5/14/03(AUD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 38,840
8%, 8/14/01(AUD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 19,026
Treasury Corp. of Victoria Gtd. Bonds, 8.25%, 10/15/03(AUD) . . . . . . . . 1,230,000
965,697
-----------
1,023,563
-----------
</TABLE>
4
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
Canada -- 1.2%
Canada (Government of) Bonds, 5.50%, 9/1/02(CAD). . . . . . . . . . . . . . 880,000
$ 638,748
----------
Cayman Islands -- 0.5%
Pera Financial Services Sec. Nts., 9.375%, 10/15/02(8) . . . . . . . . . . 290,000
271,513
----------
Colombia -- 0.5%
Colombia (Republic of) Unsec. Unsub. Bonds, 8.375%, 2/15/27 . . . . . . . . 125,000
115,155
Financiera Energetica Nacional SA Nts., 9.375%, 6/15/06 . . . . . . . . . . 140,000
141,312
----------
256,467
----------
Costa Rica -- 0.4%
Banco Central Costa Rica Interest Claim Bonds, Series A, 6.539%,
5/21/05(5)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,150 209,550
----------
Germany -- 5.8%
Germany (Republic of) Bonds:
7.375%, 12/2/02(DEM) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,090,000
696,310
Series 123, 4.50%, 5/17/02(DEM) . . . . . . . . . . . . . . . . . . . . 2,800,000
1,601,764
Series JA07, Zero Coupon, 4.255%, 1/4/01(2)(9)(DEM) . . . . . . . . . . 1,180,000
592,476
Series JA07, Zero Coupon, 5.758%, 1/4/07(9)(DEM) . . . . . . . . . . . . 420,000
147,054
Series JL07, Zero Coupon, 5.66%, 7/4/07(9)(DEM) . . . . . . . . . . . . 450,000
153,114
----------
3,190,718
----------
Great Britain -- 3.1%
United Kingdom Treasury Nts.:
13%, 7/14/00(GBP) . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,000 298,177
8%, 6/10/03(GBP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790,000 1,405,893
----------
1,704,070
----------
Italy -- 2.6%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 12%, 1/1/02(2)(ITL) . . . . . . . . . . . . . . . . . . . . 1,955,000,000
1,414,299
----------
Ivory Coast -- 0.3%
Ivory Coast (Government of) Past Due Interest Bonds, 12/29/49(4) . . . . . 500,000
184,375
----------
Jordan -- 1.1%
Hashemite (Kingdom of Jordan) Disc. Bonds, 6.75%, 12/23/23(5) . . . . . . . 550,000
446,875
Hashemite (Kingdom of Jordan) Par Bonds, 3.934%, 12/23/23(11) . . . . . . . 250,000
173,750
----------
620,625
----------
Mexico -- 0.7%
Petroleos Mexicanos Debs., 14.50%, 3/31/06(GBP) . . . . . . . . . . . . . . 100,000
216,320
United Mexican States Global Bonds, 9.875%, 1/15/07 . . . . . . . . . . . . 150,000
150,375
----------
366,695
----------
</TABLE>
5
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
Moldova -- 0.4%
Moldova (Republic of) Sr. Unsub. Nts., 8.465%, 12/10/99(5) . . . . . . . . $ 220,000
$ 220,137
----------
New Zealand -- 2.6%
National Bank of New Zealand, New Zealand Dollar Bank Bill, Zero
Coupon, 7.594%, 12/10/97(9)(17)(NZD). . . . . . . . . . . . . . . . . . . . 1,948,000
1,205,229
New Zealand (Government of) Bonds, 8%, 11/15/06(NZD). . . . . . . . . . . . 330,000
226,228
----------
1,431,457
----------
Norway -- 1.0%
Norway (Government of) Bonds, 9.50%, 10/31/02(2)(NOK) . . . . . . . . . . . 3,190,000
537,014
----------
Pakistan -- 0.5%
Pakistan (Republic of) Debs., 11.50%, 12/22/99 . . . . . . . . . . . . . . 32,000
33,440
Pakistan (Republic of) Bonds, 9.946%, 5/30/00(5) . . . . . . . . . . . . . 220,000
223,300
----------
256,740
----------
Peru -- 0.3%
Peru (Republic of) Front-Loaded Interest Reduction Bonds, 3.25%,
3/7/17(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,000 177,625
----------
Romania -- 0.5%
Romania (Government of) Bonds, 7.75%, 6/17/02(DEM). . . . . . . . . . . . . 515,000
287,998
----------
Russia -- 0.9%
Ministry of Finance (Russian Government) Debs., 9%,
3/25/04(4)(DEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 425,000 237,051
SBS Agro Finance BV Bonds, 10.25%, 7/21/00 . . . . . . . . . . . . . . . . 250,000
244,063
----------
481,114
----------
South Africa -- 2.3%
South Africa (Republic of) Bonds:
Series 150, 12%, 2/28/05(ZAR) . . . . . . . . . . . . . . . . . . . . . 3,615,620
667,952
Series 162, 12.50%, 1/15/02(ZAR) . . . . . . . . . . . . . . . . . . . . 2,087,360
406,750
Series 175, 9%, 10/15/02(ZAR) . . . . . . . . . . . . . . . . . . . . . 1,242,530
208,539
----------
1,283,241
----------
Spain -- 1.1%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
12.25%, 3/25/00(ESP) . . . . . . . . . . . . . . . . . . . . . . . . . . 78,920,000
626,032
----------
Sweden -- 1.7%
Sweden (Kingdom of) Bonds, Series 1033, 10.25%, 5/5/03(2)(SEK). . . . . . .
5,900,000 941,662
----------
Turkey -- 2.4%
Export Credit Bank of Turkey Bonds, 8.352%, 8/18/00(5) . . . . . . . . . . 240,000
237,300
Halkbank Turkiye Halk Bonds, 8%, 2/26/02(DEM) . . . . . . . . . . . . . . . 500,000
271,620
</TABLE>
6
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
Turkey (continued)
Turkey (Republic of) Treasury Bills, Zero Coupon,
93.92%, 3/4/98(9)(TRL) . . . . . . . . . . . . . . . . . . . . . . . . . 195,909,000,000 $
789,422
-----------
1,298,342
-----------
Total Foreign Government Obligations (Cost $18,097,428) . . . . . . . . . .
18,064,169
-----------
LOAN PARTICIPATIONS -- 1.1%
Colombia (Republic of) Concorde Loan Participation, 8.625%,
1/31/98(5)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 24,375
Jamaica (Government of) 1990 Refinancing Agreement Nts.,
Tranche A, 6.563%, 10/16/00(5)(6) . . . . . . . . . . . . . . . . . . . 87,499
83,563
Morocco (Kingdom of) Loan Participation Agreement,
Tranche B, 6.812%, 1/1/04(5) . . . . . . . . . . . . . . . . . . . . . 76,470
69,875
Trinidad & Tobago Loan Participation Agreement, Tranche A,
1.575%, 9/30/00(5)(6)(JPY) . . . . . . . . . . . . . . . . . . . . . . . 57,326,833
443,285
-----------
Total Loan Participations (Cost $665,588) . . . . . . . . . . . . . . . . .
621,098
-----------
CORPORATE BONDS AND NOTES -- 21.9%
BASIC INDUSTRY -- 1.5%
Chemicals -- 0.3%
ICO, Inc., 10.375% Sr. Nts., 6/1/07(8) . . . . . . . . . . . . . . . . . . 25,000
26,875
Laroche Industries, Inc., 9.50% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . 25,000
25,125
Pioneer Americas Acquisition Corp., 9.25% Sr. Nts., 6/15/07(8) . . . . . . 25,000
24,875
Sovereign Specialty Chemicals, Inc., 9.50% Sr. Sub. Nts., 8/1/07(8) . . . . 25,000
25,500
Sterling Chemicals, Inc.:
11.25% Sr. Sub. Nts., 4/1/07 . . . . . . . . . . . . . . . . . . . . . 15,000 16,425
11.75% Sr. Unsec. Sub. Nts., 8/15/06 . . . . . . . . . . . . . . . . . 25,000
27,812
-----------
146,612
-----------
Containers -- 0.1%
Consumers International, Inc., 10.25% Sr. Sec. Nts., 4/1/05(6) . . . . . . 50,000
54,250
-----------
Paper -- 0.9%
Ainsworth Lumber Ltd., 12.50% Sr. Nts., 7/15/07(8)(12) . . . . . . . . . . 20,000
20,300
Asia Pulp & Paper International Finance Co., Zero Coupon Asian
Currency Nts., 14.712%, 12/8/97(9)(IDR) . . . . . . . . . . . . . . . . 200,000,000
53,552
Four M Corp., 12% Sr. Nts., Series B, 6/1/06(6) . . . . . . . . . . . . . . 20,000
21,400
Indah Kiat International Finance Co. BV, 11.875% Gtd. Sr. Sec. Nts.,
6/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,000 99,425
Pindo Deli Finance Mauritius Ltd., 10.75% Gtd. Nts., 10/1/07(6) . . . . . . 170,000
158,100
Tjiwi Kimia International Finance Co. BV, 13.25% Gtd. Sr. Nts., 8/1/01 . . 130,000
135,720
-----------
488,497
-----------
</TABLE>
7
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
Steel -- 0.2%
Algoma Steel, Inc., 12.375% First Mtg. Nts., 7/15/05 . . . . . . . . . . . $25,000
$ 28,875
Bar Technologies, Inc., 13.50% Sr. Sec. Nts., 4/1/01 . . . . . . . . . . . 25,000
27,000
Keystone Consolidated Industries, Inc., 9.625% Sr. Nts., 8/1/07(8) . . . . 25,000
25,500
---------
81,375
---------
CONSUMER RELATED -- 1.7%
Consumer Products -- 0.1%
Coleman Escrow Corp., Zero Coupon Sr. First Priority Disc. Nts.,
10.823%, 5/15/01(8)(9) . . . . . . . . . . . . . . . . . . . . . . . . 25,000 16,125
Dyersburg Corp., 9.75% Sr. Sub. Nts., 9/1/07(8) . . . . . . . . . . . . . . 25,000
25,625
Revlon Worldwide Corp., Zero Coupon Sr. Sec. Disc. Nts., 10.773%,
3/15/01(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 13,700
---------
55,450
---------
Food/Beverages/Tobacco -- 0.0%
CFP Holdings, Inc., 11.625% Gtd. Sr. Nts., Series B, 1/15/04 . . . . . . . 25,000
24,125
---------
Healthcare -- 0.1%
Integrated Health Services, Inc., 9.50% Sr. Sub. Nts., 9/15/07(8) . . . . . 50,000
51,875
Sun Healthcare Group, Inc., 9.50% Sr. Sub. Nts., 7/1/07(8) . . . . . . . . 25,000
25,375
---------
77,250
---------
Hotel/Gaming -- 0.5%
Capital Gaming International, Inc., Promissory Nts., 8/1/95(13) . . . . . . 2,000
--
Capstar Hotel Co., 8.75% Sr. Sub. Nts., 8/15/07(8) . . . . . . . . . . . . 25,000
25,281
Casino Magic of Louisiana Corp., 13% First Mtg. Nts., 8/15/03 . . . . . . . 25,000
23,875
Grand Casinos, Inc., 10.125% Gtd. First Mtg. Nts., 12/1/03 . . . . . . . . 25,000
26,562
Horseshoe Gaming LLC, 9.375% Sr. Sub. Nts., 6/15/07(8) . . . . . . . . . . 25,000
25,625
Mohegan Tribal Gaming Authority, 13.50% Sr. Sec. Nts., Series B,
11/15/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 32,125
Rio Hotel & Casino, Inc., 9.50% Gtd. Sr. Sub. Nts., 4/15/07 . . . . . . . . 25,000
26,125
Showboat Marina Casino Partnership/Showboat Marina Finance
Corp., 13.50% First Mtg. Nts., Series B, 3/15/03 . . . . . . . . . . . 25,000
28,687
Signature Resorts, Inc., 9.75% Sr. Sub. Nts., 10/1/07(8) . . . . . . . . . 20,000
20,300
Station Casinos, Inc., 10.125% Sr. Sub. Nts., 3/15/06 . . . . . . . . . . . 45,000
46,125
---------
254,705
---------
Restaurants -- 0.0%
Ameriking, Inc., 10.75% Sr. Nts., 12/1/06 . . . . . . . . . . . . . . . . . 20,000
21,250
---------
Textile/Apparel -- 1.0%
CMI Industries, Inc., 9.50% Sr. Sub. Nts., 10/1/03(6) . . . . . . . . . . . 25,000
24,500
Consoltex Group, Inc., 11% Gtd. Sr. Sub. Nts., Series B,
10/1/03(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 52,750
Dan River, Inc., 10.125% Sr. Sub. Nts., 12/15/03 . . . . . . . . . . . . . 30,000
32,025
</TABLE>
8
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ----------
<S> <C> <C>
Textile/Apparel (continued)
Polysindo International Finance Co. BV, 11.375% Gtd. Sec. Nts.,
6/15/06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000 $ 25,562
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts.:
9.39%, 7/14/98(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 45,752
30.945%, 3/16/98(9) (IDR). . . . . . . . . . . . . . . . . . . . . . . . 1,000,000,000
246,621
Tultex Corp., 9.625% Sr. Unsec. Nts., 4/15/07 . . . . . . . . . . . . . . . 50,000
51,625
WestPoint Stevens, Inc., 9.375% Sr. Sub. Debs., 12/15/05 . . . . . . . . . 25,000
26,375
William Carter Co., 10.375% Sr. Sub. Nts., Series A, 12/1/06 . . . . . . . 50,000
52,750
--------
557,960
--------
ENERGY -- 1.0%
Belden & Blake Corp., 9.875% Sr. Sub. Nts., 6/15/07(8) . . . . . . . . . . 50,000
51,250
Canadian Forest Oil Ltd., 8.75% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . 5,000
4,986
Chesapeake Energy Corp., 9.125% Sr. Unsec. Nts., 4/15/06 . . . . . . . . . 25,000
25,875
Dailey International, Inc., 9.75% Gtd. Sr. Unsec. Nts., 8/15/07(8) . . . . 25,000
26,125
Forcenergy, Inc.:
8.50% Sr. Sub. Nts., Series B, 2/15/07 . . . . . . . . . . . . . . . . 25,000
25,000
9.50% Sr. Sub. Nts., 11/1/06 . . . . . . . . . . . . . . . . . . . . . 25,000 26,312
Gothic Energy Corp., Units (each unit consists of $1,000 principal
amount of 0%/12.25% sr. disc. nts., 9/1/04 and 14 warrants to
purchase one ordinary share)(8)(14)(15) . . . . . . . . . . . . . . . . 25,000
26,625
J. Ray McDermott SA, 9.375% Sr. Sub. Bonds, 7/15/06 . . . . . . . . . . . . 25,000
26,625
Moran Energy, Inc., 8.75% Cv. Sub. Debs., 1/15/08 . . . . . . . . . . . . . 200,000
194,750
Petroleum Heat & Power Co., Inc., 9.375% Sub. Debs., 2/1/06(6) . . . . . . 25,000
23,250
Pogo Producing Co., 8.75% Sr. Sub. Nts., 5/15/07 . . . . . . . . . . . . . 25,000
25,500
Stone Energy Corp., 8.75% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . . . . 50,000
49,875
Wiser Oil Co., 9.50% Sr. Sub. Nts., 5/15/07 . . . . . . . . . . . . . . . . 15,000
15,000
--------
521,173
--------
FINANCIAL SERVICES -- 2.9%
Banks & Thrifts -- 0.9%
Banco de Colombia, 5.20% Cv. Jr. Unsec. Sub. Nts., 2/1/99 . . . . . . . . . 250,000
261,875
First Nationwide Holdings, Inc., 10.625% Sr. Sub. Nts., 10/1/03 . . . . . . 30,000
33,150
Ongko International Finance Co. BV, 10.50% Gtd. Nts., 3/29/04(8) . . . . . 185,000
170,662
Western Financial Bank, 8.875% Sub. Bonds, 8/1/07 . . . . . . . . . . . . . 25,000
25,115
--------
490,802
--------
Diversified Financial -- 1.8%
Amresco, Inc., 10% Sr. Sub. Nts., Series 97-A, 3/15/04 . . . . . . . . . . 25,000
26,250
Bakrie Investindo, Zero Coupon Promissory Nts., 17.257%,
3/16/98(9)(IDR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 850,000,000 206,777
Emergent Group, Inc., 10.75% Sr. Nts., 9/15/04(8) . . . . . . . . . . . . . 25,000
24,625
Pycsa Panama SA, 10.28% Sr. Sec. Bonds, 12/15/12(6) . . . . . . . . . . . . 255,000
237,150
</TABLE>
9
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
Diversified Financial (continued)
Saul (B.F.) Real Estate Investment Trust, 11.625% Sr. Sec. Nts.,
Series B, 4/1/02 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000 $ 26,687
Shoshone Partners Loan Trust, 7.50% Sr. Nts., 5/31/02(5)(6) . . . . . . . . 476,000
488,931
----------
1,010,420
----------
Insurance -- 0.2%
Veritas Holdings, Inc., 9.625% Sr. Nts., 12/15/03 . . . . . . . . . . . . . 125,000
130,000
----------
HOUSING RELATED -- 0.4%
Building Materials -- 0.1%
Building Materials Corp. of America, 8.625% Sr. Nts., Series B,
12/15/06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,500
Nortek, Inc.:
9.125% Sr. Nts., 9/1/07(8) . . . . . . . . . . . . . . . . . . . . . . 20,000 20,200
9.25% Sr. Nts., Series B, 3/15/07 . . . . . . . . . . . . . . . . . . . 25,000
25,437
----------
71,137
----------
Homebuilders/Real Estate -- 0.3%
International de Ceramica SA, 9.75% Gtd. Unsec. Unsub. Nts.,
8/1/02(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000 84,600
Standard Pacific Corp., 8.50% Sr. Nts., 6/15/07 . . . . . . . . . . . . . . 50,000
50,500
----------
135,100
----------
MANUFACTURING -- 1.0%
Aerospace -- 0.1%
Amtran, Inc., 10.50% Sr. Nts., 8/1/04(8) . . . . . . . . . . . . . . . . . 25,000
25,312
----------
Automotive -- 0.3%
Cambridge Industries, Inc., 10.25% Sr. Sub. Nts., 7/15/07(8) . . . . . . . 50,000
52,250
Collins & Aikman Products Co., 11.50% Gtd. Sr. Sub. Nts., 4/15/06 . . . . . 25,000
28,500
Hayes Wheels International, Inc., 9.125% Sr. Sub. Nts., 7/15/07 . . . . . . 25,000
25,750
Key Plastics, Inc., 10.25% Sr. Sub. Nts., Series B, 3/15/07 . . . . . . . . 50,000
52,375
Oxford Automotive, Inc., 10.125% Sr. Sub. Nts., 6/15/07(8) . . . . . . . . 25,000
26,250
----------
185,125
----------
Capital Goods -- 0.6%
Burke Industries, Inc., 10% Sr. Nts., 8/15/07(8) . . . . . . . . . . . . . 25,000
26,000
Clark-Schwebel, Inc., 12.50% Debs., 7/15/07(8)(12) . . . . . . . . . . . . 45,994
50,823
Hydrochem Industrial Services, Inc., 10.375% Sr. Sub. Nts.,
8/1/07(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 51,875
Insilco Corp., 10.25% Sr. Sub. Nts., 8/15/07(8) . . . . . . . . . . . . . . 25,000
26,250
International Wire Group, Inc., 11.75% Sr. Sub. Nts., Series B,
6/1/05(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 27,437
Mettler Toledo, Inc., 9.75% Gtd. Sr. Sub. Nts., 10/1/06 . . . . . . . . . . 100,000
113,000
</TABLE>
10
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
Capital Goods (continued)
Roller Bearing Co. (America), 9.625% Sr. Sub. Nts., 6/15/07(6) . . . . . . $ 25,000
$ 25,250
Titan Wheel International, Inc., 8.75% Sr. Sub. Nts., 4/1/07 . . . . . . . 25,000
26,000
---------
346,635
---------
MEDIA -- 2.0%
Broadcasting -- 0.8%
Capstar Broadcasting Partners, Inc., 9.25% Sr. Sub. Nts., 7/1/07 . . . . . 25,000
25,250
Chancellor Radio Broadcasting Co., 8.75% Sr. Sub. Nts., 6/15/07(8) . . . . 25,000
25,250
Conecel Holdings Ltd., Units (each unit consists of $1,000
principal amount of 14% sec. nts., 10/1/00 and one warrant to
buy class B common stock)(6)(15) . . . . . . . . . . . . . . . . . . . 135,000
136,350
Consorcio Ecuatoriano, 14% Nts., 5/1/02(6) . . . . . . . . . . . . . . . . 135,000
137,700
Jacor Communications Co., 8.75% Gtd. Sr. Sub. Nts., 6/15/07(8) . . . . . . 20,000
20,100
SFX Broadcasting, Inc., 10.75% Sr. Sub. Nts., Series B, 5/15/06 . . . . . . 50,000
54,750
Sinclair Broadcast Group, Inc., 10% Sr. Sub. Nts., 9/30/05 . . . . . . . . 25,000
26,313
Spanish Broadcasting Systems, Inc., 11% Sr. Nts., 3/15/04 . . . . . . . . . 25,000
27,125
---------
452,838
---------
Cable Television -- 0.6%
Adelphia Communications Corp.:
9.25% Sr. Nts., 10/1/02(8) . . . . . . . . . . . . . . . . . . . . . . 25,000 24,875
9.875% Sr. Nts., Series B, 3/1/07 . . . . . . . . . . . . . . . . . . . 25,000
25,750
Cablevision Systems Corp., 9.875% Sr. Sub. Nts., 5/15/06 . . . . . . . . . 50,000
53,500
EchoStar Satellite Broadcasting Corp., 0%/13.125% Sr. Sec. Disc.
Nts., 3/15/04(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 19,875
FrontierVision Holdings LP, 0%/11.875% Sr. Disc. Nts., 9/15/07(8)(14) . . . 20,000
13,750
Marcus Cable Operating Co. LP/Marcus Cable Capital Corp.,
0%/13.50% Gtd. Sr. Sub. Disc. Nts., Series II, 8/1/04(14) . . . . . . . 50,000
45,250
Optel, Inc., 13% Sr. Nts., Series B, 2/15/05 . . . . . . . . . . . . . . . 20,000
20,700
Rogers Communications, Inc.:
8.75% Sr. Nts., 7/15/07(CAD) . . . . . . . . . . . . . . . . . . . . . . 80,000
57,099
8.875% Sr. Nts., 7/15/07 . . . . . . . . . . . . . . . . . . . . . . . 25,000 24,813
TCI Satellite Entertainment, Inc., 10.875% Sr. Sub. Nts., 2/15/07(8) . . . 15,000
15,525
---------
301,137
---------
Diversified Media -- 0.4%
Hollywood Theaters, Inc., 10.625% Sr. Sub. Nts., 8/1/07(8) . . . . . . . . 25,000
26,375
ITT Promedia CVA, 9.125% Sr. Sub. Nts., 9/15/07(8)(DEM) . . . . . . . . . . 100,000
58,972
ITT Publimedia BV, 9.375% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . . . . 25,000
25,625
Katz Media Corp., 10.50% Sr. Sub. Nts., Series B, 1/15/07 . . . . . . . . . 25,000
27,563
Lamar Advertising Co., 8.625% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . . 25,000
25,250
Universal Outdoor, Inc., 9.75% Sr. Sub. Nts., 10/15/06 . . . . . . . . . . 25,000
27,875
---------
191,660
---------
</TABLE>
11
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
Publishing/Printing -- 0.2%
Hollinger International Publishing, Inc., 9.25% Gtd. Sr. Sub. Nts.,
3/15/07 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000 $ 51,750
Sun Media Corp., 9.50% Sr. Sub. Nts., 2/15/07 . . . . . . . . . . . . . . . 75,000
79,500
--------
131,250
--------
OTHER -- 0.6%
Conglomerates -- 0.2%
Mechala Group Jamaica Ltd., 12.75% Gtd. Sr. Sec. Sub. Nts.,
Series B, 12/30/99 . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000 118,750
--------
Services -- 0.4%
Borg-Warner Security Corp., 9.625% Sr. Sub. Nts., 3/15/07 . . . . . . . . . 25,000
25,875
Coinstar, Inc., 0%/13% Sr. Disc. Nts., 10/1/06(6)(14) . . . . . . . . . . . 25,000
19,750
Energy Corp. of America, 9.50% Sr. Sub. Nts., Series A, 5/15/07 . . . . . . 25,000
25,125
Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09 . . . . . . 50,000
49,375
Protection One Alarm Monitoring, Inc., 0%/13.625% Sr. Disc. Nts.,
6/30/05(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 106,500
--------
226,625
--------
RETAIL -- 0.5%
Specialty Retailing -- 0.4%
Central Termica Guemes, 12% Bonds, 11/26/01(6) . . . . . . . . . . . . . . 126,000
128,520
Eye Care Centers of America, Inc., 12% Sr. Nts., 10/1/03 . . . . . . . . . 20,000
21,800
Finlay Fine Jewelry Corp., 10.625% Sr. Nts., 5/1/03(6) . . . . . . . . . . 25,000
26,375
Pantry, Inc. (The), 10.25% Sr. Sub. Nts., 10/15/07(6) . . . . . . . . . . . 25,000
24,625
Specialty Retailers, Inc., 9% Gtd. Unsec. Sr. Sub. Nts., 7/15/07 . . . . . 25,000
25,500
--------
226,820
--------
Supermarkets -- 0.1%
Fleming Cos., Inc., 10.625% Sr. Sub. Nts., 7/31/07(8) . . . . . . . . . . . 25,000
26,500
Randall's Food Markets, Inc., 9.375% Sr. Sub. Nts., 7/1/07(8) . . . . . . . 25,000
24,875
Stater Brothers Holdings, Inc., 9% Sr. Sub. Nts., 7/1/04(8) . . . . . . . . 25,000
25,188
--------
76,563
--------
TECHNOLOGY -- 2.5%
Information Technology -- 1.5%
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(6)(14) . . . . . . . . . . . 125,000
124,375
Cellular Communications International, Inc., Zero Coupon
Sr. Disc. Nts., 12.154%, 8/15/00(9) . . . . . . . . . . . . . . . . . . 25,000
19,875
Cellular, Inc., 0%/11.75% Sr. Sub. Disc. Nts., 9/1/03(14) . . . . . . . . . 50,000
49,500
Clearnet Communications, Inc., 0%/14.75% Sr. Disc. Nts.,
12/15/05(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 15,400
DII Group, Inc., 8.50% Sr. Sub. Nts., 9/15/07(8) . . . . . . . . . . . . . 15,000
14,869
Dyncorp, Inc., 9.50% Sr. Sub. Nts., 3/1/07 . . . . . . . . . . . . . . . . 25,000
25,375
</TABLE>
12
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
Information Technology (continued)
Globalstar LP/Globalstar Capital Corp., 11.25% Sr. Nts., 6/15/04 . . . . . $25,000
$ 24,500
Microcell Telecommunications, Inc.:
0%/11.125% Sr. Disc. Nts., 10/15/07(8)(14) (CAD) . . . . . . . . . . . . 90,000
35,451
0%/14% Sr. Disc. Nts., Series B, 6/1/06(14) . . . . . . . . . . . . . . 25,000
16,750
Millicom International Cellular SA, 0%/13.50% Sr. Disc. Nts.,
6/1/06(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 34,088
Nextel Communications, Inc., 0%/9.75% Sr. Disc. Nts.,
10/31/07(8)(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 27,875
Omnipoint Corp., 11.625% Sr. Nts., Series A, 8/15/06 . . . . . . . . . . . 50,000
51,750
Orion Network Systems, Inc., 0%/12.50% Sr. Disc. Nts., 1/15/07(14) . . . . 50,000
37,000
Pierce Leahy Corp., 11.125% Sr. Sub. Nts., 7/15/06 . . . . . . . . . . . . 61,000
69,235
Price Communications Cellular Holdings, Inc., Units (each unit
consists of $1,000 principal amount of 0%/13.50% sr. sec. disc. nts.,
8/1/07 and 3.44 warrants to purchase one ordinary share)(8)(14)(15) . . 50,000
29,750
Sprint Spectrum LP/Sprint Spectrum Finance Corp.:
0%/12.50% Sr. Disc. Nts., 8/15/06(14) . . . . . . . . . . . . . . . . . 50,000
38,000
11% Sr. Nts., 8/15/06 . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 27,688
Teletrac, Inc., Units (each unit consists of $1,000 principal
amount of 14% sr. nts., 8/1/07 and one warrant to buy
.537495 ordinary shares)(6)(15) . . . . . . . . . . . . . . . . . . . . 25,000
25,375
Tracor, Inc., 8.50% Sr. Sub. Nts., 3/1/07 . . . . . . . . . . . . . . . . . 75,000
76,688
Unisys Corp., 11.75% Sr. Nts., 10/15/04 . . . . . . . . . . . . . . . . . . 25,000
28,375
Wavetek Corp., 10.125% Sr. Sub. Nts., 6/15/07(8) . . . . . . . . . . . . . 25,000
25,625
---------
797,544
---------
Telecommunications/Technology -- 1.0%
American Communications Services, Inc., 13.75% Sr. Nts., 7/15/07(8) . . . . 35,000
39,375
BTI Telecom Corp., 10.50% Sr. Nts., 9/15/07(8) . . . . . . . . . . . . . . 20,000
20,000
Call-Net Enterprises, Inc., 0%/9.27% Sr. Disc. Nts., 8/15/07(14) . . . . . 25,000
16,625
Colt Telecom Group plc, Units (each unit consists of $1,000
principal amount of 0%/12% sr. disc. nts., 12/15/06 and one
warrant to purchase 7.8 ordinary shares)(14)(15) . . . . . . . . . . . 25,000
18,875
Diamond Cable Communications plc, 0%/11.75% Sr. Disc. Nts.,
12/15/05(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 55,688
GST USA, Inc., 0%/13.875% Gtd. Sr. Sec. Disc. Nts., 12/15/05(14) . . . . . 30,000
21,450
ICG Holdings, Inc.:
0%/12.50% Gtd. Sr. Disc. Nts., 5/1/06(14). . . . . . . . . . . . . . . . 50,000
36,938
0%/13.50% Sr. Disc. Nts., 9/15/05(14) . . . . . . . . . . . . . . . . . 25,000
19,969
Intermedia Communications, Inc., 0%/11.25% Sr. Disc. Nts., 7/15/07(14) . .
25,000 16,625
IXC Communications, Inc., 12.50% Sr. Nts., Series B, 10/1/05 . . . . . . . 25,000
28,500
McLeodUSA, Inc.:
0%/10.50% Sr. Disc. Nts., 3/1/07(14) . . . . . . . . . . . . . . . . . . 25,000
17,375
9.25% Sr. Nts., 7/15/07(8) . . . . . . . . . . . . . . . . . . . . . . 25,000 25,625
</TABLE>
13
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
Telecommunications/Technology (continued)
MGC Communications, Inc., Units (each unit consists of $1,000
principal amount of 13% sr. sec. nts., 10/1/04 and one warrant
to purchase 8.07 shares of common stock at $0.01 per share)(8)(15). . . $ 25,000
$ 24,750
NEXTLINK Communications, Inc., 9.625% Sr. Nts., 10/1/07 . . . . . . . . . . 45,000
45,225
NTL, Inc., 10% Sr. Nts., 2/15/07 . . . . . . . . . . . . . . . . . . . . . 25,000
25,875
Qwest Communications International, Inc., 0%/9.47% Sr. Disc.
Nts., 10/15/07(8)(14) . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 32,250
Teleport Communications Group, Inc., 0%/11.125% Sr. Disc. Nts.,
7/1/07(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 59,156
Telewest Communications plc, 0%/11% Sr. Disc. Debs., 10/1/07(14) . . . . . 50,000
37,250
----------
541,551
----------
TRANSPORTATION -- 6.9%
Railroads -- 5.6%
Red Nacional de los Ferrocarriles Espanoles, 5.875% Gtd. Nts.,
11/19/98(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 2,996,850
Transtar Holdings LP/Transtar Capital Corp., 0%/13.375% Sr.
Disc. Nts., Series B, 12/15/03(14) . . . . . . . . . . . . . . . . . . 100,000
85,750
----------
3,082,600
----------
Shipping -- 0.2%
Navigator Gas Transport plc:
10.50% First Priority Ship Mtg. Nts., 6/30/07(8) . . . . . . . . . . . 50,000
53,750
Units (each unit consists of $1,000 principal amount of 12%
second priority ship mtg. nts., 6/30/07 and one warrant)(8)(15) . . 25,000
27,625
----------
81,375
----------
Trucking -- 1.1%
Coach USA, Inc., 9.375% Gtd. Sr. Sub. Nts., 7/1/07(8) . . . . . . . . . . . 50,000
50,750
Road King Infrastructure Finance (1997) Ltd., 9.50% Gtd. Unsec.
Unsub. Bonds, 7/15/07(6) . . . . . . . . . . . . . . . . . . . . . . . 400,000 373,000
Tribasa Toll Road Trust, 10.50% Nts., Series 1993-A, 12/1/11(8) . . . . . . 246,395
203,893
----------
627,643
----------
UTILITIES -- 0.9%
Electric Utilities -- 0.5%
AES Corp., 8.375% Sr. Sub. Nts., 8/15/07 . . . . . . . . . . . . . . . . . 20,000
19,600
Calpine Corp., 10.50% Sr. Nts., 5/15/06(6) . . . . . . . . . . . . . . . . 50,000
54,250
El Paso Electric Co., 9.40% First Mtg. Bonds, Series E, 5/1/11 . . . . . . 25,000
27,750
Panda Global Energy Co., 12.50% Sr. Nts., 4/15/04(6) . . . . . . . . . . . 150,000
144,750
----------
246,350
----------
</TABLE>
14
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Shares See Note 1
----------- ---------
<S> <C> <C>
Gas Utilities -- 0.4%
CE Casecnan Water & Energy, Inc., 11.95% Sr. Nts., Series B, 11/15/10 . . .
200,000 $ 207,500
-----------
Total Corporate Bonds and Notes (Cost $12,099,566) . . . . . . . . . . . .
11,987,384
-----------
COMMON STOCKS -- 0.1%
Air New Zealand Ltd., Cl. B . . . . . . . . . . . . . . . . . . . . . . . . 24,000 50,898
Finlay Enterprises, Inc.(16) . . . . . . . . . . . . . . . . . . . . . . . 333 6,994
Optel, Inc.(6)(16) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 --
-----------
Total Common Stocks (Cost $70,764) . . . . . . . . . . . . . . . . . . . .
57,892
-----------
PREFERRED STOCKS -- 0.1%
Spanish Broadcasting Systems, Inc., 14.25% Cum. Sr.
Exchangeable Preferred Stock, Non-Vtg. (Cost $26,125)(8)(12) . . . . . . 25
26,562
-----------
OTHER SECURITIES -- 0.2%
SDW Holdings Corp., 15% Cum. Sr. Exchangeable Preferred
(Cost $129,300)(8)(16) . . . . . . . . . . . . . . . . . . . . . . . . 3,600 133,200
-----------
Units
-----------
RIGHTS, WARRANTS AND CERTIFICATES -- 0.0%
American Telecasting, Inc. Wts., Exp. 6/99(6) . . . . . . . . . . . . . . . 500
5
Capital Gaming International, Inc. Wts., Exp. 2/99(6) . . . . . . . . . . . 3,538
--
Cellular Communications International, Inc. Wts., Exp. 8/03(6) . . . . . . 100
1,700
ICG Communications, Inc. Wts., Exp. 9/05(6) . . . . . . . . . . . . . . . . 495
7,425
Microcell Telecommunications, Inc.:
Conditional Wts., Exp. 12/97(6) . . . . . . . . . . . . . . . . . . . . 100 63
Wts., Exp. 12/97(6) . . . . . . . . . . . . . . . . . . . . . . . . . . 100 1,300
Orion Network Systems, Inc. Wts., Exp. 1/07 . . . . . . . . . . . . . . . . 50
625
Protection One, Inc. Wts., Exp. 6/05(6) . . . . . . . . . . . . . . . . . . 640
8,160
Venezuela (Republic of) Oil Linked Payment Obligation
Wts., Exp. 4/20 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,785 --
-----------
Total Rights, Warrants and Certificates (Cost $18,030) . . . . . . . . . .
19,278
-----------
Face Amount(1)
-----------
STRUCTURED INSTRUMENTS -- 7.8%
Canadian Imperial Bank of Commerce (New York Branch)
Canadian Dollar Three Month Banker's Acceptance Linked
Maximum Rate Nts., 8.66%, 4/13/98 . . . . . . . . . . . . . . . . . . . $300,000
300,960
Canadian Imperial Bank of Commerce, U.S. Dollar Nts. Linked
to the Ministry of Finance of the Russian Federation GKO,
Zero Coupon, 9.857%, 9/17/98(9) . . . . . . . . . . . . . . . . . . . . 315,000
280,602
Credit Suisse First Boston (Cayman) Ltd., City of Moscow, Credit &
Convertibility Linked Nts., Series EM 215, Zero Coupon, 12.046%,
12/30/97(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 145,981
</TABLE>
15
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Face Amount(1) See Note 1
----------- ---------
<S> <C> <C>
STRUCTURED INSTRUMENTS (CONTINUED)
ING (U.S.) Financial Holdings Corp.:
PT Polysindo Linked Nts., Zero Coupon, 10.426%, 7/15/98(6)(9) . . . . . $150,000
$ 134,704
U.S. Dollar Hedged GKO Pass-Through Nts., Zero Coupon,
13.088%, 12/3/97(6)(9) . . . . . . . . . . . . . . . . . . . . . . . 350,000 346,133
Merrill Lynch & Co., Inc.:
SPIRES Ltd. -- Series XXX, 10.91%, 10/11/06(4) . . . . . . . . . . . . 435,000
435,000
U.S. Dollar Nts. Linked to the Ministry of Finance of Ukraine
OVGZ's, Zero Coupon, 11.45%, 10/19/98(9) . . . . . . . . . . . . . . 640,000
555,328
Morgan Guaranty Trust Co. of New York, Japanese Government
Bond 193 Currency Protected Bank Nts., 8.14%, 4/29/98 . . . . . . . . . 10,000
6,000
Salomon, Inc.:
Colombian Peso Linked Nts., Zero Coupon, 18.174%, 8/20/98(9) . . . . . 350,000
282,800
Russian GKO Linked Nts., Zero Coupon, 9.58%, 6/11/99(9) . . . . . . . . 450,000
358,425
Russian S-Account Credit Linked Nts., Zero Coupon, 14.157%,
5/22/98(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675,000 624,240
Standard Chartered Bank:
Indian Rupee Linked Nts.:
32.641%, 11/28/97 . . . . . . . . . . . . . . . . . . . . . . . . . 58,000 57,907
35.115%, 11/28/97 . . . . . . . . . . . . . . . . . . . . . . . . . 58,000 57,820
U.S. Dollar/Chinese Yuan Linked Nts.:
11.268%, 11/20/97 . . . . . . . . . . . . . . . . . . . . . . . . . 510,000 506,889
12.903%, 12/5/97 . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 148,110
Union Bank of Switzerland, Indian Rupee Linked Nts., 5.40%,
11/17/97 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000 35,364
----------
Total Structured Instruments (Cost $4,370,642) . . . . . . . . . . . . . .
4,276,263
----------
</TABLE>
<TABLE>
<CAPTION>
Date Strike Contracts
------ -------------- ---------
<S> <C> <C> <C> <C>
CALL OPTIONS PURCHASED -- 0.2%
Finnish Markka/German Mark Call Opt. . . . . . . 1/98 2.949(FIM/DEM)
1,610,000 68
German Mark Call Opt. . . . . . . . . . . . . . 12/97 19.22(CZK) 275,000
6,325
German Mark/Japanese Yen Call Opt. . . . . . . . 11/97 69.06(DEM/JPY)
1,500,000 5,256
German Mark/Japanese Yen Call Opt. . . . . . . . 11/97 71.00(DEM/JPY)
6,860,000 25,862
Norwegian Krone/German Mark Call Opt. . . . . . 1/98 4.101(NOK/DEM)
2,270,000 24,634
Russian (Government of) Principal Loans
Debs., 5.80%, 12/29/49 Call Opt. . . . . . . . 11/97 75.125% 405
202
Russian (Government of) Principal Loans
Debs., 12/29/49 Call Opt. . . . . . . . . . . 12/97 75.50% 400
200
U.S. Treasury Nts., 6.125%, 8/15/07 Call Opt. . 11/97 100.953% 1,000
14,687
U.S. Treasury Nts., 6.125%, 8/15/07 Call Opt. . 11/97 101.453% 1,000
11,563
----------
Total Call Options Purchased (Cost $85,657) . . .
88,797
----------
</TABLE>
16
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Market Value
Date Strike Contracts See Note 1
------ -------------- --------- ---------
<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED -- 0.1%
New Zealand Dollar Put Opt. . . . . . . . . . . . 11/97 1.567(NZD) 1,710,000
$ 27,941
Standard & Poor's 500 Index Futures Put Opt. . . 12/97 $935 2
42,200
-----------
Total Put Options Purchased (Cost $42,197) . . .
70,141
-----------
</TABLE>
<TABLE>
<CAPTION>
Face Amount(1)
-----------
<S> <C> <C>
REPURCHASE AGREEMENTS -- 9.7%
Repurchase agreement with First Chicago Capital Markets,
5.69%, dated 10/31/97, to be repurchased at $5,299,512 on
11/3/97, collateralized by U.S. Treasury Nts., 5.75%--8.50%,
5/15/99--11/15/00, with a value of $5,405,702
(Cost $5,297,000). . . . . . . . . . . . . . . . . . . . . . . $5,297,000 5,297,000
-----------
Total Investments, at Value (Cost $59,000,447) . . . . . . . . . 107.9%
59,113,384
Liabilities in Excess of Other Assets . . . . . . . . . . . . . . (7.9)
(4,332,464)
---------- -----------
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $54,780,920
========== ===========
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
AUD -- Australian Dollar
CAD -- Canadian Dollar
CZK -- Czech Koruna
DEM -- German Mark
ESP -- Spanish Peseta
FIM -- Finnish Markka
GBP -- British Pound Sterling
IDR -- Indonesian Rupiah
ITL -- Italian Lira
JPY -- Japanese Yen
NOK -- Norwegian Krone
NZD -- New Zealand Dollar
SEK -- Swedish Krona
TRL -- Turkish Lira
ZAR -- South African Rand
2. A sufficient amount of securities have been designated to cover outstanding
written options, as follows:
<TABLE>
<CAPTION>
Face/Contracts Expiration Exercise Premium
Market Value
Subject to Call Date Price Received See Note
1
------------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
British Pound Sterling Call Opt. . . . . . . 365,000 12/23/97 0.602(GBP) $3,869
$10,549
British Pound Sterling Put Opt. . . . . . . 365,000 12/18/97 0.625(GBP) 4,199
1,422
British Pound Sterling Put Opt. . . . . . . 365,000 12/18/97 0.602(GBP) 4,288
11,177
British Pound Sterling Put Opt. . . . . . . 365,000 12/23/97 0.625(GBP) 3,577
986
Finnish Markka/German Mark Put Opt. . . . . . 1,610,000 1/22/98 3.00(FIM/DEM)
1,858 3,817
German Mark Put Opt. . . . . . . . . . . . . 530,000 11/6/97 1.79(DEM) 1,214
21
German Mark Put Opt. . . . . . . . . . . . . 2,300,000 11/19/97 1.80(DEM) 4,217
872
German Mark Put Opt. . . . . . . . . . . . . 1,065,000 11/20/97 1.82(DEM) 1,276
167
German Mark Put Opt. . . . . . . . . . . . . 1,070,000 11/26/97 1.85(DEM) 1,041
1,002
Japanese Yen Call Opt. . . . . . . . . . . . 73,000,000 1/5/98 115.00(JPY) 3,904
4,380
Japanese Yen Call Opt. . . . . . . . . . . . 68,600,000 11/20/97 118.00(JPY) 3,372
4,891
Japanese Yen Put Opt. . . . . . . . . . . . . 73,000,000 1/5/98 125.00(JPY) 6,366
2,993
Japanese Yen Put Opt. . . . . . . . . . . . . 68,600,000 11/20/97 123.00(JPY) 1,952
2,360
</TABLE>
17
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
2. Outstanding written options (continued)
<TABLE>
<CAPTION>
Expiration Exercise Premium Market
Value
Face/Contracts Date Price Received See
Note 1
------------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Japanese Yen Put Opt. . . . . . . . . . . . . . . . 73,010,000 11/26/97 125.00(JPY) $
2,044 $ 1,227
Japanese Yen Put Opt. . . . . . . . . . . . . . . . 72,520,000 12/11/97 115.00(JPY) 3,153
3,466
Japanese Yen Put Opt. . . . . . . . . . . . . . . . 72,520,000 12/11/97 123.00(JPY) 4,717
4,670
New Zealand Dollar Call Opt. . . . . . . . . . . . 1,710,000 11/20/97 1.558(NZD)
7,191 1,334
Norwegian Krone/German Mark Put Opt. . . . . . . . 2,270,000 1/23/98
4.18(NOK/DEM) 3,694 6,030
United Mexican States Collateralized Fixed
Rate Par Bonds, Series A, 6.25%, 12/31/19 Put Opt. 175 11/28/97 75.00%
15,750 11,200
------- -------
$77,679 $72,564
======= =======
</TABLE>
3. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income
securities increase in price when interest rates decline. The principal
amount of the underlying pool represents the notional amount on which
current interest is calculated. The price of these securities is typically
more sensitive to changes in prepayment rates than traditional
mortgage-backed securities (for example, GNMA pass-throughs). Interest rates
disclosed represent current yields based upon the current cost basis and
estimated timing and amount of future cash flows.
4. When-issued security to be delivered and settled after October 31, 1997.
5. Represents the current interest rate for a variable rate security.
6. Identifies issues considered to be illiquid or restricted -- See Note 8 of
Notes to Financial Statements.
7. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See Note 5 of Notes to
Financial Statements.
8. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities
have been determined to be liquid under guidelines established by the Board
of Trustees. These securities amount to $2,595,326 or 4.74% of the Fund's
net assets, at October 31, 1997.
9. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
10. Securities with an aggregate market value of $388,763 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
11. Represents the current interest rate for an increasing rate security.
12. Interest or dividend is paid in kind.
13. Non-income producing -- issuer is in default of interest payment.
14. Denotes a step bond: a zero coupon bond that converts to a fixed or
variable interest rate at a designated future date.
15. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents total underlying
principal.
16. Non-income producing security.
17. A sufficient amount of securities has been designated to cover outstanding
interest rate swap transactions. See Note 9 of Notes to Financial
Statements.
See accompanying Notes to Financial Statements.
18
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
Oppenheimer World Bond Fund
Distribution of investments by country of issue, as a percentage of total
investments at value, is as follows:
<TABLE>
<CAPTION>
Industry Market Value Percent
----- ------------ -------
<S> <C> <C>
United States ......................................................... $29,193,849 49.3%
Spain ................................................................. 3,622,882 6.1
Germany ............................................................... 3,320,718 5.6
Russia ................................................................ 2,236,896 3.8
Great Britain ......................................................... 1,815,882 3.1
New Zealand ........................................................... 1,482,356 2.5
Italy ................................................................. 1,414,299 2.4
Turkey ................................................................ 1,298,343 2.2
South Africa .......................................................... 1,283,241 2.2
Canada ................................................................ 1,219,133 2.1
Argentina ............................................................. 1,205,704 2.0
Indonesia ............................................................. 1,088,620 1.8
Australia ............................................................. 1,052,574 1.8
Colombia .............................................................. 949,892 1.6
Sweden ................................................................ 941,662 1.6
China ................................................................. 799,749 1.4
Mexico ................................................................ 655,188 1.1
Jordan ................................................................ 620,625 1.1
Other ................................................................. 4,911,771 8.3
----------- -----
Total ................................................................. $59,113,384 100.0%
=========== =====
</TABLE>
See accompanying Notes to Financial Statements.
19
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES October 31, 1997
Oppenheimer World Bond Fund
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $59,000,447)--see accompanying statement ........................
$59,113,384
Cash ........................................................................................ 887,563
Unrealized appreciation on forward foreign currency exchange contracts -- Note 5 ............
93,002
Receivables:
Investments sold .......................................................................... 4,498,209
Closed forward foreign currency exchange contracts ........................................ 2,325,036
Interest, dividends and principal paydowns ................................................ 921,464
Daily variation on futures contracts -- Note 6 ............................................ 15,330
Other ....................................................................................... 2,617
-----------
Total assets ............................................................................ 67,856,605
-----------
LIABILITIES:
Unrealized depreciation on forward foreign currency exchange contracts -- Note 5 ............
117,592
Options written, at value (premiums received $77,679) -- see accompanying statement -- Note 7
72,564
Open interest rate swap transactions at market value -- Note 9 .............................. 7,560
Payables and other liabilities:
Investments purchased (including $4,448,993 purchased on a when-issued
basis) -- Note 1 ........................................................................ 10,355,155
Closed forward foreign currency exchange contracts ........................................ 2,395,080
Trustees' fees -- Note 1 .................................................................. 43,469
Management and administrative fees ........................................................ 23,554
Daily variation on futures contracts -- Note 6 ............................................ 4,165
Other ....................................................................................... 56,546
-----------
Total liabilities ....................................................................... 13,075,685
-----------
NET ASSETS .................................................................................. $54,780,920
-----------
COMPOSITION OF NET ASSETS:
Par value of shares of beneficial interest .................................................. $66,155
Additional paid-in capital .................................................................. 59,674,068
Undistributed net investment income ......................................................... 82,750
Accumulated net realized loss on investments and foreign currency transactions ..............
(5,105,071)
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies ......................................................... 63,018
-----------
NET ASSETS -- applicable to 6,615,505 shares of beneficial interest outstanding .............
$54,780,920
===========
NET ASSET VALUE PER SHARE ................................................................... $8.28
=====
</TABLE>
See accompanying Notes to Financial Statements.
20
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended October 31, 1997
Oppenheimer World Bond Fund
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest (net of foreign withholding taxes of $24,070) . . . . . . . . . . . . . . . . . $5,438,948
Dividends (net of foreign withholding taxes of $601) . . . . . . . . . . . . . . . . . . 3,465
----------
Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,442,413
----------
EXPENSES:
Management fees -- Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359,532
Administrative fees -- Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,613
Custodian fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,702
Shareholder reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,947
Transfer agent and accounting services fees -- Note 4 . . . . . . . . . . . . . . . . . . 33,011
Legal and auditing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,915
Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,950
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,686
----------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663,356
Less expenses paid indirectly--Note 4 . . . . . . . . . . . . . . . . . . . . . . . . . . (8,303)
----------
Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655,053
----------
NET INVESTMENT INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,787,360
----------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,825,394
Closing of futures contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (185,198)
Closing and expiration of options written . . . . . . . . . . . . . . . . . . . . . . . (72,879)
Foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (481,386)
----------
Net realized gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,085,931
----------
Net change in unrealized appreciation or depreciation on:
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,415,140)
Translation of assets and liabilities denominated in foreign currencies . . . . . . . . (194,026)
----------
Net change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,609,166)
----------
NET REALIZED AND UNREALIZED LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . (523,235)
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . .
. $4,264,125
==========
</TABLE>
See accompanying Notes to Financial Statements.
21
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income ................................................... $ 4,787,360 $ 4,817,348
Net realized gain ....................................................... 1,085,931 1,174,051
Net change in unrealized appreciation or depreciation ................... (1,609,166)
1,076,747
------------ ------------
Net increase in net assets resulting from operations ................ 4,264,125 7,068,146
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM
NET INVESTMENT INCOME ................................................... (4,445,641)
(4,445,589)
------------ ------------
NET ASSETS:
Total increase (decrease) ............................................... (181,516) 2,622,557
Beginning of period ..................................................... 54,962,436 52,339,879
------------ ------------
End of period (including undistributed net investment
income of $82,750 and $523,824, respectively) ......................... $ 54,780,920 $
54,962,436
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
22
<PAGE>
FINANCIAL HIGHLIGHTS
Oppenheimer World Bond Fund
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period ................ $8.31 $7.91 $7.93 $8.54
$8.55
----- ----- ----- ----- -----
Income (loss) from investment operations:
Net investment income ............................. .72 .73 .71 .69 .82
Net realized and unrealized gain (loss) ........... (.08) .34 (.05) (.61)
--
----- ----- ----- ----- -----
Total income from investment operations ......... .64 1.07 .66 .08
.82
----- ----- ----- ----- -----
Dividends and distributions to shareholders:
Dividends from net investment income .............. (.67) (.67) (.68) (.68)
(.75)
Tax return of capital distribution ................ -- -- -- (.01) (.08)
----- ----- ----- ----- -----
Total dividends and distributions to shareholders (.67) (.67) (.68) (.69)
(.83)
----- ----- ----- ----- -----
Net asset value, end of period ...................... $8.28 $8.31 $7.91 $7.93
$8.54
===== ===== ===== =====
=====
Market value, end of period ......................... $8.06 $7.50 $7.00 $7.00
$8.00
TOTAL RETURN, AT MARKET VALUE(1) 16.42% 16.40%
9.09% (4.84)% 2.22%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ............ $54,781 $54,962 $52,340
$52,439 $56,526
Average net assets (in thousands) ................... $55,339 $53,309 $51,207
$54,380 $55,877
Ratios to average net assets:
Net investment income ............................. 8.65% 9.04% 9.20% 8.90%
9.59%
Expenses(2) ....................................... 1.20% 1.28% 1.24% 1.24%
1.22%
Portfolio turnover rate(3) .......................... 289.2% 260.8% 344.2% 315.5%
112.5%
</TABLE>
(1) Assumes a hypothetical purchase at the current market price on the business
day before the first day of the fiscal period, with all dividends and
distributions reinvested in additional shares on the reinvestment date, and
a sale at the current market price on the last business day of the period.
Total return does not reflect sales charges or brokerage commissions.
(2) Beginning in fiscal 1997, the expense ratio reflects the effect of expenses
paid indirectly by the Fund. Prior year expense ratios have not been
adjusted.
(3) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities and mortgage "dollar-rolls") for the period ended
October 31, 1997 were $144,978,367 and $142,251,536, respectively. Prior to
the period ended October 31, 1996, purchases and sales of investment
securities included mortgage "dollar-rolls."
See accompanying Notes to Financial Statements.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Oppenheimer World Bond Fund
1. SIGNIFICANT ACCOUNTING POLICIES
Oppenheimer World Bond Fund (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a diversified, closed-end management
investment company. The Fund's investment objective is to seek high current
income consistent with preservation of capital through investments in debt
securities. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager). The following is a summary of significant accounting policies
consistently followed by the Fund.
Investment Valuation -- Portfolio securities are valued at the close of the New
York Stock Exchange on the last day of each week on which day the New York Stock
Exchange is open. Listed and unlisted securities for which such information is
regularly reported are valued at the last sale price of the day or, in the
absence of sales, at values based on the closing bid or the last sale price on
the prior trading day. Long-term and short-term "non-money market" debt
securities are valued by a portfolio pricing service approved by the Board of
Trustees. Such securities which cannot be valued by an approved portfolio
pricing service are valued using dealer-supplied valuations provided the Manager
is satisfied that the firm rendering the quotes is reliable and that the quotes
reflect current market value, or are valued under consistently applied
procedures established by the Board of Trustees to determine fair value in good
faith. Short-term "money market type" debt securities having a remaining
maturity of 60 days or less are valued at cost (or last determined market value)
adjusted for amortization to maturity of any premium or discount. Forward
foreign currency contracts are valued based on the closing prices of the forward
currency contract rates in the London foreign exchange markets on a daily basis
as provided by a reliable bank or dealer. Options are valued based upon the last
sale price on the principal exchange on which the option is traded or, in the
absence of any transactions that day, the value is based upon the last sale
price on the prior trading date if it is within the spread between the closing
bid and asked prices. If the last sale price is outside the spread, the closing
bid is used.
Structured Notes -- The Fund invests in foreign currency-linked structured notes
whereby the market value and redemption price are linked to foreign currency
exchange rates. The structured notes may be leveraged, which increases the
notes' volatility relative to the face of the security. Fluctuations in values
of the securities are recorded as unrealized gains and losses in the
accompanying financial statements. During the year ended October 31, 1997, the
market value of these securities comprised an average of 9% of the Fund's net
assets, and resulted in realized and unrealized losses of $573,017.
Securities Purchased on a When-Issued Basis -- Delivery and payment for
securities that have been purchased by the Fund on a forward commitment or
when-issued basis can take place a month or more after the transaction date.
During this period, such securities do not earn interest, are subject to market
fluctuation and may increase or decrease in value prior to their delivery. The
Fund maintains, in a segregated account with its custodian, assets with a market
value equal to the amount of its purchase commitments. The purchase of
securities on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. As of October 31, 1997,
the Fund had entered into outstanding when-issued or forward commitments of
$4,448,993.
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
In connection with its ability to purchase securities on a when-issued or
forward commitment basis, the Fund may enter into mortgage "dollar-rolls" in
which the Fund sells securities for delivery in the current month and
simultaneously contracts with the same counterparty to repurchase similar (same
type coupon and maturity) but not identical securities on a specified future
date. The Fund records each dollar-roll as a sale and a new purchase
transaction.
Security Credit Risk -- The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower-yielding, higher-rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of securities
whose issuers subsequently default.
Foreign Currency Translation -- The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of exchange.
Amounts related to the purchase and sale of securities and investment income are
translated at the rates of exchange prevailing on the respective dates of such
transactions. The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and reported with all other foreign currency
gains and losses in the Fund's Statement of Operations.
Repurchase Agreements -- The Fund requires the custodian to take possession, to
have legally segregated in the Federal Reserve Book Entry System or to have
segregated within the custodian's vault, all securities held as collateral for
repurchase agreements. The market value of the underlying securities is required
to be at least 102% of the resale price at the time of purchase. If the seller
of the agreement defaults and the value of the collateral declines, or if the
seller enters an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
Federal Taxes -- The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required. At October 31, 1997, the
Fund had available for federal income tax purposes an unused capital loss
carryover of approximately $5,093,000, which expires between 2001 and 2003.
Trustees' Fees and Expenses -- The Fund has adopted a nonfunded retirement plan
for the Fund's independent trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
October 31, 1997, a provision of $384 was made for the Fund's projected benefit
obligations and payments of $1,509 were made to retired trustees, resulting in
an accumulated liability of $40,578 at October 31, 1997.
Distributions to Shareholders -- The Fund intends to declare and pay dividends
from net investment income monthly. Distributions from net realized gains on
investments, if any, will be made at least once each year.
Classification of Distributions to Shareholders -- Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of paydown gains and losses and the recognition of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes. The
character of the distributions made during the
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
year from net investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes. Also, due to timing
of dividend distributions, the fiscal year in which amounts are distributed may
differ from the year that the income or realized gain was recorded by the Fund.
The Fund adjusts the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions determined
in accordance with income tax regulations. Accordingly, during the year ended
October 31, 1997, amounts have been reclassified to reflect a decrease in
accumulated net realized loss on investments of $892,777, a decrease in
undistributed net investment income of $782,793, and a decrease in additional
paid-in capital of $109,984.
Other -- Investment transactions are accounted for on the date the investments
are purchased or sold (trade date) and dividend income is recorded on the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective securities, in accordance with federal income tax requirements.
Realized gains and losses on investments and unrealized appreciation and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes. Dividends in kind are recognized as income
on the ex-dividend date, at the current market value of the underlying security.
Interest on payment-in-kind debt instruments is accrued as income at the coupon
rate and a market adjustment is made periodically.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
2. SHARES OF BENEFICIAL INTEREST
The Fund has authorized an unlimited number of $.01 par value shares of
beneficial interest. There were no transactions in shares of beneficial interest
for the years ended October 31, 1997 and 1996.
3. UNREALIZED GAINS AND LOSSES ON INVESTMENTS
At October 31, 1997 net unrealized appreciation on investments and written
options of $118,052 was composed of gross appreciation of $1,304,632, and gross
depreciation of $1,186,580.
4. MANAGEMENT AND ADMINISTRATIVE FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
Management fees paid to the Manager were in accordance with the investment
advisory agreement with the Fund which provides for an annual fee of 0.65% on
the Fund's average annual net assets.
Mitchell Hutchins Asset Management Inc. serves as the Fund's Administrator. The
Fund pays the Administrator an annual fee of 0.20% of the Fund's average annual
net assets.
The Manager acts as the accounting agent for the Fund at an annual fee of
$18,000, plus out-of-pocket costs and expenses reasonably incurred.
Shareholder Financial Services, Inc. (SFSI), a wholly-owned subsidiary of the
Manager, is the transfer agent and registrar for the Fund. Fees paid to SFSI
are based on the number of accounts and the number of shareholder transactions,
plus out-of-pocket costs and expenses.
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
Expenses paid indirectly represent a reduction of custodian fees for earnings on
cash balances maintained at the custodian bank by the Fund.
5. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
A forward foreign currency exchange contract (forward contract) is a commitment
to purchase or sell a foreign currency at a future date, at a negotiated rate.
The Fund uses forward contracts to manage foreign currency risks. They may also
be used to tactically shift portfolio currency risk. The Fund generally enters
into forward contracts as a hedge upon the purchase or sale of a security
denominated in a foreign currency. In addition, the Fund may enter into such
contracts as a hedge against changes in foreign currency exchange rates on
portfolio positions.
Forward contracts are valued based on the closing prices of the forward currency
contract rates in the London foreign exchange markets on a daily basis as
provided by a reliable bank or dealer. The Fund will realize a gain or loss upon
the closing or settlement of the forward transaction.
Securities held in segregated accounts to cover net exposure on outstanding
forward contracts are noted in the Statement of Investments where applicable.
Unrealized appreciation or depreciation on forward contracts is reported in the
Statement of Assets and Liabilities. Realized gains and losses are reported with
all other foreign currency gains and losses in the Fund's Statement of
Operations.
Risks include the potential inability of the counterparty to meet the terms of
the contract and unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At October 31, 1997, the Fund had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
Contract
Expiration Amount Valuation as of Unrealized
Unrealized
Dates (000s) October 31, 1997 Appreciation
Depreciation
- ------------------------------------------------------------------------------------------------------------------
- --------------
<S> <C> <C> <C> <C> <C>
Contracts to Purchase
- ---------------------
German Mark (DEM) ............................ 11/4/97-11/28/97 1,824 DEM $1,059,970
$14,977 $ 133
Italian Lira (ITL) ........................... 1/6/98 521,884 ITL 308,005 6,944
--
Portuguese Escudo (PTE) ...................... 12/17/97 116,707 PTE 661,552
13,723 --
Spanish Peseta (ESP) ......................... 12/17/97 97,001 ESP 665,351 17,522
--
------- --------
53,166 133
------- --------
Contracts to Sell
- -----------------
Australian Dollar (AUD) ...................... 1/29/98 880 AUD 618,288 --
12,584
British Pound Sterling (GBP) ................. 11/28/97 275 GBP 460,866 --
13,989
German Mark (DEM) ............................ 12/19/97 100 DEM 58,184 --
2,082
Indonesian Rupiah (IDR) ...................... 2/10/98 1,642,500 IDR 437,498
2,532 --
Japanese Yen (JPY) ........................... 11/12/97 6,100 JPY 50,836 963
--
New Zealand Dollar (NZD) ..................... 11/28/97 650 NZD 404,558
14,229 --
South African Rand (ZAR) ..................... 12/29/97 5,724 ZAR 1,167,848
22,112 --
Swiss Franc (CHF) ............................ 12/17/97-1/16/98 2,765 CHF 1,988,063 --
88,804
------- --------
39,836 117,459
------- --------
Total Unrealized Appreciation and Depreciation ................................................ $93,002
$117,592
======= ========
</TABLE>
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
6. FUTURES CONTRACTS
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against increases in
interest rates and the resulting negative effect on the value of fixed rate
portfolio securities. The Fund may also purchase futures contracts to gain
exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to deposit either
cash or securities in an amount (initial margin) equal to a certain percentage
of the contract value. Subsequent payments (variation margin) are made or
received by the Fund each day. The variation margin payments are equal to the
daily changes in the contract value and are recorded as unrealized gains and
losses. The Fund recognizes a realized gain or loss when the contract is closed
or expires.
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable and/or payable for the
daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
At October 31, 1997, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Valuation
Number as of Unrealized
Expiration of Futures October 31, Appreciation
Date Contracts 1997 (Depreciation)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Contracts to Purchase
- ---------------------
Nikkei 225 .................. 12/97 2 $273,717 $(23,780)
U.S. Treasury Bonds, 30 yr .. 12/97 44 5,212,625 70,938
U.S. Treasury Nts., 10 yr ... 12/97 4 447,000 11,375
--------
58,533
--------
Contracts to Sell
- -----------------
Hang Seng Index ............. 11/97 4 274,015 (13,059)
Nikkei 225 .................. 12/97 4 328,000 11,300
U.S. Treasury Nts., 2 yr .... 12/97 4 415,750 (2,906)
U.S. Treasury Nts., 5 yr .... 12/97 48 5,203,500 (85,500)
--------
(90,165)
--------
$(31,632)
========
</TABLE>
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
7. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call options to hedge
against adverse movements in the value of portfolio holdings. When an option is
written, the Fund receives a premium and becomes obligated to sell or purchase
the underlying security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. Shares subject to call, expiration
date, exercise price, premium received and market value are detailed in a
footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist.
Written option activity for the year ended October 31, 1997 was as follows:
<TABLE>
<CAPTION>
Call Options Put Options
----------------------------- -----------------------------
Number Amount Number Amount
of of of of
Options Premiums Options Premiums
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at October 31, 1996 ... 2,987,100 $ 31,287 -- $ --
Options written ........................... 246,935,296 386,760 417,367,263 237,990
Options closed or expired ................. (30,612,016) (354,360) (116,766,978)
(164,324)
Options exercised ......................... (2,750,380) (37,911) (3,895,110) (21,763)
------------ --------- ------------ ---------
Options outstanding at October 31, 1997 ... 216,560,000 $ 25,776 296,705,175
$ 51,903
============ ========= ============
=========
</TABLE>
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Oppenheimer World Bond Fund
8. ILLIQUID AND RESTRICTED SECURITIES
At October 31, 1997, investments in securities included issues that are illiquid
or restricted. Restricted securities are often purchased in private placement
transactions, are not registered under the Securities Act of 1933, may have
contractual restrictions on resale, and are valued under methods approved by the
Board of Trustees as reflecting fair value. A security may be considered
illiquid if it lacks a readily-available market or if its valuation has not
changed for a certain period of time. The Fund intends to invest no more than
10% of its net assets (determined at the time of purchase and reviewed
periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at October 31, 1997 was $4,901,847, which represents
8.95% of the Fund's net assets.
9. INTEREST RATE SWAP TRANSACTIONS
The Fund may enter into an interest rate swap transaction to seek to maintain a
total return or yield spread on a particular investment or portion of its
portfolio, or for other non-speculative purposes. Interest rate swaps involve
the exchange of commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The coupon payments are based on
an agreed upon principal amount and a specified index. Because the principal
amount is not exchanged, it represents neither an asset nor a liability to
either counterparty, and is referred to as a notional principal amount. The Fund
records an increase or decrease to interest income, the amount due or owed by
the Fund at termination or settlement. The Fund enters into swaps only on
securities it owns. Interest rate swaps are subject to credit risks (if the
other party fails to meet its obligations) and also to interest rate risks. The
Fund could be obligated to pay more under its swap agreements than it receives
under them, as a result of interest rate changes. The Fund segregates liquid
assets to cover any amounts it could owe under swaps that exceed the amounts it
is entitled to receive.
As of October 31, 1997, the Fund had entered into the following interest rate
swap agreements:
<TABLE>
<CAPTION>
Swap Notional Rate Paid by the Floating Rate Received Floating Termination
Net
Counterparty Principal Fund at 10/31/97 by the Fund at 10/31/97 Rate Index Date
Unrealized Loss
- ------------ --------- ---------------- ----------------------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Morgan $1,920,000 7.65% 7.287% Three- 3/8/01 $7,560
Guaranty month
Trust Co. New Zealand
of New York Dollar Bank
Bills
</TABLE>
10. OTHER MATTERS
On October 9, 1997, the Board of Trustees of Oppenheimer World Bond Fund
approved the conversion of the Fund to an open-end fund, subject to shareholder
approval. If approved by shareholders, the conversion would occur during the
first quarter of calendar 1998.
30
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
1. Financial Statements.
(a) Statement of Investments - (See Part B, Statement of Additional
Information): Filed herewith.
(b) Statement of Assets and Liabilities - (See Part B, Statement of
Additional Information): Filed herewith.
(c) Statement of Operations - (See Part B, Statement of Additional
Information): Filed herewith.
(d) Statements of Changes in Net Assets - (See Part B, Statement of
Additional Information): Filed herewith.
(e) Financial Highlights - (See Part B, Statement of Additional
Information): Filed herewith.
(f) Notes to Financial Statements - (See Part B, Statement of Additional
Information): Filed herewith.
(g) Independent Auditors' Report - (See Part B, Statement of Additional
Information): Filed herewith.
(h) Independent Auditors' Consent - (See Part B, Statement of Additional
Information): Filed herewith.
2. Exhibits:
(a) (1) Declaration of Trust of Registrant - Filed with Registrant's
Registration Statement, 10/7/88, and refiled with Post-Effective Amendment No. 8
to Registrant's Registration
Statement, 2/27/95, and incorporated herein by reference.
(2) Amendment No. 1 dated as of October 18, 1988 to Declaration of
Trust of Registrant - Filed with Pre-Effective Amendment No. 2 to Registrant's
Registration Statement, 11/12/88, and refiled with Post-Effective Amendment No.
8 to Registrant's Registration Statement, 2/27/95, and incorporated herein by
reference.
(3) Amendment No. 2 dated as of November 12, 1988 to Declaration of
Trust of Registrant - Filed with Post-Effective Amendment No. 1 to Registrant's
Registration Statement, 11/25/88, and refiled with Post-Effective Amendment No.
8 to Registrant's Registration Statement, 2/27/95, and incorporated herein by
reference.
(4) Amendment No. 3 dated November 6, 1989 to Declaration of Trust
of Registrant - Filed with Post-Effective Amendment No. 8 to Registrant's
Registration Statement, 2/27/95, and incorporated herein by reference.
(5) Amendment No. 4 dated July 3, 1996 to Declaration of Trust of
Registrant - Previously filed with Registrant's Post- Effective Amendment No.
10, 7/26/96, and incorporated herein by reference.
(b) (1) By-Laws of Registrant - Filed with Registrant's Registration
Statement, 10/7/88, and refiled with Post-Effective Amendment No. 8 to
Registrant's Registration Statement, 2/27/95, and incorporated herein by
reference.
(2) Amendment to By-Laws of Registrant - Filed with Post-Effective
Amendment No. 8 to Registrant's Registration Statement, 2/27/95, and
incorporated herein by reference.
(3) Amendment to By-Laws of Registrant - Previously filed with
Registrant's Post-Effective Amendment No. 10, 7/26/96, and incorporated herein
by reference.
(c) Inapplicable
(d) Specimen certificate for Shares of Beneficial Interest, $.01 par value
- -Filed with Post-Effective Amendment No. 10 to Registrant's Registration
Statement and incorporated herein by reference.
(e) See Exhibit (k)(2).
(f) Inapplicable
(g) (1) Investment Advisory Agreement with Oppenheimer Management
Corporation dated 10/22/90 - Filed with Post-Effective Amendment No. 5 to
Registrant's Registration Statement dated 2/28/91 and refiled with
Post-Effective Amendment No. 8 to Registrant's Registration Statement, 2/27/95,
and incorporated herein by reference.
(2) Form of Administration Agreement with Mitchell Hutchins Asset
Management Inc. - Filed with Pre-Effective Amendment No. 2 to Registrant's
Registration Statement, 11/12/88, and refiled with Post-Effective Amendment No.
8 to Registrant's Registration Statement, 2/27/95, and incorporated herein by
reference.
(h) Inapplicable
(i) Retirement Plan for Non-Interested Trustees or Directors (adopted by
Registrant on 6/7/90) - Filed with Post-Effective
Amendment No. 45 to the Registration Statement of Oppenheimer
Special Fund (Reg. No. 2-14586) dated 10/21/94, and refiled with
Post-Effective Amendment No. 8 to Registrant's Registration
Statement, 2/27/95, and incorporated herein by reference.
(j) Co-Custody Agreement - Filed with Post-Effective Amendment No. 7 to
Registrant's Registration Statement, dated 2/26/93, and refiled with
Post-Effective Amendment No. 8 to Registrant's Registration Statement, 2/27/95,
and incorporated herein by reference.
(k) (1) Accounting Service Agreement - Filed with Post- Effective
Amendment No. 8 to Registrant's Registration Statement, 2/27/95, and
incorporated herein by reference.
(2) Registrar, Transfer Agency and Service Agreement -Filed with
Post-Effective Amendment No. 8 to Registrant's Registration Statement, 2/27/95,
and incorporated herein by reference.
(3) Co-Transfer Agent and Co-Registrar Agreement - Filed with
Post-Effective Amendment No. 8 to Registrant's Registration Statement, 2/27/95,
and incorporated herein by reference.
(l) Inapplicable.
(m) Inapplicable
(n) Inapplicable
(o) Inapplicable
(p) Inapplicable
(q) Inapplicable
(r) Financial Data Schedule - Filed herewith.
Item 25. Marketing Arrangements.
Inapplicable.
Item 26. Other Expenses of Issuance and Distribution.
Inapplicable.
Item 27. Persons Controlled by or under Common Control.
None.
Item 28. Number of Holders of Securities.
(1) (2)
Number of
Record Holders at
Title of Class February 20, 1998
Shares of Beneficial Interest, 920
$.01 par value
Item 29. Indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act, and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its By-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation therein of Sections 17(h) and 17(i) of the Investment
Company Act remains in effect.
Registrant, in conjunction with the Registrant's Trustees, and other
registered management investment companies managed by the Adviser, generally
maintains insurance on behalf of any person who is or was a Trustee, officer,
employee, or agent of Registrant. However, in no event will Registrant pay that
portion of the premium, if any, for insurance to indemnify any such person for
any act for which Registrant itself is not permitted to indemnify him.
Item 30. Business and Other Connections of Investment Adviser
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and
certain subsidiaries and affiliates act in the same capacity to other registered
investment companies as described in Parts A and B hereof and listed in Item
28(b) below.
(b) There is set forth below information as to any other business, profession,
vocation or employment of a substantial nature in which each officer and
director of OppenheimerFunds, Inc. is, or at any time during the past two fiscal
years has been, engaged for his/her own account or in the capacity of director,
officer, employee, partner or trustee.
<TABLE>
<CAPTION>
<S> <C>
Name and Current Position with Other Business and Connections
OppenheimerFunds, Inc.("OFI") During the Past Two Years
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real Asset
Management, Inc. ("ORAMI"); formerly Vice
President of Equity Derivatives at
Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst;Senior Vice President of
HarbourView Asset Management Corporation
("HarbourView"); prior to March, 1996 he
was the senior equity portfolio manager
for the Panorama Series Fund, Inc. (the
"Company") and other mutual funds and
pension funds managed by G.R. Phelps & Co.
Inc. ("G.R. Phelps"), the Company's former
investment adviser, which was a subsidiary
of Connecticut Mutual Life Insurance
Company; was also responsible for managing
the common stock department and common
stock investments of Connecticut Mutual
Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Vice President and Senior Portfolio
Manager at First of America Investment
Corp.
Beichert, Kathleen
Vice President None.
Rajeev Bhaman,
Vice President Formerly Vice President (January 1992 -
February, 1996) of Asian Equities for
Barclays de Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of Mutual Fund Accounting
(since May 1996); an officer of other
Oppenheimer funds; formerly an Assistant
Vice President of OFI/Mutual Fund
Accounting (April 1994-May 1996), and a
Fund Controller for OFI.
George C. Bowen,
Senior Vice President & Treasurer Vice President (since June 1983) and
Treasurer (since March 1985) of
OppenheimerFunds Distributor, Inc. (the
"Distributor"); Vice President (since
October 1989) and Treasurer (since April
1986) of HarbourView; Senior Vice
President (since February 1992), Treasurer
(since July 1991)and a director (since
December 1991) of Centennial; President,
Treasurer and a director of Centennial
Capital Corporation (since June 1989);
Vice President and Treasurer (since August
1978) and Secretary (since April 1981) of
Shareholder Services, Inc. ("SSI"); Vice
President, Treasurer and Secretary of
Shareholder Financial Services, Inc.
("SFSI") (since November 1989); Treasurer
of Oppenheimer Acquisition Corp. ("OAC")
(since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc.
(since November 1989); Vice President and
Treasurer of ORAMI (since July 1996);
Chief Executive Officer, Treasurer and a
director of MultiSource Services, Inc., a
broker-dealer (since December 1995); an
officer of other Oppenheimer funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division Formerly Assistant Vice President of
Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice President
of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 - present) of Awhtolia
College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President & Director An officer and/or portfolio manager of
certain Oppenheimer funds. John Doney, Vice President An officer and/or
portfolio manager of certain Oppenheimer funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Executive Vice President (since September
1993), and a director (since January
1992) of the Distributor; Executive
Vice President, General Counsel and a
director of HarbourView, SSI, SFSI and
Oppenheimer Partnership Holdings, Inc.
since (September 1995) and MultiSource
Services, Inc. (a broker-dealer) (since
December 1995); President and a director
of Centennial (since September 1995);
President and a director of ORAMI (since
July 1996); General Counsel (since May
1996) and Secretary (since April 1997) of
OAC; Vice President of OppenheimerFunds
International, Ltd. ("OFIL") and
Oppenheimer Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds.
George Evans,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of Oppenheimer
Millennium Funds plc (since October 1997);
an officer of other Oppenheimer funds;
formerly an Assistant Vice President of
OFI/Mutual Fund Accounting (April 1994-May
1996), and a Fund Controller for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of the
Distributor; Secretary of HarbourView,
MultiSource and Centennial; Secretary,
Vice President and Director of Centennial
Capital Corporation;
Vice President and Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds;
Presently he holds the following other
positions: Director (since 1995) of ICI
Mutual Insurance Company; Governor (since
1994) of St. John's College; Director
(since 1994 - present) of International
Museum of Photography at George Eastman
House; Director (since 1986) of GeVa
Theater. Formerly he held the following
positions: formerly, Chairman of the Board
and Director of Rochester Fund
Distributors, Inc. ("RFD"); President and
Director of Fielding Management Company,
Inc. ("FMC"); President and Director of
Rochester Capital Advisors, Inc. ("RCAI");
Managing Partner of Rochester Capital
Advisors, L.P., President and Director of
Rochester Fund Services, Inc. ("RFS");
President and Director of Rochester Tax
Managed Fund, Inc.; Director (1993 - 1997)
of VehiCare Corp.; Director (1993 - 1996)
of VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following positions:
An officer of certain former Rochester
funds (May, 1993 - January, 1996);
Secretary of Rochester Capital Advisors,
Inc. and General
Counsel (June, 1993 - January 1996) of
Rochester Capital
Advisors, L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director (1990-1996) for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based Oppenheimer
Funds. Formerly Vice President and General
Counsel of Oppenheimer Acquisition Corp.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly Vice President for Schroder
Capital Management International.
Jill Glazerman,
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial Officer Currently a Member and Fellow of the
Institute of Chartered Accountants;
formerly an accountant for Arthur Young
(London, U.K.).
Robert Grill,
Vice President Formerly Marketing Vice President for
Bankers Trust Company (1993-1996);
Steering Committee Member,
Subcommittee Chairman for American
Savings Education Council (1995-1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; formerly Vice
President of Fixed Income Portfolio
Management at Bankers Trust.
Elaine T. Hamann,
Vice President Formerly Vice President (September, 1989 -
January, 1997) of Bankers Trust Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President (1994-1997) of
Retirement Plans Services for
OppenheimerFunds Services.
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive Officer of
OppenheimerFunds Services,
a division of the Adviser President and Director of SFSI; President
and Chief executive Officer of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly a Senior Vice President and
Portfolio Manager for Warburg, Pincus
Counselors, Inc. (1993-1997), Co-manager
of Warburg, Pincus Emerging Markets Fund
(12/94 - 10/97), Co-manager Warburg,
Pincus Institutional Emerging Markets
Fund - Emerging Markets Portfolio (8/96
- 10/97), Warburg Pincus Japan OTC Fund, Associate Portfolio
Manager of Warburg Pincus International
Equity Fund, Warburg Pincus Institutional
Fund - Intermediate Equity Portfolio, and
Warburg Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President None.
Ronald Jamison,
Vice President Formerly Vice President and Associate General Counsel at Prudential Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly, a Managing Director of Global
Equities at Paine Webber's Mitchell
Hutchins division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director (1994 - 1996) of Van Eck Global.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio manager of certain
Oppenheimer funds; formerly, a Securities Analyst for Columbus Circle
Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President Director of Board (since 2/96),
Chinese Finance Society; formerly,
Chairman (11/94-2/96), Chinese Finance
Society; and Director (6/94-6/95), Greater
China Business Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio manager for certain
Oppenheimer funds; a Chartered Financial Analyst; a Vice President of
HarbourView; prior to March 1996, the senior bond portfolio
manager for Panorama Series Fund Inc., other mutual funds
and pension accounts managed by G.R. Phelps; also
responsible for managing the public fixed-income securities
department at Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director Chief Executive Officer (since September 1995); President and
director (since June 1991) of HarbourView; Chairman and a
director of SSI (since August 1994), and SFSI (September
1995); President (since September 1995) and a director (since
October 1990) of OAC; President (since September 1995)
and a director (since November 1989) of Oppenheimer
Partnership Holdings, Inc., a holding company subsidiary of
OFI; a director of ORAMI (since July 1996) ; President and a
director (since October 1997) of OFIL, an offshore fund
manager subsidiary of OFI and Oppenheimer Millennium
Funds plc (since October 1997); President and a director of
other Oppenheimer funds; a director of the NASDAQ Stock
Market, Inc. and of Hillsdown Holdings plc (a U.K. food
company); formerly an Executive Vice President of OFI.
Wesley Mayer,
Vice President Formerly Vice President (January, 1995 - June, 1996) of
Manufacturers Life Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Tanya Mrva,
Assistant Vice President None.
Lisa Migan,
Assistant Vice President None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager of certai
Oppenheimer funds; formerly a Portfolio Manager (August, 1989 - August,
1995) with Phoenix Securities Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager (July 1995-November 1996) for Chase Investment Services Corp.
Tanya Mrva,
Assistant Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
John Pirie,
Assistant Vice President Formerly, a Vice President with Cohane Rafferty Securities, Inc.
Jane Putnam,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Russell Read,
Senior Vice President Vice President of Oppenheimer Real Asset Management, Inc.
(since March, 1995); formerly director of Quantitative
Research for the Adviser. Prior to that he was a lecturer at
Stamford University, an investment manager for The
Prudential, and Associate Economist for the First National
Bank of Chicago.
Thomas Reedy,
Vice President An officer and/or portfolio manager of certain Oppenheimer
funds; formerly, a Securities Analyst for the Adviser.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio manager of certain Oppenheimer funds;
Formerly, Vice President (June, 1983 - January, 1996)
of RFS, President and Director of RFD; Vice President and
Director of FMC; Vice President and director of RCAI;
General Partner of RCA; Vice President and Director of
Rochester Tax Managed Fund Inc.
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
formerly Vice President and Portfolio
Manager/Security Analyst for Oppenheimer
Capital Corp., an investment adviser.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of Citicorp Investment Services.
Richard Soper,
Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman and
Trustee of the New York-based Oppenheimer
Funds; formerly Chairman of the Adviser
and the Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since 1995) of Rochester Capitol Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
Ralph Stellmacher,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer
funds.
John Stoma,
Senior Vice President, Director
Retirement Plans Formerly Vice President of U.S. Group Pension Strategy and Marketing for Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds;
a Chartered Financial Analyst; a Vice President of
HarbourView; prior to March 1996, an equity portfolio
manager for Panorama Series Fund, Inc. and other mutual
funds and pension accounts managed by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or Managing Partner of the
Denver-based Oppenheimer Funds; President and a
Director of Centennial; formerly President and Director of
OAMC, and Chairman of the Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds;
formerly Managing Director of Buckingham Capital
Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Dorothy Warmack,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds.
Jerry Webman,
Senior Vice President Director of New York-based
tax-exempt fixed income Oppenheimer funds;
Formerly, Managing Director and Chief
Fixed Income Strategist at Prudential
Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager of certain Oppenheimer funds;
a Chartered Financial Analyst; Vice President of
HarbourView; prior to March 1996, an equity portfolio
manager for Panorama Series Fund, Inc. and other mutual
funds and pension funds managed by G.R. Phelps.
William L. Wilby,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds;
Vice President of HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds; Vice
President of Centennial; Vice President,
Finance and Accounting and member of the
Board of Directors of the Junior League of
Denver, Inc.; Point of Contact: Finance
Supporters of Children; Member of the
Oncology Advisory Board of the Childrens
Hospital; Member of the Board of Directors
of the Colorado Museum of Contemporary
Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer
Millennium Funds plc (since October 1997); an officer of
other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or portfolio manager of certain Oppenheimer funds;
Vice President of Centennial.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds, the
Denver-based Oppenheimer Funds and the Oppenheimer/Quest Rochester Funds, as set
forth below:
New York-based Oppenheimer Funds
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer
Funds, the Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset
Management Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer
Acquisition Corp. is Two World Trade Center, New
York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of MultiSource Services, Inc. is 1700 Lincoln Street, Denver,
Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester,
New York 14625- 2807.
Item 29. Principal Underwriter
(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's
shares. It is also the Distributor of each of the other registered open-end
investment companies for which OppenheimerFunds, Inc. is the investment adviser,
as described in Part A and B of this Registration Statement and listed in Item
28(b) above.
(b) The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
George C. Bowen(1) Vice President and Vice President and
Treasurer Treasurer of the
Oppenheimer funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President & Director Oppenheimer funds.
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1215 W. 10th Street
Apt. 510
Cleveland, OH 44113
Birmingham, MI 48009
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
C. Webb Heidinger(2) Vice President None
Byron Ingram(2) Assistant Vice President None
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
560 Beacon Hill Drive
Orange Village, OH 44022
Ilene Kutno(2) Assistant Vice President None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
39 Coleman Avenue
Chatham, N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marke Nakamura Vice President None
2870 White Ridge Place, #24
Thousand Oaks, CA 91362
Chad V. Noel Vice President None
60 Myrtle Beach Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Steve Puckett Vice President None
2555 N. Clark, #209
Chicago, IL 60614
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI 48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd. #123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
201 Summerfield
Northbrook, IL 60062
Sarah Turpin Vice President None
2735 Dover Road
Atlanta, GA 30327
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
Item 31. Location of Accounts and Records.
All accounts, books and other documents, required to be maintained by the
Registrant under Section 31(a) of the Investment Company Act of 1940 and the
Rule thereunder are maintained by OppenheimerFunds, Inc. at its offices at 6803
South Tucson Way, Englewood, Colorado 80112.
Item 32. Management Services.
The Registrant is not a party to any management-related service contract
not discussed in Part A of this Registration Statement.
Item 33. Undertakings.
1. The Registrant undertakes to suspend the offering of the shares
covered hereby until it amends its prospectus if (1) subsequent to the effective
date of this Registration Statement, its net asset value per share declines more
than 10 percent from its net asset value per share as of the effective date of
this Registration Statement, or (2) its net asset value increases to an amount
greater than its net proceeds as stated in the prospectus.
2. Inapplicable
3. Inapplicable
4. Inapplicable
5. Inapplicable
6. Inapplicable
-6-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York and State of New York on the 26th day of February, 1998.
OPPENHEIMER WORLD BOND FUND
By: /s/ Bridget A. Macaskill*
-------------------------------
Bridget A. Macaskill, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
Signatures Title Date
- ---------- ----- ----
/s/ Leon Levy* Chairman of the
- -------------- Board of Trustees February 26, 1998
Leon Levy
/s/ Donald W. Spiro* Vice Chairman of the
- ------------------- Board of Trustees February 26, 1998
Donald W. Spiro
/s/ Bridget A. Macaskill* President & Trustee February 26, 1998
- ------------------------
Bridget A. Macaskill
/s/ George Bowen* Treasurer and
- ----------------- Principal Financial
George Bowen & Accounting Officer February 26, 1998
/s/ Robert G. Galli* Trustee February 26, 1998
- -------------------
Robert G. Galli
/s/ Benjamin Lipstein* Trustee February 26, 1998
- ----------------------
Benjamin Lipstein
/s/ Elizabeth B. Moynihan* Trustee February 26, 1998
- ---------------------
Elizabeth B. Moynihan
/s/ Kenneth A. Randall* Trustee February 26, 1998
- ----------------------
Kenneth A. Randall
/s/ Edward V. Regan* Trustee February 26, 1998
- --------------------
Edward V. Regan
/s/ Russell S. Reynolds, Jr.* Trustee February 26, 1998
- ------------------------
Russell S. Reynolds, Jr.
/s/ Pauline Trigere* Trustee February 26, 1998
- -------------------
Pauline Trigere
/s/ Clayton K. Yeutter* Trustee February 26, 1998
- -----------------------
Clayton K. Yeutter
*By: /s/ Robert G. Zack
--------------------------------
Robert G. Zack, Attorney in Fact
-7-
<PAGE>
OPPENHEIMER WORLD BOND FUND
Registration No. 811-5670
Post-Effective Amendment No. 13
Index to Exhibits
Exhibit No. Description
24(1)(h) Independent Auditor's Consent
24(2)(r) Financial Data Schedule
-8-
Consent of Independent Auditors
The Board of Trustees
Oppenheimer World Bond Fund
We consent to the use of our report dated November 21, 1997 included herein.
/s/ KPMG Peat Marwick LLP
- -------------------------
KPMG Peat Marwick LLP
Denver, Colorado
February 26, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 841057
<NAME> Oppenheimer World Bond Fund
<S> <C> <PERIOD-TYPE>
12-MOS <FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996 <PERIOD-END>
OCT-31-1997 <INVESTMENTS-AT-COST>
59,000,447 <INVESTMENTS-AT-VALUE>
59,113,384 <RECEIVABLES>
7,760,039 <ASSETS-OTHER> 2,617
<OTHER-ITEMS-ASSETS> 980,565
<TOTAL-ASSETS> 67,856,605
<PAYABLE-FOR-SECURITIES> 10,355,155
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,720,530
<TOTAL-LIABILITIES> 13,075,685
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59,740,223
<SHARES-COMMON-STOCK> 6,615,505
<SHARES-COMMON-PRIOR> 6,615,505
<ACCUMULATED-NII-CURRENT> 82,750
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,105,071)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 63,018
<NET-ASSETS> 54,780,920
<DIVIDEND-INCOME> 3,465
<INTEREST-INCOME> 5,438,948
<OTHER-INCOME> 0
<EXPENSES-NET> 655,053
<NET-INVESTMENT-INCOME> 4,787,360
<REALIZED-GAINS-CURRENT> 1,085,931
<APPREC-INCREASE-CURRENT> (1,609,166)
<NET-CHANGE-FROM-OPS> 4,264,125
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,445,641
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (181,516)
<ACCUMULATED-NII-PRIOR> 523,824
<ACCUMULATED-GAINS-PRIOR> (7,083,779)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 359,532
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 663,356
<AVERAGE-NET-ASSETS> 55,339,000
<PER-SHARE-NAV-BEGIN> 8.31
<PER-SHARE-NII> 0.72
<PER-SHARE-GAIN-APPREC> (0.08)
<PER-SHARE-DIVIDEND> 0.67
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.28
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
