OPPENHEIMER
International Bond Fund
Prospectus dated December 5, 1995
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Oppenheimer International Bond Fund (the "Fund") is a mutual fund with the
primary investment objective of seeking total return. As a secondary
objective, the Fund seeks income when consistent with total return. The
Fund seeks to achieve its objectives by investing primarily in foreign
debt securities, with an emphasis on debt securities issued by governments
of developed countries and emerging market countries in Latin America,
Europe and the Pacific Rim, and by companies located in those countries.
The Fund's foreign investments are subject to certain additional
risks, including foreign currency fluctuations, that do not affect
investments in domestic issuers. The Fund may invest without limit in
foreign non-investment grade debt securities, which entail greater risks
of untimely interest and principal payments, default, and price volatility
than higher rated securities, and may present problems of liquidity and
valuation. See "Special Risks of Lower-Grade Securities" on page 13.
Investors should carefully consider these risks before investing. The
Fund may also use certain hedging instruments and derivative investments
in an effort to reduce the risks of market fluctuations that affect the
value of the securities the Fund holds, or to seek total return or income.
The Fund may borrow money from banks to buy securities, which is a
speculative investment method known as "leverage."
This Prospectus explains concisely what you should know before
investing in the Fund. Please read this Prospectus carefully and keep it
for future reference. You can find more detailed information about the
Fund in the December 5, 1995 Statement of Additional Information. For a
free copy, call Oppenheimer Shareholder Services, the Fund's Transfer
Agent, at 1-800-525-7048, or write to the Transfer Agent at the address
on the back cover. The Statement of Additional Information has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference (which means that it is legally part of this
Prospectus).
[logo] OppenheimerFunds
Shares of the Fund are not deposits or obligations of any bank, are not
guaranteed by any bank, are not insured by the F.D.I.C. or any other
agency, and involve investment risks, including the possible loss of the
principal amount invested.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
Contents
A B O U T T H E F U N D
3 Expenses
5 A Brief Overview of the Fund
7 Financial Highlights
9 Investment Objectives and Policies
19 How the Fund is Managed
21 Performance of the Fund
A B O U T Y O U R A C C O U N T
22 How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
33 Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
35 How to Sell Shares
By Mail
By Telephone
By Checkwriting
37 How to Exchange Shares
39 Shareholder Account Rules and Policies
40 Dividends, Capital Gains and Taxes
43 Appendix: Description of Securities Ratings
<PAGE>
A B O U T T H E F U N D
Expenses
The Fund pays a variety of expenses directly for management of its assets,
administration, distribution of its shares and other services, and those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset values per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales
charges and account transaction charges. The following tables are
provided to help you understand your direct expenses of investing in the
Fund and your share of the Fund's business operating expenses that you
might expect to bear indirectly. The numbers below are based on the
Fund's expenses during its last fiscal period ended September 30, 1995.
-- Shareholder Transaction Expenses are charges you pay when you buy
or sell shares of the Fund. Please refer to "About Your Account," from
pages 22 through 42, for an explanation of how and when these charges
apply.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge 4.75% None None
on Purchases (as a % of
offering price)
- --------------------------------------------------------------------------
Sales Charge on None None None
Reinvested Dividends
- --------------------------------------------------------------------------
Deferred Sales Charge None(1) 5% in the first 1% if shares
(as a % of the lower of year, declining are redeemed
the original purchase to 1% in the within 12
price or redemption sixth year and months of
proceeds) eliminated purchase(2)
thereafter(2)
- --------------------------------------------------------------------------
Exchange Fee None None None
</TABLE>
(1) If you invest $1 million or more ($500,000 or more for purchases by
OppenheimerFunds prototype 401(k) plans) in Class A shares, you may have
to pay a sales charge of up to 1% if you sell your shares within 18
calendar months from the end of the calendar month during which you
purchased those shares. See "How to Buy Shares - Class A Shares," below.
(2) See "How to Buy Shares," below, for more information on the contingent
deferred sales charges.
-- Annual Fund Operating Expenses are paid out of the Fund's assets
and represent the Fund's expenses in operating its business. For example,
the Fund pays management fees to its investment adviser, Oppenheimer
Management Corporation (which is referred to in this Prospectus as the
"Manager"). The rates of the Manager's fees are set forth in "How the
Fund is Managed," below. The Fund has other regular expenses for
services, such as transfer agent fees, custodial fees paid to the bank
that holds its portfolio securities, audit fees and legal expenses. Those
expenses are detailed in the Fund's Financial Statements in the Statement
of Additional Information.
The numbers in the table below are projections of the Fund's business
expenses based on the Fund's expenses in its last fiscal period ended
September 30, 1995. These amounts are shown as a percentage of the
average net assets of each class of the Fund's shares for that year. The
12b-1 Distribution Plan Fees for Class A shares are service plan fees.
For Class B and Class C shares the 12b-1 Distribution Plan Fees are the
service plan fees and asset-based sales charges. The service fee for each
class is 0.25% of average annual net assets of the class and the asset-
based sales charge for Class B and Class C shares is 0.75%. These plans
are described in greater detail in "How to Buy Shares."
The Total Fund Operating Expenses shown are net of a voluntary
expense assumption by the Manager. The expense assumption lowered the
Fund's overall expense ratio. Without such expense assumption by the
Manager, the "Management Fees" for each class of the Fund's shares would
have been 0.75% of the Fund's average net assets, "12b-1 Plan Fees" for
the Fund's Class A, Class B and Class C shares would have been 0.25%,
1.00% and 1.00%, respectively, "Other Expenses" for the Fund's Class A
shares would have been 0.59%, and the "Total Fund Operating Expenses" for
the Fund's Class A, Class B and Class C shares would have been 1.59%,
2.21% and 2.26%, respectively. The expense assumption is described in the
Statement of Additional Information and may be modified or withdrawn by
the Manager at any time.
The actual expenses for each class of shares in future years may be
more or less than the numbers in the chart, depending on a number of
factors, including the actual value of the Fund's assets represented by
each class of shares. All three classes of shares were not publicly
offered before June 15, 1995. Therefore the Annual Fund Operating
Expenses shown are based on expenses for the period from the inception of
the Fund (June 15, 1995) until September 30, 1995.
<TABLE>
<CAPTION>
Class A Class B Class C
Shares Shares Shares
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<S> <C> <C> <C>
Management Fees None None None
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12b-1 Distribution Plan Fees None 0.43% 0.34%
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Other Expenses 0.41% 0.46% 0.51%
- --------------------------------------------------------------------------
Total Fund Operating
Expenses 0.41% 0.89% 0.85%
- --------------------------------------------------------------------------
</TABLE>
-- Examples. To try to show the effect of these expenses on an
investment over time, we have created the hypothetical examples shown
below. Assume that you make $1,000 investments in each class of shares
of the Fund, and that the Fund's annual return is 5%, and that its
operating expenses for each class are the ones shown in the Annual Fund
Operating Expenses table above. If you were to redeem your shares at the
end of each period shown below, your investment would incur the following
expenses by the end of 1 and 3, 5 and 10 years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares $51 $60 $69 $97
- ------------------------------------------------------------
Class B Shares $59 $58 $69 $83
- ------------------------------------------------------------
Class C Shares $19 $27 $47 $105
</TABLE>
If you did not redeem your investment, it would incur the following
expenses:
<TABLE>
<S> <C> <C> <C> <C>
Class A Shares $51 $60 $69 $97
- --------------------------------------------------------
Class B Shares $9 $28 $49 $83
- --------------------------------------------------------
Class C Shares $9 $27 $47 $105
</TABLE>
Because of the asset-based sales charge and the contingent deferred
sales charge on Class B and Class C shares, long-term Class B and Class
C shareholders could pay the economic equivalent of an amount greater than
the maximum front-end sales charge allowed under applicable regulatory
requirements. For Class B shareholders, the automatic conversion of Class
B shares to Class A shares is designed to minimize the likelihood that
this will occur. Please refer to "How to Buy Shares - Buying Class B
Shares" for more information.
These examples show the effect of expenses on an investment, but are
not meant to state or predict actual or expected costs or investment
returns of the Fund, all of which will vary.
A Brief Overview of the Fund
Some of the important facts about the Fund are summarized below, with
references to the section of this Prospectus where more complete
information can be found. You should carefully read the entire Prospectus
before making a decision about investing in the Fund. Keep the Prospectus
for reference after you invest, particularly for information about your
account, such as how to sell or exchange shares.
-- What Is The Fund's Investment Objective? The Fund's primary
investment objective is to seek total return. As a secondary objective,
the Fund seeks income when consistent with total return.
-- What Does the Fund Invest In? Under normal circumstances, the
Fund will invest at least 65% of its total assets in debt securities (also
known as "fixed income" securities). Debt securities, in general,
represent a loan of money to the issuer, who promises to pay back the
amount loaned (the "principal amount") plus interest, which may be at a
fixed rate or a variable rate. The Fund intends to invest primarily in
foreign debt securities, with an emphasis on debt securities issued by
governments of developed countries and emerging market countries located
in Latin America, Europe and the Pacific Rim, and by companies located in
those countries. Many of the Fund's investments are lower-grade debt
securities, which are subject to increased risk of default and market
fluctuations, and may at times be illiquid.
Under normal circumstances, the Fund may invest up to 35% of its
total assets in certain other securities, including common stocks and
other "equity securities" that represent an ownership interest in the
domestic or foreign company issuing the security. The Fund may also use
hedging instruments and some derivative investments in an effort to
protect against market risks. Derivative investments may also be used to
enhance total return or income. These investments are more fully
explained in "Investment Objectives and Policies," starting on page 9.
-- Who Manages the Fund? The Fund's investment adviser (the
"Manager") is Oppenheimer Management Corporation. The Manager (including
a subsidiary) manages investment company portfolios having over $38
billion in assets at September 30, 1995. The Manager is paid an advisory
fee by the Fund, based on its net assets. The Fund has a portfolio
manager, Mr. Ashwin K. Vasan, who is employed by the Manager. He is
primarily responsible for the selection of the Fund's securities. The
Fund's Board of Trustees, elected by shareholders, oversees the investment
adviser and the portfolio manager. Please refer to "How the Fund is
Managed," starting on page 18 for more information about the Manager and
its fees.
-- How Risky is the Fund? While different types of investments have
risks that differ in type and magnitude, all investments carry risk to
some degree. Changes in overall market movements or interest rates, or
factors affecting a particular industry or issuer, can affect the value
of the Funds' investments and the Fund's net asset values per share.
Equity investments are generally subject to a number of risks, including
the risk that values will fluctuate as a result of changing expectations
for the economy and individual issuers. Fixed-income investments are
generally subject to the risk that values will fluctuate with inflation,
with lower-rated, fixed-income investments being subject to a greater risk
that the issuer will default in its interest or principal payment
obligations. For both equity and income investments, foreign investments
are subject to the risk of adverse currency fluctuation and additional
risks and expenses in comparison to domestic investments. Hedging
instruments and derivative investments involve certain risks, as discussed
under "Hedging" and "Derivative Investments," below. The Fund may borrow
money from banks to buy securities, a practice known as leverage that is
subject to certain risks discussed below under "Special Risks - Borrowing
for Leverage."
In the Oppenheimer funds spectrum, the Fund is generally considered
to be the most aggressive fixed-income fund. The Fund has a higher
risk/return profile than the other Oppenheimer fixed-income funds. This
is because the Fund invests primarily in foreign debt securities, which
are subject to special risks.
While the Manager tries to reduce risks by diversifying investments
(particularly geographic diversification among developed countries and
emerging market countries), and by carefully researching securities before
they are purchased for the portfolio, and in some cases by using hedging
techniques, there is no guarantee of success in achieving the Fund's
objectives and your shares may be worth more or less than their original
cost when you redeem them. Please refer to "Investment Objectives and
Policies" starting on page 9 for a more complete discussion of the Fund's
investment risks.
-- How Can I Buy Shares? You can buy shares through your dealer or
financial institution, or you can purchase shares directly through the
Distributor by completing an Application or by using an Automatic
Investment Plan under AccountLink. Please refer to "How to Buy Shares"
on page 21 for more details.
-- Will I Pay a Sales Charge to Buy Shares? The Fund offers the
individual investor three classes of shares. All classes have the same
investment portfolio but different expenses. Class A shares are offered
with a front-end sales charge, starting at 4.75%, and reduced for larger
purchases. Class B and Class C shares are offered without a front-end
sales charge, but may be subject to a contingent deferred sales charge if
redeemed within 6 years or 12 months, respectively, of buying them. There
is also an annual asset-based sales charge on Class B and Class C shares.
Please review "How To Buy Shares" starting on page 21 for more details,
including a discussion about which class may be appropriate for you.
-- How Can I Sell My Shares? Shares can be redeemed by mail, by
checkwriting, or by telephone call to the Transfer Agent on any business
day, or through your dealer. Please refer to "How To Sell Shares" on page
35. The Fund also offers exchange privileges to other Oppenheimer funds,
described in "How to Exchange Shares" on page 38.
Financial Highlights
The table on the following page presents selected financial
information about the Fund, including per share data, expense ratios and
other data based on the Fund's average net assets. This information has
been audited by Deloitte & Touche LLP, the Fund's independent auditors,
whose report on the Fund's financial statements for the period June 15,
1995 (commencement of operations) to September 30, 1995 is included in the
Statement of Additional Information.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS For the period from June 15, 1995 (commencement of
operations) to September 30, 1995
CLASS A CLASS B CLASS C
----------------- --------------- ---------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1995
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.00 $5.00 $5.00
----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .15 .14 .14
Net realized and unrealized gain on
investments, options written and
foreign currency transactions .10 .10 .09
----------------------------------------------------------------------------------------------------
Total income from investment operations .25 .24 .23
----------------------------------------------------------------------------------------------------
Dividends to shareholders from net
investment income (.15) (.14) (.14)
Net asset value, end of period $5.10 $5.10 $5.09
TOTAL RETURN, AT NET ASSET VALUE (1) 5.13% 4.92%
4.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $3,984 $3,238 $201
----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,566 $1,125 $97
----------------------------------------------------------------------------------------------------
Number of shares outstanding at
end of period (in thousands) 781 635 39
----------------------------------------------------------------------------------------------------
Ratios to average net assets (2):
Net investment income 9.94% 9.20% 9.36%
Expenses, before voluntary reimbursement
by the Manager 1.59% 2.21% 2.26%
Expenses, net of voluntary reimbursement
by the Manager .41% .89% .85%
----------------------------------------------------------------------------------------------------
Portfolio turnover rate (3) 122.0% 122.0% 122.0%
</TABLE>
1. Assumes a hypothetical initial investment on
the business day before the first day of the
fiscal period, with all dividends and distribu-
tions reinvested in additional shares on the
reinvestment date, and redemption at the net
asset value calculated on the last business day
of the fiscal period. Sales charges are not
reflected in the total returns. Total returns
are not annualized for periods of less than one
full year.
2. Annualized.
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) for the period ended September 30,
1995 were $10,314,730 and $4,358,100,
respectively.
<PAGE>
Investment Objectives and Policies
Objective. The Fund's primary investment objective is to seek total
return. As a secondary objective, the Fund seeks income when consistent
with total return.
Investment Policies and Strategies. Set forth below are the investment
policies and strategies the Fund may use in seeking its investment
objectives. The Manager might not use all of these instruments or all of
these investment strategies to the full extent permitted unless it
believes doing so will help the Fund achieve its investment objectives.
Under normal market conditions, the Fund will invest in at least
three countries other than the United States, and will invest at least 65%
of its total assets in "bonds." The Fund considers debt securities to be
bonds for purposes of its policy that it will invest at least 65% of its
total assets in "bonds." "Debt securities," in general, represent a loan
of money to the issuer, who promises to pay back the amount loaned (the
"principal amount") plus interest, which may be at a fixed rate or a
variable rate.
The Fund anticipates that it will emphasize foreign debt securities,
particularly debt securities issued by governments of developed countries
and emerging market countries in Latin America, Europe and the Pacific
Rim, and by companies located in those countries. Emerging market
countries generally have the following characteristics: (1) virtually no
market for longer-term debt securities denominated in its local currency,
(2) borrowed monies are generally denominated in currencies other than its
local currency, (3) lack of a developed yield curve for its local
currency, and (4) with the exception of Mexico, is not a member of the
Organization for Economic Cooperation & Development ("OECD"). See
"Foreign Debt Securities," below.
The Fund may invest without limitation in high-yield, high risk,
"lower-grade" bonds (including both rated and unrated high-yield bonds),
because they generally offer higher income potential than investment grade
bonds. "Lower-grade" bonds are those rated below "investment grade" by
nationally-recognized rating organizations. See "Special Risks of
Lower-Grade Securities," below.
Under normal market conditions, the Fund may invest up to 35% of its
total assets in certain securities other than debt securities, including
common stocks, convertible securities, warrants and other equity
securities that generally represent an ownership interest in the company
issuing the security.
-- Can the Fund's Investment Objectives and Policies Change? The
Fund has primary and secondary investment objectives, described above, as
well as investment policies it follows to try to achieve its objectives.
Additionally, the Fund uses certain investment techniques and strategies
in carrying out those investment policies. The Fund's investment policies
and techniques are not "fundamental" unless this Prospectus or the
Statement of Additional Information says that a particular policy is
"fundamental." The Fund's primary and secondary investment objectives are
fundamental policies.
Fundamental policies are those that cannot be changed without the
approval of a "majority" of the Fund's outstanding voting shares. The
term "majority" is defined in the Investment Company Act to be a
particular percentage of outstanding voting shares (and this term is
explained in the Statement of Additional Information). The Fund's Board
of Trustees may change non-fundamental policies without shareholder
approval, although significant changes will be described in amendments to
this Prospectus.
-- Foreign Debt Securities. Under normal circumstances, as a matter
of fundamental policy, the Fund will invest in the United States and at
least three foreign countries. The Fund will normally invest a
substantial amount of its assets in foreign securities. The Fund may
invest in any country, whether it is developed or underdeveloped.
Investments in securities of issuers in non-industrialized countries
generally involve more risk and may be considered to be highly
speculative. The Fund's selection of foreign securities must be
consistent with preservation of capital, however, under its investment
objective.
The Fund may invest in foreign securities that are U.S. dollar-
denominated debt obligations known as "Brady Bonds." They are issued to
exchange existing commercial bank loans to foreign entities for new
obligations that are generally collateralized by zero coupon U.S. Treasury
securities having the same maturity. The Fund may also buy foreign debt
obligations such as bonds (including sinking fund and callable bonds),
debentures and notes (including variable and floating rate instruments),
and preferred stocks and zero coupon securities. The Fund may purchase
foreign securities denominated in U.S. dollars or in foreign currencies.
If the Fund's securities are held abroad, the countries in which they are
held and the sub-custodians holding them must be approved by the Fund's
Board of Trustees. The Fund will hold foreign currency only in connection
with the purchase or sale of foreign securities.
The Fund shall not invest 25% or more of its total assets in (1)
government securities of any one foreign country or (2) debt and equity
securities issued by companies organized under the laws of any one foreign
country.
-- Foreign securities have special risks. There are special risks
in investing in foreign securities. Because the Fund may buy securities
denominated in foreign currencies or traded primarily in foreign markets,
a change in the value of a foreign currency against the U.S. dollar will
result in a change in the U.S. dollar value of securities denominated in
that foreign currency.
Currency rate changes will also affect the income available to
distribute to shareholders of the Fund. Although the Fund's investment
income from foreign securities will be received in foreign currencies, the
Fund will be required to distribute its income to shareholders in U.S.
dollars. Therefore, the Fund will absorb the cost of currency
fluctuations. While the Fund may use hedging techniques to try to reduce
the risk of currency fluctuations, if the Fund suffers losses on foreign
currencies after it has distributed its income during the year, it may
find that it has distributed more income than was available from net
investment income. That could result in previously distributed income
being re-classified as a return of capital to shareholders.
Foreign issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to. The value of foreign
investments may be affected by other factors, including exchange control
regulations, expropriation or nationalization of a company's assets,
foreign taxes, delays in settlement of transactions, changes in
governmental economic or monetary policy in the U.S. or abroad, or other
political and economic factors. Issuers of foreign securities that are
not registered for sale in the U.S. do not have to comply with disclosure
requirements that U.S. companies are subject to.
In addition, it is generally more difficult to obtain court judgments
outside the U.S. if the Fund were to sue a foreign issuer or broker.
Additional costs may be incurred because foreign brokerage commissions are
generally higher than U.S. rates, and there are additional custodial costs
associated with holding securities abroad. More information about the
risks and potential rewards of investing in foreign securities is
contained in the Statement of Additional Information.
-- 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 values
could be affected. Emerging market countries may have smaller, less well-
developed markets and exchanges; 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.
The Manager expects the Fund's investments to be geographically well-
diversified among developed country debt and emerging market country debt.
-- Temporary Defensive Investment Strategy. Under normal market
conditions, the Fund will invest at least 65% of its total assets in debt
securities. During periods of unusual market volatility, or unusual
economic or business activity, the Fund may invest up to 100% of its
assets in shorter-term debt securities, primarily domestic shorter-term
debt securities, for defensive reasons. Securities selected for defensive
reasons may include: (1) U.S. Treasury bills and other obligations issued
or guaranteed by the U.S. government, its agencies or instrumentalities,
(2) highly-rated commercial paper, or (3) certificates of deposit, bankers
acceptances or other U.S. bank obligations.
-- U.S. Debt Securities. The Fund's investments in U.S. debt
securities may include, but are not limited to, the following:
-- U.S. Government Obligations. U.S Treasury notes, bills and bonds
are backed by the full faith and credit of the U.S. government. Some U.S.
government agency securities are backed by the full faith and credit of
the U.S. government (for example,"Ginnie Mae's"). Others are supported by
the right of the agency to borrow an amount from the U.S. government
limited to a specific line of credit (for example, "Fannie Mae's").
Others are supported only by the credit of the agency that issued the
security (for example, "Freddie Mac's").
-- Commercial Paper. Commercial paper is short-term corporate debt.
The Fund's commercial paper investments may include variable amount master
demand notes and floating rate or variable rate notes, described in the
Statement of Additional Information.
-- Mortgage-Backed Securities and CMOs. The Fund may invest in
securities that represent an interest in a pool of residential mortgage
loans. These include collateralized mortgage-backed obligations (referred
to as "CMOs") issued by the U.S. government, its agencies or
instrumentalities, or by private issuers. The issuer's obligation to make
interest and principal payments on a mortgage-backed security is secured
by the underlying portfolio of mortgages or mortgage-backed securities.
Prepayments on the underlying mortgages may reduce the yield on mortgage-
backed securities or CMOs.
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
place cash, U.S. Government securities or other high-grade debt securities
in a segregated account with its custodian bank in an amount equal to its
purchase payment obligation under the roll.
-- Asset-Backed Securities. Asset-backed securities represent
interests in pools of consumer loans (such as credit card loans and
automobile loans) and in other trade receivables. Asset-backed securities
may be supported by a credit enhancement, such as a letter of credit , a
guarantee or a preference right. However, the extent of the credit
enhancement may be different for different securities and generally
applies to only a fraction of the security's value. Prepayments on the
underlying receivables may reduce the yield on asset-backed securities.
-- Zero Coupon Securities. These securities, which may be issued by
the U.S. government, its agencies or instrumentalities or by private
issuers, are purchased at a substantial discount from their face value.
They are subject to greater fluctuations in market value as interest rates
change than debt securities that pay interest periodically. Interest
accrues on zero coupon bonds even though cash is not actually received.
-- Participation Interests. Participation interests are interests
in loans made to U.S. or foreign companies or to foreign governments.
These interests 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 may be invested in participation interests of the same
borrower.
-- Bank Obligations. These include time deposits, certificates of
deposit and bankers acceptances of a domestic or foreign bank with total
assets of at least U.S. $1 billion.
-- Risks of Debt Securities. In addition to credit risks, described
below, debt securities are subject to changes in their value due to
changes in prevailing interest rates. When prevailing interest rates
fall, the value of already-issued debt securities generally decline. The
magnitude of these fluctuations will often be greater for longer-term debt
securities than shorter-term debt securities. Changes in the value of
securities held by the Fund mean that the Fund's share prices can go up
or down when interest rates change because of the effect of the change on
the value of the Fund's portfolio of debt securities. Credit risk relates
to the ability of the issuer to meet interest or principal payments on a
security as they become due. Generally, higher yielding lower-grade
bonds, described below, are subject to credit risks to a greater extent
than lower yielding, investment-grade bonds.
-- Special Risks of Lower-Grade Securities. High yield, lower-
grade securities, whether rated or unrated, often have speculative
characteristics. Lower-grade securities have special risks that make them
riskier investments than investment grade securities. They may be subject
to greater market fluctuations and risk of loss of income and principal
than lower yielding, investment-grade securities. There may be less of
a market for them and therefore they may be harder to sell at an
acceptable price. There is a relatively greater possibility that the
issuer's earnings may be insufficient to make the payments of interest due
on the bonds. The issuer's low creditworthiness may increase the
potential for its insolvency.
These risks mean that the Fund may not achieve the expected income
from lower-grade securities, and that the Fund's net asset value per share
may be affected by declines in value of these securities. The Fund is not
obligated to dispose of securities when issuers are in default or if the
rating of the security is reduced. For foreign lower-grade securities,
these risks are in addition to the risks described in "Foreign
Securities." Convertible securities may be less subject to some of these
risks than other debt securities, to the extent they can be converted into
stock, which may be more liquid and less affected by these other risk
factors.
As of September 30, 1995, the Fund's portfolio included foreign
government debt obligations and corporate bonds in the following rating
categories of Standard & Poor's Corporation ("S&P") or if unrated,
determined by the Manager to be comparable to the category indicated (the
amounts shown are the dollar-weighted average values of the bonds in each
category measured as a percentage of the Fund's total assets): AAA,
28.23%; AA, 8.34%; A, 1.83%; BBB, 0.22%; BB, 22.68%; and B, 11.69%. If
a bond was not rated by S&P but was rated by Moody's Investors Service,
Inc., it is included in the comparable S&P category. The allocation of
the Fund's assets in securities in the different rating categories will
vary over time, and the proportion listed above should not be viewed as
representing the Fund's current or future proportionate ownership of
securities in particular rating categories. The Appendix to this
Prospectus describes the rating categories.
-- Equity Securities. The Fund may invest in common stocks,
preferred stock, convertible securities, warrants and other equity
securities of domestic or foreign companies of any size. At times, the
stock markets can be volatile and stock prices can change substantially.
This market risk will affect the Fund's net asset values per share. Not
all stock prices change uniformly or at the same time, and other factors
can affect a particular stock's price (for example, poor earnings reports
by an issuer, loss of major customers, major litigation against an issuer,
changes in government regulations affecting an industry). Not all of
these factors can be predicted.
The Fund may invest up to 5% of its net assets in warrants, which are
options to purchase stock at set prices that are valid for a limited
period of time. No more than 2% of the Fund's net assets may be invested
in warrants not listed on the New York or American Stock Exchanges. These
limits do not apply to warrants attached to other securities. Additional
risks of investing in foreign equity securities are discussed under
"Foreign Securities."
-- Stock Investment Risks. Because the Fund may invest a
substantial portion of its assets in stocks, the value of the Fund's
portfolio will be affected by changes in the stock markets. At times, the
stock markets can be volatile and stock prices can change substantially.
This market risk will affect the Fund's net asset values per share, which
will fluctuate as the values of the Fund's portfolio securities change.
Not all stock prices change uniformly or at the same time, not all stock
markets move in the same direction at the same time, and other factors can
affect a particular stock's prices (for example, poor earnings reports by
an issuer, loss of major customers, major litigation against an issuer,
and changes in government regulations affecting an industry). Not all of
these factors can be predicted.
The Fund attempts to limit market risks by diversifying its
investments, that is, by not holding a substantial amount of the stock of
any one company and by not investing too great a percentage of the Fund's
assets in any one company. Also, the Fund does not concentrate its
investments in any one industry or group of industries. Because changes
in stock and bond market prices can occur at any time, and because yields
on debt securities available at different times will vary, there is no
assurance that the Fund will achieve its investment objectives, and when
you redeem your shares, they may be worth more or less than what you paid
for them.
-- Board-Approved Instruments. The Fund may invest in other
investments (including new investments that may be developed in the
future) that the Fund's Board of Trustees (or the Manager, under
guidelines established by the Board) determines are consistent with the
Fund's investment objectives and investment policies.
-- Portfolio Turnover. A change in the securities held by the Fund
is known as "portfolio turnover." The Fund will actively use portfolio
trading to try to benefit from differences in short-term yields among
different issues of debt securities, to try to increase its income. The
Fund's portfolio turnover rate is not expected to exceed 300% per year.
High portfolio turnover of 100% or more may affect the Fund's ability to
qualify as a "regulated investment company" under the Internal Revenue
Code for tax deductions for dividends and capital gains distributions the
Fund pays to shareholders. Portfolio turnover affects brokerage costs,
dealer markups and other transaction costs, and results in the Fund's
realization of capital gains or losses for tax purposes.
Other Investment Techniques and Strategies. The Fund may also use the
investment techniques and strategies described below. These techniques
involve certain risks. The Statement of Additional Information contains
more information about these practices, including limitations on their use
that may help to reduce some of the risks.
-- Special Risks - Borrowing for Leverage. The Fund may borrow money
in an amount up to one-third of its total assets from banks to buy
securities. The Fund will borrow only if it can do so without putting up
assets as security for a loan. This is a speculative investment method
known as "leverage." Leveraging may subject the Fund to greater risks and
costs than funds that do not borrow. These risks may include the possible
reduction of income and increased fluctuation in the Fund's net asset
values per share, since the Fund pays interest on borrowings. Borrowing
is subject to regulatory limits described in more detail in the Statement
of Additional Information.
-- When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. These terms refer to
securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery. The Fund does
not intend to make such purchases for speculative purposes. During the
period between the purchase and settlement, no payment is made for the
security and no interest accrues to the buyer from the investment. There
may be a risk of loss if the value of the security changes prior to the
settlement date.
-- Repurchase Agreements. The Fund may enter into repurchase
agreements. They are primarily used for liquidity purposes. In a
repurchase transaction, the Fund buys a security and simultaneously sells
it to the vendor for delivery at a future date. Repurchase agreements
must be fully collateralized. However, if the vendor fails to pay the
resale price on the delivery date, the Fund may incur costs in disposing
of the collateral and may experience losses if there is any delay in its
ability to do so. The Fund will not enter into a repurchase agreement that
causes more than 10% of its net assets to be subject to repurchase
agreements having a maturity beyond seven days. There is no limit on the
amount of the Fund's net assets that may be subject to repurchase
agreements of seven days or less.
-- Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager
determines the liquidity of certain of the Fund's investments. Investments
may be illiquid because of the absence of an active trading market, making
it difficult to value them or dispose of them promptly at an acceptable
price. A restricted security is one that has a contractual restriction on
its resale or which cannot be sold publicly until it is registered under
the Securities Act of 1933. The Fund will not invest more than 10% of its
net assets in illiquid or restricted securities (that limit may increase
to 15% if certain state laws are changed or the Fund's shares are no
longer sold in those states). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that are
eligible for resale to qualified institutional purchasers.
-- Loans of Portfolio Securities. To attempt to increase its income,
the Fund may lend its portfolio securities to brokers, dealers and other
financial institutions. The Fund must receive collateral for a loan.
These loans are limited to not more than 25% of the Fund's net assets and
are subject to other conditions described in the Statement of Additional
Information. The Fund presently does not intend to lend its portfolio
securities, but if it does, the value of securities loaned is not expected
to exceed 5% of the value of its total assets in the coming year.
-- Derivative Investments. In general, a "derivative investment" is
a specially designed investment. Its performance is linked to the
performance of another investment or security, such as an option, future,
index, currency or commodity. The Fund may not purchase or sell physical
commodities; however, this shall not prevent the Fund from buying or
selling options and futures contracts or from investing in securities or
other instruments backed by physical commodities. The Fund may purchase
and sell foreign currency in hedging transactions.
Derivative investments used by the Fund are used in some cases for
hedging purposes and in other cases for "non-hedging" investment purposes
to seek income or total return. In the broadest sense, exchange-traded
options and futures contracts (discussed in "Hedging," below) may be
considered "derivative investments." Any derivative instrument that is
a debt security will be included for purposes of the Fund's investment
policy that it will invest at least 65% of its total assets in debt
securities.
The Fund may invest in different types of derivatives. "Index-
linked" or "commodity-linked" notes 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 to pay a fixed sum on the maturity of the
note. Principal and/or interest payments on an index-linked note depend
on the performance of one or more market indices, such as the S & P 500
Index or a weighted index of commodity futures, such as crude oil,
gasoline and natural gas. The Fund may invest in "debt exchangeable for
common stock" of an issuer or "equity-linked" debt securities of an
issuer. At maturity, the principal amount of the debt 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 expected 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 an interest rate, determined by reference to one or
more foreign currencies. The currency-indexed securities purchased by the
Fund may make payments based on a formula. The payment of principal or
periodic interest may be calculated as a multiple of the movement of one
currency against another currency, or against an index. These investments
may entail increased risk to principal and increased price volatility.
-- Derivatives may entail special risks. The company issuing the
instrument may fail to pay the amount due on the maturity of the
instrument. Also, the underlying investment or security might not perform
the way the Manager expected it to perform. Markets, underlying
securities and indices may move in a direction not anticipated by the
Manager. Performance of derivative investments may also be influenced by
interest rate and stock market changes in the U.S. and abroad. All of
this can mean that the Fund will realize less principal or income from the
investment than expected. Certain derivative investments held by the Fund
may be illiquid. Please refer to "Illiquid and Restricted Securities."
-- Hedging. As described below, the Fund may purchase and sell
certain kinds of futures contracts, put and call options, forward
contracts, and options on futures, broadly-based stock or bond indices and
foreign currency, or enter into interest rate swap agreements. These are
all referred to as "hedging instruments." The Fund does not use hedging
instruments for speculative purposes, and has limits on the use of them,
described below. The hedging instruments the Fund may use are described
in greater detail in "Other Investment Techniques and Strategies" in the
Statement of Additional Information.
The Fund may buy and sell options, futures and forward contracts for
a number of purposes. It may do so to try to manage its exposure to the
possibility that the prices of its portfolio securities may decline, or
to establish a position in the securities market as a temporary substitute
for purchasing individual securities. It may also use certain kinds of
hedging instruments to try to manage its exposure to changing interest
rates.
-- Futures. The Fund may buy and sell futures contracts that relate
to (1) foreign currencies (these are Forward Contracts), (2) financial
indices, such as U.S. or foreign government securities indices, corporate
debt securities indices or equity securities indices (these are referred
to as Financial Futures), and (3) interest rates (these are referred to
as Interest Rate Futures). These types of Futures are described in
"Hedging" in the Statement of Additional Information.
-- Put and Call Options. The Fund may buy and sell certain kinds of
put options (puts) and call options (calls).
The Fund may buy calls on securities, foreign currencies, or Futures,
or to terminate its obligation on a call the Fund previously wrote. The
Fund may write (that is, sell) call options on securities, foreign
currencies or Futures, but only if they are "covered." That means the
Fund must own the security subject to the call while the call is
outstanding (or own other securities acceptable for applicable escrow
requirements). Calls on Futures must be covered by securities or other
liquid assets the Fund owns and segregates to enable it to satisfy its
obligations if the call is exercised.
The Fund may buy puts that relate to securities, Futures, or foreign
currencies. The Fund may buy a put on security whether or not the Fund
owns the particular security in its portfolio. The Fund may sell a put
on securities or Futures, but only if the puts are 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 obligations.
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.
-- Forward Contracts. Forward Contracts are foreign currency
exchange contracts. They are used to buy or sell foreign currency for
future delivery at a fixed price. The Fund uses them to try to "lock in"
the U.S. dollar price of a security denominated in a foreign currency that
the Fund has purchased or sold, or to protect against possible losses from
changes in the relative value of the U.S. dollar and a foreign currency.
The Fund may also use "cross hedging," where the Fund hedges against
changes in currencies other than the currency in which a security it holds
is denominated. 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.
-- Hedging instruments can be volatile instruments and may involve
special risks. The use of hedging instruments requires special skills and
knowledge of investment techniques that are different from what is
required for normal portfolio management. If the Manager 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. For example, if a covered call written by the Fund is
exercised on an investment that has increased in value, the Fund will be
required to sell the investment at the call price and will not be able to
realize any profit if the investment has increased in value above the call
price. In writing a put, there is a risk that the Fund may be required
to buy the underlying security at a disadvantageous price. These risks
and the hedging strategies the Fund may use are described in greater
detail in the Statement of Additional Information.
-- Short Sales "Against-the-Box". The Fund may not sell securities
short except in collateralized transactions referred to as short sales
"against-the-box." No more than 15% of the Fund's net assets will be held
as collateral for such short sales at any one time.
-- Non-Concentration. The Fund shall not invest 25% or more of its
total assets in any industry; however, for the purposes of this
restriction, obligations of the U.S. government, its agencies or
instrumentalities are not considered to be part of any single industry.
Investment Restrictions. The Fund has other investment restrictions which
are fundamental policies. Under these fundamental policies, the Fund
cannot:
-- with respect to 75% of its assets, purchase securities issued or
guaranteed by any one issuer (other than the U.S. Government or its
agencies or instrumentalities), if more than 5% of the Fund's total assets
would be invested in securities of that issuer or the Fund would then own
more than 10% of that issuer's voting securities;
-- make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements or when-issued, delayed delivery, forward
roll or similar securities transactions, and may lend its portfolio
securities; or
-- pledge, mortgage or otherwise encumber, transfer or assign any of
its assets to secure a debt; segregation of assets arrangements for
premium and margin payments in connection with hedging instruments are not
deemed to be a pledge of assets.
All of the percentage restrictions described above and elsewhere in
this Prospectus (other than the regulatory percentage limits in the
Statement of Additional Information that apply to borrowing), apply only
at the time the Fund purchases a security, and the Fund need not dispose
of a security merely because the size of the Fund's assets has changed or
the security has increased in value relative to the size of the Fund.
There are other fundamental policies discussed in the Statement of
Additional Information.
How the Fund is Managed
Organization and History. The Fund was organized in February, 1995 as a
Massachusetts business trust. The Fund is an open-end, diversified
management investment company, with an unlimited number of authorized
shares of beneficial interest.
The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.
"Trustees and Officers of the Fund" in the Statement of Additional
Information names the Trustees and officers of the Fund and provides more
information about them. Although the Fund is not required by law to hold
annual meetings, it may hold shareholder meetings from time to time on
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.
The Board of Trustees has the power, without shareholder approval,
to divide unissued shares of the Fund into three or more classes. The
Board has done so, and the Fund currently has three classes of shares,
Class A, Class B and Class C. All classes invest in the same investment
portfolio. Each class has its own dividends and distributions and pays
certain expenses which may be different for the different classes. Each
class may have a different net asset value. Each share has one vote at
shareholder meetings, with fractional shares voting proportionally. Only
shares of a particular class vote as a class on matters that affect that
class alone. Shares are freely transferrable.
The Manager and Its Affiliates. The Fund is managed by the Manager,
Oppenheimer Management Corporation, which is responsible for selecting the
Fund's investments and handles its day-to-day business. The Manager
carries out its duties, subject to the policies established by the Board
of Trustees, under an Investment Advisory Agreement which states the
Manager's responsibilities. The Investment Advisory Agreement sets forth
the fees paid by the Fund to the Manager and describes the expenses that
the Fund is responsible to pay to conduct its business.
The Manager has operated as an investment adviser since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $38 billion
as of September 30, 1995, and with more than 2.8 million shareholder
accounts. The Manager is owned by Oppenheimer Acquisition Corp., a
holding company that is owned in part by senior officers of the Manager
and controlled by Massachusetts Mutual Life Insurance Company.
-- Portfolio Manager. The Portfolio Manager of the Fund is Mr.
Ashwin K. Vasan. He is a Vice President of the Manager and is the person
principally responsible for the day-to-day management of the Fund's
portfolio. Mr. Vasan joined the Manager in January, 1992 as a securities
analyst. Prior to that, he was a securities analyst for Citibank, N.A.
Since June, 1993, he has been an officer and co-portfolio manager of two
other Oppenheimer funds with particular responsibility for managing the
foreign debt component of those portfolios.
-- Fees and Expenses. Under the Investment Advisory Agreement, the
Fund pays the Manager the following annual fees, which are higher than the
rates paid by most other investment companies, and which decline on
additional assets as the Fund grows: 0.75% of the first $200 million of
average net assets, 0.72% of the next $200 million, 0.69% of the next $200
million, 0.66% of the next $200 million, 0.60% of the next $200 million,
and 0.50% of net assets in excess of $1 billion.
The Fund pays expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal fees and
auditing costs. Those expenses are paid out of the Fund's assets and are
not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment. More information about the Investment Advisory
Agreement and the other expenses paid by the Fund is contained in the
Statement of Additional Information.
There is also information about the Fund's brokerage policies and
practices in "Brokerage Policies of the Fund" in the Statement of
Additional Information. That section discusses how brokers and dealers
are selected for the Fund's portfolio transactions. When deciding which
brokers to use, the Manager is permitted by the Investment Advisory
Agreement to consider whether brokers have sold shares of the Fund or any
other funds for which the Manager serves as investment adviser.
-- The Distributor. The Fund's shares are sold through dealers,
brokers and other financial institutions that have a sales agreement with
Oppenheimer Funds Distributor, Inc., a subsidiary of the Manager that acts
as the Fund's Distributor. The Distributor also distributes shares of the
other Oppenheimer funds and is sub-distributor for funds managed by a
subsidiary of the Manager.
-- The Transfer Agent. The Fund's transfer agent is Oppenheimer
Shareholder Services, a division of the Manager, which acts as the
shareholder servicing agent for the Fund on an "at cost" basis. It also
acts as the shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer
Agent at the address and toll-free number shown below in this Prospectus
and on the back cover.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses the terms "total
return," "average annual total return" and "yield" to illustrate its
performance. The performance of each class of shares is shown separately,
because the performance of each class of shares will usually be different
as a result of the different kinds of expenses each class bears. These
returns measure the performance of a hypothetical account in the Fund over
various periods, and do not show the performance of each shareholder's
account (which will vary if dividends are received in cash or shares are
sold or purchased). The Fund's performance information may help you see
how well your Fund has done over time and to compare it to other funds or
market indices.
It is important to understand that the Fund's total returns and yield
represent past performance and should not be considered to be predictions
of future returns or performance. More detailed information about how
total returns are calculated is contained in the Statement of Additional
Information, which also contains information about other ways to measure
and compare the Fund's performance. The Fund's investment performance will
vary over time, depending on market conditions, the composition of the
portfolio, expenses and which class of shares you purchase.
-- Total Returns. There are different types of total returns used to
measure the Fund's performance. Total return is the change in value of
a hypothetical investment in the Fund over a given period, assuming that
all dividends and capital gains distributions are reinvested in additional
shares. The cumulative total return measures the change in value over the
entire period (for example, ten years). An average annual total return
shows the average rate of return for each year in a period that would
produce the cumulative total return over the entire period. However,
average annual total returns do not show the Fund's actual year-by-year
performance.
When total returns are quoted for Class A shares, normally they
include the payment of the current maximum initial sales charge. When
total returns are shown for Class B shares, they reflect the effect of the
contingent deferred sales charge that applies to the period for which
total return is shown. When total returns are shown for a one-year period
(or less) for Class C shares, they reflect the effect of the contingent
deferred sales charge. Total returns may also be quoted at net asset
value, without considering the effect of the sales charge, and those
returns would be reduced if sales charges were deducted.
-- Yield. Each class of shares calculates its yield by dividing the
annualized net investment income per share from the portfolio during a 30-
day period by the maximum offering price on the last day of the period.
The yield of each class will differ because of the different expenses of
each class of shares. The yield data represents a hypothetical investment
return on the portfolio, and does not measure an investment return based
on dividends actually paid to shareholders. To show that return, a
dividend yield may be calculated. Dividend yield is calculated by
dividing the dividends of a class derived from net investment income
during a stated period by the maximum offering price on the last day of
the period. Yields and dividend yields for Class A shares reflect the
deduction of the maximum initial sales charge, but may also be shown based
on the Fund's net asset value per share. Yields for Class B and Class C
shares do not reflect the deduction of the contingent deferred sales
charge.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Classes of Shares. The Fund offers investors three different classes of
shares. The different classes of shares represent investments in the same
portfolio of securities but are subject to different expenses and will
likely have different share prices.
-- Class A Shares. If you buy Class A shares, you pay an initial
sales charge on investments up to $1 million (up to $500,000 for purchases
by OppenheimerFunds prototype 401(k) plans). If you purchase Class A
shares as part of an investment of at least $1 million ($500,000 for
OppenheimerFunds prototype 401(k) plans) in shares of one or more
Oppenheimer funds, you will not pay an initial sales charge, but if you
sell any of those shares within 18 months of buying them, you may pay a
contingent deferred sales charge. The amount of that sales charge will
vary depending on the amount you invested. Sales charges are described in
"Buying Class A Shares," below.
-- Class B Shares. If you buy Class B shares, you pay no sales
charge at the time of purchase, but if you sell your shares within six
years of buying them, you will normally pay a contingent deferred sales
charge that varies depending on how long you own your shares. Sales
charges are described in "Buying Class B Shares," below.
-- Class C Shares. If you buy Class C shares, you pay no sales
charge at the time of purchase, but if you sell your shares within 12
months of buying them, you will normally pay a contingent deferred sales
charge of 1%. Sales charges are described in "Buying Class C Shares,"
below.
Which Class of Shares Should You Choose? Once you decide that the Fund
is an appropriate investment for you, the decision as to which class of
shares is better suited to your needs depends on a number of factors which
you should discuss with your financial advisor. The Fund's operating
costs that apply to a class of shares and the effect of the different
types of sales charges on your investment will vary your investment
results over time. The most important factors to consider are how much
you plan to invest and how long you plan to hold your investment. If your
goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider
another class of shares.
In the following discussion, to help provide you and your financial
advisor with a framework in which to choose a class, we have made some
assumptions using a hypothetical investment in the Fund. We used the
sales charge rates that apply to each class, considered the effect of the
annual asset-based sales charge on Class B and Class C expenses (which,
like all expenses, will affect your investment return). For the sake of
comparison, we have assumed that there is a 10% rate of appreciation in
the investment each year. Of course, the actual performance of your
investment cannot be predicted and will vary, based on the Fund's actual
investment returns and the operating expenses borne by each class of
shares, and which class of shares you invest in.
The factors discussed below are not intended to be investment advice
or recommendations, because each investor's financial considerations are
different. The discussion below of the factors to consider in purchasing
a particular class of shares assumes that you will purchase only one class
of shares and not a combination of shares of different classes.
-- How Long Do You Expect to Hold Your Investment? While future
financial needs cannot be predicted with certainty, knowing how long you
expect to hold your investment will assist you in selecting the
appropriate class of shares. Because of the effect of class-based
expenses, your choice will also depend on how much you plan to invest. For
example, the reduced sales charges available for larger purchases of Class
A shares may, over time, offset the effect of paying an initial sales
charge on your investment (which reduces the amount of your investment
dollars used to buy shares for your account), compared to the effect over
time of higher class-based expenses on Class B or Class C shares for which
no initial sales charge is paid.
Investing for the Short Term. If you have a short-term investment
horizon (that is, you plan to hold your shares for not more than six
years), you should probably consider purchasing Class A or Class C shares
rather than Class B shares, because of the effect of the Class B
contingent deferred sales charge if you redeem in less than 7 years, as
well as the effect of the Class B asset-based sales charge on the
investment return for that class in the short-term. Class C shares might
be the appropriate choice (especially for investments of less than
$100,000), because there is no initial sales charge on Class C shares, and
the contingent deferred sales charge does not apply to amounts you sell
after holding them one year.
However, if you plan to invest more than $100,000 for the shorter
term, then the more you invest and the more your investment horizon
increases toward six years, Class C shares might not be as advantageous
as Class A shares. That is because the annual asset-based sales charge on
Class C shares will have a greater impact on your account over the longer
term than the reduced front-end sales charge available for larger
purchases of Class A shares. For example, Class A might be more
advantageous than Class C (as well as Class B) for investments of more
than $100,000 expected to be held for 5 or 6 years (or more). For
investments over $250,000 expected to be held 4 to 6 years (or more),
Class A shares may become more advantageous than Class C (and B). If
investing $500,000 or more, Class A may be more advantageous as your
investment horizon approaches 3 years or more.
And for most investors who invest $1 million or more, in most cases
Class A shares will be the most advantageous choice, no matter how long
you intend to hold your shares. For that reason, the Distributor normally
will not accept purchase orders of $500,000 or $1 million or more of Class
B or Class C shares, respectively, from a single investor.
Investing for the Longer Term. If you are investing for the longer
term, for example, for retirement, and do not expect to need access to
your money for seven years or more, Class B shares may be an appropriate
consideration, if you plan to invest less than $100,000. If you plan to
invest more than $100,000 over the long term, Class A shares will likely
be more advantageous than Class B shares or C shares, as discussed above,
because of the effect of the expected lower expenses for Class A shares
and the reduced initial sales charges available for larger investments in
Class A shares under the Fund's Right of Accumulation.
Of course, these examples are based on approximations of the effect
of current sales charges and expenses on a hypothetical investment over
time, using the assumed annual performance return stated above, and
therefore should not be relied on as rigid guidelines.
-- Are There Differences in Account Features That Matter to You?
Because some account features such as checkwriting are not available to
Class B or Class C shareholders, or other features (such as Automatic
Withdrawal Plans) might not be advisable (because of the effect of the
contingent deferred sales charge) in non-retirement accounts for Class B
or Class C shareholders, you should carefully review how you plan to use
your investment account before deciding which class of shares to buy.
Share certificates are not available for Class B and Class C shares, and
if you are considering using your shares a collateral for a loan, that may
be a factor to consider.
-- How Does It Affect Payments to My Broker? A salesperson, such as
a broker, or any other person who is entitled to receive compensation for
selling Fund shares may receive different compensation for selling one
class of shares than for selling another class. It is important that
investors understand that the purpose of the Class B and Class C
contingent deferred sales charges and asset-based sales charges is the
same as the purpose of the front-end sales charge on sales of Class A
shares: that is, to compensate the Distributor for commissions it pays to
dealers and financial institutions for selling shares.
How Much Must You Invest? You can open a Fund account with a minimum
initial investment of $1,000 and make additional investments at any time
with as little as $25. There are reduced minimum investments under special
investment plans.
With Asset Builder Plans, Automatic Exchange Plans, 403(b)(7)
custodial plans and military allotment plans, you can make initial and
subsequent investments of as little as $25. Subsequent purchases of at
least $25 can be made by telephone through AccountLink.
Under pension and profit-sharing plans and Individual Retirement
Accounts (IRAs), you can make an initial investment of as little as $250
(if your IRA is established under an Asset Builder Plan, the $25 minimum
applies), and subsequent investments may be as little as $25.
There is no minimum investment requirement if you are buying shares
by reinvesting dividends from the Fund or other Oppenheimer funds (a list
of them appears in the Statement of Additional Information, or you can ask
your dealer or call the Transfer Agent), or by reinvesting distributions
from unit investment trusts that have made arrangements with the
Distributor.
-- How Are Shares Purchased? You can buy shares several ways --
through any dealer, broker or financial institution that has a sales
agreement with the Distributor, or directly through the Distributor, or
automatically from your bank account through an Asset Builder Plan under
the OppenheimerFunds AccountLink service. When you buy shares, be sure
to specify Class A, Class B or Class C shares. If you do not choose, your
investment will be made in Class A shares.
-- Buying Shares Through Your Dealer. Your dealer will place your
order with the Distributor on your behalf.
-- Buying Shares Through the Distributor. Complete an
OppenheimerFunds New Account Application and return it with a check
payable to "Oppenheimer Funds Distributor, Inc." Mail it to P.O. Box 5270,
Denver, Colorado 80217. If you don't list a dealer on the application,
the Distributor will act as your agent in buying the shares. However, it
is recommended that you discuss your investment first with a financial
advisor, to be sure that it is appropriate for you.
-- Buying Shares Through OppenheimerFunds AccountLink. You can use
AccountLink to link your Fund account with an account at a U.S. bank or
other financial institution that is an Automated Clearing House (ACH)
member. You can then transmit funds electronically to purchase shares,
or to have the Transfer Agent send redemption proceeds or to transmit
dividends and distributions to your bank account.
Shares are purchased for your account on AccountLink on the regular
business day the Distributor is instructed by you to initiate the ACH
transfer to buy shares. You can provide those instructions automatically,
under an Asset Builder Plan, described below, or by telephone instructions
using OppenheimerFunds PhoneLink, also described below. You should
request AccountLink privileges on the application or dealer settlement
instructions used to establish your account. Please refer to
"AccountLink" below for more details.
-- Asset Builder Plans. You may purchase shares of the Fund (and up
to four other Oppenheimer funds) automatically each month from your
account at a bank or other financial institution under an Asset Builder
Plan with AccountLink. Details are on the Application and in the
Statement of Additional Information.
-- At What Price Are Shares Sold? Shares are sold at the public
offering price based on the net asset value (and any initial sales charge
that applies) that is next determined after the Distributor receives the
purchase order in Denver, Colorado. In most cases, to enable you to
receive that day's offering price, the Distributor must receive your order
by the time of day The New York Stock Exchange closes, which is normally
4:00 P.M., New York time, but may be earlier on some days (all references
to time in this Prospectus mean "New York time"). The net asset value of
each class of shares is determined as of that time on each day The New
York Stock Exchange is open (which is a "regular business day").
If you buy shares through a dealer, the dealer must receive your
order by the close of The New York Stock Exchange on a regular business
day and transmit it to the Distributor so that it is received before the
Distributor's close of business that day, which is normally 5:00 P.M. The
Distributor may reject any purchase order for the Fund's shares, in its
sole discretion.
Buying Class A Shares. Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However,
in some cases, described below, purchases are not subject to an initial
sales charge, and the offering price will be the net asset value. In some
cases, reduced sales charges may be available, as described below. Out
of the amount you invest, the Fund receives the net asset value to invest
for your account. The sales charge varies depending on the amount of your
purchase. A portion of the sales charge may be retained by the
Distributor and allocated to your dealer. The current sales charge rates
and commissions paid to dealers and brokers
are as follows:
<TABLE>
<CAPTION>
Front-End Sales Front-end Sales
Charge as a Charge as a Commissions as
Percentage of Percentage of Percentage of
Amount of Purchase Offering Price Amount Invested Offering Price
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 4.75% 4.98% 4.00%
- -------------------------------------------------------------------------
$50,000 or more but
less than $100,000 4.50% 4.71% 3.75%
- -------------------------------------------------------------------------
$100,000 or more but
less than $250,000 3.50% 3.63% 2.75%
- -------------------------------------------------------------------------
$250,000 or more but
less than $500,000 2.50% 2.56% 2.00%
- -------------------------------------------------------------------------
$500,000 or more but
less than $1 million 2.00% 2.04% 1.60%
- -------------------------------------------------------------------------
</TABLE>
The Distributor reserves the right to reallow the entire commission to
dealers. If that occurs, the dealer may be considered an "underwriter"
under Federal securities laws.
-- Class A Contingent Deferred Sales Charge. There is no initial
sales charge on purchases of Class A shares of any one or more of the
Oppenheimer funds in the following cases:
-- Purchases aggregating $1 million or more; or
-- Purchases by an OppenheimerFunds prototype 401(k) plan that (1)
buys shares costing $500,000 or more, or (2) has, at the time of purchase,
100 or more eligible participants, or (3) certifies that it projects to
have annual plan purchases of $200,000 or more.
Shares of any of the Oppenheimer funds that offers only one class of
shares that has no class designation are considered "Class A shares" for
this purpose. The Distributor pays dealers of record commissions on these
purchases in an amount equal to the sum of 1.0% of the first $2.5 million,
plus 0.50% of the next $2.5 million, plus 0.25% of purchases over $5
million. That commission will be paid only on the amount of those
purchases in excess of $1 million ($500,000, for purchases by
OppenheimerFunds prototype 401(k) plans) that were not previously subject
to a front-end sales charge and dealer commission.
If you redeem any of those shares within 18 months of the end of the
calendar month of their purchase, a contingent deferred sales charge
(called the "Class A contingent deferred sales charge") may be deducted
from the redemption proceeds. That sales charge will be equal to 1.0% of
either (1) the aggregate net asset value of the redeemed shares (not
including shares purchased by reinvestment of dividends or capital gain
distributions) or (2) the original cost of the shares, whichever is less.
However, the Class A contingent deferred sales charge will not exceed the
aggregate amount of the commissions the Distributor paid to your dealer
on all Class A shares of all Oppenheimer funds you purchased subject to
the Class A contingent deferred sales charge.
In determining whether a contingent deferred sales charge is payable,
the Fund will first redeem shares that are not subject to the sales
charge, including shares purchased by reinvestment of dividends and
capital gains, and then will redeem other shares in the order that you
purchased them. The Class A contingent deferred sales charge is waived
in certain cases described in "Waivers of Class A Sales Charges" below.
No Class A contingent deferred sales charge is charged on exchanges
of shares under the Fund's Exchange Privilege (described below). However,
if the shares acquired by exchange are redeemed within 18 months of the
end of the calendar month of the purchase of the exchanged shares, the
sales charge will apply.
-- Special Arrangements With Dealers. The Distributor may advance
up to 13 months' commissions to dealers that have established special
arrangements with the Distributor for Asset Builder Plans for their
clients. Dealers whose sales of Class A shares of Oppenheimer funds
(other than money market funds) under OppenheimerFunds-sponsored 403(b)(7)
custodial plans exceed $5 million per year (calculated per quarter), will
receive monthly one-half of the Distributor's retained commissions on
those sales, and if those sales exceed $10 million per year, those dealers
will receive the Distributor's entire retained commission on those sales.
Reduced Sales Charges for Class A Share Purchases. You may be eligible
to buy Class A shares at reduced sales charge rates in one or more of the
following ways:
-- Right of Accumulation. To qualify for the lower sales charge
rates that apply to larger purchases of Class A shares, you and your
spouse can add together Class A and Class B shares you purchase for your
individual accounts, or jointly, or for trust or custodial accounts on
behalf of your children who are minors. A fiduciary can count all shares
purchased for a trust, estate or other fiduciary account (including one
or more employee benefit plans of the same employer) that has multiple
accounts.
Additionally, you can add together current purchases of Class A and
Class B shares of the Fund and other Oppenheimer funds to reduce the sales
charge rate that applies to current purchases of Class A shares. You can
also include Class A and Class B shares of Oppenheimer funds you
previously purchased subject to an initial or contingent deferred sales
charge to reduce the sales charge rate for current purchases of Class A
shares, provided that you still hold your investment in one of the
Oppenheimer funds. The value of those shares will be based on the greater
of the amount you paid for the shares or their current value (at offering
price). The Oppenheimer funds are listed in "Reduced Sales Charges" in
the Statement of Additional Information, or a list can be obtained from
the Distributor. The reduced sales charge will apply only to current
purchases and must be requested when you buy your shares.
-- Letter of Intent. Under a Letter of Intent, if you purchase Class
A shares or Class A and Class B shares of the Fund and other Oppenheimer
funds during a 13-month period, you can reduce the sales charge rate that
applies to your purchases of Class A shares. The total amount of your
intended purchases of both Class A and Class B shares will determine the
reduced sales charge rate for the Class A shares purchased during that
period. This can include purchases made up to 90 days before the date of
the Letter. More information is contained in the Application and in
"Reduced Sales Charges" in the Statement of Additional Information.
-- Waivers of Class A Sales Charges. The Class A sales charges are
not imposed in the circumstances described below. There is an explanation
of this policy in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers of Initial and Contingent Deferred Sales Charges for Certain
Purchasers. Class A shares purchased by the following investors are not
subject to any Class A sales charges:
-- the Manager or its affiliates;
-- present or former officers, directors, trustees and employees (and
their "immediate families" as defined in "Reduced Sales Charges" in the
Statement of Additional Information) of the Fund, the Manager and its
affiliates, and retirement plans established by them for their employees;
-- registered management investment companies, or separate accounts
of insurance companies having an agreement with the Manager or the
Distributor for that purpose;
-- dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees;
-- employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that have
entered into sales arrangements with such dealers or brokers (and are
identified to the Distributor) or with the Distributor; the purchaser must
certify to the Distributor at the time of purchase that the purchase is
for the purchaser's own account (or for the benefit of such employee's
spouse or minor children);
-- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor providing specifically for
the use of shares of the Fund in particular investment products made
available to their clients; (those clients may be charged a transaction
fee by their dealer, broker or adviser for the purchase or sale of Fund
shares) or
-- dealers, brokers or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to defined
contribution employee retirement plans for which the dealer, broker or
investment adviser provides administration services.
Waivers of Initial and Contingent Deferred Sales Charges in Certain
Transactions. Class A shares issued or purchased in the following
transactions are not subject to Class A sales charges:
-- shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
-- shares purchased by the reinvestment of loan repayments by a
participant in a retirement plan for which the Manager or its affiliates
acts as sponsor;
-- shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds (other
than Oppenheimer Cash Reserves) or unit investment trusts for which
reinvestment arrangements have been made with the Distributor; or
-- shares purchased and paid for with the proceeds of shares redeemed
in the past 12 months from a mutual fund (other than a fund managed by the
Manager or any of its subsidiaries) on which an initial sales charge or
contingent sales charge was paid (this waiver also applies to shares
purchased by exchange of shares of Oppenheimer Money Market Fund, Inc.
that were purchased and paid for in this manner); this waiver must be
requested when the purchase order is placed for your shares of the Fund,
and the Distributor may require evidence of your qualification for this
waiver.
Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions. The Class A contingent deferred sales charge is also waived
if shares that would otherwise be subject to the contingent deferred sales
charge are redeemed in the following cases:
-- for retirement distributions or loans to participants or
beneficiaries from qualified retirement plans, deferred compensation plans
or other employee benefit plans, including OppenheimerFunds prototype
401(k) plans (these are all referred to as "Retirement Plans");
-- to return excess contributions made to Retirement Plans;
-- to make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the original account value;
-- involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (see "Shareholder Account Rules
and Policies," below);
-- if, at the time a purchase order is placed for Class A shares that
would otherwise be subject to the Class A contingent deferred sales
charge, the dealer agrees in writing to accept the dealer's portion of the
commission payable on the sale in installments of 1/18th of the commission
per month (and no further commission will be payable if the shares are
redeemed within 18 months of purchase); or
-- for distributions from OppenheimerFunds prototype 401(k) plans for
any of the following cases or purposes: (1) following death or disability
(as defined in the Internal Revenue Code) of the participant or
beneficiary (the death or disability must occur after the participant's
account was established); (2) hardship withdrawals, as defined in the
plan; (3) under a Qualified Domestic Relations Order, as defined in the
Internal Revenue Code; (4) to meet the minimum distribution requirements
of the Internal Revenue Code; (5) to establish "substantially equal
periodic payments" as described in Section 72(t) of the Internal Revenue
Code, or (6) separation from service.
-- Service Plan for Class A Shares. The Fund has adopted a Service
Plan for Class A shares to reimburse the Distributor for a portion of its
costs incurred in connection with the personal service and maintenance of
accounts that hold Class A shares. Reimbursement is made quarterly at an
annual rate that may not exceed 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor uses all of those fees to
compensate dealers, brokers, banks and other financial institutions
quarterly for providing personal service and maintenance of accounts of
their customers that hold Class A shares and to reimburse itself (if the
Fund's Board of Trustees authorizes such reimbursements, which it has not
yet done) for its other expenditures under the Plan.
Services to be provided include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining
accounts in the Fund, making the Fund's investment plans available and
providing other services at the request of the Fund or the Distributor.
Payments are made by the Distributor quarterly at an annual rate not to
exceed 0.25% of the average annual net assets of Class A shares held in
accounts of the dealer or its customers. The payments under the Plan
increase the annual expenses of Class A shares. For more details, please
refer to "Distribution and Service Plans" in the Statement of Additional
Information.
Buying Class B Shares. Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are
redeemed within 6 years of their purchase, a contingent deferred sales
charge will be deducted from the redemption proceeds. That sales charge
will not apply to shares purchased by the reinvestment of dividends or
capital gains distributions. The charge will be assessed on the lesser of
the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class B contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 6 years, and (3) shares held the longest during the
6-year period. The contingent deferred sales charge is not imposed in the
circumstances described in "Waivers of Class B and Class C Sales Charges,"
below.
The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Years Since Beginning of Month in On Redemptions in That Year
which Purchase Order Was Accepted (As % of Amount Subject to Charge)
- -----------------------------------------------------------------------
<S> <C>
0-1 5.0%
1-2 4.0%
2-3 3.0%
3-4 3.0%
4-5 2.0%
5-6 1.0%
6 and following None
</TABLE>
In the table, a "year" is a 12-month period. All purchases are considered
to have been made on the first regular business day of the month in which
the purchase was made.
-- Automatic Conversion of Class B Shares. 72 months after you
purchase Class B shares, those shares will automatically convert to Class
A shares. This conversion feature relieves Class B shareholders of the
asset-based sales charge that applies to Class B shares under the Class
B Distribution and Service Plan, described below. The conversion is based
on the relative net asset value of the two classes, and no sales load or
other charge is imposed. When Class B shares convert, any other Class B
shares that were acquired by the reinvestment of dividends and
distributions on the converted shares will also convert to Class A shares.
The conversion feature is subject to the continued availability of a tax
ruling described in "Alternative Sales Arrangements - Class A, Class B and
Class C Shares" in the Statement of Additional Information.
-- Distribution and Service Plan for Class B Shares. The Fund has
adopted a Distribution and Service Plan for Class B shares to compensate
the Distributor for distributing Class B shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class B shares that are outstanding for 6
years or less. The Distributor also receives a service fee of 0.25% per
year. Both fees are computed on the average annual net assets of Class
B shares, determined as of the close of each regular business day. The
asset-based sales charge allows investors to buy Class B shares without
a front-end sales charge while allowing the Distributor to compensate
dealers that sell Class B shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class B shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class B expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class B shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the fee on a
quarterly basis. The Distributor pays sales commissions of 3.75% of the
purchase price to dealers from its own resources at the time of sale.
The Fund pays the asset-based sales charge to the Distributor for its
services rendered in connection with the distribution of Class B shares.
Those payments, retained by the Distributor, are at a fixed rate which is
not related to the Distributor's expenses. The services rendered by the
Distributor include paying and financing the payment of sales commissions,
service fees, and other costs of distributing and selling Class B shares.
If the Plan is terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge to the
Distributor for distributing Class B shares before the Plan was
terminated.
-- Waivers of Class B and Class C Sales Charges. The Class B and
Class C contingent deferred sales charges will not be applied to shares
purchased in certain types of transactions nor will it apply to shares
redeemed in certain circumstances as described below. The reasons for
this policy are in "Reduced Sales Charges" in the Statement of Additional
Information.
Waivers for Redemptions in Certain Cases. The Class B and Class C
contingent deferred sales charges will be waived for redemptions of shares
in the following cases:
-- distributions to participants or beneficiaries from Retirement
Plans, if the distributions are made (a) under an Automatic Withdrawal
Plan after the participant reaches age 59-1/2, as long as the payments are
no more than 10% of the account value annually (measured from the date the
Transfer Agent receives the request), or (b) following the death or
disability (as defined in the Internal Revenue Code) of the participant
or beneficiary (the death or disability must have occurred after the
account was established);
-- redemptions from accounts other than Retirement Plans following
the death or disability of the last surviving shareholder (the death or
disability must have occurred after the account was established, and for
disability you must provide evidence of a determination of disability by
the Social Security Administration);
-- returns of excess contributions to Retirement Plans;
-- distributions from IRAs (including SEP-IRAs and SAR/SEP accounts)
before the participant is age 59-1/2, and distributions from 403(b)(7)
custodial plans or pension or profit sharing plans before the participant
is age 59-1/2 but only after the participant has separated from service,
if the distributions are made in substantially equal periodic payments
over the life (or life expectancy) of the participant or the joint lives
(or joint life and last survivor expectancy) of the participant and the
participant's designated beneficiary (and the distributions must comply
with other requirements for such distributions under the Internal Revenue
Code and may not exceed 10% of the account value annually, measured from
the date the Transfer Agent receives the request);
-- shares redeemed involuntarily, as described in "Shareholder
Account Rules and Policies," below; or
-- distributions from OppenheimerFunds prototype 401(k) plans (1) for
hardship withdrawals; (2) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code; (3) to meet minimum distribution
requirements as defined in the Internal Revenue Code; (4) to make
"substantially equal periodic payments" as described in Section 72(t) of
the Internal Revenue Code; or (5) for separation from service.
Waivers for Shares Sold or Issued in Certain Transactions. The
contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
-- shares sold to the Manager or its affiliates;
-- shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose; or
-- shares issued in plans of reorganization to which the Fund is a
party.
Buying Class C Shares. Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are
redeemed within 12 months of their purchase, a contingent deferred sales
charge of 1.0% will be deducted from the redemption proceeds. That sales
charge will not apply to shares purchased by the reinvestment of dividends
or capital gains distributions. The charge will be assessed on the lesser
of the net asset value of the shares at the time of redemption or the
original purchase price. The contingent deferred sales charge is not
imposed on the amount of your account value represented by the increase
in net asset value over the initial purchase price (including increases
due to the reinvestment of dividends and capital gains distributions). The
Class C contingent deferred sales charge is paid to the Distributor to
reimburse its expenses of providing distribution-related services to the
Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to
a redemption, the Fund redeems shares in the following order: (1) shares
acquired by reinvestment of dividends and capital gains distributions, (2)
shares held for over 12 months, and (3) shares held the longest during the
12-month period.
-- Waivers of Class C Sales Charge. The Class C contingent deferred
sales charge will be waived if the shareholder requests it for any of the
redemptions or circumstances described above under "Waivers of Class B and
Class C Sales Charges."
-- Distribution and Service Plan for Class C Shares. The Fund has
adopted a Distribution and Service Plan for Class C shares to compensate
the Distributor for distributing Class C shares and servicing accounts.
Under the Plan, the Fund pays the Distributor an annual "asset-based sales
charge" of 0.75% per year on Class C shares. The Distributor also
receives a service fee of 0.25% per year. Both fees are computed on the
average annual net assets of Class C shares, determined as of the close
of each regular business day. The asset-based sales charge allows
investors to buy Class C shares without a front-end sales charge while
allowing the Distributor to compensate dealers that sell Class C shares.
The Distributor uses the service fee to compensate dealers for
providing personal services for accounts that hold Class C shares. Those
services are similar to those provided under the Class A Service Plan,
described above. The asset-based sales charge and service fees increase
Class C expenses by up to 1.00% of average net assets per year.
The Distributor pays the 0.25% service fee to dealers in advance for
the first year after Class C shares have been sold by the dealer. After
the shares have been held for a year, the Distributor pays the service fee
on a quarterly basis. The Distributor pays sales commissions of 0.75% of
the purchase price to dealers from its own resources at the time of sale.
The total up-front commission paid by the Distributor to the dealer at the
time of sale of Class C shares is 1.00% of the purchase price. The
Distributor plans to pay the asset-based sales charge as an ongoing
commission to the dealer on Class C shares that have been outstanding for
a year or more.
The Fund pays the asset-based sales charge to the Distributor for its
services rendered in connection with the distribution of Class C shares.
Those payments are at a fixed rate which is not related to the
Distributor's expenses. The services rendered by the Distributor include
paying and financing the payment of sales commissions, service fees, and
other costs of distributing and selling Class C shares, including
compensating personnel of the Distributor who support distribution of
Class C shares. If the Plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales
charge to the Distributor for distributing Class C shares before the Plan
was terminated.
Special Investor Services
AccountLink. OppenheimerFunds AccountLink links your Fund account to your
account at your bank or other financial institution to enable you to send
money electronically between those accounts to perform a number of types
of account transactions. These include purchases of shares by telephone
(either through a service representative or by PhoneLink, described
below), automatic investments under Asset Builder Plans, and sending
dividends and distributions or Automatic Withdrawal Plan payments directly
to your bank account. Please refer to the Application for details or call
the Transfer Agent for more information.
AccountLink privileges should be requested on the Application you use
to buy shares, or on your dealer's settlement instructions if you buy your
shares through your dealer. After your account is established, you can
request AccountLink privileges by sending signature-guaranteed
instructions to the Transfer Agent. AccountLink privileges will apply to
each shareholder listed in the registration on your account as well as to
your dealer representative of record unless and until the Transfer Agent
receives written instructions terminating or changing those privileges.
After you establish AccountLink for your account, any change of bank
account information must be made by signature-guaranteed instructions to
the Transfer Agent signed by all shareholders who own the account.
-- Using AccountLink to Buy Shares. Purchases may be made by
telephone only after your account has been established. To purchase shares
in amounts up to $250,000 through a telephone representative, call the
Distributor at 1-800-852-8457. The purchase payment will be debited from
your bank account.
-- PhoneLink. PhoneLink is the OppenheimerFunds automated telephone
system that enables shareholders to perform a number of account
transactions automatically using a touch-tone phone. PhoneLink may be
used on already-established Fund accounts after you obtain a Personal
Identification Number (PIN), by calling the special PhoneLink number:
1-800-533-3310.
-- Purchasing Shares. You may purchase shares in amounts up to
$100,000 by phone, by calling 1-800-533-3310. You must have established
AccountLink privileges to link your bank account with the Fund, to pay for
these purchases.
-- Exchanging Shares. With the OppenheimerFunds Exchange Privilege,
described below, you can exchange shares automatically by phone from your
Fund account to another Oppenheimer funds account you have already
established by calling the special PhoneLink number. Please refer to "How
to Exchange Shares," below, for details.
-- Selling Shares. You can redeem shares by telephone automatically
by calling the PhoneLink number and the Fund will send the proceeds
directly to your AccountLink bank account. Please refer to "How to Sell
Shares," below, for details.
Automatic Withdrawal and Exchange Plans. The Fund has several plans that
enable you to sell shares automatically or exchange them to another
Oppenheimer funds account on a regular basis:
-- Automatic Withdrawal Plans. If your Fund account is worth $5,000
or more, you can establish an Automatic Withdrawal Plan to receive
payments of at least $50 on a monthly, quarterly, semi-annual or annual
basis. The checks may be sent to you or sent automatically to your bank
account on AccountLink. You may even set up certain types of withdrawals
of up to $1,500 per month by telephone. You should consult the
Application and Statement of Additional Information for more details.
-- Automatic Exchange Plans. You can authorize the Transfer Agent
automatically to exchange an amount you establish in advance for shares
of up to five other Oppenheimer funds on a monthly, quarterly, semi-annual
or annual basis under an Automatic Exchange Plan. The minimum purchase
for each Oppenheimer funds account is $25. These exchanges are subject
to the terms of the Exchange Privilege, described below.
Reinvestment Privilege. If you redeem some or all of your Class A or
Class B shares of the Fund, you have up to 6 months to reinvest all or
part of the redemption proceeds in Class A shares of the Fund or other
Oppenheimer funds without paying a sales charge. This privilege applies
to Class A shares that you purchased subject to an initial sales charge
and to Class A or Class B shares on which you paid a contingent deferred
sales charge when you redeemed them. This privilege does not apply to
Class C shares. You must be sure to ask the Distributor for this
privilege when you send your payment. Please consult the Statement of
Additional Information for more details.
Retirement Plans. Fund shares are available as an investment for your
retirement plans. If you participate in a plan sponsored by your employer,
the plan trustee or administrator must make the purchase of shares for
your retirement plan account. The Distributor offers a number of different
retirement plans that can be used by individuals and employers:
-- Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
-- 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
-- SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SARSEP-IRAs
-- Pension and Profit-Sharing Plans for self-employed persons and
other employers
-- 401(k) Prototype Retirement Plans for businesses
Please call the Distributor for the OppenheimerFunds plan documents,
which contain important information and applications.
How to Sell Shares
You can arrange to take money out of your account by selling (redeeming)
some or all of your shares on any regular business day. Your shares will
be sold at the next net asset value calculated after your order is
received and accepted by the Transfer Agent. The Fund offers you a number
of ways to sell your shares in writing or by telephone. You can also set
up Automatic Withdrawal Plans to redeem shares on a regular basis, as
described above. If you have questions about any of these procedures, and
especially if you are redeeming shares in a special situation, such as due
to the death of the owner or from a retirement plan, please call the
Transfer Agent first, at 1-800-525-7048, for assistance.
-- Retirement Accounts. To sell shares in an Oppenheimer funds
retirement account in your name, call the Transfer Agent for a
distribution request form. There are special income tax withholding
requirements for distributions from retirement plans and you must submit
a withholding form with your request to avoid delay. If your retirement
plan account is held for you by your employer, you must arrange for the
distribution request to be sent by the plan administrator or trustee.
There are additional details in the Statement of Additional Information.
-- Certain Requests Require a Signature Guarantee. To protect you
and the Fund from fraud, certain redemption requests must be in writing
and must include a signature guarantee in the following situations (there
may be other situations also requiring a signature guarantee):
-- You wish to redeem more than $50,000 worth of shares and receive
a check
-- The redemption check is not payable to all shareholders listed on
the account statement
-- The redemption check is not sent to the address of record on your
account statement
-- Shares are being transferred to a Fund account with a different
owner or name
-- Shares are redeemed by someone other than the owners (such as an
Executor)
-- Where Can I Have My Signature Guaranteed? The Transfer Agent will
accept a guarantee of your signature by a number of financial
institutions, including: a U.S. bank, trust company, credit union or
savings association, or by a foreign bank that has a U.S. correspondent
bank, or by a U.S. registered dealer or broker in securities, municipal
securities or government securities, or by a U.S. national securities
exchange, a registered securities association or a clearing agency. If you
are signing on behalf of a corporation, partnership or other business, or
as a fiduciary, you must also include your title in the signature.
Selling Shares by Mail. Write a "letter of instructions" that includes:
-- Your name
-- The Fund's name
-- Your Fund account number (from your account statement)
-- The dollar amount or number of shares to be redeemed
-- Any special payment instructions
-- Any share certificates for the shares you are selling
-- The signatures of all registered owners exactly as the account is
registered, and
-- Any special requirements or documents requested by the Transfer
Agent to assure proper authorization of the person asking to sell shares.
<TABLE>
<CAPTION>
Use the following address for requests by mail:Send courier or Express Mail requests to:
<S> <C>
Oppenheimer Shareholder Services Oppenheimer Shareholders Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
</TABLE>
Selling Shares by Telephone. You and your dealer representative of record
may also sell your shares by telephone. To receive the redemption price
on a regular business day, your call must be received by the Transfer
Agent by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but which may be earlier on some days. You may not
redeem shares held in an OppenheimerFunds retirement plan or under a share
certificate by telephone.
-- To redeem shares through a service representative, call
1-800-852-8457
-- To redeem shares automatically on PhoneLink, call 1-800-533-3310
Whichever method you use, you may have a check sent to the address
on the account statement, or, if you have linked your Fund account to your
bank account on AccountLink, you may have the proceeds sent to that bank
account.
-- Telephone Redemptions Paid by Check. Up to $50,000 may be redeemed
by telephone once in any 7-day period. The check must be payable to all
owners of record of the shares and must be sent to the address on the
account statement. This service is not available within 30 days of
changing the address on an account.
-- Telephone Redemptions Through AccountLink. There are no dollar
limits on telephone redemption proceeds sent to a bank account designated
when you establish AccountLink. Normally the ACH transfer to your bank
is initiated on the business day after the redemption. You do not receive
dividends on the proceeds of the shares you redeemed while they are
waiting to be transferred.
Checkwriting. To be able to write checks against your Fund account, you
may request that privilege on your account Application or you can contact
the Transfer Agent for signature cards, which must be signed (with a
signature guarantee) by all owners of the account and returned to the
Transfer Agent so that checks can be sent to you to use. Shareholders with
joint accounts can elect in writing to have checks paid over the signature
of one owner.
-- Checks can be written to the order of whomever you wish, but may
not be cashed at the Fund's bank or custodian.
-- Checkwriting privileges are not available for accounts holding
Class B or Class C shares, or Class A shares that are subject to a
contingent deferred sales charge.
-- Checks must be written for at least $100.
-- Checks cannot be paid if they are written for more than your
account value. Remember: your shares fluctuate in value and you should
not write a check close to the total account value.
-- You may not write a check that would require the Fund to redeem
shares that were purchased by check or Asset Builder Plan payments within
the prior 15 days.
-- Don't use your checks if you changed your Fund account number.
Selling Shares Through Your Dealer. The Distributor has made arrangements
to repurchase Fund shares from dealers and brokers on behalf of their
customers. Brokers or dealers may charge for that service. Please refer
to "Special Arrangements for Repurchase of Shares from Dealers and
Brokers" in the Statement of Additional Information for more details.
How to Exchange Shares
Shares of the Fund may be exchanged for shares of certain Oppenheimer
funds at net asset value per share at the time of exchange, without sales
charge. To exchange shares, you must meet several conditions:
-- Shares of the fund selected for exchange must be available for
sale in your state of residence
-- The prospectuses of this Fund and the fund whose shares you want
to buy must offer the exchange privilege
-- You must hold the shares you buy when you establish your account
for at least 7 days before you can exchange them; after the account is
open 7 days, you can exchange shares every regular business day
-- You must meet the minimum purchase requirements for the fund you
purchase by exchange
-- Before exchanging into a fund, you should obtain and read its
prospectus
Shares of a particular class may be exchanged only for shares of the
same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. At
present, Oppenheimer Money Market Fund, Inc. offers only one class of
shares, which are considered "Class A" shares for this purpose. In some
cases, sales charges may be imposed on exchange transactions. Please
refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.
Exchanges may be requested in writing or by telephone:
-- Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the
Transfer Agent at the addresses listed in "How to Sell Shares."
-- Telephone Exchange Requests. Telephone exchange requests may be
made either by calling a service representative at 1-800-852-8457 or by
using PhoneLink for automated exchanges, by calling 1-800-533-3310.
Telephone exchanges may be made only between accounts that are registered
with the same name(s) and address. Shares held under certificates may not
be exchanged by telephone.
You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one by
calling a service representative at 1-800-525-7048. That list can change
from time to time.
There are certain exchange policies you should be aware of:
-- Shares are normally redeemed from one fund and purchased from the
other fund in the exchange transaction on the same regular business day
on which the Transfer Agent receives an exchange request that is in proper
form by the close of The New York Stock Exchange that day, which is
normally 4:00 P.M., but may be earlier on some days. However, either fund
may delay the purchase of shares of the fund you are exchanging into up
to 7 days if it determines it would be disadvantaged by a same-day
transfer of the proceeds to buy shares. For example, the receipt of
multiple exchange requests from a dealer in a "market-timing" strategy
might require the sale of portfolio securities at a time or price
disadvantageous to the Fund.
-- Because excessive trading can hurt fund performance and harm
shareholders, the Fund reserves the right to refuse any exchange request
that will disadvantage it, or to refuse multiple exchange requests
submitted by a shareholder or dealer.
-- The Fund may amend, suspend or terminate the exchange privilege
at any time. Although the Fund will attempt to provide you notice
whenever it is reasonably able to do so, it may impose these changes at
any time.
-- For tax purposes, exchanges of shares involve a redemption of the
shares of the Fund you own and a purchase of the shares of the other fund,
which may result in a capital gain or loss. For more information about
taxes affecting exchanges, please refer to "How to Exchange Shares" in the
Statement of Additional Information.
-- If the Transfer Agent cannot exchange all the shares you request
because of a restriction cited above, only the shares eligible for
exchange will be exchanged.
Shareholder Account Rules and Policies
-- Net Asset Value Per Share is determined for each class of shares
as of the close of The New York Stock Exchange on each day the Exchange
is open by dividing the value of the Fund's net assets attributable to a
class by the number of shares of that class that are outstanding. The
Fund's Board of Trustees has established procedures to value the Fund's
securities to determine net asset value. In general, securities values
are based on market value. There are special procedures for valuing
illiquid and restricted securities and obligations for which market values
cannot be readily obtained. These procedures are described more
completely in the Statement of Additional Information.
-- The offering of shares may be suspended during any period in which
the determination of net asset value is suspended, and the offering may
be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.
-- Telephone Transaction Privileges for purchases, redemptions or
exchanges may be modified, suspended or terminated by the Fund at any
time. If an account has more than one owner, the Fund and the Transfer
Agent may rely on the instructions of any one owner. Telephone privileges
apply to each owner of the account and the dealer representative of record
for the account unless and until the Transfer Agent receives cancellation
instructions from an owner of the account.
-- The Transfer Agent will record any telephone calls to verify data
concerning transactions and has adopted other procedures to confirm that
telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by
confirming such transactions in writing. If the Transfer Agent does not
use reasonable procedures it may be liable for losses due to unauthorized
transactions, but otherwise neither the Transfer Agent nor the Fund will
be liable for losses or expenses arising out of telephone instructions
reasonably believed to be genuine. If you are unable to reach the
Transfer Agent during periods of unusual market activity, you may not be
able to complete a telephone transaction and should consider placing your
order by mail.
-- Redemption or transfer requests will not be honored until the
Transfer Agent receives all required documents in proper form. From time
to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
-- Dealers that can perform account transactions for their clients
by participating in NETWORKING through the National Securities Clearing
Corporation are responsible for obtaining their clients' permission to
perform those transactions and are responsible to their clients who are
shareholders of the Fund if the dealer performs any transaction
erroneously or improperly.
-- The redemption price for shares will vary from day to day because
the value of the securities in the Fund's portfolio fluctuates, and the
redemption price, which is the net asset value per share, will normally
be different for Class A, Class B and Class C shares. Therefore, the
redemption value of your shares may be more or less than their original
cost.
-- Payment for redeemed shares is made ordinarily in cash and
forwarded by check or through AccountLink (as elected by the shareholder
under the redemption procedures described above) within 7 days after the
Transfer Agent receives redemption instructions in proper form, except
under unusual circumstances determined by the Securities and Exchange
Commission delaying or suspending such payments. For accounts registered
in the name of a broker-dealer, payment will be forwarded within 3
business days. The Transfer Agent may delay forwarding a check or
processing a payment via AccountLink for recently purchased shares, but
only until the purchase payment has cleared. That delay may be as much
as 10 days from the date the shares were purchased. That delay may be
avoided if you purchase shares by certified check or arrange with your
bank to provide telephone or written assurance to the Transfer Agent that
your purchase payment has cleared.
-- Involuntary redemptions of small accounts may be made by the Fund
if the account value has fallen below $200 for reasons other than the fact
that the market value of shares has dropped, and in some cases involuntary
redemptions may be made to repay the Distributor for losses from the
cancellation of share purchase orders.
-- Under unusual circumstances, shares of the Fund may be redeemed
"in kind," which means that the redemption proceeds will be paid with
securities from the Fund's portfolio. Please refer to "How to Sell
Shares" in the Statement of Additional Information for more details.
-- "Backup Withholding" of Federal income tax may be applied at the
rate of 31% from taxable dividends, distributions and redemption proceeds
(including exchanges) if you fail to furnish the Fund a certified Social
Security or Employer Identification Number when you sign your application,
or if you violate Internal Revenue Service regulations on tax reporting
of income.
-- The Fund does not charge a redemption fee, but if your dealer or
broker handles your redemption, they may charge a fee. That fee can be
avoided by redeeming your Fund shares directly through the Transfer Agent.
Under the circumstances described in "How To Buy Shares," you may be
subject to a contingent deferred sales charge when redeeming certain Class
A, Class B and Class C shares.
-- To avoid sending duplicate copies of materials to households, the
Fund will mail only one copy of each annual and semi-annual report to
shareholders having the same last name and address on the Fund's records.
However, each shareholder may call the Transfer Agent at 1-800-525-7048
to ask that copies of those materials be sent personally to that
shareholder.
Dividends, Capital Gains and Taxes
Dividends. The Fund declares dividends separately for Class A, Class B and
Class C shares from net investment income each regular business day and
pays such dividends to shareholders monthly. Normally, dividends are paid
on or about the last business day of each month, but the Board of Trustees
can change that date. It is expected that distributions paid with respect
to Class A shares will generally be higher than for Class B or Class C
shares because expenses allocable to Class B and Class C shares will
generally be higher. Dividends paid on each class of shares may generally
be less than dividends paid by a conventional bond fund that seeks income,
because the Fund seeks total return as its primary objective.
The Fund has adopted the practice, to the extent consistent with the
amount of the Fund's net investment income and other distributable income,
of attempting to pay dividends on Class A shares at a constant level,
although the amount of such dividends may be subject to change from time
to time depending on market conditions, the composition of the Fund's
portfolio and expenses borne by the Fund or borne separately by that
Class. The practice of attempting to pay dividends on Class A shares at
a constant level requires the Manager, consistent with the Fund's
investment objective and investment restrictions, to monitor the Fund's
portfolio and select higher yielding securities when deemed appropriate
to maintain necessary net investment income levels. The Fund anticipates
paying dividends at the targeted dividend level from net investment income
and other distributable income without any impact on the Fund's net asset
value per share. The Board of Trustees may change the Fund's targeted
dividend level at any time, without prior notice to shareholders; the Fund
does not otherwise have a fixed dividend rate and there can be no
assurance as to the payment of any dividends or the realization of any
capital gains.
Capital Gains. The Fund may make distributions annually in December out
of any net short or long-term capital gains, and may make supplemental
distributions of dividends and capital gains following the end of its
fiscal year (which ends September 30). Short-term capital gains are
treated as dividends for tax purposes. Long-term capital gains will be
separately identified in the tax information the Fund sends you after the
end of the calendar year. There can be no assurance that the Fund will
pay any capital gains distributions in a particular year.
Distribution Options. When you open your account, specify on your
application how you want to receive your distributions. For
OppenheimerFunds retirement accounts, all distributions are reinvested.
For other accounts, you have four options:
-- Reinvest all distributions in the Fund. You can elect to reinvest
all dividends and long-term capital gains distributions in additional
shares of the Fund.
-- Reinvest long-term capital gains only. You can elect to reinvest
long-term capital gains in the Fund while receiving dividends by check or
sent to your bank account on AccountLink.
-- Receive all distributions in cash. You can elect to receive a
check for all dividends and long-term capital gains distributions or have
them sent to your bank on AccountLink.
-- Reinvest your distributions in another Oppenheimer Funds account.
You can reinvest all distributions in another Oppenheimer funds account
you have established.
Taxes. If your account is not a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the
Fund. Long-term capital gains are taxable as long-term capital gains when
distributed to shareholders. It does not matter how long you held your
shares. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Distributions are subject to
federal income tax and may be subject to state or local taxes. Your
distributions are taxable when paid, whether you reinvest them in
additional shares or take them in cash. Every year the Fund will send you
and the IRS a statement showing the amount of each taxable distribution
you received in the previous year.
-- "Buying a Dividend". When a fund goes ex-dividend, its share
price is reduced by the amount of the distribution. If you buy shares on
or just before the ex-dividend date, or just before the Fund declares a
capital gains distribution, you will pay the full price for the shares and
then receive a portion of the price back as a taxable dividend or capital
gain.
-- Taxes on Transactions. Share redemptions, including redemptions
for exchanges, are subject to capital gains tax. Generally speaking, a
capital gain or loss is the difference between the price you paid for the
shares and the price you receive when you sell them.
-- Returns of Capital. In certain cases distributions made by the
Fund may be considered a non-taxable return of capital to shareholders.
If that occurs, it will be identified in notices to shareholders. A non-
taxable return of capital may reduce your tax basis in your Fund shares.
This information is only a summary of certain Federal tax information
about your investment. More information is contained in the Statement of
Additional Information, and in addition you should consult with your tax
adviser about the effect of an investment in the Fund on your particular
tax situation.
<PAGE>
Appendix: Description of Ratings Categories of Rating Services
Description of Moody's Investors Service, Inc. Bond Ratings
Aaa: Bonds rated "Aaa" are judged to be the best quality and to carry
the smallest degree of investment risk. Interest payments are protected
by a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, the changes
that can be expected are most unlikely to impair the fundamentally strong
position of such issues.
Aa: Bonds rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally
known as "high-grade" bonds. They are rated lower than the best bonds
because margins of protection may not be as large as with "Aaa" securities
or fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than those of "Aaa" securities.
A: Bonds rated "A" possess many favorable investment attributes and
are to be considered as upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa: Bonds rated "Baa" are considered medium grade obligations, that
is, 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 have speculative characteristics as well.
Ba: Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered well-assured. Often the protection of
interest and principal payments may be very moderate and not well
safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B: Bonds rated "B" generally lack characteristics of 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.
Caa: Bonds rated "Caa" are of poor standing and may be in default or
there may be present elements of danger with respect to principal or
interest.
Ca: Bonds rated "Ca" represent obligations which are speculative in
a high degree and are often in default or have other marked shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority
of instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to adverse effects
of change in circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded,
on balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms
of the obligation. "BB" indicates the lowest degree of speculation and
"CC" the highest degree. While such bonds will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds
rated "D" are in default and payment of interest and/or repayment of
principal is in arrears.
<PAGE>
Oppenheimer International Bond Fund
3410 South Galena Street
Denver, Colorado 80231
1-800-525-7048
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
No dealer, broker, salesperson or any other person has been authorized to
give any information or to make any representations other than those
contained in this Prospectus or the Statement of Additional Information
and, if given or made, such information and representations must not be
relied upon as having been authorized by the Fund, Oppenheimer Management
Corporation, Oppenheimer Funds Distributor, Inc. or any affiliate thereof.
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such an offer in such state.
PR0880.001.1295 Printed on Recycled Paper
<PAGE>
Oppenheimer International Bond Fund
3410 South Galena Street, Denver, Colorado 80231
1-800-525-7048
Statement of Additional Information dated December 5, 1995
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated December 5, 1995. It should be read
together with the Prospectus, which may be obtained by writing to the
Fund's Transfer Agent, Oppenheimer Shareholder Services, at P.O. Box 5270,
Denver, Colorado 80217 or by calling the Transfer Agent at the toll-free
number shown above.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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About the Fund
Investment Objectives and Policies . . . . . . . . . . . . .2
Investment Policies and Strategies. . . . . . . . . . .2
Other Investment Techniques and Strategies. . . . . . .10
Other Investment Restrictions . . . . . . . . . . . . .22
How the Fund is Managed. . . . . . . . . . . . . . . . . . .23
Organization and History. . . . . . . . . . . . . . . .23
Trustees and Officers of the Fund . . . . . . . . . . .24
The Manager and Its Affiliates. . . . . . . . . . . . .28
Brokerage Policies of the Fund . . . . . . . . . . . . . . .29
Performance of the Fund. . . . . . . . . . . . . . . . . . .31
Distribution and Service Plans . . . . . . . . . . . . . . .35
About Your Account
How To Buy Shares. . . . . . . . . . . . . . . . . . . . . .37
How To Sell Shares . . . . . . . . . . . . . . . . . . . . .43
How To Exchange Shares . . . . . . . . . . . . . . . . . . .47
Dividends, Capital Gains and Taxes . . . . . . . . . . . . .49
Additional Information About the Fund. . . . . . . . . . . .50
Financial Information About the Fund
Independent Auditors' Report . . . . . . . . . . . . . . . .51
Financial Statements . . . . . . . . . . . . . . . . . . . .52
Appendix A: Corporate Industry Classifications. . . . . . .A-1
</TABLE>
<PAGE>
ABOUT THE FUND
Investment Objectives and Policies
Investment Policies and Strategies. The investment objectives and
policies of the Fund are discussed in the Prospectus. Set forth below is
supplemental information about those policies and the types of securities
in which the Fund invests, as well as strategies the Fund may use to
achieve its investment objectives. Certain capitalized terms used in this
Statement of Additional Information have the same meaning as those terms
have in the Prospectus.
In selecting securities for the Fund's portfolio, the Fund's
investment adviser, Oppenheimer Management Corporation (referred to as the
"Manager"), evaluates the investment merits of debt and equity securities
primarily through the exercise of its own investment analysis. This may
include, among other things, consideration of the financial strength of
an issuer, including its historic and current financial condition, the
trading activity in its securities, present and anticipated cash flow,
estimated current value of its assets in relation to their historical
cost, the issuer's experience and managerial expertise, responsiveness to
changes in interest rates and business conditions, debt maturity
schedules, current and future borrowing requirements, and any change in
the financial condition of an issuer and the issuer's continuing ability
to meet its future obligations. The Manager also may consider anticipated
changes in business conditions, levels of interest rates of bonds as
contrasted with levels of cash dividends, industry and regional prospects,
the availability of new investment opportunities and the general economic,
legislative and monetary outlook for specific industries, the nation and
the world. Additional factors considered by the Manager with respect to
the Fund's foreign securities investments are discussed below under
"Foreign Securities."
-- Foreign Securities. As noted in the Prospectus, the Fund may
invest in securities (which may be denominated in U.S. dollars or 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 securities issued by U.S.
corporations denominated in non-U.S. currencies. The types of foreign
debt obligations and other securities in which the Fund may invest are the
same types of debt and equity securities identified above. Foreign
securities are subject, however, to additional risks not associated with
domestic securities, as discussed below. These additional risks may be
more pronounced as to investments in securities issued by emerging market
countries or by companies located in emerging market countries.
Securities of foreign issuers that are represented by American
depository receipts, or that are listed on a U.S. securities exchange, or
are traded in the U.S. over-the-counter market are not considered "foreign
securities" because they are not subject to many of the special
considerations and risks (discussed below) that apply to foreign
securities traded and held abroad. If the Fund's securities are held
abroad, the countries in which such securities may be held and the sub-
custodians holding must be, in most cases, approved by the Fund's Board
of Trustees where required under applicable SEC rules.
The Fund may invest in U.S. dollar-denominated, collateralized "Brady
Bonds." These debt obligations of foreign entities may be fixed-rate par
bonds or floating- rate discount bonds and are generally collateralized
in full as to principal due at maturity by U.S. Treasury zero coupon
obligations that have the same maturity as the Brady Bonds. Brady Bonds
are often viewed as having three or four valuation components: (i) the
collateralized repayment of principal at final maturity; (ii) the
collateralized interest payments; (iii) the uncollateralized interest
payments; and (iv) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). In the
event of a default with respect to collateralized Brady Bonds as a result
of which the payment obligations of the issuer are accelerated, the zero
coupon Treasury securities held as collateral for the payment of principal
will not be distributed to investors, nor will such obligations be sold
and the proceeds distributed. The collateral will be held by the
collateral agent to the scheduled maturity of the defaulted Brady Bonds,
which will continue to be outstanding, at which time the face amount of
the collateral will equal the principal payments which would have then
been due on the Brady Bonds in the normal course. In addition, in light
of the residual risk of Brady Bonds and, among other factors, the history
of defaults with respect to commercial bank loans to public and private
entities of countries issuing Brady Bonds, investments in Brady Bonds are
to be viewed as speculative.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government.
Obligations of supranational entities include those of international
organizations designated or supported by governmental entities to promote
economic reconstruction or development and of international banking
institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"),
the European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or
"stockholders," of these entities usually make initial capital
contributions to the supranational entity and in many cases are committed
to make additional capital contributions if the supranational entity is
unable to repay its borrowings. Each supranational entity's lending
activities are limited to a percentage of its total capital (including
"callable capital" contributed by members at the entity's call), reserves
and net income. There is no assurance that foreign governments will be
able or willing to honor their commitments.
Investing in foreign securities involves considerations and possible
risks not typically associated with investing in securities in the U.S.
The values of foreign securities will be affected by changes in currency
rates or exchange control regulations or currency blockage, application
of foreign tax laws, including withholding taxes, changes in governmental
administration or economic or monetary policy (in the U.S. or abroad) or
changed circumstances in dealings between nations. Costs will be incurred
in connection with conversions between various currencies. Foreign
brokerage commissions are generally higher than commissions in the U.S.,
and foreign securities markets may be less liquid, more volatile and less
subject to governmental regulation than in the U.S. Investments in foreign
countries could be affected by other factors not generally thought to be
present in the U.S., including expropriation or nationalization,
confiscatory taxation and potential difficulties in enforcing contractual
obligations, and could be subject to extended settlement periods.
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 its 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. See "Other
Investment Techniques and Strategies - Hedging," below.
The values of foreign investments and the investment income derived
from them may also be affected unfavorably by changes in currency exchange
control regulations. Although the Fund will invest only in securities
denominated in foreign currencies that at the time of investment do not
have significant government-imposed restrictions on conversion into U.S.
dollars, there can be no assurance against subsequent imposition of
currency controls. In addition, the values of foreign securities will
fluctuate in response to a variety of factors, including changes in U.S.
and foreign interest rates.
Investments in foreign securities offer potential benefits not
available from investing solely in securities of domestic issuers, by
offering 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 bond or
other markets that do not move in a manner parallel to U.S. markets. From
time to time, 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
reimposed.
-- Debt Securities. All debt securities are subject to two types of
risks: credit risk and interest rate risk (these are in addition to other
investment risks that may affect a particular security).
-- Credit Risk. Credit risk relates to the ability of the issuer to
meet interest or principal payments or both as they become due.
Generally, higher yielding bonds are subject to credit risk to a greater
extent than higher quality bonds.
-- Interest Rate Risk. Interest rate risk refers to the fluctuations
in value of fixed-income securities resulting solely from the inverse
relationship between the market value of outstanding fixed-income
securities and changes in interest rates. An increase in interest rates
will generally reduce the market value of fixed-income investments, and
a decline in interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to produce
higher yields, are subject to potentially greater capital appreciation and
depreciation than obligations with shorter maturities. Fluctuations in
the market value of fixed-income securities subsequent to their
acquisition will not affect the interest payable on those securities, and
thus the cash income from such securities, but will be reflected in the
valuations of those securities used to compute the Fund's net asset
values.
-- Government Obligations. The Fund seeks to achieve its objectives
by investing primarily in foreign debt securities, with an emphasis on
foreign government bonds. Foreign securities are discussed below.
-- U.S. Treasury Obligations. These include Treasury Bills (which
have maturities of one year or less when issued), Treasury Notes (which
have maturities of one 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.
-- U.S. Government and Agency Obligations. U.S. government
securities are debt obligations issued by or guaranteed by the United
States government or any of its agencies or instrumentalities. Some of
these obligations, including U.S. Treasury notes and bonds, and mortgage-
backed securities (referred to as "Ginnie Maes") guaranteed by the
Government National Mortgage Association, are supported by the full faith
and credit of the United States, which means that the government pledges
to use its taxing power to repay the debt. Other U.S. government
securities issued or guaranteed by Federal agencies or government-
sponsored enterprises are not supported by the full faith and credit of
the United States. They may include obligations supported by the ability
of the issuer to borrow from the U.S. Treasury. However, the Treasury is
not under a legal obligation to make a loan. Examples of these are
obligations of Federal Home Loan Mortgage Corporation (these securities
are often called "Freddie Macs"). Other obligations are supported by the
credit of the instrumentality, such as Federal National Mortgage
Association bonds (these securities are often called "Fannie Maes").
GNMA Certificates. Certificates of Government National Mortgage
Association ("GNMA") are mortgage-backed securities of GNMA that evidence
an undivided interest in a pool or pools of mortgages ("GNMA
Certificates"). 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 payments.
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. Prepayments 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.
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 Certificate 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.
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 certificates ("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 owed on the
underlying pool. FHLMC guarantees timely monthly payment of interest on
PCs and the ultimate payment of principal. The FHLMC guarantee is not
backed by the full faith and credit of the U.S. Government.
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.
Mortgage-Backed Security Rolls. The Fund may enter into "forward
roll" transactions with respect to mortgage-backed securities issued by
GNMA, FNMA or FHLMC. In a forward roll transaction, which is considered
to be a borrowing by the Fund, the Fund will sell a mortgage security to
a bank or other permitted entity and simultaneously agree to repurchase
a similar security from the institution at a later date at an agreed upon
price. The mortgage securities that are repurchased will bear the same
interest rate as those sold, but generally will be collateralized by
different pools of mortgages with different prepayment histories than
those sold. Risks of mortgage-backed security rolls include: (i) the risk
of prepayment prior to maturity, (ii) the possibility that the proceeds
of the sale may have to be invested in money market instruments (typically
repurchase agreements) maturing not later than the expiration of the roll,
and (iii) the possibility that the market value of the securities sold by
the Fund may decline below the price at which the Fund is obligated to
purchase the securities. Upon entering into a mortgage-backed security
roll, the Fund will be required to place cash, U.S. Government Securities
or other high-grade debt securities in a segregated account with its
Custodian in an amount equal to its obligation under the roll.
-- Commercial Paper. The Fund's commercial paper investments include
the following:
Variable Amount Master Demand Notes. 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 prepay 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. There is no secondary market for
these notes, although they are redeemable (and thus immediately repayable
by the borrower) at principal amount, plus accrued interest, at any time.
Accordingly, the Fund's right to redeem such notes is dependent upon the
ability of the borrower to pay principal and interest on demand. The Fund
has no limitations on the type of issuer from whom these notes will be
purchased; however, in connection with such purchases and on an ongoing
basis, the Manager 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 master demand notes are
subject to the limitation on investments by the Fund in illiquid
securities, described in the Prospectus.
Floating Rate/Variable Rate Notes. Some of the notes the Fund may
purchase may have variable or floating interest rates. Variable rates are
adjustable at stated periodic intervals; floating rates are automatically
adjusted according to a specified market rate for such investments, such
as the percentage of the prime rate of a bank, or the 91-day U.S. Treasury
Bill rate. Such obligations may be secured by bank letters of credit or
other credit support arrangements.
-- Mortgage-Backed Securities and CMO's. These securities represent
participation interests in pools of residential mortgage loans. Mortgage-
backed securities include collateralized mortgage-backed obligations
(referred to as "CMOs") issued by the U.S. government, its agencies or
instrumentalities, or by private issuers. Mortgage-backed securities and
CMOs securities differ from conventional debt securities which generally
provide for periodic payment of interest in fixed or determinable amounts
(usually semi-annually) with principal payments at maturity or specified
call dates.
Mortgage-Backed Securities. The yield on mortgage-backed securities
is based on the average expected life of the underlying pool of mortgage
loans. The actual life of any particular pool will be shortened by any
unscheduled or early payments of principal and interest. Principal
prepayments generally result from the sale of the underlying property or
the refinancing or foreclosure of underlying mortgages. The occurrence
of prepayments is affected by a wide range of economic, demographic and
social factors and, accordingly, it is not possible to predict accurately
the average life of a particular pool. Yield on such pools is usually
computed by using the historical record of prepayments for that pool, or,
in the case of newly-issued mortgages, the prepayment history of similar
pools. The actual prepayment experience of a pool of mortgage loans may
cause the yield realized by the Fund to differ from the yield calculated
on the basis of the expected average life of the pool.
Prepayments tend to increase during periods of falling interest
rates, while during periods of rising interest rates prepayments will most
likely decline. When prevailing interest rates rise, the value of a pass-
through security may decrease, as do the values of other debt securities,
but, when prevailing interest rates decline, the value of a pass-through
security is not likely to rise to the extent that the value of other debt
securities rise, because of the prepayment feature of pass-through
securities. The Fund's reinvestment of scheduled principal payments and
unscheduled prepayments it receives may occur at times when available
investments offer higher or lower rates than the original investment, thus
affecting the yield of the Fund. Monthly interest payments received by
the Fund have a compounding effect which may increase the yield to the
Fund more than debt obligations that pay interest semi-annually. Because
of those factors, mortgage-backed securities may be less effective than
Treasury bonds of similar maturity at maintaining yields during periods
of declining interest rates. The Fund may purchase mortgage-backed
securities at par or at a premium or at a discount. Accelerated
prepayments adversely affect yields for pass-through securities purchased
at a premium (i.e., at a price in excess of their principal amount) and
may involve additional risk of loss of principal because the premium may
not have been fully amortized at the time the obligation is repaid. The
opposite is true for pass-through securities purchased at a discount.
The Fund may invest in "stripped" mortgage-backed securities, in
which the principal and interest portions of the security are separated
and sold. Stripped mortgage-backed securities usually have at least two
classes each of which receives different proportions of interest and
principal distributions on the underlying pool of mortgage assets. One
common variety of stripped mortgage-backed security has one class that
receives some of the interest and most of the principal, while the other
class receives most of the interest and remainder of the principal. In
some cases, one class will receive all of the interest (the "interest-
only" or "I/O" class), while the other class will receive all of the
principal (the "principal-only" or "P/O" class).
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.
CMOs. CMOs are fully-collateralized bonds that are the general
obligations of the issuer thereof. Such bonds generally are secured by
an assignment to a trustee (under the indenture pursuant to which the
bonds are issued) of collateral consisting of a pool of mortgages.
Payments with respect to the underlying mortgages generally are made to
the trustee under the indenture. Payments of principal and interest on
the underlying mortgages are not passed through to the holders of the CMOs
as such (i.e., the character of payments of principal and interest is not
passed through, and therefore payments to holders of CMOs attributable to
interest paid and principal repaid on the underlying mortgages do not
necessarily constitute income and return of capital, respectively, to such
holders), but such payments are dedicated to payment of interest on and
repayment of principal of the CMOs. CMOs often are issued in two or more
classes with different characteristics such as varying maturities and
stated rates of interest. Because interest and principal payments on the
underlying mortgages are not passed through to holders of CMOs, CMOs of
varying maturities may be secured by the same pool of mortgages, the
payments on which are used to pay interest on each class and to retire
successive maturities (known as "tranches") in sequence. Unlike other
mortgage-backed securities (discussed above), CMOs are designed to be
retired as the underlying mortgages are repaid. In the event of
prepayment on such mortgages, the class of CMO first to mature generally
will be paid down. Therefore, although in most cases the issuer of CMOs
will not supply additional collateral in the event of such prepayment,
there will be sufficient collateral to secure CMOs that remain
outstanding. The value of certain classes or "tranches" may be more
volatile than the value of the pool as a whole, and losses may be more
severe than on other classes.
Mortgage-backed securities may be less effective than debt
obligations of similar maturity at maintaining yields during periods of
declining interest rates. As new types of mortgage-related securities are
developed and offered to investors, the Manager will, subject to the
direction of the Board of Trustees and consistent with the Fund's
investment objectives and policies, consider making investments in such
new types of mortgage-related securities.
-- Asset-Backed Securities. The value of an asset-backed security
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 has
been exhausted. The risks of investing in asset-backed securities are
ultimately dependent upon payment of consumer loans by the individual
borrowers. As a purchaser of an asset-backed security, 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, which may shorten the weighted average life of asset-backed
securities and may lower their return, in the same manner as described in
the Prospectus and in "Mortgage-Backed Securities and CMOs", above, for
prepayments of a pool of mortgage loans underlying mortgage-backed
securities.
-- Zero Coupon Securities. The Fund may invest in zero coupon
securities issued by the U.S. Treasury or by private issuers such as
domestic or foreign corporations. Zero coupon U.S. Treasury securities
include: (1) U.S. Treasury bills without interest coupons, (2) U.S.
Treasury notes and bonds that have been stripped of their unmatured
interest coupons and (3) receipts or certificates representing interests
in such stripped debt obligations or coupons. These securities usually
trade at a deep discount from their face or par value and will be subject
to greater fluctuations in market value in response to changing interest
rates than debt obligations of comparable maturities that make current
payments of interest. However, the lack of periodic interest payments
means that the interest rate is "locked in" and the investor avoids the
risk of having to reinvest periodic interest payments in securities having
lower rates. An additional risk of private-issuer zero coupon securities
is the credit risk that the issuer will be unable to make payment at
maturity of the obligation.
Because the Fund accrues taxable income from zero coupon securities
without receiving cash, the Fund may be required to sell portfolio
securities in order to pay dividends or redemption proceeds for its
shares, which require the payment of cash. This will depend on several
factors: the proportion of shareholders who elect to receive dividends in
cash rather than reinvesting dividends in additional shares of the Fund,
and the amount of cash income the Fund receives from other investments and
the sale of shares. In either case, cash distributed or held by the Fund
that is not reinvested by investors in additional Fund shares will hinder
the Fund from seeking current income.
-- Participation Interests. The Fund may invest in participation
interests, subject to the limitation, described in "Illiquid and
Restricted Securities" in the Prospectus on investments by the Fund in
illiquid investments. Participation interests provide the Fund an
undivided interest in a loan made by the issuing financial institution in
the proportion that the Fund's participation interest bears to the total
principal amount of the loan. No more than 5% of the Fund's net assets
can be invested in participation interests of the same borrower. The
issuing financial institution may have no obligation to the Fund other
than to pay the Fund the proportionate amount of the principal and
interest payments it receives. Participation interests are primarily
dependent upon the creditworthiness of the borrowing corporation, which
is obligated to make payments of principal and interest on the loan, and
there is a risk that such borrowers may have difficulty making payments.
In the event the borrower fails to pay scheduled interest or principal
payments, the Fund could experience a reduction in its income and might
experience a decline in the value of that participation interest and in
the net asset value of its shares. In the event of a failure by the
financial institution to perform its obligation in connection with the
participation agreement, the Fund might incur certain costs and delays in
realizing payment or may suffer a loss of principal and/or interest.
-- 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 in the Prospectus under "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.
-- Equity Securities. Additional information about some of the types
of equity securities the Fund may invest in is provided below.
-- Convertible Securities. While convertible securities are a form
of debt security in many cases, their conversion feature (allowing
conversion into equity securities) causes them to be regarded more as
"equity equivalents." As a result, any rating assigned to the security
has less impact on the Manager's investment decision with respect to
convertible securities than in the case of non-convertible debt
securities. To determine whether convertible securities should be
regarded as "equity equivalents," the Manager examines the following
factors: (1) whether, at the option of the investor, the convertible
security can be exchanged for a fixed number of shares of common stock of
the issuer, (2) whether the issuer of the convertible securities has
restated its earnings per share of common stock on a fully diluted basis
(considering the effect of converting the convertible securities), and (3)
the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any appreciation in
the price of the issuer's common stock.
-- Warrants and Rights. Warrants are options to purchase equity
securities at set prices valid for a specified period of time. The prices
of warrants do not necessarily move in a manner parallel to the prices of
the underlying securities. The price the Fund pays for a warrant will be
lost unless the warrant is exercised prior to its expiration. Rights are
similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. Rights and
warrants have no voting rights, receive no dividends and have no rights
with respect to the assets of the issuer.
-- Portfolio Turnover. To the extent that increased portfolio
turnover results in gains from sales of securities held less than three
months, the Fund's ability to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code") may be affected. Although changes in the value of the Fund's
portfolio securities subsequent to their acquisition are reflected in the
net asset value of the Fund's shares, such changes will not affect the
income received by the Fund from such securities. The dividends paid by
the Fund will increase or decrease in relation to the income received by
the Fund from its investments, which will in any case be reduced by the
Fund's expenses before being distributed to the Fund's shareholders.
Other Investment Techniques and Strategies
-- Borrowing. From time to time, the Fund may increase its ownership
of securities by borrowing from banks on a unsecured basis and investing
the borrowed funds, subject to the restrictions stated in the Prospectus.
Any such borrowing will be made only from banks, and pursuant to the
requirements of the Investment Company Act, will be made only to the
extent that the value of that Fund's assets, less its liabilities other
than borrowings, is equal to at least 300% of all borrowings including the
proposed borrowing and amounts covering the Fund's obligations under
"forward roll" transactions. If the value of the Fund's assets so computed
should fail to meet the 300% asset coverage requirement, the Fund is
required within three days to reduce its bank debt to the extent necessary
to meet such requirement and may have to sell a portion of its investments
at a time when independent investment judgment would not dictate such
sale. Borrowing for investment increases both investment opportunity and
risk. Since substantially all of the Fund's assets fluctuate in value,
but borrowing obligations are fixed, when the Fund has outstanding
borrowings, its net asset value per share correspondingly will tend to
increase and decrease more when portfolio assets fluctuate in value than
otherwise would be the case.
-- When-Issued and Delayed Delivery Transactions. The Fund may
purchase securities on a "when-issued" basis, and may purchase or sell
such securities on a "delayed delivery" basis. Although the Fund will
enter into such transactions for the purpose of acquiring securities for
its portfolio or for delivery pursuant to options contracts it has entered
into, the Fund may dispose of a commitment prior to settlement. "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, or to securities to be delivered at a
later date. 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. The Fund does not intend to make such purchases for speculative
purposes. The commitment to purchase a security for which payment will
be made on a future date may be deemed a separate security and involve
risk of loss if the value of the security declines prior to the settlement
date. During the period between commitment by the Fund and settlement
(generally within two months but not to exceed 120 days), no payment is
made for the securities purchased by the purchaser, and no interest
accrues to the purchaser from the transaction. Such securities are
subject to market fluctuation; the value at delivery may be less than the
purchase price. The Fund will maintain a segregated account with its
Custodian, consisting of cash, U.S. Government securities or other high
grade debt obligations at least equal to the value of purchase commitments
until payment is made.
The Fund will engage in when-issued transactions in order to secure
what is considered to be an advantageous price and yield at the time of
entering into the obligation. When the Fund engages in when-issued or
delayed delivery transactions, it relies on the buyer or seller, as the
case may be, to consummate the transaction. Failure of the buyer or
seller to do so may result in the Fund losing the opportunity to obtain
a price and yield considered to be advantageous. At the time the Fund
makes a commitment to purchase or sell a security on a when-issued or
forward commitment basis, it records the transaction and reflects the
value of the security purchased, or if a sale, the proceeds to be
received, in determining its net asset value. If the Fund chooses to (i)
dispose of the right to acquire a when-issued security prior to its
acquisition or (ii) dispose of its right to deliver or receive against a
forward commitment, it may incur a gain or loss.
To the extent the Fund engages in when-issued and delayed delivery
transactions, it will do so for the purpose of acquiring or selling
securities consistent with its investment objectives and policies and not
for the purposes of investment leverage. The Fund enters into such
transactions only with the intention of actually receiving or delivering
the securities, although as noted above, when-issued securities and
forward commitments may be sold prior to settlement date. In addition,
changes in interest rates before settlement in a direction other than that
expected by the Manager will affect the value of such securities and may
cause a loss to the Fund.
When-issued transactions and forward commitments allow the Fund a
technique to use against anticipated changes in interest rates and prices.
For instance, in periods of rising interest rates and falling prices, the
Fund might sell securities in its portfolio on a forward commitment basis
to attempt to limit its exposure to anticipated falling prices. In
periods of falling interest rates and rising prices, the Fund might sell
portfolio securities and purchase the same or similar securities on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields.
-- Repurchase Agreements. In a repurchase transaction, the Fund
acquires a security from, and simultaneously resells it to, an approved
vendor (a U.S. commercial bank, the U.S. branch of a foreign bank or a
broker-dealer which has been designated a primary dealer in U.S.
government securities, which must meet the credit requirements set by the
Fund's Board of Trustees from time to time), for delivery on an agreed-
upon future date. The resale 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 resale
typically will occur within one to five days of the purchase. Repurchase
agreements are considered "loans" under the Investment Company Act,
collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the collateral's value must equal or exceed the repurchase price
to fully collateralize the repayment obligation. Additionally, the
Manager will impose creditworthiness requirements to confirm that the
vendor is financially sound and will continuously monitor the collateral's
value.
-- Illiquid and Restricted Securities. To enable the Fund to sell
restricted securities not registered under the Securities Act of 1933, the
Fund may have to cause those securities to be registered. The expenses
of registration of restricted securities may be negotiated by the Fund
with the issuer at the time such securities are purchased by the Fund, if
such registration is required before such securities may be sold publicly.
When registration must be arranged because the Fund wishes to sell the
security, a considerable period may elapse between the time the decision
is made to sell the securities and the time the Fund would be permitted
to sell them. The Fund would bear the risks of any downward price
fluctuation during that period. The Fund may also acquire, through
private placements, securities having contractual restrictions on their
resale, which might limit the Fund's ability to dispose of such securities
and might lower the amount realizable upon the sale of such securities.
The Fund has percentage limitations that apply to purchases of
restricted and illiquid securities, as stated in the Prospectus. Those
percentage restrictions do not limit purchases of restricted securities
that are eligible for sale to qualified institutional purchasers pursuant
to Rule 144A under the Securities Act of 1933, provided that those
securities have been determined to be liquid by the Board of Trustees of
the Fund or by the Manager under Board-approved guidelines. Those
guidelines take into account the trading activity for such securities and
the availability of reliable pricing information, among other factors.
If there is a lack of trading interest in a particular Rule 144A security,
the Fund's holding of that security may be deemed to be illiquid.
-- Loans of Portfolio Securities. The Fund may lend its portfolio
securities subject to the restrictions stated in the Prospectus. Under
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, at least equal the market value of
the loaned securities and must consist of cash, bank letters of credit,
U.S. government securities, or other cash equivalents in which the Fund
is permitted to invest. 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. In a portfolio securities lending transaction,
the Fund receives from the borrower an amount equal to the interest paid
or the dividends declared on the loaned securities during the term of the
loan as well as the interest on the collateral securities, less any
finders' or administrative fees the Fund pays in arranging the loan. The
Fund may share the interest it receives on the collateral securities with
the borrower as long as it realizes at least a minimum amount of interest
required by the lending guidelines established by its Board of Trustees.
The Fund will not lend its portfolio securities to any officer, trustee,
employee or affiliate of the Fund or its Manager. The terms of the Fund's
loans must meet certain tests under the Internal Revenue Code and permit
the Fund to reacquire loaned securities on five business days' notice or
in time to vote on any important matter.
-- Hedging. As described in the Prospectus, the Fund may employ one
or more types of hedging instruments. When hedging to attempt to protect
against declines in the market value of the Fund's portfolio, to permit
the Fund to retain unrealized gains in the value of portfolio securities
which have appreciated, or to facilitate selling securities for investment
reasons, the Fund may: (i) sell Futures, (ii) buy puts on such Futures
or securities, or (iii) write calls on securities held by it or on
Futures. When hedging to attempt to protect against the possibility that
portfolio securities are not fully included in a rise in value of the debt
securities market, the Fund may: (i) buy Futures, or (ii) buy calls or
write puts on such Futures or on securities. Covered calls and puts may
also be written on debt securities to attempt to increase the Fund's
income. When hedging to protect against declines in the dollar value of
a foreign currency-denominated security, the Fund may: (a) buy puts on
that foreign currency and on foreign currency Futures, (b) write calls on
that currency or on such Futures, or (c) enter into Forward Contracts at
a higher or lower rate than the spot ("cash") rate.
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.
Additional Information about the hedging instruments the Fund may use is
provided below. In the future, the Fund may employ hedging instruments
and strategies that are not presently contemplated but which may be
developed, to the extent such investment methods are consistent with the
Fund's investment objective, legally permissible and adequately disclosed.
-- Writing Covered Call Options. When the Fund writes a call on a
security, it receives a premium and agrees to sell the callable investment
to a purchaser of a corresponding call on the same security during the
call period (usually not more than 9 months) at a fixed exercise price
(which may differ from the market price of the underlying security),
regardless of market price changes during the call period. The Fund has
retained the risk of loss should the price of the underlying security
decline during the call period, which may be offset to some extent by the
premium.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." A
profit or loss will be realized, depending upon whether the net of the
amount of the option transaction costs and the premium received on the
call written is more or less than the price of the call subsequently
purchased. A profit may also be realized if the call lapses unexercised,
because the Fund retains the underlying investment and the premium
received. Any such profits are considered short-term capital gains for
Federal income tax purposes, and when distributed by the Fund are taxable
as ordinary income. An option position may be closed out only on a market
that provides secondary trading for option of the same series, and there
is no assurance that a liquid secondary market will exist for a particular
option. If the Fund could not effect a closing purchase transaction due
to lack of a market, it would have to hold the callable investments until
the call lapsed or was exercised.
The Fund may also write calls on Futures without owning a futures
contract or a deliverable security, provided that at the time the call is
written, the Fund covers the call by segregating in escrow an equivalent
dollar amount of liquid assets. The Fund will segregate additional liquid
assets if the value of the escrowed assets drops below 100% of the
obligation under the Future. In no circumstances would an exercise notice
require the Fund to deliver a futures contract; it would simply put the
Fund in a short futures position, which is permitted by the Fund's hedging
policies.
-- Writing Put Options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy, the
underlying investment at the exercise price during the option period.
Writing a put covered by segregated liquid assets equal to the exercise
price of the put has the same economic effect to the Fund as writing a
covered call. The premium the Fund receives from writing a put option
represents a profit, as long as the price of the underlying investment
remains above the exercise price. However, the Fund has also assumed the
obligation during the option period to buy the underlying investment from
the buyer of the put at the exercise price, even though the value of the
investment may fall below the exercise price. If the put lapses
unexercised, the Fund (as the writer of the put) realizes a gain in the
amount of the premium. If the put is exercised, the Fund must fulfill its
obligation to purchase the underlying investment at the exercise price,
which will usually exceed the market value of the investment at that time.
In that case, the Fund may incur a loss, equal to the sum of the current
market value of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs incurred.
When writing put options on securities, to secure its obligation to
pay for the underlying security, the Fund will deposit in escrow liquid
assets with a value equal to or greater than the exercise price of the put
option. The Fund therefore forgoes the opportunity of investing the
segregated assets or writing calls against those assets. As long as the
obligation of the Fund as the put writer continues, it may be assigned an
exercise notice by the broker-dealer through whom such option was sold,
requiring the Fund to take delivery of the underlying security against
payment of the exercise price. The Fund has no control over when it may
be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation
as the writer of the put. This obligation terminates upon expiration of
the put, or such earlier time at which the Fund effects a closing
purchase transaction by purchasing a put of the same series as that
previously sold. Once the Fund has been assigned an exercise notice, it
is thereafter not allowed to effect a closing purchase transaction.
The Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option it has written or to prevent an
underlying security from being put. Furthermore, effecting such a closing
purchase transaction will permit the Fund to write another put option to
the extent that the exercise price thereof is secured by the deposited
assets, or to utilize the proceeds from the sale of such assets for other
investments by the Fund. The Fund will realize a profit or loss from a
closing purchase transaction if the cost of the transaction is less or
more than the premium received from writing the option. As above for
writing covered calls, any and all such profits described herein from
writing puts are considered short-term gains for Federal tax purposes, and
when distributed by the Fund, are taxable as ordinary income.
-- Purchasing Calls and Puts. When the Fund purchases a call (other
than in a closing purchase transaction), it pays a premium and, except as
to calls on indices or Futures, has the right to buy the underlying
investment from a seller of a corresponding call on the same investment
during the call period at a fixed exercise price. When the Fund purchases
a call on an index or Future, it pays a premium, but settlement is in cash
rather than by delivery of the underlying investment to the Fund. In
purchasing a call, the Fund benefits only if the call is sold at a profit
or if, during the call period, the market price of the underlying
investment is above the sum of the exercise price plus the transaction
costs and the premium paid and the call is exercised. If the call is not
exercised or sold (whether or not at a profit), it will become worthless
at its expiration date and the Fund will lose its premium payment and the
right to purchase the underlying investment.
When the Fund purchases a put, it pays a premium and, except as to
puts on indices, has the right to sell the underlying investment to a
seller of a corresponding put on the same investment during the put period
at a fixed exercise price. Buying a put on an investment the Fund owns
enables the Fund to protect itself during the put period against a decline
in the value of the underlying investment below the exercise price by
selling such underlying investment at the exercise price to a seller of
a corresponding put. If the market price of the underlying investment is
equal to or above the exercise price and as a result the put is not
exercised or resold, the put will become worthless at its expiration date,
and the Fund will lose its premium payment and the right to sell the
underlying investment. The put may, however, be sold prior to expiration
(whether or not at a profit.)
Buying a put on an investment it does not own, either a put on an
index or a put on a Future not held by the Fund, permits the Fund either
to resell the put or buy the underlying investment and sell it at the
exercise price. The resale price of the put will vary inversely with the
price of the underlying investment. If the market price of the underlying
investment is above the exercise price and as a result the put is not
exercised, the put will become worthless on its expiration date. When the
Fund purchases a put on an index, or on a Future not held by it, the put
protects the Fund to the extent that the index moves in a similar pattern
to the securities held. In the case of a put on an index or Future,
settlement is in cash rather than by delivery by the Fund of the
underlying investment.
Puts and calls on broadly-based indices or Futures are similar to
puts and calls on securities except that all settlements are in cash and
gain or loss depends on changes in the index or Future in question (and
thus on price movements in the securities markets generally) rather than
on price movements in individual securities or futures contracts. When
the Fund buys a calls on an index or Future, it pays a premium. During
the call period, upon exercise of a call by the Fund, a seller of a
corresponding call on the same investment will pay the Fund an amount of
cash to settle the call if the closing level of the index or Future upon
which the call is based is greater than the exercise price of the call.
That cash payment is equal to the difference between the closing price of
the index or Future and the exercise price of the call times a specified
multiple (the "multiplier"), which determines the total dollar value for
each point of difference. When the Fund buys a put on an index or Future,
it pays a premium and has the right during the put period to require a
seller of a corresponding put, upon the Fund's exercise of its put, to
deliver to the Fund an amount of cash to settle the put if the closing
level of the index or Future upon which the put is based is less than the
exercise price of the put. That cash payment is determined by the
multiplier, in the same manner as described above as to calls.
An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance
that a liquid secondary market will exist for any particular option. The
Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise by the Fund of puts on securities will cause
the sale of related investments, increasing portfolio turnover. Although
such exercise is within the Fund's control, holding a put might cause the
Fund to sell the related investments for reasons which would not exist in
the absence of the put. The Fund will pay a brokerage commission each
time it buys a put or call, sells a put or call, or buys or sells an
underlying investment in connection with the exercise of a put or call.
Such commissions may be higher than those which would apply to direct
purchases or sales of such underlying investments. Premiums paid for
options are small in relation to the market value of the related
investments, and consequently, put or call options offer large amounts of
leverage. The leverage offered by trading in options could result in the
Fund's net asset value being more sensitive to changes in the value of the
underlying investments.
-- Options on Foreign Currencies. The Fund intends to write and
purchase calls and puts on foreign currencies. The Fund may purchase and
write puts and calls on foreign currencies that are traded on a securities
or commodities exchange or over-the-counter markets or are quoted by major
recognized dealers in such options. It does so to protect against
declines in the dollar value of foreign securities and against increases
in the dollar cost of foreign securities to be acquired. If the Manager
anticipates a rise 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 lose
the premium it paid and transaction costs.
A call written on a foreign currency by the Fund is covered if the
Fund owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held
in a segregated account by its Custodian) upon conversion or exchange of
other foreign currency held in its portfolio. A call may be written by
the Fund on a foreign currency to provide a hedge against a decline in the
U.S. dollar value of a security which the Fund owns or has the right to
acquire and which is denominated in the currency underlying the option due
to an expected adverse change in the exchange rate. This is a cross-
hedging strategy. In such circumstances, the Fund covers the option by
maintaining in a segregated account with the Fund's Custodian, cash or
U.S. government securities or other liquid, high grade debt securities in
an amount equal to the exercise price of the option.
-- Interest Rate Futures. No price is paid or received upon the
purchase or sale of an Interest Rate Future. Interest Rate Futures
obligate one party to deliver and the other party to take a specific debt
security or amount of foreign currency, respectively, at a specified price
on a specified date. Upon entering into a Futures transaction, the Fund
will be required to deposit an initial margin payment with the futures
commission merchant (the "futures broker"). The initial margin will be
deposited with the Fund's Custodian in an account registered in the
futures broker's name; however the futures broker can gain access to that
account only under specified conditions. As the Future is marked to
market to reflect changes in its market value, subsequent margin payments,
called variation margin, will be made to and from the futures broker on
a daily basis. Prior to expiration of the Future, if the Fund elects to
close out its position by taking an opposite position, a final
determination of variation margin is made, additional cash is required to
be paid by or released to the Fund, and any loss or gain is realized for
tax purposes. Although Interest Rate Futures by their terms call for
settlement by delivery or acquisition of debt securities, in most cases
the obligation is fulfilled by entering into an offsetting position. All
futures transactions are effected through a clearinghouse associated with
the exchange on which the contracts are traded.
-- Financial Futures. Financial Futures are similar to Interest Rate
Futures except that settlement is made in cash, and net gain or loss on
options on Financial Futures depends on price movements of the securities
included in the index. The strategies which the Fund employs regarding
Financial Futures are similar to those described above with regard to
Interest Rate Futures.
-- Forward Contracts. A Forward Contract involves bilateral
obligations of one party to purchase, and another party to sell, a
specific currency at a future date (which may be any fixed number of days
from the date of the contract agreed upon by the parties), at a price set
at the time the contract is entered into. These contracts are traded in
the interbank market conducted directly between currency traders (usually
large commercial banks) and their customers.
The Fund may use Forward Contracts to protect against uncertainty in
the level of future exchange rates. The use of Forward Contracts does not
eliminate fluctuations in the prices of the underlying securities the Fund
owns or intends to acquire, but it does fix a rate of exchange in advance.
In addition, although Forward Contracts limit the risk of loss due to a
decline in the value of the hedged currencies, at the same time they limit
any potential gain that might result should the value of the currencies
increase.
The Fund may enter into Forward Contracts with respect to specific
transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when
the Fund anticipates receipt of dividend payments in a foreign currency,
the Fund may desire to "lock-in" the U.S. dollar price of the security or
the U.S. dollar equivalent of such payment. To do so, the Fund enters
into a Forward Contract, for a fixed amount of U.S. dollars per unit of
foreign currency, for the purchase or sale of the amount of foreign
currency involved in the underlying transaction ("transaction hedge").
The Fund will thereby be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the currency
exchange rates during the period between the date on which the security
is purchased or sold, or on which the payment is declared, and the date
on which such payments are made or received.
The Fund may also use Forward Contracts to lock in the U.S. dollar
value of portfolio positions ("position hedge"). In a position hedge, for
example, when the Fund believes that foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter into a forward
sale contract to sell an amount of that foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in
such foreign currency. When the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it may enter into
a forward purchase contract to buy that foreign currency for a fixed
dollar amount. In either situation the Fund may, in the alternative,
enter into a forward contract to sell a different foreign currency for a
fixed U.S. dollar amount where the Fund believes that the U.S. dollar
value of the currency to be sold pursuant to the forward contract will
fall whenever there is a decline in the U.S. dollar value of the currency
in which portfolio securities of the Fund are denominated ("cross hedge").
The Fund will not enter into such Forward Contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of
the value of the Fund's portfolio securities or other assets denominated
in that currency or a closely-correlated currency. The Fund, however, in
order to avoid excess transactions and transaction costs, may maintain a
net exposure to Forward Contracts in excess of the value of the Fund's
portfolio securities or other assets denominated in that currency or a
closely-correlated currency provided the excess amount is "covered" by
liquid, high-grade debt securities, denominated in any currency, at least
equal at all times to the amount of such excess. As an alternative, the
Fund may purchase a call option permitting the Fund to purchase the amount
of foreign currency being hedged by a forward sale contract at a price no
higher than the forward contract price or the Fund may purchase a put
option permitting the Fund to sell the amount of foreign currency subject
to a forward purchase contract at a price as high or higher than the
forward contract price. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not
entered into such contracts.
The precise matching of the Forward Contract amounts and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of these securities between
the date the Forward Contract is entered into and the date it is sold.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense
of such purchase), if the market value of the security is less than the
amount of foreign currency the Fund is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some
of the foreign currency received upon the sale of the portfolio security
if its market value exceeds the amount of foreign currency the Fund is
obligated to deliver. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-
term hedging strategy is highly uncertain. Forward Contracts involve the
risk that anticipated currency movements will not be accurately predicted,
causing the Fund to sustain losses on these contracts and transactions
costs.
At or before the maturity of a Forward Contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use
the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a Forward
Contract requiring it to purchase a specified currency by entering into
a second contract entitling it to sell the same amount of the same
currency on the maturity date of the first contract. The Fund would
realize a gain or loss as a result of entering into such an offsetting
Forward Contract under either circumstance to the extent the exchange rate
or rates between the currencies involved moved between the execution dates
of the first contract and offsetting contract.
The cost to the Fund of engaging in Forward Contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are
involved. Because such contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of each particular
counterparty under a Forward Contract.
Although the Fund values its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time
to time, and investors should be aware of the costs of currency
conversion. Foreign exchange dealers do not charge a fee for conversion,
but they do seek to realize a profit based on the difference between the
prices at which they buy and sell various currencies. Thus, a dealer may
offer to sell a foreign currency to the Fund at one rate, while offering
a lesser rate of exchange should the Fund desire to resell that currency
to the dealer.
-- Interest Rate Swap Transactions. 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 interest 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. The
Fund will segregate liquid assets (such as cash or U.S. Government
securities) 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. Swap agreements entail both interest rate risk and credit
risk. There is a risk that, based on movements of interest rates in the
future, the payments made by the Fund under a swap agreement will have
been greater than those received by it. Credit risk arises from the
possibility that the counterparty will default. If the counterparty to
an interest rate swap defaults, the Fund's loss will consist of the net
amount of contractual interest payments that the Fund has not yet
received. The Manager will monitor the creditworthiness of counterparties
to the Fund's interest rate swap transactions on an ongoing basis. The
Fund will enter into swap transactions with appropriate counterparties
pursuant to master netting agreements.
A master netting agreement provides that all swaps done between the
Fund and that counterparty under the master agreement shall be regarded
as parts of an integral agreement. If on any date amounts are payable in
the same currency in respect of one or more swap transactions, the net
amount payable on that date in that currency shall be paid. In addition,
the master netting agreement may provide that if one party defaults
generally or on one swap, the counterparty may terminate the swaps with
that party. Under such agreements, if there is a default resulting in a
loss to one party, the measure of that party's damages is calculated by
reference to the average cost of a replacement swap with respect to each
swap (i.e., the mark-to-market value at the time of the termination of
each swap). The gains and losses on all swaps are then netted, and the
result is the counterparty's gain or loss on termination. The termination
of all swaps and the netting of gains and losses on termination is
generally referred to as "aggregation."
-- Additional Information About Hedging Instruments and Their Use.
The Fund's Custodian, or a securities depository acting for the Custodian,
will act as the Fund's escrow agent, through the facilities of the Options
Clearing Corporation ("OCC"), as to the investments on which the Fund has
written options traded on exchanges or as to other acceptable escrow
securities, so that no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or upon the
Fund's entering into a closing transaction. An option position may be
closed out only on a market which provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option.
When the Fund writes an over-the-counter("OTC") option, it will enter
into an arrangement with a primary U.S. Government securities dealer,
which would establish a formula price at which the Fund would have the
absolute right to repurchase that OTC option. That formula price would
generally be based on a multiple of the premium received for the option,
plus the amount by which the option is exercisable below the market price
of the underlying security (that is, the extent to which the option is
"in-the-money"). When the Fund writes an OTC option, it will treat as
illiquid (for purposes of the limit on its assets that may be invested in
illiquid securities, stated in the Prospectus) the mark-to-market value
of any OTC option held by it. The Securities and Exchange
Commission is evaluating whether OTC options should be considered liquid
securities, and the procedure described above could be affected by the
outcome of that evaluation.
The Fund's option activities may affect its turnover rate and
brokerage commissions. The exercise of calls written by the Fund may
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate in a manner beyond the Fund's control. The exercise by the
Fund of puts on securities or Futures may cause the sale of related
investments, also increasing portfolio turnover. Although such exercise
is within the Fund's control, holding a put might cause the Fund to sell
the related investments for reasons which would not exist in the absence
of the put. The Fund will pay a brokerage commission each time it buys
or sells a put, a call, or an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than those
which would apply to direct purchases or sales of the underlying
investments. Premiums paid for options are small in relation to the
market value of the related investments, and consequently, put and call
options offer large amounts of leverage. The leverage offered by trading
in options could result in the Fund's net asset value being more sensitive
to changes in the value of the underlying investments.
-- Regulatory Aspects of Hedging Instruments. The Fund is required
to operate within certain guidelines and restrictions with respect to its
use of Futures and options on Futures established by the Commodity Futures
Trading Commission ("CFTC"). In particular, the Fund is exempted from
registration with the CFTC as a "commodity pool operator" if the Fund
complies with the requirements of the Rule adopted by the CFTC. The Rule
does not limit the percentage of the Fund's assets that may be used for
Futures margin and related options premiums for a bona fide hedging
position. However, under the Rule the Fund must limit its aggregate
Futures margin and related options premiums to no more than 5% of the
Fund's net assets for hedging strategies that are not considered bona fide
hedging strategies under the Rule.
Transactions in options by the Fund are subject to limitations
established by option exchanges governing the maximum number of options
that may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options were written or
purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more
brokers. Thus, the number of options which the Fund may write or hold may
be affected by options written or held by other entities, including other
investment companies having the same adviser as the Fund (or an adviser
that is an affiliate of the Fund's adviser. The exchanges also impose
position limits on Futures transactions which apply to Futures. An
exchange may order the liquidation of positions found to be in violation
of those limits and may impose certain other sanctions.
Due to requirements under the Investment Company Act, when the Fund
buys or sells a Future, the Fund will maintain, in a segregated account
or accounts with its Custodian, cash or readily-marketable, short-term
(maturing in one year or less) debt instruments in an amount equal to the
net exposure between the market value and the contract price of the
Future, less the margin deposit applicable to it.
-- Tax Aspects of Covered Calls and Hedging Instruments. The Fund
intends to qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). That
qualification enables the Fund to "pass through" its income and realized
capital gains to shareholders without having to pay tax on them. This
avoids a "double tax" on that income and capital gains, since shareholders
normally will be taxed on the dividends and capital gains they receive
from the Fund (unless the Fund's shares are held in a retirement account
or the shareholder is otherwise exempt from tax). One of the tests for
the Fund's qualification as a regulated investment company is that less
than 30% of its gross income must be derived from gains realized on the
sale of securities held for less than three months. To comply with this
30% cap, the Fund will limit the extent to which it engages in the
following activities, but will not be precluded from them: (i) selling
investments, including Futures, held for less than three months, whether
or not they were purchased on the exercise of a call held by the Fund;
(ii) purchasing calls or puts which expire in less than three months;
(iii) effecting closing transactions with respect to calls or puts
purchased less than three months previously; (iv) exercising puts or calls
held by the Fund for less than three months; or (v) writing calls on
investments held for less than three months.
Certain foreign currency exchange contracts ("Forward Contracts") in
which the Fund may invest are treated as "section 1256 contracts." Gains
or losses relating to section 1256 contracts generally are characterized
under the Internal Revenue Code as 60% long-term and 40% short-term
capital gains or losses. However, foreign currency gains or losses
arising from certain section 1256 contracts (including Forward Contracts)
generally are treated as ordinary income or loss. In addition, section
1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized. These contracts also may be marked-
to-market for purposes of the excise tax applicable to investment company
distributions and for other purposes under rules prescribed pursuant to
the Internal Revenue Code. An election can be made by the Fund to exempt
these transactions from this marked-to-market treatment.
Certain Forward Contracts entered into by the Fund may result in
"straddles" for Federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund on straddle
positions. Generally, a loss sustained on the disposition of a position
making up a straddle is allowed only to the extent such loss exceeds any
unrecognized gain in the offsetting positions making up the straddle.
Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.
Under the Internal Revenue Code, gains or losses attributable to
fluctuations in exchange rates that occur between the time the Fund
accrues interest or other receivables or accrues expenses or other
liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities generally are
treated as ordinary income or ordinary loss. Similarly, on disposition
of debt securities denominated in a foreign currency and on disposition
of foreign currency forward contracts, gains or losses attributable to
fluctuations in the value of a foreign currency between the date of
acquisition of the security or contract and the date of disposition also
are treated as ordinary gain or loss. Currency gains and losses are
offset against market gains and losses on each trade before determining
a net "Section 988" gain or loss under the Internal Revenue Code for that
trade, which may increase or decrease the amount of the Fund's investment
company income available for distribution to its shareholders.
-- Risks of Hedging With Options and Futures. An option position may
be closed out only on a market that provides secondary trading for options
of the same series, and there is no assurance that a liquid secondary
market will exist for any particular option. In addition to the risks
associated with hedging that are discussed in the Prospectus and above,
there is a risk in using short hedging by selling Futures to attempt to
protect against decline in value of the Fund's portfolio securities (due,
for example, to an increase in interest rates) that the prices of such
Futures will correlate imperfectly with the behavior of the cash (i.e.,
market value) prices of the Fund's securities. The ordinary spreads
between prices in the cash and futures markets are subject to distortions
due to differences in the natures of those markets. First, all
participants in the futures markets are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash
and futures markets. Second, the liquidity of the futures markets depend
on participants entering into offsetting transactions rather than making
or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures markets could be reduced, thus
producing distortion. Third, from the point of view of speculators, the
deposit requirements in the futures markets are less onerous than margin
requirements in the securities markets. Therefore, increased
participation by speculators in the futures markets may cause temporary
price distortions.
The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the
price of the equity securities being hedged and movements in the price of
the hedging instruments, the Fund may use hedging instruments in a greater
dollar amount than the dollar amount of equity securities being hedged if
the historical volatility of the prices of the equity securities being
hedged is more than the historical volatility of the applicable index.
It is also possible that if the Fund has used hedging instruments in a
short hedge, the market may advance and the value of equity securities
held in the Fund's portfolio may decline. If that occurred, the Fund would
lose money on the hedging instruments and also experience a decline in
value in its portfolio securities. However, while this could occur for
a very brief period or to a very small degree, over time the value of a
diversified portfolio of equity securities will tend to move in the same
direction as the indices upon which the hedging instruments are based.
If the Fund uses hedging instruments to establish a position in the
debt securities markets as a temporary substitute for the purchase of
individual debt securities (long hedging) by buying Futures and/or calls
on such Futures or on debt securities, it is possible that the market may
decline; if the Fund then concludes not to invest in such securities at
that time because of concerns as to possible further market decline or for
other reasons, the Fund will realize a loss on the hedging instruments
that is not offset by a reduction in the price of the debt securities
purchased.
-- Short Sales "Against-the-Box." In a short sale, the seller does
not own the security that is sold, but normally borrows the security to
fulfill the delivery obligation. The seller later buys the security to
repay the loan, in the expectation that the price of the security will be
lower when the purchase is made, resulting in a gain. In these
transactions, the Fund owns an equivalent amount of the securities sold
short. This technique is primarily used for tax purposes.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in
the Prospectus. There are additional investment restrictions that the
Fund must follow that are also fundamental policies. Fundamental policies
and the Fund's investment objectives cannot be changed without the vote
of a "majority" of the Fund's outstanding voting securities. Under the
Investment Company Act, such a "majority" vote is defined as the vote of
the holders of the lesser of: (1) 67% or more of the shares present or
represented by proxy at a shareholder meeting if the holders of more than
50% of the outstanding shares are present or represented by proxy, or (2)
more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
-- buy or sell real estate; however, the Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies, including real estate investment trusts, which invest in real
estate or interests therein;
-- buy securities on margin, except that the Fund may make margin
deposits in connection with any of the Hedging Instruments which it may
use;
-- underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments, it
may be deemed to be an underwriter for purposes of the Securities Act of
1933;
-- buy and retain securities of any issuer if those officers,
Trustees or Directors of the Fund or the Manager who beneficially own more
than 0.5% of the securities of such issuer together own more than 5% of
the securities of such issuer;
-- invest in oil, gas, or other mineral exploration or development
programs or leases; or
-- buy the securities of any company for the purpose of exercising
management control, except in connection with a merger, consolidation,
reorganization or acquisition of assets.
For purposes of the Fund's policy not to concentrate its assets as
described in the Prospectus, the Fund has adopted the corporate industry
classifications set forth in Appendix A to this Statement of Additional
Information.
In connection with the registration of its shares in certain states,
the Fund has made the following undertakings. These undertakings shall
terminate if the Fund ceases to qualify its shares for sale in that state
or if the state's applicable rules or regulations are amended. The Fund
has undertaken that: (1) it will not invest more than 5% of its total
assets in equity securities of issuers that are not readily marketable,
(2) it will not invest more than 5% of its total assets in securities of
issuers that have operated less than three years (including operations of
predecessors), (3) it will not invest in securities of other investment
companies, except by purchase in the open market where no commission or
profit to a sponsor or dealer results from the purchase other than the
customary broker's commission, (4) it will not invest more than 15% of its
total assets in securities of issuers that have operated less than three
years (including operations of predecessors) and securities which are
restricted as to disposition, including securities eligible for resale
under Rule 144A of the Securities Act of 1933, or (5) it will not invest
in real estate limited partnerships.
How the Fund Is Managed
Organization and History. As a Massachusetts business trust, the Fund is
not required to hold, and does not plan to hold, regular annual meetings
of shareholders. The Fund will hold meetings when required to do so by the
Investment Company Act or other applicable law, or when a shareholder
meeting is called by the Trustees or upon proper request of the
shareholders. Shareholders have the right, upon the declaration in
writing or vote of two-thirds of the outstanding shares of the Fund, to
remove a Trustee. The Trustees will call a meeting of shareholders to
vote on the removal of a Trustee upon the written request of the record
holders of 10% of its outstanding shares. In addition, if the Trustees
receive a request from at least 10 shareholders (who have been
shareholders for at least six months) holding shares of the Fund valued
at $25,000 or more or holding at least 1% of the Fund's outstanding
shares, whichever is less, stating that they wish to communicate with
other shareholders to request a meeting to remove a Trustee, the Trustees
will then either make the Fund's shareholder list available to the
applicants or mail their communication to all other shareholders at the
applicants' expense, or the Trustees may take such other action as set
forth under Section 16(c) of the Investment Company Act.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides
for indemnification and reimbursement of expenses out of its property for
any shareholder held personally liable for its obligations. The
Declaration of Trust also provides that the Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act
or obligation of the Fund and satisfy any judgment thereon. Thus, while
Massachusetts law permits a shareholder of a business trust (such as the
Fund) to be held personally liable as a "partner" under certain
circumstances, the risk of a Fund shareholder incurring financial loss on
account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any
shareholder of the Trust, agrees under the Trust's Declaration of Trust
to look solely to the assets of the Trust for satisfaction of any claim
or demand which may arise out of any dealings with the Trust, and the
Trustees shall have no personal liability to any such person, to the
extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations and occupations
during the past five years are set forth below. Each Trustee is also a
Trustee, Director or Managing General Partner of Daily Cash Accumulation
Fund, Inc., Centennial Money Market Trust, Centennial Tax Exempt Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial California Tax Exempt Trust, Centennial America Fund, L.P.,
Oppenheimer Total Return Fund, Inc., Oppenheimer Equity Income Fund,
Oppenheimer Champion Income Fund, Oppenheimer High Yield Fund, Oppenheimer
Cash Reserves, Oppenheimer Variable Account Funds, Oppenheimer Main Street
Funds, Inc., Oppenheimer Integrity Funds, Oppenheimer Strategic Funds
Trust, Oppenheimer Strategic Income & Growth Fund, Oppenheimer Tax-Exempt
Fund, Oppenheimer Limited-Term Government Fund, and The New York Tax-
Exempt Income Fund, Inc. (all of the foregoing are collectively referred
to as the "Denver-based Oppenheimer funds") except Mr. Fossel, who is a
Trustee, Director or Managing General Partner of all of the Denver-based
Oppenheimer funds except Oppenheimer Integrity Funds and Oppenheimer
Strategic Funds Trust. Messrs. Bishop, Bowen, Donohue, Farrar and Zack
hold similar positions as officers of all such funds. Mr. Fossel is
President and Mr. Swain is Chairman of the Denver-based Oppenheimer funds.
As of November 6, 1995, the Trustees and officers of the Fund as a group
owned less than 1% of each class of shares of the Fund not including
shares held of record by an employee benefit plan of the Manager for which
two officers of the Fund (Jon S. Fossel and Andrew J. Donohue) are
trustees.
Robert G. Avis, Trustee*, Age: 64
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its parent holding company); Chairman of A.G.E. Asset
Management and A.G. Edwards Trust Company (its affiliated investment
adviser and trust company, respectively).
William A. Baker, Trustee; Age: 80
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
Charles Conrad, Jr., Trustee; Age: 65
19411 Merion Circle, Huntington Beach, California 92648
Vice President of McDonnell Douglas Space Systems, Co.; formerly
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, President and Trustee*: Age: 53
Two World Trade Center, New York, New York 10048-0203
Chairman and Director of the Manager; President and a director of
Oppenheimer Acquisition Corp. ("OAC"), the Manager's parent holding
company; President and a director of HarbourView Asset Management
Corporation ("HarbourView"), a subsidiary of the Manager; a director
of Shareholder Services, Inc. ("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent subsidiaries of the Manager;
formerly President and Chief Executive Officer of the Manager.
Raymond J. Kalinowski, Trustee; Age: 66
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.; formerly Vice
Chairman and a director of A.G. Edwards, Inc., parent holding company
of A.G. Edwards & Sons, Inc. (a broker-dealer), of which he was a
Senior Vice President.
C. Howard Kast, Trustee; Age: 73
2552 East Alameda, Denver, Colorado 80209
Formerly the Managing Partner of Deloitte, Haskins & Sells (an
accounting firm).
Robert M. Kirchner, Trustee; Age: 74
7500 East Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Ned M. Steel, Trustee; Age: 80
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; Director of Visiting
Nurse Corporation of Colorado; formerly Senior Vice President and a
Director of Van Gilder Insurance Corp. (insurance brokers).
James C. Swain, Chairman and Trustee*; Age: 61
3410 South Galena Street, Denver, Colorado 80231
Vice Chairman and a director of the Manager; President and a director
of Centennial Asset Management Corporation, an investment adviser
subsidiary of the Manager ("Centennial"); formerly Chairman of the
Board of SSI.
Andrew J. Donohue, Vice President; Age: 45
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of Oppenheimer
Management Corporation (the "Manager") and Oppenheimer Funds
Distributor, Inc. (the "Distributor"); an officer of other
Oppenheimer funds; formerly Senior Vice President and Associate
General Counsel of the Manager and the Distributor, prior to which
he was a Partner in Kraft & McManimon (a law firm); an officer of
First Investors Corporation (a broker-dealer) and First Investors
Management Company, Inc. (broker-dealer and investment adviser) and
a director and an officer of the First Investors Family of Funds and
First Investors Life Insurance Company.
Ashwin Vasan, Vice President and Portfolio Manager; Age: 33
Vice President of the Manager; an officer of other Oppenheimer funds;
formerly a Securities Analyst for the Manager, prior to which he was
a Securities Analyst for Citibank, N.A.
George C. Bowen, Vice President, Secretary and Treasurer; Age: 59
3410 South Galena Street Denver, Colorado 80231
Senior Vice President and Treasurer of the Manager; Vice President
and Treasurer of the Distributor and HarbourView; Senior Vice
President, Treasurer, Assistant Secretary and a director of
Centennial; Vice President, Treasurer and Secretary of SSI and SFSI;
an officer of other Oppenheimer funds.
Robert G. Zack, Assistant Secretary; Age: 47
Two World Trade Center, New York, New York 10048-0203
Senior Vice President and Associate General Counsel of the Manager;
Assistant Secretary of SSI and SFSI; an officer of other Oppenheimer
funds.
Robert J. Bishop, Assistant Treasurer; Age: 37
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting; an
officer of other Oppenheimer funds; formerly a Fund Controller for
the Manager, prior to which he was an Accountant for Yale &
Seffinger, P.C., an accounting firm, and previously an Accountant and
Commissions Supervisor for Stuart James Company Inc., a broker-
dealer.
Scott Farrar, Assistant Treasurer; Age: 30
3410 South Galena Street, Denver, Colorado 80231
Assistant Vice President of the Manager/Mutual Fund Accounting, an
officer of other Oppenheimer funds; previously a Fund Controller for
the Manager, prior to which he was an International Mutual Fund
Supervisor for Brown Brothers Harriman & Co. (a bank) and previously
a Senior Fund Accountant for State Street Bank & Trust Company.
[FN]
- ---------------------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
-- Remuneration of Trustees. The officers of the Fund are affiliated
with the Manager; they and the Trustees of the Fund who are affiliated
with the Manager (Messrs. Fossel and Swain, who are both officers and
Trustees) receive no salary or fee from the Fund. The Trustees of the
Fund (excluding Messrs. Fossel and Swain) received the total amounts shown
below (i) from the Fund during its fiscal period ended September 30, 1995,
and (ii) from all 21 of the Denver-based Oppenheimer funds (other than the
Fund) listed in the first paragraph of this section (and from Oppenheimer
Tax-Exempt Cash Reserves, Oppenheimer Strategic Investment Grade Bond Fund
and Oppenheimer Strategic Short-Term Income Fund, which ceased operations
following the acquisition of their assets by certain other Oppenheimer
funds), for services in the positions shown:
<TABLE>
<CAPTION>
Total
Aggregate Compensation
Compensation From All
From the Denver-based
Name and Position Fund2 OppenheimerFunds1
<S> <C> <C>
Robert G. Avis, Trustee $201 $52,983
William A. Baker, Audit $279 $73,315
Committee, Chairman
and Trustee
Charles Conrad, Jr., Audit$260 $68,296
Committee and Trustee
Raymond J. Kalinowski,
Trustee $201 $52,983
C. Howard Kast, Trustee $201 $52,983
Robert M. Kirchner, Audit$260 $68,296
Committee and Trustee
Ned M. Steel, Trustee $201 $52,983
</TABLE>
________________
1 For the 1995 calendar year.
2 Estimated to be received during the current fiscal year ending December
31, 1995.
-- Major Shareholders. As of November 6, 1995, no person owned of
record or was known by the Fund to own beneficially 5% or more of the
Fund's Class A, Class B or Class C shares except (i) Oppenheimer & Co.,
Inc., FBO 392-12739-12, P.O. Box 3484, Church Street Station, New York,
New York 10008-8484, who owned of record 67,780.000 Class A shares
(approximately 6.63% of the Fund's outstanding Class A shares); (ii)
Sterling Trust Co., TR IRA, FBO Hammond J. Dugent, #26448, P.O. Box 2526,
Waco, Texas 76702-2526, who owned of record 6,150.055 Class C Shares
(approximately 10.58% of the Fund's outstanding Class C Shares); (iii)
RPSS TR IRA, Lloyd E. Reed, 15 Indian Ridge Drive, Trafalgar, Indiana
46181-9570, who owned of record 5,180.636 Class C shares (approximately
8.91% of the Fund's outstanding Class C shares); (iv) NFSC FEBO #AFN-
188883, Claude K. Whatley, Jr., 560 Basin Drive, Kissimmee, Florida 34744,
who owned of record 4,980.080 Class C shares (approximately 8.56% of the
Fund's outstanding Class C shares); (v) Painewebber, FBO Sue Obanion
Stroud, 10517 Pagewood, Dallas, Texas 75230-4255, who owned of record
4,921.260 Class C shares (approximately 8.46% of the Fund's outstanding
Class C shares); (vi) Smith Barney, Inc., 00170964038, 388 Greenwich
Street, New York, New York 10013, who owned of record 3,036.019 Class C
shares (approximately 5.22% of the Fund's outstanding Class C shares); and
(vii) Joanne Mueller, 1211 S. Eads Street, Apt. 606, Arlington, Virginia
22202-2890, who owned of record 2,962.986 Class C shares (approximately
5.09% of the Fund's outstanding Class C shares).
The Manager and Its Affiliates. The Manager is wholly-owned by
Oppenheimer Acquisition Corp. ("OAC"), a holding company controlled by
Massachusetts Mutual Life Insurance Company. OAC is also owned in part
by certain of the Manager's directors and officers, some of whom also
serve as officers of the Fund, and two of whom (Mr. Swain and Mr. Fossel)
serve as Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to
detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage
of the Fund's portfolio transactions. Compliance with the Code of Ethics
is carefully monitored and strictly enforced by the Manager.
-- The Investment Advisory Agreement. The investment advisory
agreement between the Manager and the Fund requires the Manager, at its
expense, to provide the Fund with adequate office space, facilities and
equipment, and to provide and supervise the activities of all
administrative and clerical personnel required to provide effective
corporate administration for the Fund, including the compilation and
maintenance of records with respect to its operations, the preparation and
filing of specified reports, and composition of proxy materials and
registration statements for continuous public sale of shares of the Fund.
Expenses not expressly assumed by the Manager under the advisory
agreement or by the Distributor under the General Distributor's Agreement
are paid by the Fund. The advisory agreement lists examples of expenses
paid by the Fund, the major categories of which relate to interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent and custodian expenses, share issuance costs,
certain printing and registration costs and non-recurring expenses,
including litigation costs. For the Fund's fiscal period ended September
30, 1995, the management fees paid by the Fund to the Manager totalled
$8,252.
The advisory agreement contains no expense limitation. However,
independently of the advisory agreement, the Manager has undertaken that
the total expenses of the Fund in any fiscal year (including the
management fee but excluding taxes, interest, brokerage commissions,
distribution assistance payments and extraordinary expenses such as
litigation costs) shall not exceed the most stringent expense limitation
imposed under state law applicable to the Fund. Pursuant to the
undertaking, the Manager's fee will be reduced at the end of a month so
that there will not be any accrued but unpaid liability under this
undertaking. Currently, the most stringent state expense limitation is
imposed by California, and limits the Fund's expenses (with specified
exclusions) to 2.5% of the first $30 million of average annual net assets,
2% of the next $70 million of average annual net assets, and 1.5% of
average annual net assets in excess of $100 million. Any assumption of
the Fund's expenses under this limitation would lower the Fund's overall
expense ratio and increase its total return during any period in which
expenses are limited. The Manager reserves the right to terminate or
amend the undertaking at any time.
The advisory agreement provides that in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard for its obligations and duties under the
advisory agreement, the Manager is not liable for any loss resulting from
a good faith error or omission on its part with respect to any of its
duties thereunder. The advisory agreement permits the Manager to act as
investment adviser for any other person, firm or corporation and to use
the name "Oppenheimer" in connection with other investment companies for
which it may act as investment adviser or general distributor. If the
Manager shall no longer act as investment adviser to the Fund, the right
of the Fund to use the name "Oppenheimer" as part of its name may be
withdrawn.
-- The Distributor. Under its General Distributor's Agreement with
the Fund, the Distributor acts as the Fund's principal underwriter in the
continuous public offering of the Fund's Class A, Class B and Class C
shares, but is not obligated to sell a specific number of shares.
Expenses normally attributable to sales (excluding payments under the
Distribution and Service Plans but including advertising and the cost of
printing and mailing prospectuses other than those furnished to existing
shareholders), are borne by the Distributor. During the Fund's fiscal
period ended September 30, 1995, the aggregate sales charges on sales of
the Fund's Class A shares were $38,181, of which the Distributor and an
affiliated broker-dealer retained in the aggregate $11,736. During the
Fund's fiscal period ended September 30, 1995, contingent deferred sales
charges collected on the Fund's Class B and Class C shares totalled $140
and $0, respectively, all of which the Distributor retained. For
additional information about distribution of the Fund's shares and the
expenses connected with such activities, please refer to "Distribution and
Service Plans," below.
-- The Transfer Agent. Oppenheimer Shareholder Services, the Fund's
Transfer Agent, is responsible for maintaining the Fund's shareholder
registry and shareholder accounting records, and for shareholder servicing
and administrative functions.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the
duties of the Manager under the advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers ("brokers") to
effect the Fund's portfolio transactions. In doing so, the Manager is
authorized by the advisory agreement to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company
Act, 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 Manager need not seek
competitive commission bidding but is expected to minimize the commissions
paid to the extent consistent with the interest and policies of the Fund
as established by its Board of Trustees. Purchases of 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.
Under the advisory agreement, the Manager is authorized to select
brokers that provide brokerage and/or research services for the Fund
and/or the other accounts over which the Manager or its affiliates have
investment discretion. The commissions paid to such brokers may be higher
than another qualified broker would have charged if a good faith
determination is made by the Manager that the commission is fair and
reasonable in relation to the services provided. Subject to the foregoing
considerations, the Manager may also consider sales of shares of the Fund
and other investment companies managed by the Manager or its affiliates
as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to
the provisions of the advisory agreement, and the procedures and rules
described above, allocations of brokerage are generally made by the
Manager's portfolio traders based upon recommendations from the Manager's
portfolio managers. In certain instances, portfolio managers may directly
place trades and allocate brokerage, also subject to the provisions of the
advisory agreement and the procedures and rules described above. In
either case, brokerage is allocated under the supervision of the Manager's
executive officers. Transactions in securities other than those for which
an exchange is the primary market are generally done with principals or
market makers. Brokerage commissions are paid primarily for effecting
transactions in listed securities or for certain fixed-income agency
transactions in the secondary market and are otherwise paid only if it
appears likely that a better price or execution can be obtained. 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 transaction in the
securities to which the option relates. When possible, concurrent orders
to purchase or sell the same security by more than one of the accounts
managed by the Manager 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.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or
purchasing principal or market maker unless it determines that a better
price or execution can be obtained by using a broker. Purchases of these
securities from underwriters include a commission or concession paid by
the issuer to the underwriter. Purchases from dealers include a spread
between the bid and asked prices. The Fund seeks to obtain prompt
execution of these orders at the most favorable net price. Options
commissions may be relatively higher than those which would apply to
direct purchases and sales of portfolio securities.
The research services provided by a particular broker may be useful
only to one or more of the advisory accounts of the Manager and its
affiliates, and investment research received for the commissions of those
other accounts may be useful both to the Fund and one or more of such
other accounts. Such research, which may be supplied by a third party at
the instance of a broker, includes information and analyses on particular
companies and industries as well as market or economic trends and
portfolio strategy, receipt of market quotations for portfolio
evaluations, information systems, computer hardware and similar products
and services. If a research service also assists the Manager in a non-
research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the
Manager in the investment decision-making process may be paid in
commission dollars. The Board of Trustees has permitted the Manager to
use concessions on fixed-price offerings to obtain research, in the same
manner as is permitted for agency transactions. The Board has also
permitted the Manager to use stated commissions on secondary fixed-income
agency trades to obtain research where the broker has represented to the
Manager that: (i) the trade is not from or for the broker's own inventory,
(ii) the trade was executed by the broker on an agency basis at the stated
commission, and (iii) the trade is not a riskless principal transaction.
The research services provided by brokers broadens the scope and
supplements the research activities of the Manager, by making available
additional views for consideration and comparisons, and by enabling the
Manager to obtain market information for the valuation of securities held
in the Fund's portfolio or being considered for purchase. The Board of
Trustees, including the "independent" Trustees of the Fund (those Trustees
of the Fund who are not "interested persons" as defined in the Investment
Company Act, and who have no direct or indirect financial interest in the
operation of the advisory agreement or the Distribution Plans described
below) annually reviews information furnished by the Manager as to the
commissions paid to brokers furnishing such services so that the Board may
ascertain whether the amount of such commissions was reasonably related
to the value or benefit of such services.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from
time to time the "standardized yield," "dividend yield," "average annual
total return," "cumulative total return," "average annual total return at
net asset value" and "cumulative total return at net asset value" of an
investment in a class of shares of the Fund may be advertised. An
explanation of how these total returns are calculated for each class and
the components of those calculations is set forth below.
The Fund's advertisements of its performance data must, under
applicable rules of the Securities and Exchange Commission, include the
average annual total returns for each class of shares of the Fund for the
1, 5, and 10-year periods (or the life of the class, if less) ending as
of the most recently-ended calendar quarter prior to the publication of
the advertisement. This enables an investor to compare the Fund's
performance to the performance of other funds for the same periods.
However, a number of factors should be considered before using such
information as a basis for comparison with other investments. An
investment in the Fund is not insured; its returns and share prices are
not guaranteed and normally will fluctuate on a daily basis. When
redeemed, an investor's shares may be worth more or less than their
original cost. Returns for any given past period are not a prediction or
representation by the Fund of future returns. The returns of Class A,
Class B and Class C shares of the Fund are affected by portfolio quality,
the type of investments the Fund holds and its operating expenses
allocated to the particular class.
-- Standardized Yields.
-- Yield. The Fund's "yield" (referred to as "standardized yield")
for a given 30-day period for a class of shares is calculated using the
following formula set forth in rules adopted by the Securities and
Exchange Commission that apply to all funds (other than money market
funds) that quote yields:
(a-b) 6
Standardized Yield = 2 ((--- + 1) - 1)
( cd)
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
reimbursements).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive
dividends.
d = the maximum offering price per share of that class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield of a class of shares for a 30-day period may
differ from its yield for any other period. The SEC formula assumes that
the standardized yield for a 30-day period occurs at a constant rate for
a six-month period and is annualized at the end of the six-month period.
This standardized yield is not based on actual distributions paid by the
Fund to shareholders in the 30-day period, but is a hypothetical yield
based upon the net investment income from the Fund's portfolio investments
calculated for that period. The standardized yield may differ from the
"dividend yield" of that class, described below. Additionally, because
each class of shares is subject to different expenses, it is likely that
the standardized yields of the Fund's classes of shares will differ. For
the 30-day period ended September 30, 1995, the standardized yields for
the Fund's Class A, Class B and Class C shares were 9.44%, 9.06% and
9.22%, respectively.
-- Dividend Yield and Distribution Return. From time to time the
Fund may quote a "dividend yield" or a "distribution return" for each
class. Dividend yield is based on the dividends paid on shares of a class
from dividends derived from net investment income during a stated period.
Distribution return includes dividends derived from net investment income
and from realized capital gains declared during a stated period. Under
those calculations, the dividends and/or distributions for that class
declared during a stated period of one year or less (for example, 30 days)
are added together, and the sum is divided by the maximum offering price
per share of that class on the last day of the period. When the result
is annualized for a period of less than one year, the "dividend yield" is
calculated as follows:
Dividend Yield of the Class =
Dividends of the Class
-----------------------------------------------------
Max. Offering Price of the Class (last day of period)
divided by Number of days (accrual period) x 365
The maximum offering price for Class A shares includes the maximum
front-end sales charge. For Class B or Class C shares, the maximum
offering price is the net asset value per share without considering the
effect of contingent deferred sales charges.
From time to time similar yield or distribution return calculations
may also be made using the Class A net asset value (instead of its
respective maximum offering price) at the end of the period. The dividend
yields on Class A shares for the 30-day period ended September 30, 1995
were 9.81% and 10.29% when calculated at maximum offering price and at net
asset value, respectively. The dividend yields on Class B and Class C
shares for the 30-day period ended September 30, 1995 was 9.59% and 9.62%,
respectively, when calculated at net asset value.
-- Total Return Information.
-- Average Annual Total Returns. The "average annual total return"
of each class is an average annual compounded rate of return for each year
in a specified number of years. It is the rate of return based on the
change in value of a hypothetical initial investment of $1,000 ("P" in the
formula below) held for a number of years ("n") to achieve an Ending
Redeemable Value ("ERV") of that investment, according to the following
formula:
1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )
-- Cumulative Total Returns. The cumulative "total return"
calculation measures the change in value of a hypothetical investment of
$1,000 over an entire period of years. Its calculation uses some of the
same factors as average annual total return but it does not average the
rate of return on an annual basis. Cumulative total return is determined
as follows:
ERV - P
------- = Total Return
P
In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown at net asset
value, as described below). For Class B shares, payment of a contingent
deferred sales charge (5.0% for the first year, 4.0% for the second year,
3.0% for the third and fourth years, 2.0% for the fifth year, and 1.0% for
the sixth year, and none thereafter) is applied to the investment result
for the period shown (unless the total return is shown at net asset value,
as described below). For Class C shares, a 1.0% contingent deferred sales
charge is applied to the investment result for the one-year period (or
less). Total returns also assume that all dividends and capital gains
distributions during the period are reinvested to buy additional shares,
at net asset value per share, and that the investment is redeemed at the
end of the period. The average annual total return on an investment in
Class A, Class B and Class C shares of the Fund for the period June 15,
1995 (inception of the Fund) to September 30, 1995 were 0.14%, -0.09% and
3.73%, respectively.
-- Total Returns At Net Asset Value. From time to time the Fund may
also quote an average annual total return at net asset value or a
cumulative total return at net asset value for Class A, Class B or Class
C shares. Each is based on the difference in net asset value per share
at the beginning and the end of the period for a hypothetical investment
in that class of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions. The cumulative total return
at net asset value for the Fund's Class A shares for the period June 15,
1995 (inception of the Fund) to September 30, 1995 was 5.13%. The
cumulative total return at net asset value for the Fund's Class B and
Class C shares for the period June 15, 1995 (inception of the Fund) to
September 30, 1995 were 4.92% and 4.73%, respectively.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical
Services, Inc. ("Lipper"), a widely-recognized independent mutual fund
monitoring service. Lipper monitors the performance of regulated
investment companies, including the Fund, and ranks their performance for
various periods based on categories relating to investment objectives.
The performance of the Fund is ranked against (i) all other funds, (ii)
all other "international bond" funds, and (iii) all other fixed-income
funds, excluding money market funds. The Lipper performance rankings are
based on total returns that include the reinvestment of capital gains
distributions and income dividends but do not take sales charges or taxes
into consideration.
From time to time, the Fund may include in its advertisements and
sales literature performance information about the Fund cited in other
newspapers and periodicals, such as The New York Times, which may include
performance quotations from other sources, including Lipper.
From time to time the Fund may publish the ranking of the performance
of its Class A, Class B or Class C shares by Morningstar, Inc., an
independent mutual fund monitoring service, that ranks mutual funds,
including the Fund, monthly in broad investment categories (equity,
taxable bond, municipal bond and hybrid) based on risk-adjusted investment
return. Investment return measures a fund's three, five and ten-year
average annual total returns (when available) in excess of 90-day U.S.
Treasury bill returns after considering sales charges and expenses. Risk
measures fund performance below 90-day U.S. Treasury bill monthly returns.
Risk and investment return are combined to produce star rankings
reflecting performance relative to the average fund in a fund's category.
Five stars is the "highest" ranking (top 10%), four stars is "above
average" (next 22.5%), three stars is "average" (next 35%), two stars is
"below average" (next 22.5%) and one star is "lowest" (bottom 10%).
Morningstar ranks the Fund in relation to other hybrid funds. Rankings
are subject to change.
The total return on an investment in the Fund's Class A, Class B or
Class C shares may be compared with the performance for the same period
of one or more of the following indices, among others: the Consumer Price
Index, the Salomon Brothers Non-U.S. World Government Bond Index, and the
Standard & Poor's 500 Index. The Consumer Price Index is generally
considered to be a measure of inflation. The Salomon Brothers Non-U.S.
World Government Bond Index generally represents the performance of
government debt securities of various markets throughout the world,
excluding the United States. The Standard & Poor's 500 Index is widely
recognized as a general measure of stock performance. The performance of
each index includes a factor for the reinvestment of income dividends but
does not reflect reinvestment of capital gains, expenses or taxes. The
performance of the Fund's Class A, Class B or Class C shares may also be
compared in publications to (i) the performance of various market indices
or to other investments for which reliable performance data is available,
and (ii) to averages, performance rankings or other benchmarks prepared
by recognized mutual fund statistical services.
Total return information may be useful to investors in reviewing the
performance of the Fund's Class A, Class B or Class C shares. However,
when comparing total return of an investment in Class A, Class B or Class
C shares of the Fund, a number of factors should be considered before
using such information as a basis for comparison with other investments.
For example, investors may also wish to compare the Fund's Class A, Class
B or Class C return to the returns on fixed income investments available
from banks and thrift institutions, such as certificates of deposit,
ordinary interest-paying checking and savings accounts, and other forms
of fixed or variable time deposits, and various other instruments such as
Treasury bills. However, the Fund's returns and share price are not
guaranteed by the FDIC or any other agency and will fluctuate daily, while
bank depository obligations may be insured by the FDIC and may provide
fixed rates of return, and Treasury bills are guaranteed as to principal
and interest by the U.S. government.
From time to time, the Fund's Manager may publish rankings or ratings
of the Manager or Transfer Agent or the investor services provided by them
to shareholders of the OppenheimerFunds, other than performance rankings
of the Oppenheimer funds themselves. Those ratings or rankings of
shareholder/investor services by third parties may compare the Oppenheimer
funds' services to those of other mutual fund families selected by the
rating or ranking services and may be based upon the opinions of the
rating or ranking service itself, based on its research or judgment, or
based upon surveys of investors, brokers, shareholders or others.
Distribution and Service Plans
The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B and Class C shares under Rule
12b-1 of the Investment Company Act pursuant to which the Fund makes
payments to the Distributor in connection with the distribution and/or
servicing of the shares of that class. Each Plan has been approved by a
vote of (i) the Board of Trustees of the Fund, including a majority of the
Independent Trustees, cast in person at a meeting called for the purpose
of voting on that Plan, and (ii) the holders of a "majority" (as defined
in the Investment Company Act) of the shares of each class. For the
Distribution and Service Plans for the Fund's Class B and Class C Plans,
that vote was cast by the Manager as the sole initial shareholder of Class
B and Class C shares of the Fund.
In addition, under the Plans, the Manager and the Distributor, in
their sole discretion, from time to time, may use their own resources
(which, in the case of the Manager, may include profits from the advisory
fee it receives from the Fund), to make payments to brokers, dealers or
other financial institutions (each is referred to as a "Recipient" under
the Plans) for distribution and administrative services they perform. The
Distributor and the Manager may, in their sole discretion, increase or
decrease the amount of payments they make from their own resources to
Recipients.
Unless terminated as described below, each Plan continues in effect
from year to year but only as long as such continuance is specifically
approved at least annually by the Fund's Board of Trustees and its
Independent Trustees by a vote cast in person at a meeting called for the
purpose of voting on such continuance. Any Plan may be terminated at any
time by the vote of a majority of the Independent Trustees or by the vote
of the holders of a "majority" (as defined in the Investment Company Act)
of the outstanding shares of that class. None of the Plans may be amended
to increase materially the amount of payments to be made unless such
amendment is approved by shareholders of the class affected by the
amendment. In addition, because Class B shares automatically convert into
Class A shares after six years, the Fund is required to obtain the
approval of Class B as well as Class A shareholders for a proposed
amendment to the Class A Plan that would materially increase the amount
to be paid by Class A shareholders under the Class A Plan. Such approval
must be by a "majority" of the Class A and Class B shares (as defined in
the Investment Company Act), voting separately by class. All material
amendments must be approved by the Independent Trustees.
While the Plans are in effect, the Treasurer of the Fund shall
provide separate written reports to the Fund's Board of Trustees at least
quarterly on the amount of all payments made pursuant to each Plan, the
purpose for which each payment was made and the identity of each Recipient
that received any such payment. The report for the Class B and Class C
Plan shall also include the distribution costs for that quarter and such
costs for previous fiscal years are carried forward, as explained in the
Prospectus and below. Those reports, including the allocations on which
they are based, will be subject to the review and approval of the
Independent Trustees in the exercise of their fiduciary duty. Each Plan
further provides that while it is in effect, the selection and nomination
of those Trustees of the Fund who are not "interested persons" of the Fund
is committed to the discretion of the Independent Trustees. This does not
prevent the involvement of others in such selection and nomination if the
final decision on any such selection or nomination is approved by a
majority of the Independent Trustees.
Under the Plans, no payment will be made to any Recipient in any
quarter if the aggregate net asset value of all Fund shares held by the
Recipient for itself and its customers did not exceed a minimum amount,
if any, that may be determined from time to time by a majority of the
Fund's Independent Trustees. Initially, the Board of Trustees has set the
fees at the maximum rate and set no minimum amount. For the fiscal period
ended September 30, 1995, payments under the Class A Plan totalled $1,750,
all of which was paid by the Distributor to Recipients, including $32 paid
to an affiliate.
Any unreimbursed expenses incurred by the Distributor with respect
to Class A shares for any fiscal year may not be recovered in subsequent
fiscal years. Payments received by the Distributor under the Plan for
Class A shares will not be used to pay any interest expense, carrying
charges, or other financial costs, or allocation of overhead by the
Distributor.
The Class B and Class C Plans allow the service fee payments to be
paid by the Distributor to Recipients in advance for the first year such
shares are outstanding, and thereafter on a quarterly basis, as described
in the Prospectus. The advance payment is based on the net asset value
of the shares sold. An exchange of shares does not entitle the Recipient
to an advance service fee payment. In the event shares are redeemed during
the first year shares are outstanding, the Recipient will be obligated to
repay a pro rata portion of the advance payment to the Distributor.
Although the Class B and the Class C Plans permit the Distributor to
retain both the asset-based sales charges and the service fee, or to pay
Recipients the service fee on a quarterly basis, without payment in
advance, the Distributor presently intends to pay the service fee to
Recipients in the manner described above. A minimum holding period may
be established from time to time under the Class B Plan and the Class C
Plan by the Board. Initially, the Board has set no minimum holding
period. All payments under the Class B Plan and the Class C Plan are
subject to the limitations imposed by the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. The Distributor
anticipates that it will take a number of years for it to recoup (from the
Fund's payments to the Distributor under the Class B or Class C Plan and
from contingent deferred sales charges collected on redeemed Class B or
Class C shares) the sales commissions paid to authorized brokers or
dealers.
Asset-based sales charge payments are designed to permit an investor
to purchase shares of the Fund without paying a front-end sales load and
at the same time permit the Distributor to compensate Recipients in
connection with the sale of Class B and Class C shares of the Fund. The
Distributor retains the asset-based sales charge on Class B shares. As
to Class C shares, the Distributor retains the asset-based sales charge
during the first year shares are outstanding, and pays the asset-based
sales charge as an ongoing commission to the dealer on Class C shares
outstanding for a year or more. Under the Class B and Class C Plans, the
asset-based sales charge is paid to compensate the Distributor for its
services, described below, to the Fund.
Under the Class B and Class C Plans, the distribution assistance and
administrative support services rendered by the Distributor in connection
with the distribution of Class B and Class C shares may include: (i)
paying service fees and sales commissions to any broker, dealer, bank or
other person or entity that sells and services the Fund's Class B or Class
C shares, (ii) paying compensation to and expenses of personnel of the
Distributor who support distribution of Class B or Class C shares by
Recipients, (iii) obtaining financing or providing such financing from its
own resources, or from an affiliate, for interest and other borrowing
costs of the Distributor's unreimbursed expenses incurred in rendering
distribution assistance for Class B or Class C shares, and (iv) paying
certain other distribution expenses.
About Your Account
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits the individual investor
to choose the method of purchasing shares that is more beneficial to the
investor depending on the amount of the purchase, the length of time the
investor expects to hold shares and other relevant circumstances.
Investors should understand that the purpose and function of the deferred
sales charge and asset-based sales charge with respect to Class B and
Class C shares are the same as those of the initial sales charge with
respect to Class A shares. Any salesperson or other person entitled to
receive compensation for selling Fund shares may receive different
compensation with respect to one class of shares than the other. The
Distributor will not accept any order for $500,000 or $1 million or more
of Class B or Class C shares, respectively, on behalf of a single investor
(not including dealer "street name" or omnibus accounts) because generally
it will be more advantageous for that investor to purchase Class A shares
of the Fund instead.
The three classes of shares each represent an interest in the same
portfolio investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class
B and Class C shares and the dividends payable on Class B and Class C
shares will be reduced by incremental expenses borne solely by that class,
including the asset-based sales charge to which Class B and Class C shares
are subject.
The conversion of Class B shares to Class A shares after six years
is subject to the continuing availability of a private letter ruling from
the Internal Revenue Service, or an opinion of counsel or tax adviser, to
the effect that the conversion of Class B shares does not constitute a
taxable event for the holder under Federal income tax law. If such a
revenue ruling or opinion is no longer available, the automatic conversion
feature may be suspended, in which event no further conversions of Class
B shares would occur while such suspension remained in effect. Although
Class B shares could then be exchanged for Class A shares on the basis of
relative net asset value of the two classes, without the imposition of a
sales charge or fee, such exchange could constitute a taxable event for
the holder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes
two types of expenses. General expenses that do not pertain specifically
to a class are allocated pro rata to the shares of each class, based on
the percentage of the net assets of such class to the Fund's total assets,
and then equally to each outstanding share within a given class. Such
general expenses include (i) management fees, (ii) legal, bookkeeping and
audit fees, (iii) printing and mailing costs of shareholder reports,
Prospectuses, Statements of Additional Information and other materials for
current shareholders, (iv) fees to Independent Trustees, (v) custodian
expenses, (vi) share issuance costs, (vii) organization and start-up
costs, (viii) interest, taxes and brokerage commissions, and (ix) non-
recurring expenses, such as litigation costs. Other expenses that are
directly attributable to a class are allocated equally to each outstanding
share within that class. Such expenses include (a) Distribution and
Service Plan fees, (b) incremental transfer and shareholder servicing
agent fees and expenses, (c) registration fees and (d) shareholder meeting
expenses, to the extent that such expenses pertain to a specific class
rather than to the Fund as a whole.
Determination of Net Asset Value Per Share. The net asset values per
share of Class A, Class B and Class C shares of the Fund are determined
as of the close of business of The New York Stock Exchange (the
"Exchange") on each day that the Exchange is open, by dividing the Fund's
net assets attributable to a class by the number of shares of that class
that are outstanding. The Exchange normally closes at 4:00 P.M., New York
time, but may close earlier on some days (for example, in case of weather
emergencies or on days falling before a holiday). The Exchange's most
recent annual holiday schedule (which is subject to change) states that
it will close on New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It
may also close on other days. The Fund may invest a substantial portion
of its assets in foreign securities primarily listed on foreign exchanges
or in foreign over-the-counter markets that may trade on Saturdays or
customary U.S. business holidays on which the Exchange is closed. Because
the Fund's net asset values will not be calculated on those days, the
Fund's net asset values per share of Class A, Class B and Class C shares
may be significantly affected on such days when shareholders may not
purchase or redeem shares.
The Fund's Board of Trustees has established procedures for the
valuation of the Fund's securities, generally as follows: (i) equity
securities traded on a U.S. securities exchange or on NASDAQ for which
last sale information is regularly reported are valued at the last
reported sale price on their primary exchange or NASDAQ that day (or, in
the absence of sales that day, at values based on the last sales prices
of the preceding trading day, or closing bid and asked prices); (ii)
securities actively traded on a foreign securities exchange are valued at
the last sales price available to the pricing service approved by the
Fund's Board of Trustees or to the Manager as reported by the principal
exchange on which the security is traded; (iii) unlisted foreign
securities or listed foreign securities not actively traded are valued as
in (i) above, if available, or at the mean between "bid" and "asked"
prices obtained from active market makers in the security on the basis of
reasonable inquiry; (iv) long-term debt securities having a remaining
maturity in excess of 60 days are valued at the mean between the "bid" and
"asked" prices determined by a portfolio pricing service approved by the
Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (v) debt instruments having
a maturity of more than one year when issued, and non-money market type
instruments having a maturity of one year or less when issued, which have
a remaining maturity of 60 days or less are valued at the mean between the
"bid" and "asked" prices determined by a pricing service approved by the
Fund's Board of Trustees or obtained from active market makers in the
security on the basis of reasonable inquiry; (vi) money market-type debt
securities having a maturity of less than one year when issued that having
a remaining maturity of 60 days or less are valued at cost, adjusted for
amortization of premiums and accretion of discounts; (vii) securities
(including restricted securities) not having readily-available market
quotations are valued at fair value under the Board's procedures; and
(viii) securities traded on foreign exchanges are valued at the closing
or last sales prices reported on a principal exchange, or, if none, at the
mean between closing bid and asked prices and reflect prevailing rates of
exchange taken from the closing price on the London foreign exchange
market that day.
Trading in securities on European and Asian exchanges and over-the-
counter markets is normally completed before the close of The New York
Stock Exchange. Events affecting the values of foreign securities traded
in stock markets that occur between the time their prices are determined
and the close of the Exchange will not be reflected in the Fund's
calculation of net asset value unless the Board of Trustees or the
Manager, under procedures established by the Board of Trustees, determines
that the particular event would materially affect the Fund's net asset
value, in which case an adjustment would be made. Foreign currency,
including forward contracts, will be valued at the closing price in the
London foreign exchange market that day as provided by a reliable bank,
dealer or pricing service. The values of securities denominated in
foreign currency will be converted to U.S. dollars at the closing price
in the London foreign exchange market that day as provided by a reliable
bank, dealer or pricing service.
Puts, calls and Futures held by the Fund are valued at the last sales
price on the principal exchange on which they are traded, or on NASDAQ as
applicable, or, if there are no sales that day, in accordance with (i),
above. Forward currency contracts are valued at the closing price in the
London foreign exchange market. When the Fund writes an option, an amount
equal to the premium received by the Fund is included in the Fund's
Statement of Assets and Liabilities as an asset, and an equivalent
deferred credit is included in the liability section. The deferred credit
is marked-to-market to reflect the current market value of the option.
In determining the Fund's gain on investments, if a call written by the
Fund is exercised, the proceeds are increased by the premium received.
If a call or put written by the Fund expires, the Fund has a gain in the
amount of the premium; if the Fund enters into a closing purchase
transaction, it will have a gain or loss depending on whether the premium
was more or less than the cost of the closing transaction. If the Fund
exercises a put it holds, the amount the Fund receives on its sale of the
underlying investment is reduced by the amount of the premium paid by the
Fund.
AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $25.00. Shares will be purchased on the regular business
day the Distributor is instructed to initiate the Automated Clearing House
("ACH") transfer to buy shares. Dividends will begin to accrue on shares
purchased by the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange. The Exchange normally closes at
4:00 P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the
Fund 3 days after the transfers are initiated. The Distributor and the
Fund are not responsible for any delays in purchasing shares resulting
from delays in ACH transmissions.
Reduced Sales Charges. As discussed in the Prospectus, a reduced sales
charge rate may be obtained for Class A shares under Right of Accumulation
and Letters of Intent because of the economies of sales efforts and
reduction in expenses realized by the Distributor, dealers and brokers
making such sales. No sales charge is imposed in certain other
circumstances described in the Prospectus because the Distributor incurs
little or no selling expenses. The term "immediate family" refers to
one's spouse, children, grandchildren, grandparents, parents, parents-in-
law, sons- and daughters-in-law, siblings, a sibling's spouse and a
spouse's siblings.
-- The Oppenheimer Funds. The Oppenheimer funds are those mutual
funds for which the Distributor acts as the distributor or the sub-
distributor and include the following:
Oppenheimer Tax-Free Bond Fund
Oppenheimer New York Tax-Exempt Fund
Oppenheimer California Tax-Exempt Fund
Oppenheimer Intermediate Tax-Exempt Fund
Oppenheimer Insured Tax-Exempt Fund
Oppenheimer Main Street California Tax-Exempt Fund
Oppenheimer Florida Tax-Exempt Fund
Oppenheimer Pennsylvania Tax-Exempt Fund
Oppenheimer New Jersey Tax-Exempt Fund
Oppenheimer Fund
Oppenheimer Discovery Fund
Oppenheimer Target Fund
Oppenheimer Growth Fund
Oppenheimer Equity Income Fund
Oppenheimer Value Stock Fund
Oppenheimer Asset Allocation Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Main Street Income & Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Champion Income Fund
Oppenheimer Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Limited-Term Government Fund
Oppenheimer Global Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer International Bond Fund
Oppenheimer Strategic Income Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
and the following "Money Market Funds":
Oppenheimer Money Market Fund, Inc.
Oppenheimer Cash Reserves
Centennial Money Market Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial America Fund, L.P.
Daily Cash Accumulation Fund, Inc.
There is an initial sales charge on the purchase of Class A shares
of each of the Oppenheimer funds except Money Market Funds (under certain
circumstances described herein, redemption proceeds of Money Market Fund
shares may be subject to a contingent deferred sales charge).
-- Letters of Intent. A Letter of Intent ("Letter") is the
investor's statement of intention to purchase Class A and Class B shares
(or shares of either class) of the Fund (and other eligible Oppenheimer
funds) sold with a front-end sales charge during the 13-month period from
the investor's first purchase pursuant to the Letter (the "Letter of
Intent period"), which may, at the investor's request, include purchases
made up to 90 days prior to the date of the Letter. The Letter states the
investor's intention to make the aggregate amount of purchases (excluding
any purchases made by reinvestment of dividends or distributions or
purchases made at net asset value without sales charge), which together
with the investor's holdings of such funds (calculated at their respective
public offering prices calculated on the date of the Letter) will equal
or exceed the amount specified in the Letter. This enables the investor
to count the shares to be purchased under the Letter of Intent to obtain
the reduced sales charge rate (as set forth in the Prospectus) that
applies under the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter will be made at
the public offering price (including the sales charge) that applies to a
single lump-sum purchase of shares in the amount intended to be purchased
under the Letter.
In submitting a Letter, the investor makes no commitment to purchase
shares, but if the investor's purchases of shares within the Letter of
Intent period, when added to the value (at offering price) of the
investor's holdings of shares on the last day of that period, do not equal
or exceed the intended purchase amount, the investor agrees to pay the
additional amount of sales charge applicable to such purchases, as set
forth in "Terms of Escrow," below (as those terms may be amended from time
to time). The investor agrees that shares equal in value to 5% of the
intended purchase amount will be held in escrow by the Transfer Agent
subject to the Terms of Escrow. Also, the investor agrees to be bound by
the terms of the Prospectus, this Statement of Additional Information and
the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those
amendments will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer funds by
OppenheimerFunds prototype 401(k) plans under a Letter of Intent, the
Transfer Agent will not hold shares in escrow. If the intended purchase
amount under the Letter entered into by an OppenheimerFunds prototype
401(k) plan is not purchased by the plan by the end of the Letter of
Intent period, there will be no adjustment of commissions paid to the
broker-dealer or financial institution of record for accounts held in the
name of that plan.
If the total eligible purchases made during the Letter of Intent
period do not equal or exceed the intended purchase amount, the
commissions previously paid to the dealer of record for the account and
the amount of sales charge retained by the Distributor will be adjusted
to the rates applicable to actual purchases. If total eligible purchases
during the Letter of Intent period exceed the intended purchase amount and
exceed the amount needed to qualify for the next sales charge rate
reduction set forth in the applicable prospectus, the sales charges paid
will be adjusted to the lower rate, but only if and when the dealer
returns to the Distributor the excess of the amount of commissions allowed
or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the
Distributor will be used to purchase additional shares for the investor's
account at the net asset value per share in effect on the date of such
purchase, promptly after the Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter of
Intent period will be deducted. It is the responsibility of the dealer
of record and/or the investor to advise the Distributor about the Letter
in placing any purchase orders for the investor during the Letter of
Intent period. All of such purchases must be made through the
Distributor.
-- Terms of Escrow That Apply to Letters of Intent.
1. Out of the initial purchase (or subsequent purchases if
necessary) made pursuant to a Letter, shares of the Fund equal in value
to 5% of the intended purchase amount specified in the Letter shall be
held in escrow by the Transfer Agent. For example, if the intended
purchase amount is $50,000, the escrow shall be shares valued in the
amount of $2,500 (computed at the public offering price adjusted for a
$50,000 purchase). Any dividends and capital gains distributions on the
escrowed shares will be credited to the investor's account.
2. If the intended purchase amount specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the thirteen-month Letter of Intent period the
total purchases pursuant to the Letter are less than the intended purchase
amount specified in the Letter, the investor must remit to the Distributor
an amount equal to the difference between the dollar amount of sales
charges actually paid and the amount of sales charges which would have
been paid if the total amount purchased had been made at a single time.
Such sales charge adjustment will apply to any shares redeemed prior to
the completion of the Letter. If such difference in sales charges is not
paid within twenty days after a request from the Distributor or the
dealer, the Distributor will, within sixty days of the expiration of the
Letter, redeem the number of escrowed shares necessary to realize such
difference in sales charges. Full and fractional shares remaining after
such redemption will be released from escrow. If a request is received
to redeem escrowed shares prior to the payment of such additional sales
charge, the sales charge will be withheld from the redemption proceeds.
4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for
redemption any or all escrowed shares.
5. The shares eligible for purchase under the Letter (or the holding
of which may be counted toward completion of a Letter) include (a) Class
A shares sold with a front-end sales charge or subject to a Class A
contingent deferred sales charge, (b) Class B shares acquired subject to
a contingent deferred sales charge, and (c) Class A shares or Class B
shares acquired in exchange for either (i) Class A shares of one of the
other Oppenheimer funds that were acquired subject to a Class A initial
or contingent deferred sales charge or (ii) Class B shares of one of the
other Oppenheimer funds that were acquired subject to a contingent
deferred sales charge.
6. Shares held in escrow hereunder will automatically be exchanged
for shares of another fund to which an exchange is requested, as described
in the section of the Prospectus entitled "How to Exchange Shares," and
the escrow will be transferred to that other fund.
Asset Builder Plans. To establish an Asset Builder Plan from a bank
account, a check (minimum $25) for the initial purchase must accompany the
application. Shares purchased by Asset Builder Plan payments from bank
accounts are subject to the redemption restrictions for recent purchases
described in "How To Sell Shares," in the Prospectus. Asset Builder Plans
also enable shareholders of Oppenheimer Cash Reserves to use those
accounts for monthly automatic purchases of shares of up to four other
Oppenheimer funds.
There is a front-end sales charge on the purchase of certain
Oppenheimer funds, or a contingent deferred sales charge may apply to
shares purchased by Asset Builder payments. An application should be
obtained from the Distributor, completed and returned, and a prospectus
of the selected fund(s) should be obtained from the Distributor or your
financial advisor before initiating Asset Builder payments. The amount
of the Asset Builder investment may be changed or the automatic
investments may be terminated at any time by writing to the Transfer
Agent. A reasonable period (approximately 15 days) is required after the
Transfer Agent's receipt of such instructions to implement them. The Fund
reserves the right to amend, suspend, or discontinue offering such plans
at any time without prior notice.
Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset value of the
Fund's shares on the cancellation date is less than on the purchase date.
That loss is equal to the amount of the decline in the net asset value per
share multiplied by the number of shares in the purchase order. The
investor is responsible for that loss. If the investor fails to
compensate the Fund for the loss, the Distributor will do so. The Fund
may reimburse the Distributor for that amount by redeeming shares from any
account registered in that investor's name, or the Fund or the Distributor
may seek other redress.
How To Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below supplements the terms and conditions for
redemptions set forth in the Prospectus.
-- Involuntary Redemptions. The Fund's Board of Trustees has the
right to cause the involuntary redemption of the shares held in any
account if the aggregate net asset value of those shares is less than $200
or such lesser amount as the Board may fix. The Board of Trustees will
not cause the involuntary redemption of shares in an account if the
aggregate net asset value of the shares has fallen below the stated
minimum solely as a result of market fluctuations. Should the Board elect
to exercise this right, it may also fix, in accordance with the Investment
Company Act, the requirements for any notice to be given to the
shareholders in question (not less than 30 days), or the Board may set
requirements for granting permission to the shareholder to increase the
investment, and set other terms and conditions so that the shares would
not be involuntarily redeemed.
-- Payments "In Kind". The Prospectus states that payment for shares
tendered for redemption is ordinarily made in cash. However, the Board
of Trustees of the Fund may determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment
of a redemption order wholly or partly in cash. In that case the Fund may
pay the redemption proceeds in whole or in part by a distribution "in
kind" of securities from the portfolio of the Fund, in lieu of cash, in
conformity with applicable rules of the Securities and Exchange
Commission. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act, pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets
of the Fund during any 90-day period for any one shareholder. If shares
are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing
securities used to make redemptions in kind will be the same as the method
the Fund uses to value its portfolio securities described above under
"Determination of Net Asset Values Per Share" and that valuation will be
made as of the time the redemption price is determined.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of (i) Class A shares,
or (ii) Class B shares that were subject to the Class B contingent
deferred sales charge when redeemed. This privilege does not apply to
Class C shares. The reinvestment may be made without sales charge only
in Class A shares of the Fund or any of the other OppenheimerFunds into
which shares of the Fund are exchangeable as described below, at the net
asset value next computed after the Transfer Agent receives the
reinvestment order. The shareholder must ask the Distributor for that
privilege at the time of reinvestment. Any capital gain that was realized
when the shares were redeemed is taxable, and reinvestment will not alter
any capital gains tax payable on that gain. If there has been a capital
loss on the redemption, some or all of the loss may not be tax deductible,
depending on the timing and amount of the reinvestment. Under the
Internal Revenue Code, if the redemption proceeds of Fund shares on which
a sales charge was paid are reinvested in shares of the Fund or another
of the Oppenheimer funds within 90 days of payment of the sales charge,
the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge paid. That would reduce the
loss or increase the gain recognized from the redemption. However, in
that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may
amend, suspend or cease offering this reinvestment privilege at any time
as to shares redeemed after the date of such amendment, suspension or
cessation.
Transfers of Shares. Shares are not subject to the payment of a
contingent deferred sales charge of any class at the time of transfer to
the name of another person or entity (whether the transfer occurs by
absolute assignment, gift or bequest, not involving, directly or
indirectly, a public sale). The transferred shares will remain subject
to the contingent deferred sales charge, calculated as if the transferee
shareholder had acquired the transferred shares in the same manner and at
the same time as the transferring shareholder. If less than all shares
held in an account are transferred, and some but not all shares in the
account would be subject to a contingent deferred sales charge if redeemed
at the time of transfer, the priorities described in the Prospectus under
"How to Buy Shares" for the imposition of the Class B and Class C
contingent deferred sales charge will be followed in determining the order
in which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans,
or pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address
listed in "How To Sell Shares" in the Prospectus or on the back cover of
this Statement of Additional Information. The request must: (i) state the
reason for the distribution; (ii) state the owner's awareness of tax
penalties if the distribution is premature; and (iii) conform to the
requirements of the plan and the Fund's other redemption requirements.
Participants other than self-employed persons maintaining a plan account
in their own name in OppenheimerFunds-sponsored prototype pension or
profit-sharing or 401(k) plans may not directly redeem or exchange shares
held for their account under those plans. The employer or plan
administrator must sign the request. Distributions from pension and
profit sharing plans are subject to special requirements under the
Internal Revenue Code and certain documents (available from the Transfer
Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding
requirements under the Internal Revenue Code, and IRS Form W-4P (available
from the Transfer Agent) must be submitted to the Transfer Agent with the
distribution request, or the distribution may be delayed. Unless the
shareholder has provided the Transfer Agent with a certified tax
identification number, the Internal Revenue Code requires that tax be
withheld from any distribution even if the shareholder elects not to have
tax withheld. The Fund, the Manager, the Distributor, the Trustee and the
Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not
be responsible for any tax penalties assessed in connection with a
distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers.
The Distributor is the Fund's agent to repurchase its shares from
authorized dealers or brokers. The repurchase price per share will be the
net asset value next computed after the Distributor receives the order
placed by the dealer or broker, except that if the Distributor receives
a repurchase order from a dealer or broker after the close of The New York
Stock Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker
from its customers prior to the time the Exchange closes (normally, that
is 4:00 P.M., but may be earlier on some days) and the order was
transmitted to and received by the Distributor prior to its close of
business that day (normally 5:00 P.M.). Ordinarily, for accounts redeemed
by a broker-dealer under this procedure, payment will be made within three
days after the shares have been redeemed upon the Distributor's receipt
of the required redemption documents in proper form, with the signature(s)
of the registered owners guaranteed on the redemption document as
described in the Prospectus.
Automatic Withdrawal and Exchange Plans. Investors owning shares of the
Fund valued at $5,000 or more can authorize the Transfer Agent to redeem
shares (minimum $50) automatically on a monthly, quarterly, semi-annual
or annual basis under an Automatic Withdrawal Plan. Shares will be
redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to
$1,500 per month may be requested by telephone if payments are to be made
by check payable to all shareholders of record and sent to the address of
record for the account (and if the address has not been changed within the
prior 30 days). Required minimum distributions from OppenheimerFunds-
sponsored retirement plans may not be arranged on this basis. Payments
are normally made by check, but shareholders having AccountLink privileges
(see "How To Buy Shares") may arrange to have Automatic Withdrawal Plan
payments transferred to the bank account designated on the
OppenheimerFunds New Account Application or signature-guaranteed
instructions. The Fund cannot guarantee receipt of a payment on the date
requested and reserves the right to amend, suspend or discontinue offering
such plans at any time without prior notice. Because of the sales charge
assessed on Class A share purchases, shareholders should not make regular
additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans, because of the imposition of the contingent deferred
sales charges on such withdrawals (except where the Class B and Class C
contingent deferred sales charges are waived as described in the
Prospectus under "Waivers of Class B and Class C Sales Charges".
By requesting an Automatic Withdrawal or Exchange Plan, the
shareholder agrees to the terms and conditions applicable to such plans,
as stated below and in the provisions of the OppenheimerFunds Application
relating to such Plans, as well as in the Prospectus. These provisions
may be amended from time to time by the Fund and/or the Distributor. When
adopted, such amendments will automatically apply to existing Plans.
-- Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent (on the OppenheimerFunds Application or signature-guaranteed
instructions) to exchange a pre-determined amount of shares of the Fund
for shares (of the same class) of other Oppenheimer funds automatically
on a monthly, quarterly, semi-annual or annual basis under an Automatic
Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $25. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange
Shares" in the Prospectus and below in this Statement of Additional
Information.
-- Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales
charge will be redeemed first and shares acquired with reinvested
dividends and capital gains distributions will be redeemed next, followed
by shares acquired with a sales charge, to the extent necessary to make
withdrawal payments. Depending upon the amount withdrawn, the investor's
principal may be depleted. Payments made under withdrawal plans should
not be considered as a yield or income on your investment. It may not be
desirable to purchase additional Class A shares while making automatic
withdrawals because of the sales charges that apply to purchases when
made. Accordingly, a shareholder normally may not maintain an Automatic
Withdrawal Plan while simultaneously making regular purchases of Class A
shares.
The Transfer Agent will administer the investor's Automatic
Withdrawal Plan (the "Plan") as agent for the investor (the "Planholder")
who executed the Plan authorization and application submitted to the
Transfer Agent. The Transfer Agent shall incur no liability to the
Planholder for any action taken or omitted by the Transfer Agent in good
faith to administer the Plan. Certificates will not be issued for shares
of the Fund purchased for and held under the Plan, but the Transfer Agent
will credit all such shares to the account of the Planholder on the
records of the Fund. Any share certificates held by a Planholder may be
surrendered unendorsed to the Transfer Agent with the Plan application so
that the shares represented by the certificate may be held under the Plan.
For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done
at net asset value without a sales charge. Dividends on shares held in
the account may be paid in cash or reinvested.
Redemptions of shares needed to make withdrawal payments will be made
at the net asset value per share determined on the redemption date.
Checks or ACH transfer payments of the proceeds of Plan withdrawals will
normally be transmitted three business days prior to the date selected for
receipt of the payment (receipt of payment on the date selected cannot be
guaranteed), according to the choice specified in writing by the
Planholder.
The amount and the interval of disbursement payments and the address
to which checks are to be mailed or AccountLink payments are to be sent
may be changed at any time by the Planholder by writing to the Transfer
Agent. The Planholder should allow at least two weeks' time in mailing
such notification for the requested change to be put in effect. The
Planholder may, at any time, instruct the Transfer Agent by written notice
(in proper form in accordance with the requirements of the then-current
Prospectus of the Fund) to redeem all, or any part of, the shares held
under the Plan. In that case, the Transfer Agent will redeem the number
of shares requested at the net asset value per share in effect in
accordance with the Fund's usual redemption procedures and will mail a
check for the proceeds to the Planholder.
The Plan may be terminated at any time by the Planholder by writing
to the Transfer Agent. A Plan may also be terminated at any time by the
Transfer Agent upon receiving directions to that effect from the Fund.
The Transfer Agent will also terminate a Plan upon receipt of evidence
satisfactory to it of the death or legal incapacity of the Planholder.
Upon termination of a Plan by the Transfer Agent or the Fund, shares that
have not been redeemed from the account will be held in uncertificated
form in the name of the Planholder, and the account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder or his or her executor or
guardian, or other authorized person.
To use shares held under the Plan as collateral for a debt, the
Planholder may request issuance of a portion of the shares in certificated
form. Upon written request from the Planholder, the Transfer Agent will
determine the number of shares for which a certificate may be issued
without causing the withdrawal checks to stop because of exhaustion of
uncertificated shares needed to continue payments. However, should such
uncertificated shares become exhausted, Plan withdrawals will terminate.
If the Transfer Agent ceases to act as transfer agent for the Fund,
the Planholder will be deemed to have appointed any successor transfer
agent to act as agent in administering the Plan.
How To Exchange Shares
As stated in the Prospectus, shares of a particular class of
Oppenheimer funds having more than one class of shares may be exchanged
only for shares of the same class of other Oppenheimer funds. Shares of
the Oppenheimer funds that have a single class without a class designation
are deemed "Class A" shares for this purpose. All Oppenheimer funds offer
Class A Class B and Class C shares except Oppenheimer Money Market Fund,
Inc., Centennial Money Market Trust, Centennial Tax Exempt Trust,
Centennial Government Trust, Centennial New York Tax Exempt Trust,
Centennial California Tax Exempt Trust, Centennial America Fund, L.P., and
Daily Cash Accumulation Fund, Inc., which only offer Class A shares and
Oppenheimer Main Street California Tax-Exempt Fund, which only offers
Class A and Class B shares (Class B and Class C shares of Oppenheimer Cash
reserves are generally available only by exchange from the same class of
shares of other Oppenheimer funds or through OppenheimerFunds sponsored
401(k) plans). A list showing which funds offer which classes can be
obtained by calling the Distributor at 1-800-525-7048.
Class A shares of Oppenheimer funds may be exchanged at net asset
value for shares of any Money Market Fund. Shares of any Money Market
Fund purchased without a sales charge may be exchanged for shares of
Oppenheimer funds offered with a sales charge upon payment of the sales
charge (or, if applicable, may be used to purchase shares of
OppenheimerFunds subject to a contingent deferred sales charge). However,
shares of Oppenheimer Money Market Fund, Inc., purchased with the
redemption proceeds of shares of other mutual funds (other than funds
managed by the Manager or its subsidiaries) redeemed within the 12 months
prior to that purchase may subsequently be exchanged for shares of other
Oppenheimer funds without being subject to an initial or contingent
deferred sales charge, whichever is applicable. To qualify for that
privilege, the investor or the investor's dealer must notify the
Distributor of eligibility for this privilege at the time the shares of
Oppenheimer Money Market Fund, Inc. are purchased, and if requested, must
supply proof of entitlement to this privilege. Shares of this Fund
acquired by reinvestment of dividends or distributions from any other of
the Oppenheimer funds or from any unit investment trust for which
reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
No contingent deferred sales charge is imposed on exchanges of shares
of any class purchased subject to a contingent deferred sales charge.
However, when Class A shares acquired by exchange of Class A shares of
other Oppenheimer funds purchased subject to a Class A contingent deferred
sales charge are redeemed within 18 months of the end of the calendar
month of the initial purchase of the exchanged Class A shares, the Class
A contingent deferred sales charge is imposed on the redeemed shares. The
Class B contingent deferred sales charge is imposed on Class B shares
acquired by exchange if they are redeemed within 6 years of the initial
purchase of the exchanged Class B shares. The Class C contingent deferred
sales charge is imposed on Class C shares acquired by exchange if they are
redeemed within 12 months of the initial purchase of the exchanged Class
C shares.
When Class B or Class C shares are redeemed to effect an exchange,
the priorities described in "How To Buy Shares" in the Prospectus for the
imposition of the Class B and Class C contingent deferred sales charges
will be followed in determining the order in which the shares are
exchanged. Shareholders should take into account the effect of any
exchange on the applicability and rate of any contingent deferred sales
charge that might be imposed in the subsequent redemption of remaining
shares. Shareholders owning shares of more than one class must specify
whether they intend to exchange Class A, Class B or Class C shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 10 or more accounts. The
Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege. In
connection with any exchange request, the number of shares exchanged may
be less than the number requested if the exchange or the number requested
would include shares subject to a restriction cited in the Prospectus or
this Statement of Additional Information or would include shares covered
by a share certificate that is not tendered with the request. In those
cases, only the shares available for exchange without restriction will be
exchanged.
When exchanging shares by telephone, a shareholder must either have
an existing account in, or obtain and acknowledge receipt of a prospectus
of, the fund to which the exchange is to be made. For full or partial
exchanges of an account made by telephone, any special account features
such as Asset Builder Plans, Automatic Withdrawal Plans and retirement
plan contributions will be switched to the new account unless the Transfer
Agent is instructed otherwise. If all telephone lines are busy (which
might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.
Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are
purchased on the Redemption Date, but such purchases may be delayed by
either fund up to five business days if it determines that it would be
disadvantaged by an immediate transfer of the redemption proceeds. The
Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it (for example, if the receipt of multiple exchange
requests from a dealer might require the disposition of portfolio
securities at a time or at a price that might be disadvantageous to the
Fund).
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks, and a shareholder should assure
that the Fund selected is appropriate for his or her investment and should
be aware of the tax consequences of an exchange. For federal income tax
purposes, an exchange transaction is treated as a redemption of shares of
one fund and a purchase of shares of another. "Reinvestment Privilege,"
above, discusses some of the tax consequences of reinvestment of
redemption proceeds in such cases. The Fund, the Distributor, and the
Transfer Agent are unable to provide investment, tax or legal advice to
a shareholder in connection with an exchange request or any other
investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value.
Daily dividends on newly purchased shares will not be declared or paid
until such time as Federal Funds (funds credited to a member bank's
account at the Federal Reserve Bank) are available from the purchase
payment for such shares. Normally, purchase checks received from
investors are converted to Federal Funds on the next business day.
Dividends will be declared on shares repurchased by a dealer or broker for
four business days following the trade date (i.e., to and including the
day prior to settlement of the repurchase). If all shares in an account
are redeemed, all dividends accrued on shares of the same class in the
account will be paid together with the redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund
shares represented by checks returned to the Transfer Agent by the Postal
Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc., as promptly as possible after the return of such checks
to the Transfer Agent, to enable the investor to earn a return on
otherwise idle funds.
The amount of a class's distributions may vary from time to time
depending on market conditions, the composition of the Fund's portfolio,
and expenses borne by the Fund or borne separately by a class, as
described in "Alternative Sales Arrangements -- Class A, Class B and
Class C Shares," above. Dividends are calculated in the same manner, at
the same time and on the same day for shares of each class. However,
dividends on Class B and Class C shares are expected to be lower than
dividends on Class A shares as a result of the asset-based sales charges
on Class B and Class C shares, and Class B and Class C dividends will also
differ in amount as a consequence of any difference in net asset value
between the classes.
Tax Status of the Fund's Dividends and Distributions. The Federal tax
treatment of the Fund's dividends and capital gains distributions is
explained in the Prospectus under the caption "Dividends, Capital Gains
and Taxes." Special provisions of the Internal Revenue Code govern the
eligibility of the Fund's dividends for the dividends-received deduction
for corporate shareholders. Long-term capital gains distributions are not
eligible for the deduction. In addition, the amount of dividends paid by
the Fund which may qualify for the deduction is limited to the aggregate
amount of qualifying dividends that the Fund derives from its portfolio
investments that the Fund has held for a minimum period, usually 46 days.
A corporate shareholder will not be eligible for the deduction on
dividends paid on Fund shares held for 45 days or less. To the extent the
Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for
the deduction.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on
amounts paid by it as dividends and distributions. The Fund qualified
during its last fiscal period, and intends to qualify in current and
future years, but reserves the right not to qualify. The Internal Revenue
Code contains a number of complex tests to determine whether the Fund will
qualify, and the Fund might not meet those tests in a particular year.
For example, if the Fund derives 30% or more of its gross income from the
sale of securities held less than three months, it may fail to qualify
(see "Tax Aspects of Covered Calls and Hedging Instruments," above). If
it does not qualify, the Fund will be treated for tax purposes as an
ordinary corporation and will receive no tax deduction for payments of
dividends and distributions made to shareholders.
Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute 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 the
current year, or else the Fund must pay an excise tax on the amounts not
distributed. While it is presently anticipated that the Fund will meet
those requirements, the Fund's Board of Trustees and the Manager might
determine in a particular year that it would be in the best interest of
shareholders for the Fund not to make such distributions at the required
levels and to pay the excise tax on the undistributed amounts. That would
reduce the amount of income or capital gains available for distribution
to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect
to reinvest all dividends and/or capital gains distributions in shares of
the same class of any of the other Oppenheimer funds listed in "Reduced
Sales Charges," above, at net asset value without sales charge. To elect
this option, a shareholder must notify the Transfer Agent in writing and
either have an existing account in the fund selected for reinvestment or
must obtain a prospectus for that fund and an application from the
Distributor to establish an account. The investment will be made at the
net asset value per share in effect at the close of business on the
payable date of the dividend or distribution. Dividends and/or
distributions from shares of other Oppenheimer funds may be invested in
shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's
assets. The Custodian's responsibilities include safeguarding and
controlling the Fund's portfolio securities and handling the delivery of
such securities to and from the Fund. The Manager has represented to the
Fund that the banking relationships between the Manager 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 Manager and its
affiliates. The Fund's cash balances with the Custodian in excess of
$100,000 are not protected by Federal deposit insurance. Such uninsured
balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the
Fund's financial statements and perform other related audit services.
They also act as auditors for the Manager and certain other funds advised
by the Manager and its affiliates.
<PAGE>
<TABLE>
INDEPENDENT AUDITORS' REPORT
<S> <C>
The Board of Trustees and Shareholders of Oppenheimer
International Bond Fund:
We have audited the accompanying statement of assets
and liabilities, including the statement of
investments, of Oppenheimer International Bond Fund
as of September 30, 1995, the related statement of
operations, changes in net assets and the financial
highlights for the period from June 15, 1995
(commencement of operations) to September 30, 1995.
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 audit 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
at September 30, 1995 by correspondence with the
custodian and brokers; where replies 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
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and
financial highlights present fairly, in all material
respects, the financial position of Oppenheimer
International Bond Fund at September 30, 1995, the
results of its operations, the changes in its net
assets, and the financial highlights for the stated
period, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Denver, Colorado
October 20, 1995
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS September 30, 1995
FACE MARKET VALUE
AMOUNT (1) SEE NOTE 1
<S> <C> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT - 8.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Bank Pacific CD, Zero Coupon, 3/5/96 IDR 100,000,000 $ 40,730
----------------------------------------------------------------------------------------------------------------------
Citibank CD:
16%, 10/20/95 (2) CLP 39,050,000 97,919
29.50%, 12/22/95 (2) HUF 13,489,000 103,750
----------------------------------------------------------------------------------------------------------------------
First Boston Corp. CD:
10.40%, 10/12/95 (2)(3) CZK 1,561,260 59,206
11%, 12/27/95 (2)(3)(4) ARA 100,000 100,013
12.50%, 12/21/95 (2)(3) ARA 30,000 30,004
----------------------------------------------------------------------------------------------------------------------
Indonesia (Republic of) Bank Negara CD:
Zero Coupon, 6/17/96 (2) IDR 50,000,000 19,451
Zero Coupon, 7/18/96 (2) IDR 50,000,000 19,256
Zero Coupon, 7/8/96 (2) IDR 50,000,000 19,518
----------------------------------------------------------------------------------------------------------------------
Krungthai Thanakit CD:
Zero Coupon, 10/13/95 (2) THB 500,000 19,637
Zero Coupon, 12/1/95 (2) THB 1,250,000 49,043
----------------------------------------------------------------------------------------------------------------------
Thai Farmers Bank PLC CD, Zero Coupon, 12/7/98 (2) THB 500,000 19,139
----------------------------------------------------------------------------------------------------------------------
Thai Military Bank PLC CD, 10%, 1/31/96 (2) THB 500,000 19,928
----------------
Total Certificates of Deposit (Cost $600,309) 597,594
FOREIGN GOVERNMENT OBLIGATIONS - 73.0%
- ------------------------------------------------------------------------------------------------------------------------------------
ARGENTINA - 4.5%
----------------------------------------------------------------------------------------------------------------------
Argentina (Republic of):
Medium-Term Nts., 8%, 8/9/97 NLG 200,000 122,888
Sr. Unsec. Unsub. Bonds, 13.45%, 10/21/97 ITL 260,000,000 160,332
----------------------------------------------------------------------------------------------------------------------
Province of Buenos Aires Sr. Unsub. Unsec. Nts., 9.50%,
7/14/97 50,000 48,500
----------------
331,720
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA - 6.4%
----------------------------------------------------------------------------------------------------------------------
Australia (Commonwealth of) Bonds:
12%, 7/15/99 AUD 210,000 179,436
12.50%, 1/15/98 AUD 355,000 294,828
----------------
474,264
- ------------------------------------------------------------------------------------------------------------------------------------
BELGIUM - 1.3%
----------------------------------------------------------------------------------------------------------------------
Belgium (Kingdom of) Debs., 7.25%, 3/19/01 CHF 100,000 99,212
- ------------------------------------------------------------------------------------------------------------------------------------
BRAZIL - 5.0%
----------------------------------------------------------------------------------------------------------------------
Banco do Estado de Sao Paulo SA, 9.25% Nts., 10/4/96 60,000 57,450
----------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of):
Eligible Interest Bonds, 7.25%, 4/15/06 (5) 140,000 93,268
Interest Due and Unpaid Bonds, 6.688%, 1/1/01 (5) 256,500 217,692
----------------
368,410
- ------------------------------------------------------------------------------------------------------------------------------------
BULGARIA - 1.5%
----------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of) Interest Arrears Bonds, 6.75%,
7/28/11 (5) 250,000 112,955
- ------------------------------------------------------------------------------------------------------------------------------------
CANADA - 2.1%
----------------------------------------------------------------------------------------------------------------------
Canada (Government of) Debs., 10.75%, 3/15/98 CAD 195,000 157,064
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
FACE MARKET VALUE
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED) AMOUNT (1)
SEE NOTE 1
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
COSTA RICA - 1.5%
----------------------------------------------------------------------------------------------------------------------
Central Bank of Costa Rica Principal Bonds, Series A,
6.25%, 5/21/10 $ 200,000 $ 112,000
- ------------------------------------------------------------------------------------------------------------------------------------
ECUADOR - 2.2%
----------------------------------------------------------------------------------------------------------------------
Ecuador (Republic of):
Disc. Bonds, 6.812%, 2/28/25 (5) 100,000 49,370
Par Bonds, 3%, 2/28/25 (5) 350,000 114,170
----------------
163,540
- ------------------------------------------------------------------------------------------------------------------------------------
GERMANY - 1.9%
----------------------------------------------------------------------------------------------------------------------
Treuhandanstalt (German Federal Government) Bonds,
7.125%, 1/29/03 DEM 190,000 138,199
- ------------------------------------------------------------------------------------------------------------------------------------
GREAT BRITAIN - 5.4%
----------------------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 10%, 2/26/01 GBP 230,000 398,717
- ------------------------------------------------------------------------------------------------------------------------------------
IRELAND - 4.3%
----------------------------------------------------------------------------------------------------------------------
National Treasury Management Agency (Irish Government) Bonds:
8%, 10/18/00 IEP 55,000 89,728
9%, 7/15/01 IEP 135,000 230,401
----------------
320,129
- ------------------------------------------------------------------------------------------------------------------------------------
JAMAICA - 0.6%
----------------------------------------------------------------------------------------------------------------------
Jamaica (Government of) 1990 Refinancing Agreement Nts.,
Tranche A, 6.656%, 10/16/00 (5)(6) 50,000 44,500
- ------------------------------------------------------------------------------------------------------------------------------------
MEXICO - 10.0%
----------------------------------------------------------------------------------------------------------------------
Banco Nacional de Comercio Exterior SNC International
Finance BV Gtd. Bonds, 10.875%, 6/23/97 (3)(5) 10,000 10,125
----------------------------------------------------------------------------------------------------------------------
Banco Nacional de Obras y Servicios Publicos SA Nts.,
10.75%, 8/16/96 80,000 80,800
----------------------------------------------------------------------------------------------------------------------
Bonos de la Tesoreria de la Federacion, Zero Coupon,
8/15/96 MXP 1,246,820 147,993
----------------------------------------------------------------------------------------------------------------------
United Mexican States:
Nacional Financiera SNC Nts., 13.60%, 4/2/98 ESP 10,000,000 78,842
Petroleos Mexicanos Gtd. Sr. Unsec. Nts., 6.875%, 3/8/99 (5) 100,000 89,750
Petroleos Mexicanos Gtd. Unsec. Unsub. Nts., 7.875%,
3/2/99 CAD 500,000 335,019
----------------
742,529
- ------------------------------------------------------------------------------------------------------------------------------------
MOROCCO - 2.9%
----------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.688%, 1/1/09 (5) 350,000 219,188
- ------------------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND - 1.9%
----------------------------------------------------------------------------------------------------------------------
New Zealand (Republic of) Bonds, 10%, 3/15/02 NZD 130,000 94,463
----------------------------------------------------------------------------------------------------------------------
The Queen in Right of New Zealand Government Bonds, 14%,
10/15/96 NZD 70,000 48,405
----------------
142,868
- ------------------------------------------------------------------------------------------------------------------------------------
PAKISTAN - 1.4%
----------------------------------------------------------------------------------------------------------------------
Islamic (Republic of Pakistan) Debs., 11.50%, 12/22/99 100,000 102,875
- ------------------------------------------------------------------------------------------------------------------------------------
PANAMA - 4.1%
----------------------------------------------------------------------------------------------------------------------
Panama (Republic of) Debs., 7.25%, 5/10/02 (5) 380,000 302,100
- ------------------------------------------------------------------------------------------------------------------------------------
PHILIPPINES - 1.0%
----------------------------------------------------------------------------------------------------------------------
Philippines (Republic of) Front-Loaded Interest Reduction
Bonds, Series B, 5%, 6/1/08 (7) 100,000 77,188
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
FACE MARKET VALUE
FOREIGN GOVERNMENT OBLIGATIONS (CONTINUED) AMOUNT (1)
SEE NOTE 1
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
POLAND - 3.6%
----------------------------------------------------------------------------------------------------------------------
Poland (Republic of) Disc. Bonds, 7.125%, 10/27/24 (5) $ 350,000 $ 270,375
- ------------------------------------------------------------------------------------------------------------------------------------
PORTUGAL - 3.1%
----------------------------------------------------------------------------------------------------------------------
Portugal (Republic of) Gtd. Bonds, Obrigicion do tes Medio Prazo:
12.50%, 1/23/98 (8) PTE 14,500,000 101,491
13%, 12/23/97 PTE 17,800,000 125,863
----------------
227,354
- ------------------------------------------------------------------------------------------------------------------------------------
SPAIN - 4.2%
----------------------------------------------------------------------------------------------------------------------
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado:
7.40%, 7/30/99 ESP 28,500,000 209,950
11.30%, 1/15/02 ESP 12,000,000 99,290
----------------
309,240
- ------------------------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL - 0.7%
----------------------------------------------------------------------------------------------------------------------
International Bank for Reconstruction and Development
Bonds, 12.50%, 7/25/97 NZD 70,000 49,194
- ------------------------------------------------------------------------------------------------------------------------------------
SWEDEN - 3.4%
----------------------------------------------------------------------------------------------------------------------
Sweden (Kingdom of) Bonds, Series 1028, 11%, 1/21/99 SEK 1,700,000 256,008
----------------
Total Foreign Government Obligations (Cost $5,340,850) 5,419,629
CORPORATE BONDS AND NOTES - 11.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Banco Bamerindus do Brasil SA:
10.50% Debs., 6/23/97 20,000 19,150
11% Sr. Unsub. Unsec. Bonds, 10/6/97 20,000 19,775
9% Unsub. Unsec. Bonds, 10/29/98 20,000 18,350
----------------------------------------------------------------------------------------------------------------------
Banco del Atlantico SA, 7.875% Eurobonds, 11/5/98 60,000 52,800
----------------------------------------------------------------------------------------------------------------------
Banco Ganadero SA:
Zero Coupon Nts., 7/1/96 (3) 10,000 9,308
Zero Coupon Sr. Unsub. Unsec. Nts., 6/15/96 (3) 10,000 9,348
----------------------------------------------------------------------------------------------------------------------
Banco Mexicano SA, 8% Sr. Unsub. Unsec. Exchangeable
Medium-Term Nts., 11/4/98 60,000 52,050
----------------------------------------------------------------------------------------------------------------------
Canadian Imperial Banking Corp., Zero Coupon Indexed
Nts., 12/28/95 (4) 100,000 93,830
----------------------------------------------------------------------------------------------------------------------
KfW International Finance, Inc., 11.625% Gtd. Nts.,
11/27/98 ITL 310,000,000 195,974
----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Group, 14.25% Indian Rupee Indexed Nts.,
6/26/96 INR 314,100 9,259
----------------------------------------------------------------------------------------------------------------------
New Zealand Electric Corp., 10% Debs., 10/15/01 NZD 110,000 78,212
----------------------------------------------------------------------------------------------------------------------
Pulsar Internacional SA de CV, 11.80% Nts., 9/19/96 (6) 50,000 50,375
----------------------------------------------------------------------------------------------------------------------
Rabobank Nederland:
11.05% Sr. Unsec. Debs., 12/12/97 ITL 190,000,000 118,197
5.25% Sr. Unsec. Unsub. Debs., 1/30/02 CHF 100,000 91,815
----------------------------------------------------------------------------------------------------------------------
Unibanco Leasing SA, 9.113% Nts., 12/28/97 (5) 50,000 48,125
----------------
Total Corporate Bonds and Notes (Cost $863,797) 866,568
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS (CONTINUED)
FACE MARKET VALUE
AMOUNT (1) SEE NOTE 1
<S> <C> <C> <C>
STRUCTURED INSTRUMENTS - 0.5%
- ------------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Zero Coupon Brazilian Credit
Linked Nts., 12/14/95 (indexed to the Nota Do Tesouro
Nacional, Zero Coupon, 12/13/95) (Cost $38,962) $ 40,000 $ 38,962
REPURCHASE AGREEMENTS - 5.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with First Chicago Capital Markets, 6.35%,
dated 9/29/95, to be repurchased at $400,211 on 10/2/95,
collateralized by U.S. Treasury Nts., 4.25%-8.75%, 11/30/95-
8/15/00, with a value of $272,713, U.S. Treasury Bills maturing
12/28/95-3/28/96, with a value of $61,914, and U.S. Treasury
Bonds, 8.50%-13.25%, 5/15/14-2/15/20, with a value of $74,134
(Cost $400,000) 400,000 400,000
----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $7,243,918) 98.7%
7,322,753
----------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 1.3 99,849
---------------- ----------------
NET ASSETS 100.0% $ 7,422,602
================
================
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those
denoted in the following currencies:
ARA - Argentine Austral IDR - Indonesian Rupiah
AUD - Australian Dollar IEP - Irish Punt
CAD - Canadian Dollar INR - Indian Rupee
CHF - Swiss Franc ITL - Italian Lira
CLP - Chilean Peso MXP - Mexican Peso
CZK - Czech Koruna NLG - Netherlands Guilder
DEM - German Deutsche Mark NZD - New Zealand Dollar
ESP - Spanish Peseta PTE - Portuguese Escudo
GBP - British Pound Sterling SEK - Swedish Krona
HUF - Hungarian Forints THB - Thai Baht
2. Indexed instrument for which the principal amount and/or
interest due at maturity is affected by the relative value of a
foreign currency.
3. Represents a security sold under Rule 144A, which is exempt
from registration under the Securities Act of 1933, as amended.
This security has been determined to be liquid under guidelines
established by the Board of Trustees. These securities amount to
$218,004 or 2.94% of the Fund's net assets, at September 30, 1995.
4. When-issued security to be delivered and settled after
September 30, 1995.
5. Represents the current interest rate for a variable rate
security.
6. Identifies issues considered to be illiquid - See Note 7 of
Notes to Financial Statements.
7. Represents the current interest rate for an increasing rate
security.
8. A sufficient amount of liquid assets has been designated to
cover outstanding written call options, as follows:
<TABLE>
<CAPTION>
FACE SUBJECT EXPIRATION EXERCISE PREMIUM MARKET
VALUE
TO CALL DATE PRICE RECEIVED SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Call option on Sweden (Kingdom of)
Bonds, Series 1028, 11%, 1/21/99 245 1/21/99 $105.00 $1,350 $ 1,350
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES September 30, 1995
<S> <C> <C>
ASSETS Investments, at value (cost $7,243,918) - see accompanying statement $ 7,322,753
----------------------------------------------------------------------------------------------------
Cash 238,118
----------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency
exchange contracts - Note 6 9,130
----------------------------------------------------------------------------------------------------
Receivables:
Investments sold 527,402
Shares of beneficial interest sold 278,607
Interest 220,485
Deferred organization costs 14,399
----------------------------------------------------------------------------------------------------
Other 1,159
-------------------
Total assets 8,612,053
LIABILITIES Options written, at value (premiums received $1,350) -
see accompanying statement - Note 5 1,350
----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 863,349
Shares of beneficial interest redeemed 301,855
Dividends 15,989
Distribution and service plan fees - Note 4 2,656
Other 4,252
-------------------
Total liabilities 1,189,451
NET ASSETS $ 7,422,602
===================
COMPOSITION OF Paid-in capital $ 7,334,740
NET ASSETS ----------------------------------------------------------------------------------------------------
Accumulated net realized loss from investments, written options
and foreign currency transactions (189)
----------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 88,051
-------------------
Net assets $ 7,422,602
==================
NET ASSET VALUE Class A Shares:
PER SHARE Net asset value and redemption price per share (based on net assets
of $3,983,778 and 781,299 shares of beneficial interest outstanding) $5.10
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $5.35
----------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $3,237,933 and 635,325 shares of beneficial interest outstanding) $5.10
----------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $200,891 and 39,431 shares of beneficial interest outstanding) $5.09
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS For the Period from June 15, 1995
(commencement of operations)
to September 30, 1995
<S> <C> <C>
INVESTMENT INCOME Interest (net of foreign withholding taxes of $1,013) $ 115,114
EXPENSES Management fees - Note 4 8,252
----------------------------------------------------------------------------------------------------
Distribution and service plan fees - Note 4:
Class A 1,750
Class B 3,267
Class C 282
----------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 1,623
Class B 444
Class C 45
----------------------------------------------------------------------------------------------------
Custodian fees and expenses 1,886
----------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees - Note 4 860
----------------------------------------------------------------------------------------------------
Shareholder reports 546
----------------------------------------------------------------------------------------------------
Legal and auditing fees 520
----------------------------------------------------------------------------------------------------
Other 600
-------------------
Total expenses 20,075
-------------------
Less reimbursement of expenses by Oppenheimer Management
Corporation - Note 4 (13,764)
-------------------
Net expenses 6,311
NET INVESTMENT INCOME 108,803
REALIZED AND Net realized gain (loss) on:
UNREALIZED GAIN (LOSS) Investments 27,645
ON INVESTMENTS, Closing of options written (4,542)
OPTIONS WRITTEN AND Foreign currency transactions (23,292)
FOREIGN CURRENCY -------------------
TRANSACTIONS Net realized loss (189)
----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments and options written 46,609
Translation of assets and liabilities denominated in foreign currencies 41,442
-------------------
Net change 88,051
-------------------
Net realized and unrealized gain on investments, options written and
foreign currency transactions 87,862
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $
196,665
===================
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Period Ended
September 30,
1995 (1)
<S> <C> <C>
OPERATIONS Net investment income $ 108,803
----------------------------------------------------------------------------------------------------
Net realized loss on investments, options written and
foreign currency transactions (189)
----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
on investments, options written and translation of assets
and liabilities denominated in foreign currencies 88,051
-------------------
Net increase in net assets resulting
from operations 196,665
DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income:
TO SHAREHOLDERS Class A ($.1523 per share) (76,404)
Class B ($.1419 per share) (29,790)
Class C ($.1429 per share) (2,609)
BENEFICIAL INTEREST Net increase in net assets resulting from
TRANSACTIONS Class A beneficial interest transactions - Note 2 3,923,812
----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
Class B beneficial interest transactions - Note 2 3,212,495
----------------------------------------------------------------------------------------------------
Net increase in net assets resulting from
Class C beneficial interest transactions - Note 2 198,433
NET ASSETS Total increase 7,422,602
----------------------------------------------------------------------------------------------------
Beginning of period --
-------------------
End of period $ 7,422,602
===================
</TABLE>
1. For the period from June 15, 1995 (commence-
ment of operations) to September 30, 1995.
See accompanying Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS For the period from June 15, 1995 (commencement of
operations) to September 30, 1995
CLASS A CLASS B CLASS C
----------------- --------------- ---------------
PERIOD ENDED PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1995
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.00 $5.00 $5.00
----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .15 .14 .14
Net realized and unrealized gain on
investments, options written and
foreign currency transactions .10 .10 .09
----------------------------------------------------------------------------------------------------
Total income from investment operations .25 .24 .23
----------------------------------------------------------------------------------------------------
Dividends to shareholders from net
investment income (.15) (.14) (.14)
Net asset value, end of period $5.10 $5.10 $5.09
TOTAL RETURN, AT NET ASSET VALUE (1) 5.13% 4.92%
4.73%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $3,984 $3,238 $201
----------------------------------------------------------------------------------------------------
Average net assets (in thousands) $2,566 $1,125 $97
----------------------------------------------------------------------------------------------------
Number of shares outstanding at
end of period (in thousands) 781 635 39
----------------------------------------------------------------------------------------------------
Ratios to average net assets (2):
Net investment income 9.94% 9.20% 9.36%
Expenses, before voluntary reimbursement
by the Manager 1.59% 2.21% 2.26%
Expenses, net of voluntary reimbursement
by the Manager .41% .89% .85%
----------------------------------------------------------------------------------------------------
Portfolio turnover rate (3) 122.0% 122.0% 122.0%
</TABLE>
1. Assumes a hypothetical initial investment on
the business day before the first day of the
fiscal period, with all dividends and distribu-
tions reinvested in additional shares on the
reinvestment date, and redemption at the net
asset value calculated on the last business day
of the fiscal period. Sales charges are not
reflected in the total returns. Total returns
are not annualized for periods of less than one
full year.
2. Annualized.
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) for the period ended September 30,
1995 were $10,314,730 and $4,358,100,
respectively.
See accompanying Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT Oppenheimer International Bond Fund (the Fund), is a
ACCOUNTING registered investment company organized as a Massa-
POLICIES chusetts Business Trust with a single series of the
same name. The Fund is registered as a diversified,
open-end management investment company under the
Investment Company Act of 1940, as amended. The
Fund's investment advisor is Oppenheimer Management
Corporation (the Manager). The Fund offers Class A,
Class B and Class C shares. Class B and Class C
shares may be subject to a contingent deferred sales
charge. All three classes of shares have identical
rights to earnings, assets and voting privileges,
except that each class has its own distribution
and/or service plan, expenses directly attributable
to a particular class and exclusive voting rights
with respect to matters affecting a single class.
Class B shares will automatically convert to Class A
shares six years after the date of purchase. 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 each
trading day. 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 asked
price 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 the 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 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 or asked price
closest to the last reported sale price is used.
-----------------------------------------------------
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
results 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 into an
insolvency proceeding, realization of the value of
the collateral by the Fund may be delayed or limited.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
1. SIGNIFICANT ALLOCATION OF INCOME, EXPENSES AND GAINS AND LOSSES.
ACCOUNTING Income, expenses (other than those attributable to a
POLICIES specific class) and gains and losses are allocated
(CONTINUED) daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Operating expenses directly attributable to a
specific class are charged against the operations of
that class.
-----------------------------------------------------
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.
-----------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS. The Fund intends to
declare dividends separately for Class A, Class B and
Class C shares from net investment income each day
the New York Stock Exchange is open for business and
pay such dividends monthly. Distributions from net
realized gains on investments, if any, will be
declared at least once each year.
-----------------------------------------------------
ORGANIZATION COSTS. The Manager advanced $14,488 for
organization and start-up costs of the Fund. Such
expenses are being amortized over a five-year period
from the date operations commenced. In the event that
all or part of the Manager's initial investment in
shares of the Fund is withdrawn during the
amortization period, the redemption proceeds will be
reduced to reimburse the Fund for any unamortized
expenses, in the same ratio as the number of shares
redeemed bears to the number of initial shares
outstanding at the time of such redemption.
-----------------------------------------------------
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 (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
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 (loss) was recorded by
the Fund.
-----------------------------------------------------
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 options
written and unrealized appreciation and depreciation
are determined on an identified cost basis, which is
the same basis used for federal income tax purposes.
Interest on payment-in-kind debt instruments is
accrued as income at the coupon rate and a market
adjustment is made on the ex-date.
2. SHARES OF The Fund has authorized an unlimited number of no par
BENEFICIAL value shares of beneficial interest. Transactions in
INTEREST shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1995(1)
----------------------------------
SHARES AMOUNT
<S> <C> <C>
CLASS A:
SOLD 909,822 $4,576,888
DIVIDENDS REINVESTED 6,117 30,991
REDEEMED (134,640) (684,067)
--------- -----------
NET INCREASE 781,299 $3,923,812
========= ==========
CLASS B:
SOLD 633,620 $3,203,816
DIVIDENDS REINVESTED 4,019 20,381
REDEEMED (2,314) (11,702)
--------- -----------
NET INCREASE 635,325 $3,212,495
========= ==========
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1995(1)
----------------------------------
SHARES AMOUNT
<S> <C> <C>
CLASS C:
SOLD 39,665 $ 199,624
DIVIDENDS REINVESTED 392 1,981
REDEEMED (626) (3,172)
--------- -----------
NET INCREASE 39,431 $ 198,433
========= ==========
</TABLE>
1. For the period from June 15, 1995 (commencement
of operations) to September 30, 1995.
3. UNREALIZED GAINS At September 30, 1995, net unrealized appreciation on
AND LOSSES ON investments and options written of $78,835 was
INVESTMENTS composed of gross appreciation of $104,694, and gross
depreciation of $25,859.
4. MANAGEMENT FEES Management fees paid to the Manager were in accord-
AND OTHER ance with the investment advisory agreement with the
TRANSACTIONS WITH Fund which provides for an annual fee of .75% on the
AFFILIATES first $200 million of net assets with a reduction of
.03% on each $200 million thereafter to $800 million,
.60% on the next $200 million and .50% on net assets
in excess of $1 billion. The Manager has agreed to
reimburse the Fund if aggregate expenses (with
specified exceptions) exceed the most stringent
state regulatory limit on Fund expenses. In
addition, the Manager has voluntarily undertaken to
reimburse Fund expenses to the level needed to main-
tain a stable dividend.
For the period ended September 30, 1995, commissions
(sales charges paid by investors) on sales of Class A
shares totaled $38,181, of which $11,736 was retained
by Oppenheimer Funds Distributor, Inc. (OFDI), a
subsidiary of the Manager, as general distributor,
and by an affiliated broker/dealer.
Oppenheimer Shareholder Services (OSS), a division of
the Manager, is the transfer and shareholder
servicing agent for the Fund, and for other
registered investment companies. OSS's total costs of
providing such services are allocated ratably to
these companies.
Under separate approved plans, each class may expend
up to .25% of its net assets annually to reimburse
OFDI for costs incurred in connection with the
personal service and maintenance of accounts that
hold shares of the Fund, including amounts paid to
brokers, dealers, banks and other institutions. In
addition, Class B and Class C shares are subject to
an asset-based sales charge of .75% of net assets
annually, to reimburse OFDI for sales commissions
paid from its own resources at the time of sale and
associated financing costs. In the event of
termination or discontinuance of the Class B or Class
C plan, the Board of Trustees may allow the Fund to
continue payment of the asset-based sales charge to
OFDI for distribution expenses incurred on Class B or
Class C shares sold prior to termination or
discontinuance of the plan. At September 30, 1995,
OFDI had incurred unreimbursed expenses of $151,296.
During the period ended September 30, 1995, OFDI
retained $3,267 and $282, respectively, as
reimbursement for Class B and Class C sales
commissions and service fee advances, as well as
financing costs.
5. OPTION ACTIVITY The Fund may buy and sell put and call options, or
write covered put and call options on portfolio
securities in order to produce incremental earnings
or protect against changes in the value of portfolio
securities.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
The Fund generally purchases put options or writes
covered call options to hedge against adverse move-
ments 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.
In this report, securities designated to cover
outstanding call options are noted in the Statement
of Investments. 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 period ended
September 30, 1995 was as follows:
<TABLE>
<CAPTION>
CALL OPTIONS
------------
NUMBER OF AMOUNT OF
OPTIONS PREMIUMS
<S> <C> <C>
Options written 570 $ 4,430
Options canceled in closing purchase
transactions (325) (3,080)
-------- --------
Options outstanding at September 30,
1995 245 $ 1,350
======== =======
</TABLE>
6. FORWARD 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 seek 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
In this report, securities held in segregated
accounts to cover net exposure on outstanding forward
contracts are noted in the Statement of Investments
where applicable. Gains and losses on outstanding
contracts (unrealized appreciation or depreciation on
forward contracts) are 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 September 30, 1995, the Fund had outstanding
forward contracts to purchase and sell foreign
currencies as follows:
<TABLE>
<CAPTION>
CONTRACT VALUATION AS OF UNREALIZED
EXCHANGE AMOUNT SEPTEMBER 30,
APPRECIATION
CONTRACTS TO PURCHASE DATE (000S) 1995
(DEPRECIATION)
--------------------- ------------- ----------- --------------- --------------
<S> <C> <C> <C> <C>
Australian Dollar (AUD) 10/3/95 243 AUD $ 183,504 $ 1,468
Canadian Dollar (CAD) 10/12/95 740 CAD 549,394 7,194
German Deutsche Mark (DEM) 10/23/95-10/26/95 1,100 DEM 773,043 2,547
Italian Lira (ITL) 10/4/95 173,129 ITL 107,379 (138)
Swiss Franc (CHF) 10/25/95 110 CHF 95,731 944
----------- --------
$1,709,051 $12,015
=========== --------
CONTRACTS TO SELL
-----------------
Canadian Dollar (CAD) 10/2/95-10/12/95 986 CAD $ 731,974 $ 996
German Deutsche Mark (DEM) 10/23/95-10/26/95 1,100 DEM 773,043 (4,432)
Swedish Krona (SEK) 10/4/95 600 SEK 86,642 2
Swiss Franc (CHF) 10/25/95 110 CHF 95,731 549
----------- -------
$1,687,390 $(2,885)
=========== --------
Net unrealized appreciation $ 9,130
=======
</TABLE>
7. ILLIQUID AND At September 30, 1995, investments in securities
RESTRICTED included issues that are illiquid or restricted.
SECURITIES The securities are often purchased in private place-
ment transactions, are not registered under the
Securities Act of 1933, may have contractual restric-
tions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair
value. The Fund intends to invest no more than 10% of
its net assets (determined at the time of purchase)
in illiquid and restricted securities. The aggregate
value of these securities subject to this limitation
at September 30, 1995 was $94,875 which represents
1.28% of the Fund's net assets. Information
concerning these securities is as follows:
<TABLE>
<CAPTION>
VALUATION PER
COST UNIT AS OF
SECURITY ACQUISITION DATE PER UNIT SEPTEMBER
30, 1995
<S> <C> <C> <C>
Jamaica (Government of) 1990 Refinancing
Agreement Nts., Tranche A, 6.656%, 10/16/00 7/12/95-8/15/95 $ 89.19 $ 89.00
Pulsar Internacional SA de CV, 11.80% Nts.,
9/19/96 9/14/95 $100.00 $100.75
</TABLE>
Pursuant to guidelines adopted by the Board of
Trustees, certain unregistered securities are
determined to be liquid and are not included within
the 10% limitation specified above.
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense
Air Transportation
Auto Parts Distribution
Automotive
Bank Holding Companies
Banks
Beverages
Broadcasting
Broker-Dealers
Building Materials
Cable Television
Chemicals
Commercial Finance
Computer Hardware
Computer Software
Conglomerates
Consumer Finance
Containers
Convenience Stores
Department Stores
Diversified Financial
Diversified Media
Drug Stores
Drug Wholesalers
Durable Household Goods
Education
Electric Utilities
Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Transmission
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services
Homebuilders/Real Estate
Hotel/Gaming
Industrial Services
Insurance
Leasing & Factoring
Leisure
Manufacturing
Metals/Mining
Nondurable Household Goods
Oil - Integrated
Paper
Publishing/Printing
Railroads
Restaurants
Savings & Loans
Shipping
Special Purpose Financial
Specialty Retailing
Steel
Supermarkets
Telecommunications - Technology
Telephone - Utility
Textile/Apparel
Tobacco
Toys
Trucking
A-1
<PAGE>
Investment Adviser
Oppenheimer Management Corporation
Two World Trade Center
New York, New York 10048-0203
Distributor
Oppenheimer Funds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
Oppenheimer Shareholder Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
Custodian of Portfolio Securities
The Bank of New York
One Wall Street
New York, New York 10015
Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202
Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway
Denver, Colorado 80202
PROSP/880SAI
