Registration No. 33-58383
File No. 811-07255
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
PRE-EFFECTIVE AMENDMENT NO. ___ / /
POST-EFFECTIVE AMENDMENT NO. 2 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 4 / X /
OPPENHEIMER INTERNATIONAL BOND FUND
------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
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(Address of Principal Executive Offices)
303-671-3200
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(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
/ / Immediately upon filing pursuant to paragraph (b)
/ X / On January 27, 1997, pursuant to paragraph (b)
/ / 60 days after filing, pursuant to paragraph (a)(1)
/ / On _______, pursuant to paragraph (a)(1)
/ / 75 days after filing, pursuant to paragraph (a)(2)
/ / On _______, pursuant to paragraph (a)(2)of Rule 485.
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The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 promulgated under the Investment
Company Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal year ended
September 30, 1996 was filed on November 27, 1996.
<PAGE>
FORM N-1A
OPPENHEIMER INTERNATIONAL BOND FUND
Cross Reference Sheet
-------------------------
Part A of
Form N-1A
Item No. Prospectus Heading
- ---------- ------------------
1 Cover Page
2 Expenses; A Brief Overview of the Fund
3 Financial Highlights; Performance of the Fund
4 Front Cover Page; Investment Objectives and Policies
5 Expenses; How the Fund is Managed; Back Cover
5A Performance of the Fund
6 Dividends, Capital Gains and Taxes; How the Fund is
Managed -- Organization and History; The Transfer Agent
7 How to Exchange Shares; Special Investor Services; Service
Plan for Class A shares; Distribution and Service Plans
for Class B nd Class C Shares; How to Buy Shares;
How to Sell Shares;
Shareholder Account Rules and Policies
8 How to Sell Shares; How to Exchange Shares; Special
Investor Services
9 *
Part B of
Form N-1A
Item No. Heading in Statement of Additional Information or
- ---------- ----------------------------------------------------
Prospectus
----------
10 Cover Page
11 Cover Page
12 *
13 Investment Objectives and Policies; Other Investment
Techniques and Strategies; Other Investment
Restrictions
14 How the Fund is Managed -- Trustees and Officers of the
Fund
15 How the Fund is Managed -- Major Shareholders
16 How the Fund is Managed; Additional Information about the
Fund; Distribution and Service Plans; Back Cover
17 How the Fund is Managed
18 Additional Information about the Fund
19 About Your Account -- How to Buy Shares, How to Sell
Shares, How to Exchange Shares
20 Dividends, Capital Gains and Taxes
21 How the Fund is Managed; Additional Information about the
Fund - The Distributor; Distribution and Service Plans
22 Performance of the Fund
23 Financial Statements
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*Not applicable or negative answer.
<PAGE>
OPPENHEIMER
International Bond Fund
Prospectus dated February 1, 1997
Oppenheimer International Bond 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 ___. 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
February 1, 1997 Statement of Additional Information. For a free copy, call
OppenheimerFunds 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
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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.
-2-
<PAGE>
Contents
A B O U T T H E F U N D
Expenses
A Brief Overview of the Fund
Financial Highlights
Investment Objectives and Policies
How the Fund is Managed
Performance of the Fund
A B O U T Y O U R A C C O U N T
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
Automatic Withdrawal and Exchange Plans
Reinvestment Privilege
Retirement Plans
How to Sell Shares
By Mail
By Telephone
By Checkwriting
How to Exchange Shares
Shareholder Account Rules and Policies
Dividends, Capital Gains and Taxes
Appendix A: Description of Securities Ratings
Appendix B: Special Sales Charge Arrangements
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<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 will bear indirectly. The numbers below are
based on the Fund's expenses during its last fiscal year ended September 30,
1996.
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account," starting on page
___ 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)
- -----------------------------------------------------------------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the first 1% if shares
Charge (as a % of the year, declining are redeemed
lower of the original to 1% in the within 12
offering price or sixth year and months of
redemption proceeds) eliminated purchase(2)
thereafter(2)
- -----------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge on None None None
Reinvested Dividends
- -----------------------------------------------------------------------------------------------------------------------
Exchange Fee None None None
- -----------------------------------------------------------------------------------------------------------------------
Redemption Fee None None None
<FN>
(1) If you invest $1 million or more ($500,000 or more for purchases by
"Retirement Plans," as defined in "Class A Contingent Deferred Sales Charge" on
page___) in Class A shares, you may have
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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 - Buying Class B Shares" and "How to Buy Shares - Buying Class C Shares,"
below, for more information on the contingent deferred sales charges.
</FN>
</TABLE>
o 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 advisor, OppenheimerFunds, Inc. (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.
<TABLE>
<CAPTION>
Annual Fund Operating Expenses
as a Percentage of Average Net Assets (Restated)
Class A Class B Class C
Shares Shares Shares
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75%
- -------------------------------------------------------------------------------------------------------------------
12b-1 Distribution Plan Fees 0.22% 1.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------
Other Expenses 0.62 0.61% 0.61%
- -------------------------------------------------------------------------------------------------------------------
Total Fund 1.59% 2.36% 2.36%
Operating Expenses
</TABLE>
The numbers in the table above are based on the Fund's expenses in its
last fiscal year ended September 30, 1996. These amounts are shown as a
percentage of the average net assets of each class of the Fund's shares for that
period, and have been restated to reflect termination by the Manager of a
voluntary expense assumption on September 20, 1996. With the Manager's voluntary
expense assumption through September 19, 1996, annual fund operating expenses
for the fiscal year ended September 30, 1996, would have been as follows: the
Management Fees payable by the Fund's Class A, Class B and Class C shares would
have been 0.65%;
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the 12b-1 Distribution Plan Fees would have been 0.22%, 1.00% and 1.00% of
average annual net assets for the Fund's Class A, Class B and Class C shares,
respectively; Other Expenses would have been 0.62%, 0.61% and 0.60%,
respectively for the Fund's Class A, Class B and Class C shares, respectively;
and Total Fund Operating Expenses would have been 1.49%, 2.26% and 2.25% for the
Fund's Class A, Class B and Class C shares, respectively.
The 12b-1 Distribution Plan Fees for Class A shares are service fees
(the maximum fee is 0.25% of average annual net assets of that class), and for
Class B and Class C shares, are the service fee (the maximum service fee is
0.25% of average annual net assets of the class) and the asset-based sales
charge of 0.75%. These Plans are discussed in greater detail in "How to Buy
Shares."
The actual expenses for each class of shares in future years may be
more or less than the figures in the table, depending on a number of factors,
including the actual value of the Fund's assets represented by each class of
shares.
o 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 a $1,000 investment 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, 3, 5 and 10
years:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years*
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Class A Shares $63 $ 95 $130 $227
- --------------------------------------------------------------------------------------------------------------------
Class B Shares $74 $104 $146 $233
- --------------------------------------------------------------------------------------------------------------------
Class C Shares $34 $ 74 $126 $270
</TABLE>
If you did not redeem your investment, it would incur the following expenses:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Class A Shares $63 $95 $130 $227
- --------------------------------------------------------------------------------------------------------------------
Class B Shares $24 $74 $126 $233
- --------------------------------------------------------------------------------------------------------------------
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<PAGE>
Class C Shares $24 $74 $126 $270
</TABLE>
*In the first example, expenses include the initial sales charge and
the applicable Class B or class C contingent deferred sales charge. In the
second example, Class A expenses include the initial sales charge, but Class B
and Class C expenses do not include contingent deferred sales charges. The Class
B expenses in years 7 through 10 are based on the Class A expenses shown above,
because the Fund automatically converts Class B shares into Class A shares after
6 years. 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 more than the maximum
front-end sales charge allowed under applicable regulations. 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 be more or less than those shown.
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.
o What Are the Fund's Investment Objectives? The Fund's primary
investment objective is to seek total return. As a secondary objective, the Fund
seeks income when consistent with total return.
o 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.
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<PAGE>
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 ___.
o Who Manages the Fund? The Fund's investment advisor (the "Manager")
is OppenheimerFunds, Inc. The Manager (including a subsidiary) manages
investment company portfolios having over $62 billion in assets at December 31,
1996. The Manager is paid an advisory fee by the Fund, based on its net assets.
The Fund's portfolio manager, Mr. Ashwin K. Vasan, 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
advisor and the portfolio manager. Please refer to "How the Fund is Managed,"
starting on page ___ for more information about the Manager and its fees.
o 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 Fund's
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 fluctuations in equity markets, and changing
expectations for the economy and individual issuers. Fixed-income investments
are generally subject to the risk that values will fluctuate with changes in
interest rates and inflation; lower-rated, fixed-income investments are 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
-8-
<PAGE>
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 "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 ___ for a
more complete discussion of the Fund's investment risks.
o 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 ___ for more
details.
o 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 ___ for more details, including a discussion about which class
may be appropriate for you.
o How Can I Sell My Shares? Shares can be redeemed by mail,
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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 ___. The
Fund also offers exchange privileges to other Oppenheimer funds, described in
"How to Exchange Shares" on page ___.
o How Has the Fund Performed? The Fund measures its performance by
quoting its average annual total returns and cumulative total returns, which
measure historical performance. Those returns can be compared to the returns
(over similar periods) of other mutual funds. Of course, other mutual funds may
have different objectives, investments and levels of risk. The Fund's
performance can also be compared to one or more securities market indices, which
we have done on pages 22 and 23. Please remember that past performance does not
guarantee future results.
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 fiscal year ended September 30, 1996 is included in
the Statement of Additional Information.
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
CLASS A CLASS B CLASS C
--------------------------- -------------------------- ---------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1996 1995(1) 1996 1995(1) 1996 1995(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $ 5.10 $ 5.00 $ 5.10 $ 5.00 $ 5.09 $ 5.00
- ------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .52 .15 .48 .14 .48 .14
Net realized and unrealized gain .40 .10 .39 .10 .39 .09
- ------------------------------------------------------------------------------------------------------------------------------
Total income from investment operations .92 .25 .87 .24 .87 .23
- ------------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from net
investment income (.53) (.15) (.49) (.14) (.48) (.14)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 5.49 $ 5.10 $ 5.48 $ 5.10 $ 5.48 $ 5.09
=====================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 18.82% 5.13% 17.71% 4.92% 17.92% 4.73%
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $52,128 $ 3,984 $45,207 $ 3,238 $10,282 $ 201
- ------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $19,817 $ 2,566 $17,891 $ 1,125 $ 4,039 $ 97
- ------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 9.60% 9.94%(3) 8.81% 9.20%(3) 8.76% 9.36%(3)
Expenses, before voluntary reimbursement
by the Manager 1.59% 1.59%(3) 2.36% 2.21%(3) 2.36% 2.26%(3)
Expenses, net of voluntary reimbursement
by the Manager 1.49% 0.41%(3) 2.26% 0.89%(3) 2.25% 0.85%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 273.3% 122.0% 273.3% 122.0% 273.3% 122.0%
<FN>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions 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.
3. Annualized.
4. 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, 1996 were $161,923,766 and $93,759,294, respectively.
</FN>
</TABLE>
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Investment Objectives and Policies
Objectives. 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 and their
markets 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 and
(3) a lack of a developed yield curve for its local currency. 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, often referred to as "junk 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
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ownership interest in the company issuing the security.
o 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.
o 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 its investment objectives.
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. The Fund will hold foreign currency only in connection
with the purchase or sale of foreign securities.
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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.
o 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.
Please refer to "Taxes - Returns of Capital."
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.
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<PAGE>
o Special Risks of Emerging Market Countries. Investments in emerging
market countries may involve further risks in addition to those identified above
for investments in foreign securities. Securities issued by emerging market
countries and by companies located in those countries may be subject to extended
settlement periods, whereby the Fund might not receive principal and/or income
on a timely basis and its net asset 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.
o 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.
o U.S. Debt Securities. The Fund's investments in U.S. debt
securities may include, but are not limited to, the following:
o 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").
o Commercial Paper. Commercial paper is short-term corporate
debt. The Fund's commercial paper investments may include variable
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amount master demand notes and floating rate or variable rate notes, described
in the Statement of Additional Information.
o 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 identify with its
custodian bank certain assets, which may consist of liquid assets of any type,
including equity securities and debt securities of any grade, in an amount equal
to its purchase payment obligation under the roll.
o 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.
o 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.
o 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
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participation interests of the same borrower.
o 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.
|X| 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 rises and their value will decline when
interest rates rise. 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.
|X| Special Risks of Lower-Grade Securities. High yield, lower-grade
securities, whether rated or unrated, often have speculative characteristics.
Lower-grade securities, often referred to as "junk bonds," 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
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other risk factors.
As of September 30, 1996, 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, 24.13%; AA, 4.04%; A, 2.58%; BBB,
3.81%; BB, 15.83%; B, 22.43%; and CCC, 0.06%. 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. Appendix A to this
Prospectus describes the rating categories.
o 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."
o 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
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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 securities 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.
|X| 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.
o 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.
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o 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 since the Fund pays interest on
borrowings and increased fluctuation in the Fund's net asset values per share.
Borrowing is subject to regulatory limits described in more detail in the
Statement of Additional Information. Under the Investment Company Act, the Fund
can borrow only if it maintains at least a 300% ratio of assets to borrowings at
all times.
|X| 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.
|X| 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 because they may be illiquid (See "Illiquid and Restricted Securities"
below.) 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.
o 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
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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 (the Board may
increase that limit to 15%). The Fund's percentage limitation on these
investments does not apply to certain restricted securities that are eligible
for resale to qualified institutional purchasers. The Manager monitors holdings
of illiquid securities on an ongoing basis and at times the Fund may be required
to sell some holdings to maintain adequate liquidity.
|X| 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.
o 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
does not prevent the Fund from buying or selling options and futures contracts
or from investing in securities or other instruments backed by physical
commodities.
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
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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.
o 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."
o 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, and
options and futures thereon, 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
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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. The Fund may purchase and sell foreign
currency in hedging transactions. It may also use certain kinds of hedging
instruments to try to manage its exposure to changing interest rates.
o 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.
o 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. 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. Up to 50% of the
Fund's total assets may be subject to calls.
The Fund may buy puts that relate to securities, Futures, or foreign
currencies. The Fund may buy a put on a 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
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exceed 5% of the Fund's total assets.
o 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.
o 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.
o 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.
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o 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:
o 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;
o 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
o 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.
Unless the prospectus states that a percentage restriction applies on
an ongoing basis, it applies only at the time that Fund makes an investment and
the Fund need not sell securities to meet the percentage limits if the value of
the investment increases in proportion to the size of the Fund. Other investment
restrictions are listed in "Investment Restrictions" 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
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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 will not normally hold annual
meetings of its shareholders, 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,
OppenheimerFunds, Inc., 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 advisor since 1959. The
Manager (including a subsidiary) currently manages investment companies,
including other Oppenheimer funds, with assets of more than $62 billion as of
December 31, 1996, and with more than 3 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.
o Portfolio Manager. The Portfolio Manager of the Fund is
Mr. Ashwin K. Vasan. He is a Vice President of the Fund and the
Manager and has been the person principally responsible for the
day-to-day management of the Fund's portfolio since June, 1995.
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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.
o 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 annual 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 average annual
net assets in excess of $1 billion. The Fund's management fee for its fiscal
year ended September 30, 1996, as restated to reflect the Manager's termination
of its voluntary expense assumption, was 0.75% of average annual net assets for
its Class A, Class B and Class C shares. Please refer to "Expenses."
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 advisor.
o The Distributor. The Fund's shares are sold through dealers, brokers
and other financial institutions that have a sales agreement with
OppenheimerFunds 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.
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<PAGE>
o The Transfer Agent. The Fund's transfer agent is OppenheimerFunds
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 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 mutual 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.
o 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.
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When total returns are quoted for Class A shares, normally the current
maximum initial sales charge has been deducted. When total returns are shown for
Class B shares, normally the contingent deferred sales charge that applies to
the period for which total return is shown has been deducted. 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. However, total returns may also
be quoted at net asset value, without considering the effect of either the
front-end or the appropriate contingent deferred sales charge, as applicable,
and those returns would be less if sales charges were deducted.
o 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.
How Has the Fund Performed? Below is a discussion by the Manager of the Fund's
performance during its last fiscal year ended September 30, 1996, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index and a secondary index.
o Managements' Discussion of Performance. During the Fund's fiscal year
ended September 30, 1996, the Fund's performance was affected positively by its
limited exposure to the Japanese government bond market and its emphasis on
positions in select emerging markets and Europe's higher yielding markets, which
both performed well in the third and fourth quarters. While continuing to
maintain an overweighted allocation in select emerging markets, the portfolio
manager began to restructure that exposure during the fourth quarter somewhat by
gradually reducing the amount of foreign bonds that are U.S. dollar denominated
in the portfolio. In the
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fourth quarter the portfolio manager also began to reduce the Funds' exposure to
the higher yielding European markets, specifically Italy, Spain, Sweden and
Portugal, taking profits in those investments which had increased in value as
the high yield markets rallied. The Fund's portfolio and its portfolio manager's
strategies are subject to change.
o Comparing the Fund's Performance to the Market. The charts below show
the performance of a hypothetical $10,000 investment in Class A, Class B and
Class C shares of the Fund held from the inception of the Fund on June 15, 1995
until September 30, 1996.
The performance of each class of the Fund's shares is compared to two
indices because the Fund invests in debt securities issued by governments in
both developed countries and emerging market countries and in debt securities
issued by companies located in those countries. In the Manager's view, no one
index adequately combines both types of investments.
Performance is compared to the Salomon Brothers Non-US Dollar World
Government Bond Index, a subset of the Salomon Brothers World Government Bond
Index. The Salomon Brothers Non-Us Dollar World Government Bond Index is a
market capitalization weighted benchmark that tracks the performance of 13
government bond markets including Australia, Canada, Japan and 10 European
countries. Thus, the Salomon Brothers Non-US Dollar World Government Bond Index
does not reflect the performance of the fixed income markets in either the
United States or in any emerging market countries. In addition, it is comprised
of only government bonds and does not reflect the performance of corporate
bonds.
Performance is also compared to the performance of the Salomon Brothers
Brady Bond Index which provides a total return benchmark for emerging market
country bonds. It is designed to be consistent with other Salomon Brothers
fixed-income indices to allow direct comparison of the developing country debt
market with other markets. A Brady Bond is a bond that is exchanged for debt or
new money within the context of the debt-restructuring program initiated in 1990
by the United States Department of the Treasury.
Index performance reflects the reinvestment of dividends' but does not
consider the effect of capital gains or transaction costs, and none of that data
below shows the effect of taxes. Moreover, the index performance data does not
reflect any assessment of the risk of the investments included in the index. The
Fund's
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<PAGE>
performance reflects the effect of the Fund's business and operating expenses.
While index comparisons may be useful to provide a benchmark for the Fund's
performance, it must be noted that the Fund's investments are not limited to the
securities in the indices shown.
Class A Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer International Bond Fund (Class A), Salomon Brothers
Non-US Dollar World Government Bond Index and Salomon Brothers
Brady Bond Index
[graph]
Average Annual Total Return of Class A Shares of the Fund at
9/30/96(1)
1 Year Life of Class
- -------------------------------------------------------------------
13.18% 14.40%
Class B Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer International Bond Fund (Class B), Salomon Brothers
Non-US Dollar World Government Bond Index and Salomon Brothers
Brady Bond Index
[graph]
Average Annual Total Return of Class B Shares of the Fund at
9/30/96(2)
1 Year Life of Class
- -------------------------------------------------------------------
12.71% 14.79%
Total returns and the ending account values in the graphs reflect change in
share value and include reinvestment of all dividends and capital gains
distributions. The performance information for the Salomon Brothers Non-US
Dollar World Government Index and the Salomon Brothers Brady bond Index in each
of the graphs begins on
June 30, 1995.
(1) The inception date of the Fund (Class A shares) was 6/15/95. Class A returns
and the ending account value in the graph are shown net of the applicable 4.75%
maximum initial sales charge. (2) Class B shares of the Fund were first publicly
offered on
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6/15/95. Returns are shown net of the applicable 5% and 4% contingent deferred
sales charge, respectively, for the one-year period and for the life-of-class.
The ending account value in the graph is net of the applicable 4% contingent
deferred sales charge. Past performance is not predicative of future
performance.
Class C Shares
Comparison of Change in Value of $10,000 Hypothetical Investments
in:
Oppenheimer International Bond Fund (Class C), Salomon Brothers
Non-US Dollar World Government Bond Index and Salomon Brothers
Brady Bond Index
[graph]
Average Annual Total Return of Class C Shares of the Fund at
9/30/96(3)
1 Year Life of Class
- -------------------------------------------------------------------
16.92% 17.75%
Total returns and the ending account values in the graphs reflect change in
share value and include reinvestment of all dividends and capital gains
distributions. The performance information for the Salomon Brothers Non-US
Dollar World Government Index and the Salomon Brothers Brady bond Index in each
of the graphs begins on
June 30, 1995.
(3) Class C shares of the Fund were first publicly offered on 6/15/95. The
return for the one year result is shown net of the applicable 1% contingent
deferred sales charge.
Past performance is not predicative of future performance. Graphs may not be
drawn to same scale.
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.
o Class A Shares. If you buy Class A shares, you pay an
initial sales charge on investments up to $1 million (up to
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$500,000 for purchases by "Retirement Plans," as defined in "Class A Contingent
Deferred Sales Charge" on page ____). If you purchase Class A shares as part of
an investment of at least $1 million ($500,000 for Retirement 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 charge rates are described in
"Buying Class A Shares," below.
o 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, as described in "Buying Class B
Shares," below.
o 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%, as
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
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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.
o 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.
o 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
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<PAGE>
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 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.
o 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 you should
analyze your options carefully.
o 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 as collateral
for a loan, that may be a factor to consider.
o 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
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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, profit-sharing and 401(k) 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.
o 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. The Distributor may appoint certain servicing agents as the
Distributor's agent to accept purchase (and redemption) orders. 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.
o Buying Shares Through Your Dealer. Your dealer will place
your order with the Distributor on your behalf.
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<PAGE>
o Buying Shares Through the Distributor. Complete an OppenheimerFunds
New Account Application and return it with a check payable to "OppenheimerFunds
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.
o 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.
o 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 in the Statement of Additional Information.
o 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 or its designated agent 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").
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<PAGE>
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.
o Class A Contingent Deferred Sales Charge. There is no
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<PAGE>
initial sales charge on purchases of Class A shares of any one or more of the
Oppenheimer funds in the following cases:
o Purchases aggregating $1 million or more.
o Purchases by a retirement plan qualified under section 401(a) if the
retirement plan has total plan assets of $500,000 or more.
o Purchases by a retirement plan qualified under sections 401(a) or
401(k) of the Internal Revenue Code, by a non-qualified deferred compensation
plan (not including Section 457 plans), employee benefit plan, group retirement
plan (see "How to Buy Shares - Retirement Plans" in the Statement of Additional
Information for further details), and employee's 403(b)(7) custodial plan
account, SEP IRA, SARSEP, or SIMPLE plan (all of these plans are collectively
referred to as "Retirement Plans"); 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.
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are
made (1) through a broker, dealer, bank or registered investment advisor that
has made special arrangements with the Distributor for these purchases, or (2)
by a direct rollover of a distribution from a qualified retirement plan if the
administrator of that plan has made special arrangements with the Distributor
for those purchases.
The Distributor pays dealers of record commissions on those purchases
in an amount equal to (i) 1.0% for non-Retirement Plan accounts, and (ii) for
Retirement Plan accounts, 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 that were not previously subject to a
front-end sales charge and dealer commission. No sales commission will be paid
to the dealer, broker or financial institution on sales of Class A shares
purchased with the redemption proceeds of shares of a mutual fund offered as an
investment option in a Retirement Plan in which Oppenheimer funds are also
offered as an investment option under a special arrangement with the Distributor
if the purchase occurs more that 30 days after the addition of the Oppenheimer
funds as an investment option to the Retirement Plan.
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<PAGE>
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 may be equal to 1.0% of the lesser of (1) the
aggregate net asset value of the redeemed shares (not including shares purchased
by reinvestment of dividends or capital gains distributions) or (2) the original
offering price (which is the original net asset value) of the redeemed shares.
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.
o 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.
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:
o 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.
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<PAGE>
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.
o 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.
o 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:
o the Manager or its affiliates;
o 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;
o registered management investment companies, or separate
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accounts of insurance companies having an agreement with the
Manager or the Distributor for that purpose;
o 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;
o 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);
o dealers, brokers or registered investment advisors 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 advisor for the purchase or sale of Fund shares);
o (1) investment advisors and financial planners who charge an
advisory, consulting or other fee for their services and buy shares for their
own accounts or the accounts of their clients, (2) Retirement Plans and deferred
compensation plans and trusts used to fund those Plans (including, for example,
plans qualified or created under sections 401(a), 403(b) or 457 of the Internal
Revenue Code), and "rabbi trusts" that buy shares for their own accounts, in
each case if those purchases are made through a broker or agent or other
financial intermediary that has made special arrangements with the Distributor
for those purchases; and (3) clients of such investment advisors or financial
planners who buy shares for their own accounts may also purchase shares without
sales charge but only if their accounts are linked to a master account of their
investment advisor or financial planner of the books and records of the broker,
agent or financial intermediary with which the Distributor has made such special
arrangements (each of these investors may be charged a fee by the broker, agent
or financial intermediary for purchasing shares).
o directors, trustees, officers or full-time employees of OpCap
Advisors or its Affiliates, their relatives or any trust, pension, profit
sharing or other benefit plan which beneficially
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owns shares for those persons;
o accounts for which Oppenheimer Capital is the investment advisor (the
Distributor must be advised of this arrangement) and persons who are directors
or trustees of the company or trust which is the beneficial owner of such
accounts;
o any unit investment trust that has entered into an
appropriate agreement with the Distributor;
o a TRAC-2000 401(k) plan (sponsored by the former Quest for Value
Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were
exchanged for Class A shares of that Fund due to the termination of the Class B
and Class C TRAC-2000 program on November 24, 1995; or
o qualified retirement plans that had agreed with the former Quest for
Value Advisors to purchase shares of any of the Former Quest for Value Funds at
net asset value, with such shares to be held through DCXchange, a sub-transfer
agency mutual fund clearinghouse, provided that such arrangements are
consummated and share purchases commence by December 31, 1996.
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:
o shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party;
o 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;
o 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;
o 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
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<PAGE>
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; or
o shares purchased with the proceeds of maturing principal of units of
any Qualified Unit Investment Liquid Trust Series.
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:
o to make Automatic Withdrawal Plan payments that are limited annually
to no more than 12% of the original account value;
o involuntary redemptions of shares by operation of law or involuntary
redemptions of small accounts (see "Shareholder Account Rules and Policies,"
below);
o 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);
o for distributions form TRAC-2000 401(k) plan sponsored by the
Distributor due to the termination of the TRAC-2000 program.
o for distributions from Retirement Plans, deferred compensation plans
or other employee benefit plans for any of the following purposes: (1) following
the 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) to return excess contributions; (3)
to return contributions made due to a mistake of fact;(4) hardship withdrawals,
as defined in the plan;(5) under a Qualified Domestic Relations Order, as
defined in the Internal Revenue Code: (6) to meet the minimum distribution
requirements of the Internal Revenue Code; (7) to establish "substantially equal
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periodic payments" as described in Section 72(t) of the Internal Revenue Code;
(8) for retirement distributions or loans to participants or beneficiaries; (9)
separation from service; (10) participant-directed redemptions to purchase
shares of mutual fund (other than a fund managed by the Manger or its
subsidiary) offered as an investment option in a Retirement Plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor; or (11) plan termination or "in- service
distributions", if the redemption proceeds are rolled over directly to an
OppenheimerFunds IRA.
o 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 service providers or
their 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
contingent deferred sales charge will be based on the lesser of the net asset
value of the shares at the time of redemption or the original offering price
(which is the original net asset value).
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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.
o 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
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B shareholders at that time 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.
o 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. This Plan is
described below under "Distribution and Service Plans for Class B and Class C
Shares."
o Waivers of Class B Sales Charge. The Class B contingent deferred
sales charge will not apply to share purchases in certain types of transactions,
nor will it apply to shares redeemed in certain circumstances, as described
below under "Waivers of Class B and Class C Sales Charges."
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 contingent deferred sales charge will be based on the lesser
of the net asset value of the redeemed shares at the time of redemption or the
original offering price (which is the original net asset value). 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.
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.
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<PAGE>
Distribution and Service Plans for Class B and Class C Shares. The Fund has
adopted Distribution and Service Plans for Class B and Class C shares to
compensate the Distributor for distributing Class B and Class C shares and
servicing accounts. Under the Plans, 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 and on Class C shares. The Distributor also
receives a service fee of 0.25% per year under each plan.
Under each Plan, both fees are computed on the average of the net asset
value of shares in the respective class, determined as of the close of each
regular business day during the period. The asset-based sales charge and service
fees increase Class B and Class C expenses by up to 1.00% of the net assets per
year of the respective class.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class C shares.
Those services are similar to those provided under the Class A Service Plan,
described above. The Distributor pays the 0.25% service fees to dealers in
advance for the first year after Class B or Class C shares have been sold by the
dealer and retains the service fee paid by the Fund in that year. After the
shares have been held for a year, the Distributor pays the service fees to
dealers on a quarterly basis.
The Distributor currently pays sales commissions of 3.75% of the
purchase price of Class B shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class B shares is 4.00% of the
purchase price. 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.
The Distributor currently pays sales commissions of 0.75% of
the purchase price to dealers from its own resources at the time of
sale of Class C shares. Including the advance of the service fee,
the total amount paid by the Distributor to the dealer at the time
of sale of Class C shares is 1.00% of the purchase price. The
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<PAGE>
Distributor retains the asset-based sales charge during the first year Class C
shares are outstanding to recoup sales commissions it has paid, the advances of
service fee payments it has made, and its financing costs and other expenses.
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.
Because the Distributor's actual expenses in selling Class B and Class
C shares may be more than the payments it receives from contingent deferred
sales charges collected on redeemed shares and from the Fund under the
Distribution and Service Plans for Class B and Class C shares, those expenses
may be carried over and paid in future years. 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 certain expenses it incurred
before the plan was terminated.
At September 30, 1996, the end of the Class B Plan year, the
Distributor had incurred unreimbursed expenses under the Plan of $1,331,917
(equal to 2.95% of the Fund's net assets represented by Class B shares on that
date) which have been carried over into the present Plan year. At September 30,
1996, the end of the Class C Plan year, the Distributor had incurred
unreimbursed expenses under the Plan of $119,763 (equal to 1.16% of the Fund's
net assets represented by Class C shares on that date) which have been carried
over into the present Plan year.
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 Class B and Class C shares redeemed in
certain circumstances as described below. The reasons for this policy are
described 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 if the Transfer Agent is notified that these conditions
apply to the redemption:
o 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
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<PAGE>
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);
o redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder, including a trustee of a
"grantor" trust or revocable living trust for which the trustee is also the sole
beneficiary (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);
o returns of excess contributions to Retirement Plans;
o distributions from Retirement Plans to make "substantially equal
periodic payments" as permitted in Section 72(t) of the Internal Revenue Code
that do not exceed 10% of the account value annually, measured from the date the
Transfer Agent receives the request); or
o 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 in
the following cases:
o shares sold to the Manager or its affiliates;
o 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;
o shares issued in plans of reorganization to which the Fund
is a party; and
o shares redeemed in involuntary redemptions as described
below.
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<PAGE>
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 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.
o 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.
o 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.
o 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.
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<PAGE>
o 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.
o 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:
o 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 Statement of Additional Information for more
details.
o 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.
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<PAGE>
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:
o Individual Retirement Accounts including rollover IRAs, for
individuals and their spouses
o 403(b)(7) Custodial Plans for employees of eligible tax-exempt
organizations, such as schools, hospitals and charitable organizations
o SEP-IRAs (Simplified Employee Pension Plans) for small business
owners or people with income from self-employment, including SARSEP-IRAs
o Pension and Profit-Sharing Plans for self-employed persons
and other employers
o 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.
o 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.
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<PAGE>
o 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):
o You wish to redeem more than $50,000 worth of shares and
receive a check
o The redemption check is not payable to all shareholders
listed on the account statement
o The redemption check is not sent to the address of record
on your account statement
o Shares are being transferred to a Fund account with a
different owner or name
o Shares are redeemed by someone other than the owners (such
as an Executor)
o 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:
o Your name
o The Fund's name
o Your Fund account number (from your account statement) o The dollar
amount or number of shares to be redeemed o Any special payment
instructions o Any share certificates for the shares you are selling o
The signatures of all registered owners exactly as the
account is registered, and
o Any special requirements or documents requested by the Transfer Agent
to assure proper authorization of the person asking to sell shares.
Use the following address for Send courier or Express Mail
requests to: requests by mail:
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<PAGE>
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver, Colorado 80217 Denver, Colorado 80231
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.
o To redeem shares through a service representative, call
1-800-852-8457
o 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.
o 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.
o 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.
o Checks can be written to the order of whomever you wish,
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<PAGE>
but may not be cashed at the Fund's bank or custodian.
o 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.
o Checks must be written for at least $100.
o 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.
o 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.
o 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 call your dealer for more
information about this procedure. 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:
o Shares of the fund selected for exchange must be available
for sale in your state of residence
o The prospectuses of this Fund and the fund whose shares you
want to buy must offer the exchange privilege
o 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
o You must meet the minimum purchase requirements for the
fund you purchase by exchange
o Before exchanging into a fund, you should obtain and read
its prospectus
Shares of a particular class of the Fund 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
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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:
o 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."
o 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:
o 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.
o 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.
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o 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.
o 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.
o 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
o 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.
o 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.
o 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.
o The Transfer Agent will record any telephone calls to
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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.
o 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.
o 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.
o 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.
o 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
-58-
<PAGE>
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.
o 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.
o 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.
o "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.
o 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.
o 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
-59-
<PAGE>
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.
During the Fund's fiscal year ended June 30, 1996, the Fund's practice of
attempting to pay dividends on Class A shares at a constant level did not have
any impact on the Fund's investment strategies or its 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
-60-
<PAGE>
OppenheimerFunds retirement accounts, all distributions are reinvested. For
other accounts, you have four options:
o 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.
o 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.
o 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.
o 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.
o "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.
o 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.
o 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
-61-
<PAGE>
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 advisor
about the effect of an investment in the Fund on your particular tax situation.
-62-
<PAGE>
APPENDIX TO PROSPECTUS OF
OPPENHEIMER INTERNATIONAL BOND FUND
Graphic material included in Prospectus of Oppenheimer
International Bond Fund: "Comparison of Total Return of Oppenheimer
International Bond Fund, the Salomon Brothers Non-US Dollar World
Government Bond Inde and the Salomon Brothers Brady Bond Index - Change in
Value of a $10,000 Hypothetical Investment"
Linear graphs will be included in the Prospectus of Oppenheimer
International Bond Fund (the "Fund") depicting the initial account value and
subsequent account value of a hypothetical $10,000 in the Fund. In each
respective case of the Fund's Class A, Class B and Class C shares, the graphs
will cover the period since the Fund's inception on June 15, 1995 through
September 30, 1996. The graphs will compare such values with the same
investments over the time periods which are similar but not identical with the
Salomon Brothers Non-US Dollar World Government Bond Index and the Salomon
Brothers Brady Bond Index. In each instance the index comparison begins on
June 30, 1995. Set forth below are the relevant data points that will appear
on the linear graphs. Additional information with respect to the
foregoing, including a description of the Salomon Brothers Non-US
Dollar World Government Bond Index, is set forth in the Prospectus under
"Performance of the Fund -- Comparing the Fund's Performance to the Market"
<TABLE>
<CAPTION>
Oppenheimer Salomon Brothers Salomon Brothers
Fiscal Year International Bond Non-US Dollar World Brady Bond
(Period) Ended Fund A Government Bond Index Index
<S> <C> <C> <C>
- --------------- ------------------- ------------------------ -------------------
06/15/95 9,525 10,000 10,000
09/30/95 10,014 9,758 10,666
09/30/96 11,898 10,152 14,676
Oppenheimer Salomon Brothers Salomon Brothers
Fiscal Year International Bond Non-US Dollar World Brady Bond
(Period) Ended Fund B Government Bond Index Index
- --------------- ------------------- ------------------------ -------------------
06/15/95 10,000 10,000 10,000
09/30/95 10,492 9,758 10,666
09/30/96 11,950 10,152 14,676
Oppenheimer Salomon Brothers Salomon Brothers
Fiscal Year International Bond Non-US Dollar World Brady Bond
(Period) Ended Fund C Government Bond Index Index
- --------------- ------------------- ------------------------ --------------------
06/15/95 10,000 10,000 10,000
09/15/95 10,473 9,758 10,666
09/30/96 12,350 10,152 14,676
</TABLE>
-63-
<PAGE>
Appendix A
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
A-1
<PAGE>
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."
A-2
<PAGE>
Bonds rated "D" are in default and payment of interest and/or repayment of
principal is in arrears.
A-3
<PAGE>
APPENDIX B
Special Sales Charge Arrangements for Shareholders of the Fund
Who Were Shareholders of the Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares of the Fund described elsewhere in this Prospectus
are modified as described below for those shareholders of (i) Quest for Value
Fund, Inc., Quest for Value Growth and Income Fund, Quest for Value Opportunity
Fund, Quest for Value Small Capitalization Fund and Quest for Value Global
Equity Fund, Inc. on November 24, 1995, when OppenheimerFunds, Inc. became the
investment advisor to those funds, and (ii) Quest for Value U.S. Government
Income Fund, Quest for Value Investment Quality Income Fund, Quest for Value
Global Income Fund, Quest for Value New York Tax-Exempt Fund, Quest for Value
National Tax-Exempt Fund and Quest for Value California Tax- Exempt Fund when
those funds merged into various Oppenheimer funds on November 24, 1995. The
funds listed above are referred to in this Prospectus as the "Former Quest for
Value Funds." The waivers of initial and contingent deferred sales charges
described in this Appendix apply to shares of the Fund (i) acquired by such
shareholder pursuant to an exchange of shares of one of the Oppenheimer funds
that was one of the Former Quest for Value Funds or (ii) received by such
shareholder pursuant to the merger of any of the Former Quest for Value Funds
into an Oppenheimer fund on November 24, 1995.
Class A Sales Charges
o Reduced Class A Initial Sales Charge Rates for Certain
Former Quest Shareholders
o Purchases by Groups, Associations and Certain Qualified Retirement
Plans. The following table sets forth the initial sales charge rates for Class A
shares purchased by a "Qualified Retirement Plan" through a single broker,
dealer or financial institution, or by members of "Associations" formed for any
purpose other than the purchase of securities if that Qualified Retirement Plan
or that Association purchased shares of any of the Former Quest for Value Funds
or received a proposal to purchase such shares from OCC Distributors prior to
November 24, 1995. For this purpose only, a "Qualified Retirement Plan" includes
any 401(k)
B-1
<PAGE>
plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a
single employer.
<TABLE>
<CAPTION>
Front-End Front-End
Sales Sales Commission
Charge Charge as
as a as a Percentage
Number of Percentage Percentage of
Eligible Employees of Offering of Amount Offering
or Members Price Invested Price
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- -------------------------------------------------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
- --------------------------------------------------------------------------------------------------------
</TABLE>
For purchases by Qualified Retirement plans and Associations having 50
or more eligible employees or members, there is no initial sales charge on
purchases of Class A shares, but those shares are subject to the Class A
contingent deferred sales charge described on pages ___ to ___ of this
Prospectus.
Purchases made under this arrangement qualify for the lower of the
sales charge rate in the table based on the number of eligible employees in a
Qualified Retirement Plan or members of an Association or the sales charge rate
that applies under the Rights of Accumulation described above in the Prospectus.
In addition, purchases by 401(k) plans that are Qualified Retirement Plans
qualify for the waiver of the Class A initial sales charge if they qualified to
purchase shares of any of the Former Quest For Value Funds by virtue of
projected contributions or investments of $1 million or more each year.
Individuals who qualify under this arrangement for reduced sales charge rates as
members of Associations, or as eligible employees in Qualified Retirement Plans
also may purchase shares for their individual or custodial accounts at these
reduced sales charge rates, upon request to the Fund's Distributor.
o Special Class A Contingent Deferred Sales Charge Rates
Class A shares of the Fund issued in the reorganization on November 24, 1995 for
shares of Quest For Value Investment Quality Income Fund that were subject to a
contingent deferred sales charge, will be subject to a contingent deferred sales
charge at the following rates: if they are redeemed within 18 months of the end
of the
B-2
<PAGE>
calendar month in which they were purchased, at a rate equal to 1.0% if the
redemption occurs within 12 months of their initial purchase and at a rate of
0.50 of 1.0% if the redemption occurs in the subsequent six months. This
contingent deferred sales charge rate also applies to shares of the Fund
purchased by exchange of shares of other Oppenheimer funds that were acquired as
a result of the merger of Former Quest for Value Funds into those Oppenheimer
funds, and which shares were subject to a Class A contingent deferred sales
charge prior to November 24, 1995. Class A shares of any of the Former Quest for
Value Funds purchased without an initial sales charge on or before November 22,
1995 will continue to be subject to the applicable contingent deferred sales
charge in effect as of that date as set forth in the then-current prospectus for
such fund.
o Waiver of Class A Sales Charges for Certain Shareholders
Class A shares of the Fund purchased by the following investors are not subject
to any Class A initial or contingent deferred sales charges:
o Shareholders of the Fund who were shareholders of the AMA Family of
Funds on February 28, 1991 and who acquired shares of any of the Former Quest
for Value Funds by merger of a portfolio of the AMA Family of Funds.
o Shareholders of the Fund who acquired shares of any Former Quest for
Value Fund by merger of any of the portfolios of the Unified Funds.
o Waiver of Class A Contingent Deferred Sales Charge in
Certain Transactions
The Class A contingent deferred sales charge will not apply to redemptions of
Class A shares of the Fund purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
o Investors who purchased Class A shares from a dealer that is or was
not permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship under the Employee Retirement
Income Security Act of 1974 and regulations adopted under that law.
o Participants in Qualified Retirement Plans that purchased
B-3
<PAGE>
shares of any of the Former Quest For Value Funds pursuant to a special
"strategic alliance" with the distributor of those funds. The Fund's Distributor
will pay a commission to the dealer for purchases of Fund shares as described
above in "Class A Contingent Deferred Sales Charge."
Class A, Class B and Class C Contingent Deferred Sales Charge
Waivers
o Waivers for Redemptions of Shares Purchased Prior to March
6, 1995
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, B or C shares of the Fund acquired by merger of a Former
Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that
was a Former Quest for Value Fund or into which such fund merged, if those
shares were purchased prior to March 6, 1995: in connection with (i)
distributions to participants or beneficiaries of plans qualified under Section
401(a) of the Internal Revenue Code or from custodial accounts under Section
403(b)(7) of the Code, Individual Retirement Accounts, deferred compensation
plans under Section 457 of the Code, and other employee benefit plans, and
returns of excess contributions made to each type of plan, (ii) withdrawals
under an automatic withdrawal plan holding only either Class B or C shares if
the annual withdrawal does not exceed 10% of the initial value of the account,
and (iii) liquidation of a shareholder's account if the aggregate net asset
value of shares held in the account is less than the required minimum value of
such accounts.
o Waivers for Redemptions of Shares Purchased on or After
March 6, 1995 but Prior to November 24, 1995.
In the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, B or C shares of the Fund acquired by merger of a Former
Quest for Value Fund into the Fund or by exchange from an Oppenheimer fund that
was a Former Quest For Value Fund or into which such fund merged, if those
shares were purchased on or after March 6, 1995, but prior to November 24, 1995:
(1) distributions to participants or beneficiaries from Individual Retirement
Accounts under Section 408(a) of the Internal Revenue Code or retirement plans
under Section 401(a), 401(k), 403(b) and 457 of the Code, if those distributions
are made either (a) to an individual participant as a result of separation from
B-4
<PAGE>
service or (b) following the death or disability (as defined in the Code) of the
participant or beneficiary; (2) returns of excess contributions to such
retirement plans; (3) redemptions other than from retirement plans following the
death or disability of the shareholder(s) (as evidenced by a determination of
total disability by the U.S. Social Security Administration); (4) withdrawals
under an automatic withdrawal plan (but only for Class B or C shares) where the
annual withdrawals do not exceed 10% of the initial value of the account; and
(5) liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum account value. A
shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, B or C shares of
the Fund described in this section if within 90 days after that redemption, the
proceeds are invested in the same Class of shares in this Fund or another
Oppenheimer fund.
Special Dealer Arrangements
Dealers who sold Class B shares of a Former Quest for Value Fund to Quest for
Value prototype 401(k) plans that were maintained on the TRAC-2000 recordkeeping
system and that were transferred to an OppenheimerFunds prototype 401(k) plan
shall be eligible for an additional one-time payment by the Distributor of 1% of
the value of the plan assets transferred, but that payment may not exceed $5,000
as to any one plan.
Dealers who sold Class C shares of a Former Quest for Value Fund to
Quest for Value prototype 401(k) plans that were maintained on the TRAC-2000
recordkeeping system and (i) the shares held by those plans were exchanged for
Class A shares, or (ii) the plan assets were transferred to an OppenheimerFunds
prototype 401(k) plan, shall be eligible for an additional one-time payment by
the Distributor of 1% of the value of the plan assets transferred, but that
payment may not exceed $5,000.
B-5
<PAGE>
Oppenheimer International Bond Fund
6803 South Tucson Way
Englewood, Colorado 80112
1-800-525-7048
Investment Advisor
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer Agent
OppenheimerFunds 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, OppenheimerFunds, Inc., OppenheimerFunds
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.
PR0880.001.0197 *Printed on Recycled Paper
<PAGE>
Oppenheimer International Bond Fund
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated February 1, 1997
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated February 1, 1997. It should be read together
with the Prospectus, which may be obtained by writing to the Fund's Transfer
Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217 or by
calling the Transfer Agent at the toll-free number shown above.
CONTENTS Page
About the Fund
Investment Objectives and Policies............................................2
Investment Policies and Strategies.......................................2
Other Investment Techniques and Strategies..............................11
Other Investment Restrictions...........................................24
How the Fund is Managed......................................................26
Organization and History................................................26
Trustees and Officers of the Fund.......................................26
The Manager and Its Affiliates..........................................31
Brokerage Policies of the Fund...............................................32
Performance of the Fund......................................................34
Distribution and Service Plans...............................................39
About Your Account
How To Buy Shares............................................................42
How To Sell Shares...........................................................50
How To Exchange Shares.......................................................54
Dividends, Capital Gains and Taxes...........................................57
Additional Information About the Fund........................................58
Financial Information About the Fund
Independent Auditors' Report.................................................60
Financial Statements.........................................................61
Appendix A: Corporate Industry Classifications.............................A-1
<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, OppenheimerFunds, Inc. (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."
o 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 only on a U.S. securities exchange, or
are traded only 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
-2-
<PAGE>
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
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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.
o 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).
o 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.
o 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.
o 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.
o U.S. Treasury Obligations. These include Treasury Bills (which
have maturities of one year or less when issued), Treasury Notes (which have
maturities of one to ten years when issued)
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and Treasury Bonds (which have maturities generally greater than ten years when
issued). U.S. Treasury obligations are backed by the full faith and credit of
the United States.
o 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").
(1) 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.
(2) 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
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interest and principal on FNMA Certificates. The FNMA guarantee is not backed
by the full faith and credit of the U.S. Government.
(3) 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.
(4) 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 identify with its Custodian certain assets which may consist
of liquid securities of any type, including equity securities and debt
securities of any grade
o Commercial Paper. The Fund's commercial paper investments include
the following:
(1) 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
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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.
(2) 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.
o 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.
(1) 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
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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.
(2) 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
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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.
o 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.
o 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.
o 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
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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.
o 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.
o Equity Securities. Additional information about some of the types
of equity securities the Fund may invest in is provided below.
o 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.
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o 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.
o 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
o 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.
o 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
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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 identify with its
Custodian certain assets, which may consist of liquid assets of any type,
including equity securities and debt securities of any grade, in an amount 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.
o 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
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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.
o 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.
o 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.
o 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
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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 objectives, legally
permissible and adequately disclosed.
o 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.
o Writing Put Options. A put option on securities gives the
purchaser the right to sell, and
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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.
o 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
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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
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<PAGE>
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.
o 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 identifying with its Custodian, certain assets which may consist
of liquid securities of any type including equity securities and debt securities
of any grade in an amount equal to the exercise price of the option.
o 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
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clearinghouse associated with the exchange on which the contracts are traded.
o 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.
o 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 enter into a Forward Contract to "lock in" the U.S. dollar price of
a security denominated in a foreign currency which it has purchased or sold but
which has not yet settled, or to protect against a possible loss resulting from
an adverse change in the relationship between the U.S. dollar and a foreign
currency.
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 also enter into a forward contract to sell a foreign
currency other than that in which the underlying security is denominated. This
technique is referred to as "cross hedging," and is done when the foreign
currency sold through the forward contract is correlated with the foreign
currency or currencies in which the underlying security positions are
denominated. The foreign currency sold through the forward contract may be sold
for a fixed U.S. dollar amount or for a fixed amount of another currency
correlated with the U.S. dollar.
The success of cross hedging is dependent on many factors, including
the ability of the Manager to correctly identify and monitor the correlation
among foreign currencies and between foreign currencies and the U.S. dollar. To
the extent that these correlations are not identical, the Fund may experience
losses or gains on both the underlying security and the cross currency hedge.
However, the Manager shall determine that any cross hedge is a bona fide hedge
in that it is expected to reduce the volatility of the Fund's total return.
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
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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 value of
portfolio positions ("position hedges"). In a position hedge, for example, when
the Fund believes that a foreign currency in which the Fund has security
holdings may suffer a substantial decline against the U.S. dollar, the Fund may
enter into a forward sale contract to sell an amount of that foreign currency
for a fixed U.S. dollar amount. Additionally, 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
U.S. dollar amount.
The Fund may also cross hedge its portfolio positions by entering into
a forward contract to buy or sell a foreign currency other than the currency in
which its underlying securities are denominated for a fixed amount in U.S.
dollars or a fixed amount in another currency which is correlated with the U.S.
dollar. If the Fund does not own portfolio securities denominated in the
currency on the long side of the cross hedge, the Fund will not be required to
later purchase portfolio securities denominated in that currency. Instead, the
Fund may unwind the cross hedge by reversing the original transaction, that is,
by transacting in a forward contract that is opposite to the original cross
hedge or it may extend the hedge by "rolling" the hedge forward.
The Fund's Custodian will identify with its Custodian certain assets,
which may consist of liquid assets of any type, including equity securities and
debt securities of any grade, having a value equal to the aggregate amount of
the Fund's commitment under Forward Contracts to cover its short positions. 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 another
currency that is also the subject of the hedge. 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 these currencies provided the excess amount is
"covered" by liquid 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
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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. Such
contracts are not traded on an exchange. Therefore, 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.
o 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 identify with its custodian certain
assets, which may consist of liquid assets of any type, including equity
securities and debt securities of any grade, to cover any amounts it could owe
under swaps that exceed the amounts it is entitled to receive, and it will
adjust that amount daily, as needed. 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
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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."
o 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
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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.
o 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 a 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 initial 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. Under the Rule,
the Fund also must use short futures and options on futures positions solely for
bona fide hedging purposes within the meaning and intent of the applicable
provisions of the Commodity Exchange Act.
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 identify with its Custodian certain
assets, which may consist of liquid assets of any type, including equity
securities and debt securities of any grade, 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.
o 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
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<PAGE>
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 and timing of gains (or losses) recognized 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.
o 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
-23-
<PAGE>
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.
o 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
-24-
<PAGE>
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:
o 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;
o buy securities on margin, except that the Fund may make margin
deposits in connection with any of the Hedging Instruments which it may use;
o 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;
o 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;
o invest in oil, gas, or other mineral exploration or development
programs or leases; or
o 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.
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<PAGE>
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 during the past five years are
set forth below. All of the Trustees are also Trustees, Directors or Managing
General Partners of Centennial America Fund, L.P., Centennial California Tax
Exempt Trust, Centennial Government Trust, Centennial Money Market Trust,
Centennial New York Tax Exempt Trust, Centennial Tax Exempt Trust, Daily Cash
Accumulation Fund, Inc., Oppenheimer Cash Reserves, Oppenheimer Champion Income
Fund, Oppenheimer Equity Income Fund, Oppenheimer Limited-Term Government Fund,
Oppenheimer Integrity Funds, Oppenheimer High Yield Fund, Oppenheimer Main
Street Funds, Inc., Oppenheimer Strategic Income Fund, Oppenheimer Strategic
Income & Growth Fund, Oppenheimer Municipal Fund, Oppenheimer Total Return Fund,
Inc., Oppenheimer Variable Account Funds, Panorama Series Fund, Inc. and The New
York Tax-Exempt Income Fund, Inc., (the "Denver-based Oppenheimer funds"),
except for Mr. Fossel and Ms. Macaskill who are not Trustees or Directors of
Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund, Oppenheimer
Variable Account Funds and Panorama Series Fund, Inc. Mr. Fossel also is not a
trustee of Centennial New
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<PAGE>
York Tax Exempt Trust and he is not a Managing General Partner of Centennial
America Fund, L.P. Ms. Macaskill is President and Mr. Swain is Chairman of the
Denver-based Oppenheimer funds. Messrs. Bishop, Bowen, Donohue, Farrar and Zack
hold similar positions as officers of all such funds. As of December 31, 1996,
the Trustees and officers of the Fund as a group owned of record or beneficially
less than 1% of each class of shares of the Fund. The foregoing statement does
not reflect ownership of shares held of record by an employee benefit plan for
employees of the Manager (for which plan two of the officers listed below, Ms.
Macaskill and Mr. Donohue, are trustees), other than the shares beneficially
owned under that plan by the officers of the Fund listed below.
ROBERT G. AVIS, Trustee*; Age 65
One North Jefferson Avenue, 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 advisor and trust company,
respectively).
WILLIAM A. BAKER, Trustee; Age 81
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
CHARLES CONRAD, JR., Trustee; Age 66
1501 Quail Street, Newport Beach, California 92660
Chairman and Chief Executive Officer of Universal Space Lines, Inc. (A space
services management company); formerly, Vice President of McDonnell Douglas
Space Systems Co. and associated with National Aeronautics and Space
Administration.
JON S. FOSSEL, Trustee*; Age 54
Box 44 Mead Street, Waccabuc, New York 10597
Member of the Board of Governors of the Investment Company Institute (a national
trade association of investment companies), Chairman of the Investment Company
Institute Education Foundation; Formerly Chairman and a director of the Manager;
formerly President and a director of Oppenheimer Acquisition Corp.("OAC"), OFI's
parent holding company; formerly a director of Shareholder Services, Inc.
("SSI") and Shareholder Financial Services, Inc. ("SFSI"), transfer agent
subsidiaries of OFI.
SAM FREEDMAN, Trustee; Age 56
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly, Chairman and Chief Executive Officer of OppenheimerFunds Services (a
transfer agent); Chairman, Chief Executive Officer and a director of SSI;
Chairman, Chief Executive Officer and director of SFSI; Vice President and a
director of OAC and a director of the Manager.
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<PAGE>
RAYMOND J. KALINOWSKI, Trustee; Age 67
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc.(a computer products training
company), 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 75
2552 E. Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
ROBERT M. KIRCHNER, Trustee; Age 75
7500 East Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
BRIDGET A. MACASKILL, President and Trustee*; Age 48
Two World Trade Center, New York, New York 10048-0203
President, Chief Executive Officer and a director of the Manager and HarbourView
Asset Management Corporation ("HarbourView"), a subsidiary of the Manager;
Chairman and a director of SSI and SFSI; President and a director of OAC and
Oppenheimer Partnership Holdings Inc., a holding company subsidiary of the
Manager; a director of Oppenheimer Real Asset Management, Inc. ("Real Asset");
formerly an Executive Vice President of the Manager.
NED M. STEEL, Trustee; Age 81
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 the
Van Gilder Insurance Corp. (insurance brokers).
JAMES C. SWAIN, Chairman, Chief Executive Officer and Trustee*; Age 63 6803
South Tucson Way, Englewood, Colorado 80112 Vice Chairman of the Manager;
formerly President and a director of Centennial Management Corporation, an
investment advisor subsidiary of the Manager ("Centennial") and formerly
Chairman of the Board of SSI.
ANDREW J. DONOHUE, Vice President and Secretary; Age 46
Two World Trade Center, New York, New York 10048-0203
Executive Vice President and General Counsel of the Manager and OppenheimerFunds
Distributor, Inc. (the "Distributor"); President and a director of Centennial;
Executive Vice President, General Counsel and a director of HarbourView, SFSI,
SSI and Oppenheimer Partnership Holdings Inc.; President and a director of Real
Asset; General Counsel of OAC; Executive Vice President, Chief Legal Officer and
a director of MultiSource Services, Inc. (A broker-dealer); an officer of other
Oppenheimer funds; formerly Senior Vice President and Associate General Counsel
of the Manager and the Distributor; 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
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<PAGE>
investment advisor); director and an officer of First Investors Family of Funds
and First Investors Life Insurance Company.
GEORGE C. BOWEN, Vice President, Treasurer and Assistant Secretary; Age 60
6803 South Tucson Way, Englewood, Colorado 80112
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; Treasurer of OAC; Vice President and Treasurer of Real Asset;
Chief Executive Officer, Treasurer and a director of MultiSource Services, Inc.;
an officer of other Oppenheimer funds.
ASHWIN VASAN, Vice President and Portfolio Manager; Age 34
Two World Trade Center, New York, New York 10048-0203
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.
ROBERT G. ZACK, Assistant Secretary; Age 48
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 38
6803 South Tucson Way, Englewood, Colorado 80112
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 T. FARRAR, Assistant Treasurer; Age 31
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting; an officer of other
Oppenheimer funds; formerly a Fund Controller for the Manager.
- ---------------------
*A Trustee who is an "interested person" of the Fund as defined in the
Investment Company Act.
o Remuneration of Trustees. The officers of the Fund and certain
Trustees of the Fund (Ms. Macaskill and Mr. Swain) who are affiliated with the
Manager receive no salary or fees from the Fund. Mr. Fossel did not receive any
salary or fees from the Fund prior to January 1, 1997. The remaining Trustees of
the Fund received the compensation shown below from the Fund. Mr. Freedman
became a Trustee June 27, 1996, and received no compensation from the Fund
before that date. The compensation from the Fund was paid during its fiscal year
ended September 30, 1996. The compensation from all of the Denver-based
Oppenheimer funds includes the Fund and is compensation received as a director,
trustee, managing general partner or member of a committee
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<PAGE>
of the Board of those funds during the calendar year 1996.
<TABLE>
<CAPTION>
Total
Aggregate Compensation
Compensation From All
From the Denver-based
Name and Position Fund OppenheimerFunds1
- ------------------------ -------------- ------------------
<S> <C> <C>
Robert G. Avis, Trustee $217 $58,003
William A. Baker, Audit $297 $79,715
and Review Committee
Chairman and Trustee
Charles Conrad, Jr., Audit $280 $74,717
and Review Committee
Member and Trustee
Sam Freedman,
Trustee $110 $29,502
Raymond J. Kalinowski,
Risk Management Oversight
Committee Member
and Trustee $278 $74,173
C. Howard Kast, Risk
Management Oversight
Committee Member
and Trustee $278 $74,173
Robert M. Kirchner, Audit $280 $74,717
and Review Committee
Member and Trustee
Ned M. Steel, Trustee $217 $58,003
- ----------------
1 For the 1996 calendar year.
</TABLE>
o Major Shareholders. As of December 31, 1996, 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: (1) Merrill Lynch Pierce Fenner &
Smith Inc., 4800 Deer Lake Drive East, 3rd
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<PAGE>
Floor, Jacksonville, Florida 32246-6483, which was the record owner of
674,758,000 class B shares (equal to 5.15% of the Class B shares then
outstanding) and 644,347,000 Class C shares (equal to 21.65% of the Class C
shares then outstanding) and (ii) Bank of Boston Trust IRA FBO Blaise P. Aluise,
50 Greenock Road, Delmar, New York 12054-3527, which was the record owner of
173,327.218 Class C shares (equal to 5.95% of the Class C shares then
outstanding).
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
one of whom Mr. Swain serves as a Trustee 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.
o 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 year ended September 30, 1996, the management fees paid by
the Fund to the Manager totaled $311,128. For the fiscal period from inception
(June 13, 1995) through September 30, 1995, the management fees paid by the Fund
to the Manager totaled $8,252. As a result of voluntary expense assumption by
the Manager, independent of the advisory agreement, which remained in effect
from the inception of the Fund (June 15, 1995) through September 19, 1996, the
management fees payable to the Manager were reduced during the following periods
in the following amounts: during the period from inception of the Fund ( June
15, 1995) through September 30, 1995, $13,764; and during the fiscal year ended
September 30, 1996, $41,927.
The Investment Advisory Agreement contains no expense limitation.
However, because of state regulations limiting fund expenses that previously
applied, the Manager had voluntarily undertaken that the Fund's total expenses
in any fiscal year (including the investment advisory fee but exclusive of
taxes, interest, brokerage commissions, distribution plan payments and any
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<PAGE>
extraordinary non-recurring expenses, including litigation) would not exceed the
most stringent state regulatory limitation applicable to the Fund. Due to
changes in federal securities laws, such state regulations no longer apply and
the Manager's undertaking is therefore inapplicable and has been withdrawn.
During the Fund's last fiscal year, the Fund's expenses did not exceed the most
stringent state regulatory limit and the voluntary undertaking was not invoked.
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.
o 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 and its fiscal year ended
September 30, 1996, the aggregate amount of sales charge on sales of the Fund's
Class A shares was $38,181 and $455,830 respectively, of which the Distributor
and an affiliated broker-dealer retained $11,736 and $126,085, in those
respective periods. During the Fund's fiscal year ended September 30, 1996, the
contingent deferred sales charge collected on the Fund's Class B shares totaled
$32,060, all of which the Distributor retained. During the fiscal year ended
September 30, 1996, sales charges advanced to broker/dealers by the Distributor
on sales of the Fund's Class B shares totaled $1,115,490, of which $26,260 was
paid to an affiliated broker/dealer. During the fiscal year ended September 30,
1996, the contingent deferred sales charge collected on Class C shares totaled
$3,260, all of which the Distributor retained. During the fiscal year ended
September 30, 1996, sales charge advanced to broker/dealers by the Distributor
on sales of the Fund's Class C shares totaled $77, 326, of which $1,600 was paid
to an affiliated broker/dealer. 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.
o The Transfer Agent. OppenheimerFunds 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
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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
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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 also permits 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 Manager provides information to
the Board of Trustees on an annual basis relating to the commissions paid to
brokers for such services, together with the Manager's assessment of the
reasonableness of such commissions in relation to the value or benefit of such
services.
During the Fund's fiscal period ended September 30, 1995 and the Fund's fiscal
year ended September 30, 1996, total brokerage commissions paid by the Fund (not
including spreads or concessions on principal transactions on a net trade basis)
were $63 and $976, respectively.
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
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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.
o Standardized Yields.
o 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, 1996, the
standardized yields for the Fund's Class A, Class B and Class C shares were
8.27%, 7.89% and 7.90%, respectively.
o 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
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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, 1996 were 9.67% and 10.14% 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, 1996 were 9.41% and 9.43%, respectively, when calculated at net
asset value.
o Total Return Information.
o 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:
( ERV ) 1/n
(-----) -1 = Average Annual Total Return
( P )
o 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
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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 shares of
the Fund (using the method described above) for the one year period ended
September 30, 1996, and for the period from June 15, 1996 (commencement of
operations) through September 30, 1996, were 13.18% and 14.40%, respectively.
The average "annual total return" on an investment in Class B shares of the Fund
(using the method described above) for the one year period ended September 30,
1996, and for the period from June 15, 1996 (commencement of operations) through
September 30, 1996, were 12.71% and 14.79%, respectively. The average "annual
total return" on an investment in Class C shares of the Fund (using the method
described above) for the one year period ended September 30, 1996, and for the
period from June 15, 1996 (commencement of operations) through September 30,
1996, were 16.92% and 17.75%, respectively. The cumulative total return on an
investment in Class A, Class B and Class C shares of the Fund (using the method
described above) for the period June 15, 1995 (commencement of operations)
through September 30, 1996, were 18.98%, 19.50% and 23.50%, respectively.
o 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
average annual total returns at net asset value on an investment in Class A,
Class B and Class C shares of the Fund for the fiscal year ended September 30,
1996, were 18.82%, 17.71% and 17.92%, respectively. The average annual total
returns at net asset value on an investment in Class A, Class B and Class C
shares of the Fund for the period from June 15, 1996 (commencement of
operations) through September 30, 1996, were 18.80%, 17.75% and 17.75%,
respectively. The cumulative total return at net asset value for the Fund's
Class A shares for the period from June 15, 1995 (commencement of operations) to
September 30, 1996 was 24.92%. The cumulative total returns at net asset value
for the Fund's Class B and Class C shares for the period from June 15, 1995
(commencement of operations) to September 30, 1996 were 23.50% and 23.50%,
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
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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. Morningstar ranks mutual funds in broad
investment categories: domestic stock funds, international stock funds, taxable
bond funds and municipal bond funds, based on risk-adjusted total investment
returns. The Fund is ranked among international stock funds. Investment return
measures a fund's or class's one, three, five and ten-year average annual total
returns (depending on the inception of the fund or class) in excess of 90-day
U.S. Treasury bill returns after considering the fund's sales charges and
expenses. Risk measures fund's or class' performance below 90-day U.S. Treasury
bill returns. Risk and investment return are combined to produce star rankings
reflecting performance relative to the average fund in the 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%). The current star ranking is the
fund's or class's 3-year ranking or its combined 3- and 5-year ranking (weighted
60%/40%, respectively, or its combined 3-, 5- and 10-year ranking (weighted 40%,
30% and 30% , respectively), depending on the inception of the fund or class.
Rankings are subject to change monthly.
The Fund may also compare its performance to that of other funds in its
Morningstar Category. In addition to its star rankings, Morningstar also
categorizes and compares a fund's 3-year performance based on Morningstar's
classification of the fund's investments and investment style, rather than how a
fund defines its investment objective. Morningstar's four broad categories
(domestic equity, international equity, municipal bond and taxable bond) are
each further subdivided into categories based on types of investments and
investment styles. Those comparisons by Morningstar are based on the same risk
and return measurements as its star rankings but do not consider the effect of
sales charges.
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
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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.
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.
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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 by a
Securities and Exchange Commission rule 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 and the fiscal year
ended September 30, 1996, payments under the Class A Plan totaled $1,750, and
$43,913, respectively, all of which was paid by the Distributor to Recipients,
including $32 and $2,532 paid to an affiliate in those respective periods. 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
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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.
Payments made under the Class B Plan during the fiscal period ended
September 30, 1995 and the fiscal year ended September 30, 1996 totaled $3,267
and $178,039, respectively, of which $3,202 and $168,499, respectively, was
retained by the Distributor. Payments made under the Class C Plan during the
fiscal period ended September 30, 1995 and the fiscal year ended September 30,
1996 totaled $282 and $40,141, respectively, of which $277 and $36,849,
respectively, was retained by the Distributor. At fiscal year end, September 30,
1996, the Distributor had incurred unreimbursed expenses under the Class B and
Class C Plans of $1,331,917 and $119,763, respectively (equal to 2.95% and 1.16%
of the Fund's net assets represented by Class B and Class C shares, respectively
on that date) which, in the case of Class B shares, has been carried over into
the present Plan year.
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 Conduct Rules 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 outstanding for less than six years.
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
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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
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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 the Automated Quotation System
("NASDAQ") of the Nasdaq Stock Market, Inc. 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 sale price of the preceding trading day, or closing bid prices
that day); (ii) securities traded on a foreign securities exchange are valued
generally 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 at its last trading session on or
immediately preceding the valuation date, or at the mean between "bid" and
"asked" prices obtained from the principal exchange or two active market makers
in the security on the basis of reasonable inquiry; (iii) long-term debt
securities having a remaining maturity in excess of 60 days are valued based on
the mean between the "bid" and "asked" prices determined by a portfolio pricing
service approved by the Fund's Board of Trustees or obtained by the Manager from
two active market makers in the security on the basis of reasonable inquiry;
(iv) debt instruments having a maturity of more than 397 days when issued, and
non-money market type instruments having a maturity of 397 days or less when
issued, which have a remaining maturity of 60 days or less are valued at the
mean between "bid" and "asked" prices determined by
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a pricing service approved by the Fund's Board of Trustees or obtained by the
Manager from two active market makers in the security on the basis of reasonable
inquiry; (v) money market debt securities that had a maturity of less than 397
days when issued that have a remaining maturity of 60 days or less are valued at
cost, adjusted for amortization of premiums and accretion of discounts; and (vi)
securities (including restricted securities) not having readily-available market
quotations are valued at fair value determined under the Board's procedures. If
the Manager is unable to locate two market makers willing to give quotes (see
(ii), (iii) and (iv) above), the security may be priced at the mean between the
"bid" and "asked" prices provided by a single active market maker (which in
certain cases may be the "bid" price if no "asked" price is available).
In the case of U.S. Government Securities and mortgage-backed
securities, where last sale information is not generally available, such pricing
procedures may include "matrix" comparisons to the prices for comparable
instruments on the basis of quality, yield, maturity and other special factors
involved. The Manager may use pricing services approved by the Board of Trustees
to price any of the types of securities described above to price U.S. Government
Securities, mortgage-backed securities, foreign government securities and
corporate bonds. The Manager will monitor the accuracy of such pricing services,
which may include comparing prices used for portfolio evaluation to actual sales
prices of selected securities.
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
securities markets that occur between the time their prices are determined and
the close of the New York Stock 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 is likely to effect a material change in the value of such
security. 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 are valued at the last sales price on the
principal exchange on which they are traded, or on NASDAQ, as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, value shall be the last sale price on
the preceding trading day if it is within the spread of the closing bid and
asked prices on the principal exchange or on NASDAQ on the valuation date, or,
if not, value shall be the closing bid price on the principal exchange or on
NASDAQ on the valuation date. If the put, call or future is not traded on an
exchange or on NASDAQ, it shall be valued at the mean between bid and asked
prices obtained by the Manager from two active market makers (which in certain
cases may be the bid price if no asked price is available).
When the Fund writes an option, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset, and
an equivalent credit is included in the
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liability section. The credit is adjusted ("marked-to-market") to reflect the
current market value of the call or put. In determining the Fund's gain on
investments, if a call or put 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 received 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 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, aunts, uncles, nieces and nephews, sons-
and daughters-in-law, siblings, a sibling's spouse and a spouse's siblings.
o 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:
Limited Term New York Municipal Fund*
Oppenheimer Bond Fund
Oppenheimer Bond Fund for Growth
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Champion Income Fund
Oppenheimer Developing Markets Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Equity Income Fund
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Oppenheimer Florida Municipal Fund
Oppenheimer Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer Value Stock Fund
Oppenheimer World Bond Fund
Rochester Fund Municipals*
The New York Tax Exempt Income Fund, Inc.
the following "Money Market Funds":
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
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Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
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*Shares of the Fund are not presently exchangeable for shares of these funds.
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).
o 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
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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.
o 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
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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.
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Retirement Plans. In describing certain types of employee benefit plans that may
purchase Class A shares without being subject to the Class A contingent differed
sales charge, the term "employee benefit plan" means any plan or arrangement,
whether or not "qualified" under the Internal Revenue Code, including, medical
savings accounts, payroll deduction plans or similar plans in which Class A
shares are purchased by a fiduciary or other person for the account of
participants who are employees of a single employer or of affiliated employers,
if the Fund account is registered in the name of the fiduciary or other person
for the benefit of participants in the plan.
The term "group retirement plan" means any qualified or non-qualified
retirement plan (including 457 plans, SEPs, SARSEPs, 403(b) plans, and SIMPLE
plans) for employees of a corporation or a sole proprietorship, members and
employees of a partnership or association or other organized group of persons
(the members of which may include other groups), if the group has made special
arrangements with the Distributor and all members of the group participating in
the plan purchase Class A shares of the Fund through a single investment dealer,
broker or other financial institution designated by the group.
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.
o 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.
o 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
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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
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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 on behalf of their customers. The shareholder should contact the
broker or dealer to arrange this type of redemption. 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
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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.
o 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.
o 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.
-53-
<PAGE>
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
Centennial America Fund, L.P., Centennial California Tax Exempt Trust,
Centennial Government Trust, Centennial Money Market Trust, Centennial New York
Tax Exempt Trust,
-54-
<PAGE>
Centennial Tax Exempt Trust, Daily Cash Accumulation Fund, Inc. and Oppenheimer
Money Market Fund, Inc., which only offer Class A shares and Oppenheimer Main
Street California Municipal 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 current list showing which
funds offer which classes can be obtained by calling the Distributor at
1-800-525- 7048.
For accounts established on or before March 8, 1996 holding Class M
shares of Oppenheimer Bond Fund for Growth, Class M shares can be exchanged only
for Class A shares of other Oppenheimer funds, including Rochester fund
Municipals and Limited Term New York Municipal Fund. Class A shares of Rochester
Fund Municipals or Limited Term New York Municipal Fund acquired on the exchange
of Class M shares of Oppenheimer Bond Fund for Growth may be exchanged for Class
M shares of that fund. For accounts of Oppenheimer Bond Fund for Growth
established after March 8, 1996, Class M shares may be exchanged for Class A
shares of other Oppenheimer funds except Rochester Fund Municipals and Limited
Term New York Municipals. Exchanges to Class M shares of Oppenheimer Bond Fund
for Growth are permitted from Class A shares of Oppenheimer Money Market Fund,
Inc. or Oppenheimer Cash Reserves that were acquired by exchange from Class M
shares. Otherwise no exchanges of any class of any Oppenheimer fund into Class M
shares are permitted.
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
-55-
<PAGE>
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 more than one account. 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
-56-
<PAGE>
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
-57-
<PAGE>
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
-58-
<PAGE>
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.
-59-
<PAGE>
INDEPENDENT AUDITORS' REPORT
=====================================================================
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, 1996, the related statement of operations
for the year then ended, and the statements of changes in net assets and
the financial highlights for each of the periods indicated. These
financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned at September 30,
1996 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 audits
provide 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, 1996,
the results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods, in conformity
with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
---------------------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
October 21, 1996
<PAGE>
STATEMENT OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
===============================================================================================================================
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--0.5%
- -------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only
Stripped Mtg.-Backed Security, Trust 240, Cl. 2,
12.405%--14.552%, 9/1/23 (Cost $452,041)(2) $ 1,631,521 $ 563,640
===============================================================================================================================
FOREIGN GOVERNMENT OBLIGATIONS--60.6%
- -------------------------------------------------------------------------------------------------------------------------------
ARGENTINA--7.8% Argentina (Republic of):
New Money Bonds, 6.50%, 10/25/99(3) 583,333 565,834
Sr. Unsec. Unsub. Bonds, 7.625%, 7/5/99 NLG 2,350,000 1,387,241
Treasury Bills, Zero Coupon, 12.117%, 1/17/97(4) ARP 1,000,000 979,375
Treasury Bills, Zero Coupon, 10.156%, 11/15/96(4) ARP 1,000,000 992,189
Unsec. Unsub. Bonds, 11.50%, 8/14/01 GBP 1,710,000 2,691,792
Banco Hipotecario Nacional (Argentina) Medium-Term Nts.,
10.625%, 8/7/06(5) 600,000 607,500
------------------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of):
Bonds, 10%, 3/5/01 DEM 1,680,000 1,148,810
Sr. Unsec. Unsub. Medium-Term Nts., 11.50%, 10/19/98 50,000 51,906
----------
8,424,647
- -------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA--2.8%
New South Wales Treasury Corp. Gtd. Bonds, 12%, 12/1/01 AUD 3,230,000 3,042,878
- -------------------------------------------------------------------------------------------------------------------------------
BRAZIL--6.2%
Banco Estado Minas Gerais, 8.25%, 2/10/00 650,000 612,625
------------------------------------------------------------------------------------------------------------------------
Banco Nacional de Desenvolvimento Economico e Social Bonds,
9%, 3/12/01 DEM 2,130,000 1,422,313
------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Nts., Banco Estado Minas Gerais,
7.875%, 2/10/99 850,000 809,625
------------------------------------------------------------------------------------------------------------------------
Cia Energetica de Sao Paulo Gtd. Unsec. Bonds, 9.25%, 5/10/01 DEM 1,754,000 1,179,576
------------------------------------------------------------------------------------------------------------------------
Comtel Brasileira Ltd. Nts., 10.75%, 9/26/04(6) 100,000 102,375
------------------------------------------------------------------------------------------------------------------------
Telecomunicacoes Brasileiras SA:
Bonds, 13%, 2/5/99 ITL 3,340,000,000 2,297,272
Medium-Term Nts., 11.30%, 12/9/99(3) 200,000 205,750
----------
6,629,536
- -------------------------------------------------------------------------------------------------------------------------------
BULGARIA--4.1% Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds, Tranche A, 2.25%, 7/28/12(5) 3,590,000 1,181,334
Interest Arrears Bonds, 6.688%, 7/28/11(5) 7,110,000 3,270,600
----------
4,451,934
- -------------------------------------------------------------------------------------------------------------------------------
CANADA--5.5%
Canada (Government of) Real Return Debs., 4.517%, 12/1/21(3)(7) CAD 7,810,000 5,919,042
- -------------------------------------------------------------------------------------------------------------------------------
COSTA RICA--0.5%
Central Bank of Costa Rica Interest Claim Bonds:
Series A, 6.344%, 5/21/05(3) 386,773 373,237
Series B, 6.344%, 5/21/05(3) 187,452 180,891
----------
554,128
- -------------------------------------------------------------------------------------------------------------------------------
DENMARK--2.2%
Denmark (Kingdom of) Bonds:
8%, 11/15/01 DKK 3,085,000 576,489
8%, 3/15/06 DKK 9,810,000 1,793,982
----------
2,370,471
- -------------------------------------------------------------------------------------------------------------------------------
FINLAND--0.9%
Finland (Republic of) Bonds, 7.25%, 4/18/06 FIM 4,000,000 909,942
- -------------------------------------------------------------------------------------------------------------------------------
GREAT BRITAIN--4.5%
United Kingdom Treasury Nts., 13%, 7/14/00 GBP 2,565,000 4,807,129
</TABLE>
Oppenheimer International Bond Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INDONESIA--0.7%
PT Hutama Karya, Zero Coupon Medium-Term Nts.:
17.514%, 3/19/97(4) IDR 1,000,000,000 $ 399,005
17.668%, 3/26/97(4) IDR 1,000,000,000 398,019
----------
797,024
- -------------------------------------------------------------------------------------------------------------------------------
IRELAND--2.5%
Ireland (Government of) Bonds, 9.25%, 7/11/03 IEP 1,445,000 2,649,750
- -------------------------------------------------------------------------------------------------------------------------------
ITALY--2.8% Italy (Republic of):
Sr. Unsec. Unsub. Global Bonds, 0.777%, 7/26/99(3) JPY 165,000,000 1,489,259
Treasury Bonds, Buoni del Tesoro Poliennali, 10.50%, 7/15/00 ITL 2,100,000,000 1,497,684
----------
2,986,943
- -------------------------------------------------------------------------------------------------------------------------------
JORDAN--2.3%
Hashemite Kingdom of Jordan:
Disc. Bonds, 6.625%, 12/23/23(3) 500,000 386,250
Interest Arrears Bonds, 6.625%, 12/23/05(3) 2,335,000 2,072,313
----------
2,458,563
- -------------------------------------------------------------------------------------------------------------------------------
MEXICO--5.3%
Banco Nacional de Comercio Exterior SNC
International Finance BV Gtd. Nts., 8%, 8/5/03 900,000 805,500
------------------------------------------------------------------------------------------------------------------------
Mexican Williams Bonds, 6.631%, 11/15/08(3) 500,000 435,000
------------------------------------------------------------------------------------------------------------------------
United Mexican States Bonds, 10.375%, 1/29/03 DEM 6,460,000 4,472,508
----------
5,713,008
- -------------------------------------------------------------------------------------------------------------------------------
NORWAY--1.7%
Norwegian Government Bonds, 9.50%, 10/31/02(8) NOK 10,405,000 1,842,210
- -------------------------------------------------------------------------------------------------------------------------------
PANAMA--1.7% Panama (Republic of):
Debs., 6.629%, 5/10/02(3) 886,154 850,709
Interest Reduction Bonds, 3.50%, 7/17/14(9) 1,500,000 943,125
----------
1,793,834
- -------------------------------------------------------------------------------------------------------------------------------
POLAND--1.3%
Poland (Republic of) Treasury Bills, Zero Coupon:
21.464%, 10/16/96(4) PLZ 1,000,000 353,419
21.655%, 10/2/96(4) PLZ 570,000 202,620
21.417%, 11/6/96(4) PLZ 1,100,000 384,600
21.294%, 12/18/96(4) PLZ 180,000 61,592
20.376%, 3/19/97(4) PLZ 1,250,000 408,878
----------
1,411,109
- -------------------------------------------------------------------------------------------------------------------------------
PORTUGAL--1.5%
Portugal (Republic of) Gtd. Bonds,
Obrigicion do tes Medio Prazo, 11.875%, 2/23/00 PTE 224,000,000 1,636,403
- -------------------------------------------------------------------------------------------------------------------------------
RUSSIA--1.0%
Russia (Government of) Interest Nts., 6.547%, 12/29/49(3)(10) 1,600,000 1,029,500
- -------------------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL--0.9%
European Bank for Reconstruction & Development
Sr. Unsec. Medium-Term Nts., 10%, 12/20/96 CZK 27,050,000 997,238
- -------------------------------------------------------------------------------------------------------------------------------
SWEDEN--2.6%
Sweden (Kingdom of) Bonds, Series 1030, 13%, 6/15/01 SEK 15,100,000 2,842,326
- -------------------------------------------------------------------------------------------------------------------------------
VENEZUELA--1.8% Venezuela (Republic of):
Collateralized Par Bonds, Series W-A, 6.75%, 3/31/20 790,000 550,038
Front-Loaded Interest Reduction Bonds, Series A, 6.375%, 3/31/07(3) 960,000 809,400
New Money Bonds, Series A, 6.75%, 12/18/05(3) 750,000 625,313
----------
1,984,751
----------
Total Foreign Government Obligations (Cost $63,963,544) 65,252,366
</TABLE>
Oppenheimer International Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
===============================================================================================================================
<S> <C> <C>
LOAN PARTICIPATIONS--5.9%
- -------------------------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Reprofiled Debt Loan Participation, Tranche A:
1.375%, 9/4/06(3)(11) JPY 104,400,000 $ 529,616
6.625%, 9/4/06(3)(11) 2,500,000 1,740,625
------------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) Concorde Loan Participation, 8.625%, 1/31/98(3)(11) 84,000 83,160
------------------------------------------------------------------------------------------------------------------------
Jamaica (Government of) 1990 Refinancing Agreement Nts.:
Tranche A, 6.50%, 10/16/00(3)(11) 219,999 212,300
Tranche B, 6.312%, 11/15/04(3)(11) 1,500,000 1,252,500
------------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement,
Tranche A, 6.437%, 1/1/09(3) 2,025,000 1,592,789
------------------------------------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement:
Tranche A, 1.772%, 9/30/00(3)(11) JPY 21,600,000 172,606
Tranche B, 1.772%, 9/30/00(3)(11) JPY 89,183,523 712,667
----------
Total Loan Participations (Cost $5,766,456) 6,296,263
===============================================================================================================================
CORPORATE BONDS AND NOTES--12.0%
- -------------------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY--4.6%
- -------------------------------------------------------------------------------------------------------------------------------
METALS/MINING--0.2%
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06(6) 200,000 207,000
- -------------------------------------------------------------------------------------------------------------------------------
PAPER--4.4%
Asia Pulp & Paper International Finance Co.,
Zero Coupon Asian Currency Nts.:
16.559%, 5/1/97(4) IDR 1,000,000,000 390,078
16.551%, 5/15/97(4) IDR 550,000,000 213,175
------------------------------------------------------------------------------------------------------------------------
Grupo Industrial Durango SA de CV, 12.625% Nts., 8/1/03 1,000,000 1,066,250
------------------------------------------------------------------------------------------------------------------------
Indah Kiat International Finance Co. BV, 12.50% Sr. Sec. Gtd. Nts.,
Series C, 6/15/06 1,300,000 1,410,500
------------------------------------------------------------------------------------------------------------------------
PT Inti Indorayon Utama, Zero Coupon Promissory Nts.,
17.234%, 2/12/97(4) IDR 800,000,000 324,419
------------------------------------------------------------------------------------------------------------------------
Tjiwi Kimia International Finance Co. BV, 13.25% Sr. Gtd. Nts., 8/1/01 1,160,000 1,302,100
----------
4,706,522
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER RELATED--0.5%
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--0.1%
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(6) 150,000 169,875
- -------------------------------------------------------------------------------------------------------------------------------
FOOD/BEVERAGES/TOBACCO--0.2%
Unilever CR spol. s.r.o., guaranteed by Unilever NV,
Rotterdam, The Netherlands, Zero Coupon Promissory Nts.,
11.184%, 10/11/96(4) CZK 5,600,000 207,241
- -------------------------------------------------------------------------------------------------------------------------------
TEXTILE/APPAREL--0.2%
PT Polysindo Eka Perkasa:
13% Sr. Nts., 6/15/01 185,000 203,962
Zero Coupon Promissory Nts., 19.111%, 2/28/97(4) IDR 50,000,000 20,054
----------
224,016
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--3.3%
- -------------------------------------------------------------------------------------------------------------------------------
BANKS & THRIFTS--3.3% Banco Bamerindus do Brasil SA:
10.50% Debs., 6/23/97 105,000 103,688
9% Unsec. Unsub. Bonds, 10/29/98 240,000 223,200
9.258% Unsub. Nts., 12/22/97(3) 700,000 687,313
------------------------------------------------------------------------------------------------------------------------
Banco de Colombia, 5.20% Cv. Jr. Sub. Unsec. Nts., 2/1/99 1,150,000 1,069,500
------------------------------------------------------------------------------------------------------------------------
Banco Itamarati SA:
10.50% Medium-Term Nts., 11/29/96 50,000 50,125
11.625% Sr. Unsec. Debs., 11/23/97 350,000 360,500
</TABLE>
Oppenheimer International Bond Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BANKS & THRIFTS
(CONTINUED)
Banco Mexicano SA, 8% Sr. Unsec. Unsub.
Exchangeable Medium-Term Nts., 11/4/98 $ 60,000 $ 58,425
------------------------------------------------------------------------------------------------------------------------
Siam City Bank Co. Ltd., Zero Coupon Debs., 11.084%, 10/31/96(4)(10) THB 5,000,000 194,952
------------------------------------------------------------------------------------------------------------------------
Siam Commercial Bank Public Ltd.,
Zero Coupon Debs., 10.581%, 11/18/96(4)(10) THB 20,500,000 795,031
-----------
3,542,734
- -------------------------------------------------------------------------------------------------------------------------------
MEDIA--0.2%
- -------------------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION--0.2%
Rogers Cablesystems Ltd., 10% Sr. Sec. Second Priority Debs., 12/1/07 150,000 150,750
------------------------------------------------------------------------------------------------------------------------
United International Holdings, Inc.,
Zero Coupon Sr. Sec. Disc. Nts., 12.495%, 11/15/99(4) 75,000 52,500
----------
203,250
- -------------------------------------------------------------------------------------------------------------------------------
OTHER--2.4%
- -------------------------------------------------------------------------------------------------------------------------------
SERVICES--2.4%
CE Casecnan Water & Energy, Inc.:
11.45% Sr. Nts., Series A, 11/15/05 500,000 538,750
11.95% Sr. Nts., Series B, 11/15/10 200,000 217,000
------------------------------------------------------------------------------------------------------------------------
Grupo Elektra SA de CV, 12.75% Sr. Nts., 5/15/01(6) 1,000,000 1,050,000
------------------------------------------------------------------------------------------------------------------------
Sociedad Comercial del Plata SA:
11.50% Medium-Term Nts., 5/9/00 560,000 568,750
11.50% Medium-Term Nts., 5/9/00(11) 200,000 203,000
----------
2,577,500
- -------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.1%
- -------------------------------------------------------------------------------------------------------------------------------
SHIPPING--0.1%
Gearbulk Holding Ltd., 11.25% Sr. Nts., 12/1/04 150,000 161,250
- -------------------------------------------------------------------------------------------------------------------------------
UTILITIES--0.9%
- -------------------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.6%
Centragas Natural Gas Transmission System, 10.65% Sr. Sec. Bonds, 12/1/10(6) 579,160 613,730
------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--0.3%
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(11)(12) 75,000 60,563
------------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred Coupon Bonds, 11/15/03(12) 400,000 248,000
----------
308,563
----------
Total Corporate Bonds and Notes (Cost $12,744,033) 12,921,681
</TABLE>
<TABLE>
<CAPTION>
UNITS
===============================================================================================================================
<S> <C> <C>
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
- -------------------------------------------------------------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp. 11/03(11) 400 2,000
------------------------------------------------------------------------------------------------------------------------
Venezuela Government Wts., Exp. 4/20 3,950 --
----------
Total Rights, Warrants and Certificates (Cost $0) 2,000
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT(1)
===============================================================================================================================
<S> <C> <C>
STRUCTURED INSTRUMENTS--17.2%
- -------------------------------------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, New York Branch:
6.28% Deutsche Mark Currency Protected Yield Curve CD, 7/25/97 $ 300,000 294,075
14% CD Linked Nts., 12/17/96 (indexed to the cross currency rates
of Greek Drachma and European Currency Unit) 450,000 442,980
</TABLE>
Oppenheimer International Bond Fund
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STRUCTURED INSTRUMENTS
(CONTINUED)
Canadian Imperial Bank of Commerce, New York Branch:
14% CD Linked Nts., 11/25/96 (indexed to the cross currency rates
of Greek Drachma and European Currency Unit) $ 800,000 $ 789,920
16.75% CD Linked Nts., 4/16/97 (indexed to the Federation GKO,
Zero Coupon, 4/9/97) 3,000,000 2,982,000
17% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
Zero Coupon, 2/19/97) 750,000 747,000
17% CD Linked Nts., 4/2/97 (indexed to the Russian Federation GKO,
Zero Coupon, 3/26/97) 500,000 497,000
17.30% CD Linked Nts., 2/26/97 (indexed to the Federation GKO,
Zero Coupon, 2/19/97) 1,200,000 1,195,200
------------------------------------------------------------------------------------------------------------------------
Internationale Nederlanden Bank NV, Prague Branch,
Zero Coupon Promissory Nts., 10.516%, 4/28/97(4) CZK 6,150,000 214,896
------------------------------------------------------------------------------------------------------------------------
Internationale Nederlanden (U.S.) Capital Holdings Corp.:
Zero Coupon Chilean Peso Linked Nts., 11.122%, 12/11/96(4) 980,000 952,756
Zero Coupon Chilean Peso Linked Nts., 11.813%, 6/23/97(4) 600,000 544,860
Zero Coupon Chilean Peso Linked Nts., 11.741%, 6/24/97(4) 600,000 544,680
Zero Coupon Czech Crown Linked Nts., 11.911%, 6/26/97(4) 600,000 563,220
Zero Coupon Indian Rupee Linked Nts., 15.675%, 12/20/96(4) 1,000,000 965,100
------------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust Co. of New York, Nassau Branch,
Zero Coupon Indian Rupee Currency Linked Nts., 17.392%, 11/27/96(4) 900,000 881,479
------------------------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Zero Coupon Brazilian Credit Linked Nts.:
12.384%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(4) 200,000 194,420
12.38%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(4) 200,000 194,420
12.638%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(4) 120,000 116,652
12.886%, 1/3/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 1/2/97)(4) 100,000 97,210
9.896%, 5/2/97 (indexed to the Brazilian National Treasury Nts.,
Zero Coupon, 5/3/97)(4) 450,000 421,515
------------------------------------------------------------------------------------------------------------------------
Salomon Brothers, Inc., Zero Coupon Chilean Peso
Indexed Enhanced Access Nts.:
11.792%, 12/11/96(4) 1,000,000 974,200
12.145%, 12/11/96(4) 1,000,000 974,000
11.406%, 12/13/96(4) 1,000,000 969,800
11.381%, 12/20/96(4) 1,000,000 972,000
------------------------------------------------------------------------------------------------------------------------
Swiss Bank Corp., New York Branch, 6.05% CD Linked Nts., 6/20/97 (indexed
to the closing Nikkei 225 Index on 1/23/97,
5 yr. & 3 mos. Japanese Yen Swap rate & New Zealand Dollar) 400,000 395,940
------------------------------------------------------------------------------------------------------------------------
United Mexican States Linked Nts., 11/27/96 (indexed to the greater
of Cetes Option Amount or USD LIBOR Option Amount, 11/27/96) 1,300,000 1,583,292
-----------
Total Structured Instruments (Cost $18,469,070) 18,508,615
</TABLE>
Oppenheimer International Bond Fund
<PAGE>
STATEMENT OF INVESTMENTS (Continued)
<TABLE>
<CAPTION>
MARKET VALUE
DATE STRIKE CONTRACTS SEE NOTE 1
==============================================================================================================================
<S> <C> <C> <C> <C>
PUT OPTIONS PURCHASED--0.2%
- ------------------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of):
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 Put Opt. 10/96 $28.125 1,750 $ 5,250
Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.25%, 7/28/12 Put Opt. 10/96 $28.75 1,750 4,375
Interest Arrears Bonds, 6.688%, 7/28/11 Put Opt. 10/96 $40.875 3,400 1
Interest Arrears Bonds, 6.688%, 7/28/11 Put Opt. 10/96 $41.375 3,400 13
-----------------------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 9.50%, 5/1/01 Put Opt. 7/97 99.96 ITL 1,842 12,714
-----------------------------------------------------------------------------------------------------------------------
Swiss Franc Put Opt. 10/96 1.22 CHF 7,639,344 203,902
-----------
Total Put Options Purchased (Cost $351,770) 226,255
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT(1)
===============================================================================================================================
<S> <C> <C>
REPURCHASE AGREEMENT--3.3%
- -------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co., 5.62%, dated 9/30/96, to
be repurchased at $3,500,546 on 10/1/96, collateralized by U.S. Treasury
Bonds, 8.875%--11.125%, 8/15/03--8/15/17, with a value
of $3,574,041 (Cost $3,500,000) $3,500,000 3,500,000
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $105,246,914) 99.7% 107,270,820
- -------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 0.3 347,051
---------- ------------
NET ASSETS 100.0% $107,617,871
========== ============
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in
the following currencies:
ARP --Argentine Peso IEP--Irish Punt
AUD --Australian Dollar ITL--Italian Lira
CAD --Canadian Dollar JPY--Japanese Yen
CHF --Swiss Franc NLG--Netherlands Guilder
CZK --Czech Koruna NOK--Norwegian Krone
DEM--German Deutsche Mark PLZ--Polish Zloty
DKK --Danish Krone PTE--Portuguese Escudo
FIM --Finnish Markka SEK--Swedish Krona
GBP --British Pound Sterling THB--Thai Baht
IDR --Indonesian Rupiah
2. Interest-Only Strips represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These
securities typically decline in price as interest rates decline. Most
other fixed-income securities increase in price when interest rates
decline. The principal amount of the underlying pool represents the
notional amount on which current interest is calculated. The price of
these securities is typically more sensitive to changes in prepayment
rates than traditional mortgage-backed securities (for example, GNMA
pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future
cash flows. 3. Represents the current interest rate for a variable rate
security. 4. For zero coupon bonds, the interest rate shown is the
effective yield on the date of purchase.
Oppenheimer International Bond Fund
<PAGE>
5. A sufficient amount of securities 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>
Call Option on Banco Hipotecario Nacional
(Argentina) Medium-Term Nts.,
10.625%, 8/7/06 600,000 8/00 $100.00 $ 5,520 $ 9,600
------------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of)
Front-Loaded Interest Reduction
Bearer Bonds, Tranche A, 2.25%, 7/28/12 1,750,000 12/96 32.75 13,125 44,625
------------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of)
Front-Loaded Interest Reduction
Bearer Bonds, Tranche A, 2.25%, 7/28/12 1,750,000 12/96 32.125 9,975 47,250
------------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of)
Interest Arrears Bonds, 6.688%, 7/28/11 3,400,000 11/96 45.375 22,100 39,100
------------------------------------------------------------------------------------------------------------------------
Call Option on Bulgaria (Republic of)
Interest Arrears Bonds, 6.688%, 7/28/11 3,400,000 11/96 45.188 22,100 42,500
------- --------
$72,820 $183,075
======= ========
</TABLE>
6. 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 $2,142,980 or
1.99% of the Fund's net assets, at September 30, 1996.
7. Indexed instrument for which the principal amount and/or interest
due at maturity is affected by the relative value of a foreign index.
8. A sufficient amount of securities has been designated to cover
outstanding forward foreign currency exchange contracts. See Note 5 of
Notes to Financial Statements.
9. Represents the current interest rate for an increasing rate
security.
10. When-issued security to be delivered and settled after September
30, 1996.
11. Identifies issues considered to be illiquid--See Note 7 of Notes to
Financial Statements.
12. Denotes a step bond: a zero coupon bond that converts to a fixed
rate of interest at a designated future date.
See accompanying Notes to Financial Statements.
Oppenheimer International Bond Fund
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
<TABLE>
================================================================================================================================
<S> <C>
ASSETS
Investments, at value (cost $105,246,914)--see accompanying statement $107,270,820
------------------------------------------------------------------------------------------------------------------------
Cash 615,444
------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency
exchange contracts--Note 5 27,610
------------------------------------------------------------------------------------------------------------------------
Receivables:
Investments sold 3,236,083
Interest 2,585,546
Shares of beneficial interest sold 1,312,326
Closed forward foreign currency exchange contracts 112,082
------------------------------------------------------------------------------------------------------------------------
Deferred organization costs--Note 1 11,338
------------------------------------------------------------------------------------------------------------------------
Other 1,862
------------
Total assets 115,173,111
================================================================================================================================
LIABILITIES
Unrealized depreciation on forward foreign currency
exchange contracts--Note 5 8,744
------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $72,820)--
see accompanying statement--Note 6 183,075
------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 6,611,001
Dividends 267,700
Shares of beneficial interest redeemed 245,867
Closed forward foreign currency exchange contracts 85,378
Distribution and service plan fees 51,307
Transfer and shareholder servicing agent fees 11,276
Other 90,892
------------
Total liabilities 7,555,240
================================================================================================================================
NET ASSETS $107,617,871
============
================================================================================================================================
COMPOSITION OF
NET ASSETS
Paid-in capital $104,210,304
------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions 1,480,266
------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies 1,927,301
------------
Net assets $107,617,871
============
================================================================================================================================
NET ASSET VALUE
PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets
of $52,128,047 and 9,494,568 shares of beneficial interest outstanding) $5.49
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $5.76
------------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $45,207,455 and 8,246,151 shares of beneficial interest outstanding) $5.48
------------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $10,282,369 and 1,876,082 shares of beneficial interest outstanding) $5.48
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer International Bond Fund
<PAGE>
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
<TABLE>
================================================================================================================================
<S> <C>
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $5,130) $4,624,080
================================================================================================================================
EXPENSES
Management fees--Note 4 311,128
------------------------------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 43,913
Class B 178,039
Class C 40,141
------------------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 78,316
------------------------------------------------------------------------------------------------------------------------
Shareholder reports 61,884
------------------------------------------------------------------------------------------------------------------------
Custodian fees and expenses 57,326
------------------------------------------------------------------------------------------------------------------------
Registration and filing fees:
Class A 15,821
Class B 14,817
Class C 3,412
------------------------------------------------------------------------------------------------------------------------
Legal and auditing fees 15,402
------------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 1,957
------------------------------------------------------------------------------------------------------------------------
Other 11,068
----------
Total expenses 833,224
Less reimbursement of expenses by OppenheimerFunds, Inc.--Note 4 (41,927)
----------
Net expenses 791,297
================================================================================================================================
NET INVESTMENT INCOME 3,832,783
================================================================================================================================
REALIZED AND UNREALIZED
GAIN (LOSS)
Net realized gain (loss) on:
Investments and options written (including premiums on options exercised) 1,466,199
Closing and expiration of options written 102,322
Foreign currency transactions (18,625)
----------
Net realized gain 1,549,896
------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 2,138,504
Translation of assets and liabilities denominated in foreign currencies (299,254)
----------
Net change 1,839,250
----------
Net realized and unrealized gain 3,389,146
================================================================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,221,929
==========
</TABLE>
See accompanying Notes to Financial Statements.
Oppenheimer International Bond Fund
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995(1)
===============================================================================================================================
<S> <C> <C>
OPERATIONS
Net investment income $ 3,832,783 $ 108,803
------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) 1,549,896 (189)
------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 1,839,250 88,051
------------ ----------
Net increase in net assets resulting from operations 7,221,929 196,665
===============================================================================================================================
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net investment income:
Class A (1,931,780) (76,404)
Class B (1,609,969) (29,790)
Class C (360,475) (2,609)
===============================================================================================================================
BENEFICIAL INTEREST
TRANSACTIONS
Net increase in net assets resulting from beneficial interest
transactions--Note 2:
Class A 46,551,563 3,923,812
Class B 40,565,844 3,212,495
Class C 9,758,157 198,433
===============================================================================================================================
NET ASSETS
Total increase 100,195,269 7,422,602
------------------------------------------------------------------------------------------------------------------------
Beginning of period 7,422,602 --
------------ ----------
End of period $107,617,871 $7,422,602
============ ==========
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
See accompanying Notes to Financial Statements.
Oppenheimer International Bond Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
------------------------ ------------------------ ------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1996 1995(1) 1996 1995(1) 1996 1995(1)
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning
of period $5.10 $5.00 $5.10 $5.00 $5.09 $5.00
- -----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .52 .15 .48 .14 .48 .14
Net realized and unrealized gain .40 .10 .39 .10 .39 .09
------- ------- ------- ------- ------- -------
Total income from
investment operations .92 .25 .87 .24 .87 .23
- -----------------------------------------------------------------------------------------------------------------------------
Dividends to shareholders from
net investment income (.53) (.15) (.49) (.14) (.48) (.14)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $5.49 $5.10 $5.48 $5.10 $5.48 $5.09
======= ======= ======= ======= ======= =======
=============================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 18.82% 5.13% 17.71% 4.92% 17.92% 4.73%
=============================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $52,128 $3,984 $45,207 $3,238 $10,282 $201
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets
(in thousands) $19,817 $2,566 $17,891 $1,125 $4,039 $ 97
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 9.60% 9.94%(3) 8.81% 9.20%(3) 8.76% 9.36%(3)
Expenses, before voluntary
reimbursement by the Manager 1.59% 1.59%(3) 2.36% 2.21%(3) 2.36% 2.26%(3)
Expenses, net of voluntary
reimbursement by the Manager 1.49% 0.41%(3) 2.26% 0.89%(3) 2.25% 0.85%(3)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 273.3% 122.0% 273.3% 122.0% 273.3% 122.0%
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
2. Assumes a hypothetical initial investment on the business day before
the first day of the fiscal period (or commencement of operations), with
all dividends and distributions 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.
3. Annualized.
4. 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, 1996 were $161,923,766 and $93,759,294, respectively.
See accompanying Notes to Financial Statements.
Oppenheimer International Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS
==============================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
Oppenheimer International Bond Fund (the Fund) is a registered
investment company organized as a Massachusetts 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 objective is to seek high
total return (which includes current income and capital appreciation in
the value of its shares) primarily from foreign debt securities. The
Fund's investment adviser is OppenheimerFunds, Inc. (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 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 foreign currency exchange contracts are
valued based on the closing prices of the forward currency contract
rates in the London foreign exchange markets on a daily basis as
provided by a reliable bank or dealer. Options are valued based upon the
last sale price on the principal exchange on which the option is traded
or, in the absence of any transactions that day, the value is based upon
the last sale price on the prior trading date if it is within the spread
between the closing bid and asked prices. If the last sale price is
outside the spread, the closing bid is used.
-----------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are
maintained in U.S. dollars. Prices of securities denominated in foreign
currencies are translated into U.S. dollars at the closing rates of
exchange. Amounts related to the purchase and sale of securities and
investment income are translated at the rates of exchange prevailing on
the respective dates of such transactions.
The effect of changes in foreign currency exchange rates
on investments is separately identified from the fluctuations arising
from changes in market values of securities held and reported with all
other foreign currency gains and losses in the Fund's Statement of
Operations.
-----------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund requires the custodian to take
possession, to have legally segregated in the Federal Reserve Book Entry
System or to have segregated within the custodian's vault, all
securities held as collateral for repurchase agreements. The market
value of the underlying securities is required to be at least 102% of
the resale price at the time of purchase. If the seller of the agreement
defaults and the value of the collateral declines, or if the seller
enters into an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
-----------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, AND GAINS AND LOSSES. Income, expenses
(other than those attributable to a specific class) and gains and losses
are allocated 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.
Oppenheimer International Bond Fund
<PAGE>
==============================================================================
1. SIGNIFICANT
ACCOUNTING POLICIES
(CONTINUED)
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. 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.
During the year ended September 30, 1996, the Fund
adjusted the classification of distributions to shareholders to reflect
the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly,
during the year ended September 30, 1996, amounts have been reclassified
to reflect a decrease in overdistributed net investment income of
$13,482. Accumulated net realized gain on investments was decreased by
the same amount. In addition, to properly reflect foreign currency gain
in the components of capital, $55,959 of foreign exchange gain
determined accord- ing to U.S. federal income tax rules has been
reclassified from net realized gain to net investment income.
-----------------------------------------------------------------------
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.
The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
==============================================================================
2. SHARES OF
BENEFICIAL INTEREST
The Fund has authorized an unlimited number of no par value shares of
beneficial interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1996 PERIOD ENDED SEPTEMBER 30, 1995(1)
----------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 9,721,751 $51,914,821 909,822 $4,576,888
Dividends reinvested 246,015 1,320,886 6,117 30,991
Redeemed (1,254,497) (6,684,144) (134,640) (684,067)
---------- ----------- -------- ----------
Net increase 8,713,269 $46,551,563 781,299 $3,923,812
========== =========== ======== ==========
----------------------------------------------------------------------------------------------------------------------------
Class B:
Sold 8,129,566 $43,322,204 633,620 $3,203,816
Dividends reinvested 172,750 925,063 4,019 20,381
Redeemed (691,490) (3,681,423) (2,314) (11,702)
---------- ----------- -------- ----------
Net increase 7,610,826 $40,565,844 635,325 $3,212,495
========== =========== ======== ==========
---------------------------------------------------------------------------------------------------------------------------
Class C:
Sold 1,915,475 $10,177,624 39,665 $ 199,624
Dividends reinvested 35,740 192,431 392 1,981
Redeemed (114,564) (611,898) (626) (3,172)
---------- ------------ -------- ----------
Net increase 1,836,651 $ 9,758,157 39,431 $ 198,433
========== ============ ======== ==========
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
Oppenheimer International Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
==============================================================================
3. UNREALIZED GAINS AND
LOSSES ON INVESTMENTS
At September 30, 1996, net unrealized appreciation on investments and
options written of $1,913,651 was composed of gross appreciation of
$2,723,838, and gross depreciation of $810,187.
==============================================================================
4. MANAGEMENT FEES
AND OTHER TRANSACTIONS
WITH AFFILIATES
Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for an annual
fee of 0.75% 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 Manager has agreed to reimburse the Fund if
aggregate expenses (with specified exceptions) exceed the most stringent
applicable regulatory limit on Fund expenses. Effective September 20,
1996, the Manager discontinued its voluntary undertaking to reimburse
Fund expenses to the level needed to maintain a stable dividend.
For the year ended September 30, 1996, commissions
(sales charges paid by investors) on sales of Class A shares totaled
$455,830, of which $126,085 was retained by OppenheimerFunds
Distributor, Inc. (OFDI), a subsidiary of the Manager, as general
distributor, and by an affiliated broker/dealer. Sales charges advanced
to broker/dealers by OFDI on sales of the Fund's Class B and Class C
shares totaled $1,115,490 and $77,326, of which $26,260 and $1,600,
respectively, was paid to an affiliated broker/dealer. During the period
ended September 30, 1996, OFDI received contingent deferred sales
charges of $32,060 and $3,260, respectively, upon redemption of Class B
and Class C shares as reimbursement for sales commissions advanced by
OFDI at the time of sale of such shares.
OppenheimerFunds Services (OFS), a division of the
Manager, is the transfer and shareholder servicing agent for the Fund,
and for other registered investment companies. OFS's total costs of
providing such services are allocated ratably to these companies.
The Fund has adopted a Service Plan for Class A shares
to reimburse OFDI 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. OFDI uses the service fee to reimburse brokers, dealers, banks and
other financial institutions quarterly for providing personal service
and maintenance of accounts of their customers that hold Class A shares.
During the year ended September 30, 1996, OFDI paid $2,532 to an
affiliated broker/dealer as reimbursement for Class A personal service
and maintenance expenses.
The Fund has adopted compensation type Distribution and
Service Plans for Class B and Class C shares to compensate OFDI for its
services and costs in distributing Class B and Class C shares and
servicing accounts. Under the Plans, the Fund pays OFDI an annual
asset-based sales charge of 0.75% per year on Class B shares and on
Class C shares, as compensation for sales commissions paid from its own
resources at the time of sale and associated financing costs. If the
Plans are terminated by the Fund, the Board of Trustees may allow the
Fund to continue payments of the asset-based sales charge to OFDI for
certain expenses it incurred before the Plans were terminated. OFDI also
receives a service fee of 0.25% per year as compensation 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 financial institutions. Both fees are
computed on the average annual net assets of Class B and Class C shares,
determined as of the close of each regular business day. During the year
ended September 30, 1996, OFDI retained $168,499 and $36,849,
respectively, as compensation for Class B and Class C sales commissions
and service fee advances, as well as financing costs. At September 30,
1996, OFDI had incurred unreimbursed expenses of $1,331,917 for Class B
and $119,763 for Class C.
Oppenheimer International Bond Fund
<PAGE>
==============================================================================
5. 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.
Securities held in designated accounts to cover net
exposure on outstanding forward contracts are noted in the Statement of
Investments where applicable. Unrealized appreciation or depreciation on
forward contracts is reported in the Statement of Assets and
Liabilities. Realized gains and losses are reported with all other
foreign currency gains and losses in the Fund's Statement of Operations.
Risks include the potential inability of the
counterparty to meet the terms of the contract and unanticipated
movements in the value of a foreign currency relative to the U.S.
dollar.
At September 30, 1996, the Fund had outstanding forward contracts to
purchase and sell foreign currencies as follows:
<TABLE>
<CAPTION>
CONTRACT AMOUNT VALUATION AS OF UNREALIZED UNREALIZED
CONTRACTS TO PURCHASE EXPIRATION DATE (000S) SEPTEMBER 30, 1996 APPRECIATION DEPRECIATION
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Danish Krone (DKK) 10/2/96 5,511 DKK $ 941,077 $ -- $1,212
Italian Lira (ITL) 10/1/96 3,854 ITL 2,532 6 --
Japanese Yen (JPY) 10/2/96 60,030 JPY 538,990 -- 7,532
---------- ------- ------
$1,482,599 6 8,744
========== ------- ------
Contracts to Sell
---------------------------------------------------------------------------------------------------------------------------
Finnish Markka (FIM) 10/2/96--12/2/96 16,245 FIM $3,562,197 $14,083 $ --
Japanese Yen (JPY) 10/28/96 28,000 JPY 252,068 8,334 --
Swedish Krona (SEK) 11/1/96 9,260 SEK 1,397,244 4,640 --
Swiss Franc (CHF) 1/3/97 1,630 CHF 1,313,111 547 --
---------- ------- ------
$6,524,620 27,604 --
========== ------- ------
Total Unrealized Appreciation and Depreciation $27,610 $8,744
======= ======
</TABLE>
Oppenheimer International Bond Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
==============================================================================
6. OPTION ACTIVITY
The Fund may buy and sell put and call options, or write put and covered
call options on portfolio securities in order to produce incremental
earnings or protect against changes in the value of portfolio
securities.
The Fund generally purchases put options or writes
covered call options to hedge against adverse movements in the value of
portfolio holdings. When an option is written, the Fund receives a
premium and becomes obligated to sell or purchase the underlying
security at a fixed price, upon exercise of the option.
Options are valued daily based upon the last sale price
on the principal exchange on which the option is traded and unrealized
appreciation or depreciation is recorded. The Fund will realize a gain
or loss upon the expiration or closing of the option transaction. When
an option is exercised, the proceeds on sales for a written call option,
the purchase cost for a written put option, or the cost of the security
for a purchased put or call option is adjusted by the amount of premium
received or paid.
Securities designated to cover outstanding call options
are noted in the Statement of Investments where applicable. Shares
subject to call, expiration date, exercise price, premium received and
market value are detailed in a footnote to the Statement of Investments.
Options written are reported as a liability in the Statement of Assets
and Liabilities. Gains and losses are reported in the Statement of
Operations.
The risk in writing a call option is that the Fund gives
up the opportunity for profit if the market price of the security
increases and the option is exercised. The risk in writing a put option
is that the Fund may incur a loss if the market price of the security
decreases and the option is exercised. The risk in buying an option is
that the Fund pays a premium whether or not the option is exercised. The
Fund also has the additional risk of not being able to enter into a
closing transaction if a liquid secondary market does not exist.
Written option activity for the year ended September 30, 1996 was as
follows:
<TABLE>
<CAPTION>
CALL OPTIONS PUT OPTIONS
--------------------------------- -------------------------
NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF
OPTIONS PREMIUMS OPTIONS PREMIUMS
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding at
September 30, 1995 245 $ 1,350 -- $ --
Options written 13,149,735 200,591 1,575 54,483
Options closed or expired (12,635,736) (124,987) (1,575) (54,483)
Options exercised (503,344) (4,134) -- --
----------- ---------- ------- ---------
Options outstanding at
September 30, 1996 10,900 $ 72,820 -- $ --
=========== ========== ======= =========
</TABLE>
==============================================================================
7. ILLIQUID AND RESTRICTED
SECURITIES
At September 30, 1996, investments in securities included issues that
are illiquid or restricted. Restricted securities are often purchased in
private placement transactions, are not registered under the Securities
Act of 1933, may have contractual restrictions on resale, and are valued
under methods approved by the Board of Trustees as reflecting fair
value. A security may be considered illiquid if it lacks a
readily-available market or if its valuation has not changed for a
certain period of time. The Fund intends to invest no more than 10% of
its net assets (determined at the time of purchase and reviewed from
time to time) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors,
are not subject to that limit. The aggregate value of illiquid or
restricted securities subject to this limitation at September 30, 1996
was $4,969,037, which represents 4.62% of the Fund's net assets.
Oppenheimer International Bond Fund
<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
<PAGE>
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
OppenheimerFunds, Inc.
Two World Trade Center
New York, New York 10048-0203
Distributor
OppenheimerFunds Distributor, Inc.
Two World Trade Center
New York, New York 10048-0203
Transfer and Shareholder Servicing Agent
OppenheimerFunds 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
<PAGE>
OPPENHEIMER INTERNATIONAL BOND FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
- -------- ---------------------------------
(a) Financial Statements:
(1) Financial Highlights (See Parts A and B): Filed
herewith.
(2) Report of Independent Auditors (See Part B): Filed
herewith.
(3) Statement of Investments (See Part B): Filed
herewith.
(4) Statement of Assets and Liabilities (See Part B):
Filed herewith.
(5) Statement of Operations (See Part B): Filed
herewith.
(6) Statement of Changes in Net Assets (See Part B):
Filed herewith.
(7) Notes to Financial Statements (See Part B): Filed
herewith.
(b) Exhibits:
(1) (i) Registrant's Declaration of Trust dated
2/28/95: Previously filed with Registrant's
Registration Statement, 3/3/95, and incorporated
herein by reference.
(ii) Amended and Restated Declaration of Trust dated
5/16/95: Previously filed with Registrant's Pre-
Effective Amendment No. 1, 5/16/95, and incorporated
herein by reference.
C-1
<PAGE>
(2) By-Laws dated 2/28/95: Previously filed with
Registrant's Pre-Effective Amendment No. 1, 5/16/95,
and incorporated herein by reference.
(3) Not applicable.
(4) (i) Specimen Class A Share Certificate: Filed
herewith.
(ii) Specimen Class B Share Certificate: Filed
herewith.
(iii)Specimen Class C Share Certificate: Filed
herewith.
(5) Form of Investment Advisory Agreement: Previously
filed with Registrant's Pre-Effective Amendment No.
1, 5/16/95, and incorporated herein by reference.
(6) (i) Form of General Distributor's Agreement:
Previously filed with Registrant's Pre-Effective
Amendment No. 1, 5/16/95, and incorporated herein by
reference.
(ii) Form of Oppenheimer Funds Distributor, Inc.
Dealer Agreement: Filed with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated
herein by reference.
(iii)Form of Oppenheimer Funds Distributor, Inc.
Broker Agreement: Filed with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated
herein by reference.
(iv) Form of Oppenheimer Funds Distributor, Inc.
Agency Agreement: Filed with Post-Effective
Amendment No. 14 of Oppenheimer Main Street Funds,
Inc. (Reg. No. 33-17850), 9/30/94, and incorporated
herein by reference.
(v) Broker Agreement between Oppenheimer Fund
Management, Inc. and Newbridge Securities, Inc.
dated October 1, 1986: Previously filed with Post-
Effective Amendment No. 25 to the Registration
Statement of Oppenheimer Growth Fund (Reg. No. 2-
45272), 11/1/86, and refiled with Post-Effective
Amendment No. 45 of Oppenheimer Growth Fund (Reg.
No. 2-45272), 8/22/94 pursuant to Item 102 of
Regulation S-T and incorporated herein by reference.
(7) Not applicable.
(8) Form of Custodian Agreement between Registrant and
The Bank of New York: Previously filed with
Registrant's Registration Statement, 3/3/95, and
incorporated herein by reference.
(9) Not applicable.
(10) Opinion and Consent of Counsel: Previously filed
with Registrant's Pre-Effective Amendment No. 2,
5/30/95, and incorporated herein by reference.
(11) Independent Auditors' Consent: Filed herewith.
(12) Not applicable.
(13) Investment Letter from Oppenheimer Management
Corporation to Registrant: Previously filed with
Registrant's Pre-Effective Amendment No. 2, 5/30/95,
and incorporated herein by reference.
(14) (i) Form of prototype Standardized and Non-
Standardized Profit-Sharing Plans and Money Purchase
Plans for self-employed persons and corporations:
Filed with Post-Effective Amendment No. 3 to the
Registration Statement of Oppenheimer Global Growth
& Income Fund (Reg. No. 33-23799), 1/31/92, and
refiled with Post-Effective Amendment No. 7 to the
Registration Statement of Oppenheimer Global Growth
& Income Fund (Reg. No. 33-23799), 12/1/94, pursuant
to Item 102 of Regulation S-T, and incorporated
herein by reference.
(ii) Form of Individual Retirement Account Trust
Agreement: Previously filed with Post-Effective
Amendment No. 21 to the Registration Statement of
Oppenheimer U.S. Government Trust (Reg. No. 2-
76645), 8/25/93 and incorporated herein by
reference.
(iii)Form of Tax Sheltered Retirement Plan and
Custody Agreement for employees of public schools
and tax-exempt organizations: Previously filed with
Post-Effective Amendment No. 47 to the Registration
Statement of Oppenheimer Growth Fund (Reg. No. 2-
45272), 10/21/94, and incorporated herein by
reference.
(iv) Form of Simplified Employee Pension IRA:
Previously filed with Post-Effective Amendment No.
42 to the Registration Statement of Oppenheimer
Equity Income Fund (Reg. No. 2-33043), 10/28/94, and
incorporated herein by reference.
(v) Form of Prototype 401(k) Plan: Previously
filed with Post-Effective Amendment No. 7 to the
Registration Statement of Oppenheimer Strategic
Income & Growth Fund (Reg. No. 33-47378), 9/28/95,
and incorporated herein by reference.
(15) (i) Form of Service Plan and Agreement for Class A
shares under Rule 12b-1: Previously filed with
Registrant's Registration Statement, 3/3/95, and
incorporated herein by reference.
(ii) Form of Distribution and Service Plan and
Agreement for Class B shares under Rule 12b-1:
Previously filed with Registrant's Pre-Effective
Amendment No. 1, 5/16/95, and incorporated herein by
reference.
(iii)Form of Distribution and Service Plan and
Agreement for Class C shares under Rule 12b-1:
Previously filed with Registrant's Pre-Effective
Amendment No. 1, 5/16/95, and incorporated herein by
reference.
(16) Performance Data Computation Schedule: Filed
herewith.
(17) (i) Financial Data Schedule for Class A shares for
the six-month period ended 9/30/96: Filed herwith.
C-2
<PAGE>
(ii) Financial Data Schedule for Class B shares for
the six-month period ended 9/30/96: Filed herwith.
(iii)Financial Data Schedule for Class C shares for
the six-month period ended 9/30/96: Filed herewith.
(18) Oppenheimer Funds Multiple Class Plan under Rule
18f-3 dated 10/24/95: Previously filed with Post-
Effective Amendment No. 12 to the Registration
Statement of Oppenheimer California Tax-Exempt Fund
(Reg. No. 33-23566), 11/1/95, and incorporated
herein by reference.
--- Powers of Attorney: For Sam Freeman, Trustee:
Filed Herewith. For all other Trustees, their
respective Powers of Attorney were previously filed
with Registrant's Registration Statement, 3/3/95,
and are incorporated herein by reference.
Item 25. Persons Controlled by or Under Common Control with
- -------- --------------------------------------------------------
Registrant
----------
None
Item 26. Number of Holders of Securities
- -------- -------------------------------
Number of Record
Holders as of
Title of Class December 31, 1996
-------------- --------------------
Class A Shares of Beneficial Interest 3,703
Class B Shares of Beneficial Interest 3,410
Class C Shares of Beneficial Interest 574
Item 27. Indemnification
- -------- ---------------
Reference is made to the provisions of Article Seventh of Registrant's
Declaration of Trust filed as Exhibit 24(b)(1) to this Registration Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
C-3
<PAGE>
controlling persons of Registrant pursuant to the foregoing provisions or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a trustee, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such trustee, officer or controlling person,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
- -------- ----------------------------------------------------
(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant;
it and certain subsidiaries and affiliates act in the same capacity to other
registered investment companies as described in Parts A and B hereof and listed
in Item 28(b) below.
(b) There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each officer
and director of OppenheimerFunds, Inc. is, or at any time during the past two
fiscal years has been, engaged for his/her own account or in the capacity of
director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Name & Current Position Other Business and Connections with
OppenheimerFunds, Inc. During the Past Two Years
- --------------------------- --------------------------------------
<S> <C>
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real
Asset Management, Inc. ("ORAMI");
formerly Vice President of Equity
Derivatives at Salomon Brothers, Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Senior Vice
C-4
<PAGE>
President of HarbourView; prior to
March, 1996 he was the senior equity
portfolio manager for the Panorama
Series Fund, Inc. (the "Company") and
other mutual funds and pension funds
managed by G.R. Phelps & Co. Inc.
("G.R. Phelps"), the Company's former
investment adviser, which was a
subsidiary of Connecticut Mutual Life
Insurance Company; was also responsible
for managing the common stock
department and common stock investments
of Connecticut Mutual Life Insurance
Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds;
formerly a
Vice President
and Senior
Portfolio
Manager at
First of
America
Investment
Corp.
Ellen Batt,
Assistant Vice President None
Kathleen Beichert,
Assistant Vice President Formerly employed by Smith Barney, Inc.
David Bernard,
Vice President Previously a Regional Sales Director
for Retirement Plan Services at Charles
Schwab & Co., Inc.
Robert J. Bishop,
Vice President Assistant Treasurer of the Oppenheimer
Funds (listed below); previously a Fund
Controller for OppenheimerFunds, Inc.
(the "Manager").
C-5
<PAGE>
George Bowen,
Senior Vice President & Treasurer Treasurer of the New York-based
Oppenheimer Funds; Vice President,
Assistant Secretary and Treasurer of
the Denver-based Oppenheimer Funds.
Vice President and Treasurer of
OppenheimerFunds Distributor, Inc. (the
"Distributor") and HarbourView Asset
Management Corporation ("HarbourView"),
an investment adviser subsidiary of the
Manager; Senior Vice President,
Treasurer, Assistant Secretary and a
director of Centennial Asset Management
Corporation ("Centennial"), an
investment adviser subsidiary of the
Manager; Vice President, Treasurer and
Secretary of Shareholder Services, Inc.
("SSI") and Shareholder Financial
Services, Inc. ("SFSI"), transfer agent
subsidiaries of the Manager; Director,
Treasurer and Chief Executive Officer
of MultiSource Services, Inc.; Vice
President and Treasurer of Oppenheimer
Real Asset Management, Inc.; President,
Treasurer and Director of Centennial
Capital Corporation; Vice President and
Treasurer of Main Street Advisers.
Scott Brooks,
Assistant Vice President None.
Susan Burton,
Assistant Vice President Previously a Director of Educational
Services for H.D. Vest Investment
Securities, Inc.
Michael A. Carbuto,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds; Vice
President of
Centennial.
Ruxandra Chivu,
Assistant Vice President None.
C-6
<PAGE>
O. Leonard Darling,
Executive Vice President Formerly Co-Director of Fixed Income
for State Street Research & Management
Co.
Robert A. Densen,
Senior Vice President None.
Robert Doll, Jr.,
Executive Vice President and
Director An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
John Doney,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director Secretary of the New York-based
Oppenheimer Funds; Vice President and
Secretary of the Denver-based
Oppenheimer Funds; Secretary of the
Oppenheimer Quest and Oppenheimer
Rochester Funds; Executive Vice
President, Director and General Counsel
of the Distributor; President and a
Director of Centennial; Chief Legal
Officer and a Director of MultiSource
Services, Inc.; President and a
Director of Oppenheimer Real Asset
Management, Inc.; Executive Vice
President, General Counsel and Director
of SFSI and SSI; formerly Senior Vice
President and Associate General Counsel
of the Manager and the Distributor.
George Evans,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Scott Farrar,
Vice President Assistant Treasurer of the New York-
based and Denver-based Oppenheimer
funds.
C-7
<PAGE>
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
OppenheimerFunds Distributor, Inc.;
Secretary of HarbourView Asset
Management Corporation, MultiSource
Services, Inc. and Centennial Asset
Management Corporation; Secretary, Vice
President and Director of Centennial
Capital Corporation; Vice President and
Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or portfolio
manager of certain Oppenheimer funds.
Formerly Chairman of the Board and
Director of Rochester Fund
Distributors, Inc. ("RFD"), President
and Director of Fielding Management
Company, Inc. ("FMC"), President and
Director of Rochester Capital Advisors,
Inc. ("RCAI"), Managing Partner of
Rochester Capital Advisors, L.P.,
President and Director of Rochester
Fund Services, Inc. ("RFS"), President
and Director of Rochester Tax Managed
Fund, Inc.
John Fortuna,
Vice President None.
Jon S. Fossel,
Chairman of the Board Director of OAC, the Manager's parent
holding company; President, CEO and a
director of HarbourView; a director of
SSI and SFSI; President, Director,
Trustee, and Managing General Partner
of the Denver-based Oppenheimer Funds;
President and Chairman of the Board of
Main Street Advisers, Inc.; formerly
Chief Executive Officer of the Manager.
C-8
<PAGE>
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds; Secretary and
General Counsel of Rochester Capital
Advisors, L.P. and Secretary of
Rochester Tax Managed Fund, Inc.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds; Vice President and
Counsel of OAC; formerly he held the
following positions: Vice President and
a director of HarbourView and
Centennial, a director of SFSI and SSI,
an officer of other Oppenheimer Funds.
Linda Gardner,
Assistant Vice President None.
Janelle Gellermann,
Assistant Vice President None.
Jill Glazerman,
Assistant Vice President None.
Ginger Gonzalez,
Vice President, Director of
Marketing Communications Formerly 1st Vice President/Director of
Graphic and Print Communications for
Shearson Lehman Brothers.
Mildred Gottlieb,
Assistant Vice President Formerly served as a Strategy
Consultant for the Private Client
Division of Merrill Lynch.
Caryn Halbrecht,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds;
formerly Vice
President of
Fixed Income
Portfolio
Management at
Bankers Trust.
C-9
<PAGE>
Barbara Hennigar,
Executive Vice President and
President and Chief Executive
Officer of OppenheimerFunds
Services, a division of the Manager President and Director of SFSI;
President and Chief Executive Officer
of SSI.
Dorothy Hirshman,
Assistant Vice President None.
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Assistant Vice President Formerly a Senior Associate with
Robinson, Lake/Sawyer Miller.
Ronald Jamison,
Vice President Formerly Vice President and Associate
General Counsel at
Prudential Securities, Inc.
Frank Jennings,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Formerly a
Managing
Director of
Global
Equities at
Paine Webber's
Mitchell
Hutchins
division.
Heidi Kagan,
Assistant Vice President None.
Thomas W. Keffer,
C-10
<PAGE>
Vice President Formerly Senior Managing Director of
Van Eck Global.
Avram Kornberg,
Vice President Formerly a Vice President with Bankers
Trust.
Paul LaRocco,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Securities Analyst for Columbus Circle
Investors.
Michael Levine,
Assistant Vice President None.
Stephen F. Libera,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March, 1996 he
was the senior bond portfolio manager
for Panorama Series Fund, Inc., other
mutual funds and pension accounts
managed by G.R. Phelps; was also
responsible for managing the public
fixed-income securities department at
Connecticut Mutual Life Insurance Co.
Mitchell J. Lindauer,
Vice President None.
Loretta McCarthy,
Executive Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director President, Director and Trustee of the
New York-based and the Denver-based
Oppenheimer funds; President and a
Director of OAC, HarbourView and
Oppenheimer Partnership Holdings, Inc.;
Director of ORAMI; Chairman and
Director of SSI; a Director of
Oppenheimer Real Asset Management, Inc.
C-11
<PAGE>
Timothy Martin,
Assistant Vice President Formerly Vice President, Mortgage
Trading, at S.N. Phelps & Co.,Salomon
Brothers, and Kidder Peabody.
Sally Marzouk,
Vice President None.
Lisa Migan,
Assistant Vice President, None.
Robert J. Milnamow,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Portfolio Manager with Phoenix
Securities Group.
Denis R. Molleur,
Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Robert E. Patterson,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
John Pirie,
Assistant Vice President Formerly a Vice President with Cohane
Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President Chairman and Director of the
Distributor.
C-12
<PAGE>
Jane Putnam,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Formerly
Senior
Investment
Officer and
Portfolio
Manager with
Chemical Bank.
Russell Read,
Vice President Consultant for Prudential Insurance on
behalf of the General Motors Pension
Plan.
Thomas Reedy,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly a
Securities Analyst for the Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President Formerly a Product Manager for
Metropolitan Life Insurance Company.
Michael S. Rosen
Vice President; President:
Rochester Division An officer and/or portfolio manager of
certain Oppenheimer funds. Formerly
Vice President of RFS, President and
Director of RFD, Vice President and
Director of FMC, Vice President and
director of RCAI, General Partner of
RCA, an officer and/or portfolio
manager of certain Oppenheimer funds.
David Rosenberg,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Richard H. Rubinstein,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds;
formerly Vice
President and
Portfolio
Manager/Security
Analyst for
Oppenheimer
Capital Corp.,
an
C-13
<PAGE>
investment adviser.
Lawrence Rudnick,
Assistant Vice President Formerly Vice President of Dollar Dry
Dock Bank.
James Ruff,
Executive Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly Vice President of Citicorp
Investment Services.
Diane Sobin,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds;
formerly a
Vice President
and Senior
Portfolio
Manager for
Dean Witter
InterCapital,
Inc.
Richard A. Soper,
Assistant Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus Vice
Chairman and
Trustee of the
New York-based
Oppenheimer
Funds;
formerly
Chairman of
the Manager
and the
Distributor.
Arthur Steinmetz,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
Ralph Stellmacher,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds.
C-14
<PAGE>
John Stoma,
Senior Vice President,
Director Retirement Plans Formerly Vice President of U.S. Group
Pension Strategy and Marketing for
Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; a Vice President of
HarbourView; prior to March, 1996 he
was an equity portfolio manager for
Panorama Series Fund, Inc. and other
mutual funds and pension accounts
managed by G.R. Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee, Director or
Managing Partner of the Denver-based
Oppenheimer Funds; President and a
Director
of Centennial; formerly President and
Director of OAMC, and Chairman of the
Board of SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President Vice President of the Manager; Vice
President and Portfolio Manager of
Oppenheimer Discovery Fund, Oppenheimer
Global Emerging Growth Fund and
Oppenheimer Enterprise Fund. Formerly
Managing Director of Buckingham Capital
Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the Distributor
and SFSI.
Ashwin Vasan,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
C-15
<PAGE>
Valerie Victorson,
Vice President None.
Dorothy Warmack,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds.
Jerry A. Webman,
Senior Vice President
Director of
New York-based
tax-exempt
fixed income
Oppenheimer
Funds;
Formerly
Managing
Director and
Chief Fixed
Income
Strategist at
Prudential
Mutual Funds.
Christine Wells,
Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; a Chartered
Financial Analyst; Vice President of
HarbourView; prior to March, 1996 he
was an equity portfolio manager for
Panorama Series Fund, Inc. and other
mutual funds and pension funds managed
by G.R. Phelps.
William L. Wilby,
Senior Vice President
An officer
and/or
portfolio
manager of
certain
Oppenheimer
funds; Vice
President of
HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio manager of
certain Oppenheimer funds; Vice
President of Centennial; Vice
President, Finance and Accounting and
member of the Board of Directors of the
Junior League of Denver, Inc.
C-16
<PAGE>
Robert G. Zack,
Senior Vice President and
Assistant Secretary
Associate
General
Counsel of the
Manager;
Assistant
Secretary of
the
Oppenheimer
Funds;
Assistant
Secretary of
SSI, SFSI; an
officer of
other
Oppenheimer
Funds.
Arthur J. Zimmer,
Vice President An
officer and/or
portfolio
manager of
certain
Oppenheimer
funds; Vice
President of
Centennial.
</TABLE>
The Oppenheimer Funds include the New York-based Oppenheimer Funds,
the Denver-based Oppenheimer Funds, and the Quest/Rochester
Oppenheimer Funds, set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer Asset Allocation Fund
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Fund
Oppenheimer Global Emerging Growth Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Series Fund, Inc.
Oppenheimer U.S. Government Trust
Oppenheimer World Bond Fund
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
C-17
<PAGE>
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Daily Cash Accumulation Fund, Inc.
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Strategic Income & Growth Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
Quest/Rochester Funds
- ---------------------------------
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer Quest for Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
The address of OppenheimerFunds, Inc., the New York-based
Oppenheimer funds, Quest funds, OppenheimerFunds Distributor, Inc.,
HarbourView Asset Management Corp., Oppenheimer Partnership
Holdings, Inc., and Oppenheimer Acquisition Corp. is Two World
Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112 .
The address of MultiSource Services, Inc. is 1700 Lincoln
Street, Denver, Colorado 80203.
C-18
<PAGE>
The address of Limited Term New York Municipal Fund, Oppenheimer Bond Fund
For Growth and Rochester Fund Municipals is 350 Linden Oaks, Rochester, New York
14625-2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
Registrant's shares. It is also the Distributor of each of the
other registered open-end investment companies for which
OppenheimerFunds, Inc. is the investment adviser, as described in
Part A and B of this Registration Statement and listed in Item
28(b) above.
(b) The directors and officers of the Registrant's principal
underwriter are:
<TABLE>
<CAPTION>
Positions and
Name & Principal Positions & Offices Offices with
Business Address with Underwriter Registrant
- ---------------- ------------------- -------------
<S> <C> <C>
George Clarence Bowen+ Vice President & Treasurer Vice President and
Treasurer of the
NY-based
Oppenheimer funds/
Vice President,
Secretary and
Treasurer of the
Denver-based Oppen-
heimer funds
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce* Senior Vice President - None
Director - Financial
Institution Div.
C-19
<PAGE>
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce DeLeon Ave.
Decatur, GA 30030
Bill Coughlin Vice President None
3425 1/2 Irving Avenue So.
Minneapolis, MN 55408
Mary Crooks+ Senior Vice President None
E. Drew Devereaux ++ Assistant Vice President None
Andrew John Donohue* Executive Vice Secretary of
President, General the New York-
Counsel and Director based Oppenheimer
funds/Vice
President of the
Denver-based Oppen-
heimer funds
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
41 Craig Place
Cranford, NJ 07016
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
Katherine P. Feld* Vice President & Secretary None
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
C-20
<PAGE>
Ronald H. Fielding++ Vice President; Chairman:
Rochester Division None
Reed F. Finley Vice President - None
320 E. Maple, Ste. 254 Financial Institution Div.
Birmingham, MI 48009
Wendy Fishler* Vice President - None
Financial Institution Div.
Ronald R. Foster Senior Vice President None
139 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
3906 Americana Drive
Tampa, FL 3334
Luiggino Galletto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President - None
5506 Bryn Mawr Financial Institution Div.
Dallas, TX 75209
Ralph Grant* Vice President/National None
Sales Manager - Financial
Institution Div.
Sharon Hamilton Vice President None
720 N. Juanita Ave. - #1
Redondo Beach, CA 90277
Mark D. Johnson Vice President None
7512 Cromwell Dr. Apt 1
Clayton, MO 63105
Michael Keogh* Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
C-21
<PAGE>
Ilene Kutno* Vice President - None
Director - Regional Sales
Wayne A. LeBlang Senior Vice President - None
23 Fox Trail Director Eastern Div.
Lincolnshire, IL 60069
Dawn Lind Vice President - None
7 Maize Court Financial Institution Div.
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Laura Mulhall* Senior Vice President - None
Director of Key Accounts
Timothy G. Mulligan ++ Vice President None
Charles Murray Vice President None
50 Deerwood Drive
Littleton, CO 80127
Wendy Murray Vice President None
114-B Larchmont Acres West
Larchmont, NY 10538
Joseph Norton Vice President None
2518 Fillmore Street
Apt. 1
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Randall Payne Vice President - None
1307 Wandering Way Dr. Financial Institution Div.
Charlotte, NC 28226
C-22
<PAGE>
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Dr.
Pittsford, NY 14534
Bill Presutti Vice President None
1777 Larimer St. #807
Denver, CO 80202
Tilghman G. Pitts, III* Chairman & Director None
Elaine Puleo* Vice President - None
Financial Institution Div.,
Director -
Key Accounts
Minnie Ra Vice President - None
0895 Thirty-First Ave. Financial Institution Div.
Apt. 4
San Francisco, CA 94121
Michael Raso Vice President None
30 Hommocks Road
Apt. 30
Larchmont, NY 10538
John C. Reinhardt ++ Vice President None
Ian Robertson Vice President None
4204 Summit Way
Marietta, GA 30066
Michael S. Rosen++ Vice President, President:
Rochester Division None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. 3D
Indianapolis, IN 46240
James Ruff* President None
C-23
<PAGE>
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 20007
Michael Sciortino Vice President None
3114 Hickory Run
Sugarland, TX 77479
Robert Shore Vice President - None
26 Baroness Lane Financial Institution Div.
Laguna Niguel, CA 92677
Peggy Spilker ++ Vice President None
Michael Stenger Vice President None
8572 Saint Ives Place
Cincinnati, OH 45255
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President - None
111 South Joliet Circle Financial Institution Div.
#304
Aurora, CO 80112
Philip Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Gary Paul Tyc+ Assistant Treasurer None
Mark Stephen Vandehey+ Vice President None
* Two World Trade Center, New York, NY 10048-0203
+ 6803 South Tucson Way, Englewood, Colorado 80112
++ 350 Linden Oaks, Rochester, NY 14625-2807 (the "Rochester Division")
</TABLE>
(c) Not applicable.
C-24
<PAGE>
Item 30. Location of Accounts and Records
- -------- ---------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
rules promulgated thereunder are in the possession of OppenheimerFunds, Inc. at
its offices at 6803 South Tucson Way, Englewood, Colorado 80112.
Item 31. Management Services
- -------- --------------------
Not applicable.
Item 32. Undertakings
- -------- ------------
(a) Not applicable.
(b) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six months from
the effective date of its registration statement under the Securities Act of
1933.
(c) Not applicable.
C-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and/or the Investment
Company Act of 1940, the Registrant certifies that it meets all the requirements
for effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Denver and State of Colorado on the 27th day of January, 1997.
OPPENHEIMER INTERNATIONAL BOND FUND
By: /s/ James C. Swain*
-----------------------------
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
<TABLE>
<CAPTION>
Signatures: Title Date
- ----------- ----------------- ----------------
<S> <C> <C>
/s/ James C. Swain * Chairman of January 27, 1997
- ---------------------- the Board of
James C. Swain Trustees, Principal
Executive Officer
/s/ Sam Freedman * Trustee January 27, 1997
- ----------------------
Sam Freedman
/s/ Jon S. Fossel * Trustee January 27, 1997
- ----------------------
Jon S. Fossel
/s/ George Bowen * Treasurer and January 27, 1997
- ---------------------- Principal Financial
George Bowen and Accounting Officer
/s/ Robert G. Avis * Trustee January 27, 1997
- ----------------------
Robert G. Avis
/s/ William A. Baker * Trustee January 27, 1997
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee January 27, 1997
- ----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee January 27, 1997
- ----------------------
Raymond J. Kalinowski
C-26
<PAGE>
/s/ C. Howard Kast * Trustee January 27, 1997
- ----------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee January 27, 1997
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel * Trustee January 27, 1997
- ----------------------
Ned M. Steel
*By: /s/ Robert G. Zack
---------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
C-27
<PAGE>
OPPENHEIMER INTERNATIONAL BOND FUND
EXHIBIT INDEX
Form N-1A
Item No. Description
- ---------- ------------
24(b)(4)(i) Specimen Class A Share Certificate
24(b)(4)(ii) Specimen Class B Share Certificate
24(b)(4)(iii) Specimen Class C Share Certificate
24(b)(11) Independent Auditors' Consent
24(b)(16) Performance Data Computation Schedule
24(b)(17)(i) Financial Data Schedule for Class A Shares
24(b)(17)(ii) Financial Data Schedule for Class B Shares
24(b)(17)(iii) Financial Data Schedule for Class C Shares
-- Power of Attorney for Sam Freedman, Trustee
Exhibit 24(b)(4)(i)
OPPENHEIMER INTERNATIONAL BOND FUND
Class A Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border)
(upper left) box with heading: (upper right) box with heading:
NUMBER (OF SHARES) CLASS A SHARES
(certificate number above)
(centered below boxes)
Oppenheimer International Bond Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) (at right)
THIS IS TO CERTIFY THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP _____________
(at left)
is the owner of
(centered)
FULLY PAID CLASS A SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER INTERNATIONAL BOND FUND
- ------------------------------------------------------------------------
(hereinafter called the "Fund"), transferable only on the books of the
Fund by the holder hereof in person or by duly authorized attorney,
upon surrender of this certificate properly endorsed. This certificate
and the shares represented hereby are issued and shall be held subject
to all of the provisions of the Declaration of Trust of the Fund to all
of which the holder by acceptance hereof assents. This certificate is
not valid until countersigned by the Transfer Agent. WITNESS the
facsimile seal of the Fund and the signatures of its duly authorized
officers.
(at left of seal) (at right of seal)
(signature) Dated:
- ------------------------- -------------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER INTERNATIONAL BOND FUND
SEAL
----
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically)
Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (Colo) Transfer Agent
By
Authorized Signature
<PAGE>
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with rights of survivorship
and not as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ________________
(State)
Additional abbreviations may also be used though not
in the above list.
For Value Received __________________ hereby sell(s), and transfer(s) unto
(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)
- -------------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------------------------
- ----------------- Class A Shares of beneficial interest represented by the
within Certificate, and do hereby irrevocably constitute and appoint.
- --------------------- Attorney to transfer the said shares on the books of the
within named Fund with full power of substitution in the premises.
Dated: ---------------------
Signed:
-----------------------------------
(Both must sign if joint owners)
Signature(s) --------------------------
guaranteed Name of Guarantor
by --------------------------
Signature of Officer/Title
(text printed vertically to right of above paragraph)
NOTICE: The signature(s) to this assignment must correspond with the
<PAGE>
name(s) as written upon the face of the certificate in every particular without
alteration or enlargement or any change whatever.
(text printed in box to left of signature guarantee) Signatures must be
guaranteed by a financial institution of the type described in the current
prospectus of the Fund.
(at left) (at right)
PLEASE NOTE: This document contains OppenheimerFunds
a watermark when viewed at an angle. logotype
It is invalid without this watermark.
- -------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(ii)
OPPENHEIMER INTERNATIONAL BOND FUND
Class B Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border)
(upper left) box with heading: (upper right) box with heading:
NUMBER (OF SHARES) CLASS B SHARES
(certificate number above)
(centered below boxes)
Oppenheimer International Bond Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) (at right)
THIS IS TO CERTIFY THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP _____________
(at left)
is the owner of
(centered)
FULLY PAID CLASS B SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER INTERNATIONAL BOND FUND
- ------------------------------------------------------------------------
(hereinafter called the "Fund"), transferable only on the books of the
Fund by the holder hereof in person or by duly authorized attorney,
upon surrender of this certificate properly endorsed. This certificate
and the shares represented hereby are issued and shall be held subject
to all of the provisions of the Declaration of Trust of the Fund to all
of which the holder by acceptance hereof assents. This certificate is
not valid until countersigned by the Transfer Agent. WITNESS the
facsimile seal of the Fund and the signatures of its duly authorized
officers.
(at left of seal) (at right of seal)
(signature) Dated:
- ------------------------- -------------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER INTERNATIONAL BOND FUND
SEAL
----
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically)
Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (Colo) Transfer Agent
By
Authorized Signature
<PAGE>
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with rights of survivorship
and not as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ________________
(State)
Additional abbreviations may also be used though not
in the above list.
For Value Received __________________ hereby sell(s), and transfer(s) unto
(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)
- -------------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------------------------
- ----------------- Class B Shares of beneficial interest represented by the
within Certificate, and do hereby irrevocably constitute and appoint.
- --------------------- Attorney to transfer the said shares on the books of the
within named Fund with full power of substitution in the premises.
Dated: ---------------------
Signed:
-----------------------------------
(Both must sign if joint owners)
Signature(s) --------------------------
guaranteed Name of Guarantor
by --------------------------
Signature of Officer/Title
(text printed vertically to right of above paragraph) NOTICE: The signature(s)
to this assignment must correspond with the name(s) as written upon the face of
the certificate in every particular without alteration or enlargement or any
change whatever.
(text printed in box to left of signature guarantee) Signatures must be
guaranteed by a financial institution of the type described in the current
prospectus of the Fund.
(at left) (at right)
PLEASE NOTE: This document contains OppenheimerFunds
a watermark when viewed at an angle. logotype
It is invalid without this watermark.
- -------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(4)(iii)
OPPENHEIMER INTERNATIONAL BOND FUND
Class C Share Certificate (8-1/2" x 11")
I. FRONT OF CERTIFICATE (All text and other matter lies within
decorative border)
(upper left) box with heading: (upper right) box with heading:
NUMBER (OF SHARES) CLASS C SHARES
(certificate number above)
(centered below boxes)
Oppenheimer International Bond Fund
A MASSACHUSETTS BUSINESS TRUST
(at left) (at right)
THIS IS TO CERTIFY THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
(box with number)
CUSIP _____________
(at left)
is the owner of
(centered)
FULLY PAID CLASS C SHARES OF BENEFICIAL INTEREST OF
OPPENHEIMER INTERNATIONAL BOND FUND
- ------------------------------------------------------------------------
(hereinafter called the "Fund"), transferable only on the books of the
Fund by the holder hereof in person or by duly authorized attorney,
upon surrender of this certificate properly endorsed. This certificate
and the shares represented hereby are issued and shall be held subject
to all of the provisions of the Declaration of Trust of the Fund to all
of which the holder by acceptance hereof assents. This certificate is
not valid until countersigned by the Transfer Agent. WITNESS the
facsimile seal of the Fund and the signatures of its duly authorized
officers.
(at left of seal) (at right of seal)
(signature) Dated:
- ------------------------- -------------------------
TREASURER PRESIDENT
<PAGE>
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER INTERNATIONAL BOND FUND
SEAL
----
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically)
Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Denver (Colo) Transfer Agent
By
Authorized Signature
<PAGE>
II. BACK OF CERTIFICATE (text reads from top to bottom of 11" dimension)
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common
TEN ENT - as tenants by the entirety
JT TEN WROS NOT TC - as tenants with rights of survivorship
and not as tenants in common
UNIF GIFT/TRANSFER MIN ACT - __________________ Custodian _______________
(Cust) (Minor)
UNDER UGMA/UTMA ________________
(State)
Additional abbreviations may also be used though not
in the above list.
For Value Received __________________ hereby sell(s), and transfer(s) unto
(at right) PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
AND PROVIDE CERTIFICATION BY TRANSFEREE (box below)
- -------------------------------------------------------------------------
(Please print or type name and address of assignee)
- ------------------------------------------------------------------------
- ----------------- Class C Shares of beneficial interest represented by the
within Certificate, and do hereby irrevocably constitute and appoint.
- --------------------- Attorney to transfer the said shares on the books of the
within named Fund with full power of substitution in the premises.
Dated: ---------------------
Signed:
-----------------------------------
(Both must sign if joint owners)
Signature(s) --------------------------
guaranteed Name of Guarantor
by --------------------------
Signature of Officer/Title
(text printed vertically to right of above paragraph) NOTICE: The signature(s)
to this assignment must correspond with the name(s) as written upon the face of
the certificate in every particular without alteration or enlargement or any
change whatever.
(text printed in box to left of signature guarantee) Signatures must be
guaranteed by a financial institution of the type described in the current
prospectus of the Fund.
(at left) (at right)
PLEASE NOTE: This document contains OppenheimerFunds
a watermark when viewed at an angle. logotype
It is invalid without this watermark.
- -------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
Exhibit 24(b)(11)
INDEPENDENT AUDITORS' CONSENT
Oppenheimer International Bond Fund:
We hereby consent to the use in this Post-Effective Amendment No. 2 to
Registration Statement No. 33-58383 of our report dated October 21, 1996
appearing in the Statement of Additional Information, which is a part of such
Registration Statement and to the reference to us under the caption "Financial
Highlights" appearing in the Prospectus, which is also a part of such
Registration Statement.
/s/Deloitte & Touche LLP
- --------------------------------
DELOITTE & TOUCHE LLP
Denver, Colorado
January 9, 1997
Oppenheimer International Bond Fund
Exhibit 24(b)(16) to Form N-1A
Performance Data Computation Schedule
The Fund's average annual total returns and total returns are calculated as
described below, on the basis of the Fund's distributions, for the past 10 years
which are as follows:
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class A Shares
07/31/95 0.0662330 0.0000000 5.060
08/31/95 0.0437500 0.0000000 5.020
09/29/95 0.0437500 0.0000000 5.100
10/31/95 0.0437500 0.0000000 5.120
11/30/95 0.0437500 0.0000000 5.120
12/29/95 0.0437500 0.0000000 5.200
01/31/96 0.0437500 0.0000000 5.270
02/29/96 0.0437500 0.0000000 5.240
03/29/96 0.0437500 0.0000000 5.260
04/30/96 0.0437500 0.0000000 5.310
05/31/96 0.0437500 0.0000000 5.340
06/28/96 0.0437500 0.0000000 5.370
07/31/96 0.0437500 0.0000000 5.390
08/30/96 0.0437500 0.0000000 5.440
09/30/96 0.0437500 0.0000000 5.490
Class B Shares
07/31/95 0.0606534 0.0000000 5.060
08/31/95 0.0417898 0.0000000 5.010
09/29/95 0.0407503 0.0000000 5.100
10/31/95 0.0401434 0.0000000 5.120
11/30/95 0.0400524 0.0000000 5.110
12/29/95 0.0401422 0.0000000 5.190
01/31/96 0.0399555 0.0000000 5.270
02/29/96 0.0406945 0.0000000 5.230
03/29/96 0.0406394 0.0000000 5.250
04/30/96 0.0404986 0.0000000 5.300
05/31/96 0.0402251 0.0000000 5.330
06/28/96 0.0408140 0.0000000 5.370
07/31/96 0.0404570 0.0000000 5.390
08/30/96 0.0399571 0.0000000 5.430
09/30/96 0.0405594 0.0000000 5.480
Class C Shares
07/31/95 0.0617192 0.0000000 5.060
08/31/95 0.0416818 0.0000000 5.010
09/29/95 0.0407938 0.0000000 5.090
10/31/95 0.0405258 0.0000000 5.110
11/30/95 0.0388509 0.0000000 5.110
12/29/95 0.0398061 0.0000000 5.190
01/31/96 0.0399993 0.0000000 5.260
02/29/96 0.0406137 0.0000000 5.230
03/29/96 0.0399852 0.0000000 5.250
04/30/96 0.0406175 0.0000000 5.300
</TABLE>
<PAGE>
Oppenheimer International Bond Fund
Page 2
<TABLE>
<CAPTION>
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
<S> <C> <C> <C>
Class C Shares (Continued)
05/31/96 0.0403599 0.0000000 5.330
06/28/96 0.0409153 0.0000000 5.360
07/31/96 0.0404267 0.0000000 5.380
08/30/96 0.0399232 0.0000000 5.430
09/30/96 0.0406559 0.0000000 5.480
</TABLE>
1. Average Annual Total Returns for the Periods Ended 09/30/96:
The formula for calculating average annual total return is as follows:
1 ERV n
--------------- = n (---) - 1 = average annual total return
number of years P
Where: ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period
P = hypothetical initial investment of $1,000
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Inception
$1,131.79 1 $1,189.83 .7742
(---------) - 1 = 13.18% (---------) - 1 = 14.40%
$1,000 $1,000
Class B Shares
Example assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 4.00% for the inception year:
One Year Inception
$1,127.14 1 $1,195.00 .7742
(---------) - 1 = 12.71% (---------) - 1 = 14.79%
$1,000 $1,000
<PAGE>
Oppenheimer International Bond Fund
Page 3
1. Average Annual Total Returns for the Periods Ended 09/30/96 (continued):
Class C Shares
Example assuming a maximum contingent deferred sales charge of 1.00% for the
first year, and 0.00% for the inception year:
One Year Inception
$1,169.19 1 $1,234.99 .7742
(---------) - 1 = 16.92% (---------) - 1 = 17.75%
$1,000 $1,000
Examples at NAV:
Class A Shares
One Year Inception
$1,188.22 1 $1,249.17 .7742
(---------) - 1 = 18.82% (---------) - 1 = 18.80%
$1,000 $1,000
Class B Shares
One Year Inception
$1,177.14 1 $1,234.99 .7742
(---------) - 1 = 17.71% (---------) - 1 = 17.75%
$1,000 $1,000
Class C Shares
One Year Inception
$1,179.19 1 $1,234.99 .7742
(---------) - 1 = 17.92% (--------) - 1 = 17.75%
$1,000 $1,000
<PAGE>
Oppenheimer International Bond Fund
Page 4
2. Cumulative Total Returns for the Periods Ended 09/30/96:
The formula for calculating cumulative total return is as follows:
ERV - P
------- = Cumulative Total Return
P
Class A Shares
Examples, assuming a maximum sales charge of 4.75%:
One Year Inception
$1,131.79 - $1,000 $1,189.83 - $1,000
------------------ = 13.18% ------------------ = 18.98%
$1,000 $1,000
Class B Shares
Example assuming a maximum contingent deferred sales charge of 5.00% for the
first year, and 4.00% for the inception year:
One Year Inception
$1,127.14 - $1,000 $1,195.00 - $1,000
------------------ = 12.71% ------------------ = 19.50%
$1,000 $1,000
Class C Shares
Example assuming a maximum contingent deferred sales charge of 1.00% for the
first year, and 0.00% for the inception year:
One Year Inception
$1,169.19 - $1,000 $1,234.99 - $1,000
------------------ = 16.92% ------------------ = 23.50%
$1,000 $1,000
<PAGE>
Oppenheimer International Bond Fund
Page 5
2. Cumulative Total Returns for the Periods Ended 09/30/96(continued):
Examples at NAV:
Class A Shares
One Year Inception
$1,188.22 - $1,000 $1,249.17 - $1,000
------------------ = 18.82% ------------------ = 24.92%
$1,000 $1,000
Class B Shares
One Year Inception
$1,177.14 - $1,000 $1,234.99 - $1,000
------------------ = 17.71% ------------------ = 23.50%
$1,000 $1,000
Class C Shares
One Year Inception
$1,179.19 - $1,000 $1,234.99 - $1,000
------------------ = 17.92% ------------------ = 23.50%
$1,000 $1,000
<PAGE>
Oppenheimer International Bond Fund
Page 6
3. Standardized Yield for the 30-Day Period Ended 09/30/96:
The Fund's standardized yields are calculated using the following formula
set forth in the SEC rules:
a - b 6
Yield = 2 { (-------- + 1 ) - 1 }
cd or ce
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 Fund shares outstanding during
the 30-day period that were entitled to receive dividends.
d = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
e = The Fund's net asset value (excluding contingent deferred
sales charge) per share on the last day of the period.
Class A Shares
Example, assuming a maximum sales charge of 4.75%:
$406,710.38 - $60,870.65 6
2{(------------------------ + 1) - 1} = 8.27%
8,865,349 x $5.76
Class B Shares
Example at NAV:
$347,527.97 - $78,718.58 6
2{(------------------------ + 1) - 1} = 7.89%
7,586,724 x $5.48
Class C Shares
Example at NAV:
$ 81,293.00 - $18,246.80 6
2{(------------------------ + 1) - 1} = 7.90%
1,775,466 x $5.48
<PAGE>
Oppenheimer International Bond Fund
Page 7
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 09/30/96:
The Fund's dividend yields are calculated using the following formula:
Dividend Yield = ( a * 12 ) / b or c
The symbols above represent the following factors:
a = The dividend earned during the thirty day period.
b = The Fund's maximum offering price (including sales charge)
per share on the last day of the period.
c = The Fund's net asset value (excluding sales charge) per share on
the last day of the period.
Examples :
Class A Shares
Dividend Yield ($0.0464009 * 12 ) / $5.76 = 9.67%
at Maximum Offer:
Dividend Yield ($0.0464009 * 12 ) / $5.49 = 10.14%
at Net Asset Value:
Class B Shares
Dividend Yield ($0.0429827 * 12 ) / $5.48 = 9.41%
at Net Asset Value:
Class C Shares
Dividend Yield ($0.0430832 * 12 ) / $5.48 = 9.43%
at Net Asset Value:
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 939800
<NAME> Oppenheimer International Bond Fund - A
<SERIES>
<NUMBER> 1
<NAME> Oppenheimer International Bond Fund
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 105,246,914
<INVESTMENTS-AT-VALUE> 107,270,820
<RECEIVABLES> 7,246,037
<ASSETS-OTHER> 1,862
<OTHER-ITEMS-ASSETS> 654,392
<TOTAL-ASSETS> 115,173,111
<PAYABLE-FOR-SECURITIES> 6,611,001
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 944,239
<TOTAL-LIABILITIES> 7,555,240
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 104,210,304
<SHARES-COMMON-STOCK> 9,494,568
<SHARES-COMMON-PRIOR> 781,299
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,480,266
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,927,301
<NET-ASSETS> 52,128,047
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,624,080
<OTHER-INCOME> 0
<EXPENSES-NET> 791,297
<NET-INVESTMENT-INCOME> 3,832,783
<REALIZED-GAINS-CURRENT> 1,549,896
<APPREC-INCREASE-CURRENT> 1,839,250
<NET-CHANGE-FROM-OPS> 7,221,929
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,931,780
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,721,751
<NUMBER-OF-SHARES-REDEEMED> 1,254,497
<SHARES-REINVESTED> 246,015
<NET-CHANGE-IN-ASSETS> 100,195,269
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (189)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 311,128
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 833,224
<AVERAGE-NET-ASSETS> 19,817,115
<PER-SHARE-NAV-BEGIN> 5.10
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.40
<PER-SHARE-DIVIDEND> 0.53
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.49
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 939800
<NAME> Oppenheimer International Bond Fund - B
<SERIES>
<NUMBER> 1
<NAME> Oppenheimer International Bond Fund
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 105,246,914
<INVESTMENTS-AT-VALUE> 107,270,820
<RECEIVABLES> 7,246,037
<ASSETS-OTHER> 1,862
<OTHER-ITEMS-ASSETS> 654,392
<TOTAL-ASSETS> 115,173,111
<PAYABLE-FOR-SECURITIES> 6,611,001
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 944,239
<TOTAL-LIABILITIES> 7,555,240
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 104,210,304
<SHARES-COMMON-STOCK> 8,246,151
<SHARES-COMMON-PRIOR> 635,325
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,480,266
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,927,301
<NET-ASSETS> 45,207,455
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,624,080
<OTHER-INCOME> 0
<EXPENSES-NET> 791,297
<NET-INVESTMENT-INCOME> 3,832,783
<REALIZED-GAINS-CURRENT> 1,549,896
<APPREC-INCREASE-CURRENT> 1,839,250
<NET-CHANGE-FROM-OPS> 7,221,929
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,609,969
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,129,566
<NUMBER-OF-SHARES-REDEEMED> 691,490
<SHARES-REINVESTED> 172,750
<NET-CHANGE-IN-ASSETS> 100,195,269
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (189)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 311,128
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 833,224
<AVERAGE-NET-ASSETS> 17,890,990
<PER-SHARE-NAV-BEGIN> 5.10
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0.39
<PER-SHARE-DIVIDEND> 0.49
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.48
<EXPENSE-RATIO> 2.26
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 939800
<NAME> Oppenheimer International Bond Fund - C
<SERIES>
<NUMBER> 1
<NAME> Oppenheimer International Bond Fund
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 105,246,914
<INVESTMENTS-AT-VALUE> 107,270,820
<RECEIVABLES> 7,246,037
<ASSETS-OTHER> 1,862
<OTHER-ITEMS-ASSETS> 654,392
<TOTAL-ASSETS> 115,173,111
<PAYABLE-FOR-SECURITIES> 6,611,001
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 944,239
<TOTAL-LIABILITIES> 7,555,240
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 104,210,304
<SHARES-COMMON-STOCK> 1,876,082
<SHARES-COMMON-PRIOR> 39,431
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,480,266
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,927,301
<NET-ASSETS> 10,282,369
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 4,624,080
<OTHER-INCOME> 0
<EXPENSES-NET> 791,297
<NET-INVESTMENT-INCOME> 3,832,783
<REALIZED-GAINS-CURRENT> 1,549,896
<APPREC-INCREASE-CURRENT> 1,839,250
<NET-CHANGE-FROM-OPS> 7,221,929
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 360,475
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,915,475
<NUMBER-OF-SHARES-REDEEMED> 114,564
<SHARES-REINVESTED> 35,740
<NET-CHANGE-IN-ASSETS> 100,195,269
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (189)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 311,128
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 833,224
<AVERAGE-NET-ASSETS> 4,039,270
<PER-SHARE-NAV-BEGIN> 5.09
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0.39
<PER-SHARE-DIVIDEND> 0.48
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.48
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints
Andrew J. Donohue or Robert G. Zack, and each of them, his true and lawful
attorney-in-fact and agents, with full power of substitution and resubstitution,
for him and in his capacity as a trustee of OPPENHEIMER INTERNATIONAL BOND FUND,
a Massachusetts business trust (the "Fund"), to sign on his behalf any and all
Registration Statements (including any post-effective amendments to Registration
Statements) under the Securities Act of 1933, the Investment Company Act of 1940
and any amendments and supplements thereto, and other documents in connection
thereunder, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully as to all intents and purposes as
she might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, and each of them, may lawfully do or cause to be
done by virtue hereof.
Dated this 27th day of June, 1996.
/s/ Sam Freedman
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Sam Freedman