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. 3 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X
/
AMENDMENT NO. 5
/ X /
OPPENHEIMER INTERNATIONAL BOND FUND
----------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
----------------------------------------------------------------------
(Address of Principal Executive Offices)
303-671-3200
----------------------------------------------------------------------
(Registrant's Telephone Number)
ANDREW J. DONOHUE, ESQ.
OppenheimerFunds, Inc.
Two World Trade Center, New York, New York 10048-0203
----------------------------------------------------------------------
(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 9, 1998, 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.
- -------------------------------------------------------------------
A Rule 24f-2 Notice for the Registrant's fiscal year ended September 30, 1997
was filed on December 24, 1997.
<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 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 Plansf for Class B and
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
- ---------------
*Not applicable or negative answer.
<PAGE>
OPPENHEIMER
International Bond Fund
Prospectus dated January 9, 1998
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 January
9, 1998 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 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-1-
<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
-2-
<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,
1997.
o Shareholder Transaction Expenses are charges you pay when you buy or
sell shares of the Fund. Please refer to "About Your Account" from pages ___
through ___ for an explanation of how and
when these charges apply.
Class A Class B Class C
Shares Shares Shares
- ------------------------------------------------------------------------------
Maximum Sales Charge 4.75% None None
on Purchases (as a % of
offering price)
- ------------------------------------------------------------------------------
Maximum Deferred Sales None(1) 5% in the firs1% if shares
Charge (as a % of the year, declininare redeemed
lower of the original to 1% in the within 12
offering price or sixth year andmonths 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
(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 to pay a sales charge of up to 1% if
you sell your shares within 12 calendar months (18 calendar months if you
purchased Fund shares prior to May 1, 1997) from the end of the calendar month
during which you purchased those shares. See "How to Buy Shares - Buying 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.
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.
Annual Fund Operating Expenses
as a Percentage of Average Net Assets
Class A Class B Class C
Shares Shares Shares
- -------------------------------------------------------------------
Management Fees 0.75% 0.75% 0.75%
- -------------------------------------------------------------------
12b-1 Distribution Plan Fees 0.24% 1.00% 1.00%
- -------------------------------------------------------------------
Other Expenses 0.29% 0.29% 0.29%
- -----------------------------------------------
Total Fund 1.28% 2.04%
2.04%
Operating Expenses
The numbers in the table above are based on the Fund's expenses in its
last fiscal year ended September 30, 1997.
These
amounts are shown as a percentage of the average net assets of each class of the
Fund's shares for that period .
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:
1 year 3 years 5 years 10 years*
- -------------------------------------------------------------------
Class A Shares $60 $86 $114 $195
- -------------------------------------------------------------------
Class B Shares $71 $94 $130 $199
- -------------------------------------------------------------------
Class C Shares $31 $64 $110 $237
If you did not redeem your investment, it would incur the
following expenses:
Class A Shares $60 $86 $114 $195
- -------------------------------------------------------------------
Class B Shares $21 $64 $110 $199
- -------------------------------------------------------------------
Class C Shares $211 $64 $110 $237
*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. 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 subsidiaries) manages investment
company portfolios having over $75 billion in assets at September 30, 1997. 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 country, 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 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, 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 , cumulative total returns and yields, 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 __ and __. 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, 1997 is included in
the Statement of Additional Information.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS CLASS A
--------------------------------------------
YEAR ENDED SEPTEMBER 30,
1997 1996 1995(1)
================================================================================================
<S> <C> <C> <C>
PER SHARE OPERATING DATA:
Net asset value, beginning of period $5.49 $5.10 $5.00
- ------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .52 .52 .15
Net realized and unrealized gain .08 .40 .10
----- ----- -----
Total income from investment operations .60 .92 .25
- ------------------------------------------------------------------------------------------------
Dividends to shareholders from net
investment income (.53) (.53) (.15)
Distributions from net realized gain (.05) -- --
----- ----- -----
Total dividends and distributions to
shareholders (.58) (.53) (.15)
- ------------------------------------------------------------------------------------------------
Net asset value, end of period $5.51 $5.49 $5.10
===== ===== =====
================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2) 11.33% 18.82% 5.13%
================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $114,847 $52,128 $3,984
- ------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 89,112 $19,817 $2,566
- ------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income 9.24% 9.60% 9.94%(3)
Expenses, before voluntary
reimbursement by the Manager 1.28% 1.59% 1.59%(3)
Expenses, net of voluntary
reimbursement by the Manager N/A 1.49% 0.41%(3)
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate(4) 280.1% 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.
<PAGE>
<TABLE>
<CAPTION>
CLASS B CLASS C
- ----------------------------------------------- ----------------------------------------------
YEAR ENDED SEPTEMBER 30, YEAR ENDED SEPTEMBER 30,
1997 1996 1995(1) 1997 1996 1995(1)
======================================================================================================
<S> <C> <C> <C> <C> <C>
$5.48 $5.10 $5.00 $5.48 $5.09 $5.00
- ---------------------------------------------------------------------------------------------------
.48 .48 .14 .48 .48 .14
.07 .39 .10 .07 .39 .09
----- ----- ----- ----- ----- -----
.55 .87 .24 .55 .87 .23
----- ---- ----- ----- ----- -----
(.48) (.49) (.14) (.48) (.48) (.14)
(.05) -- -- (.05) -- --
----- ---- ----- ----- ----- -----
(.53) (.49) (.14) (.53) (.48) (.14)
- -------------------------------------------------------------------------------------------------------
$5.50 $5.48 $5.10 $5.50 $5.48 $5.09
==== ===== ===== ===== ===== =====
- -------------------------------------------------------------------------------------------------------
10.52% 17.71% 4.92% 10.52% 17.92% 4.73%
- -------------------------------------------------------------------------------------------------------
$122,874 $45,207 $3,238 $28,684 $10,282 $201
- -------------------------------------------------------------------------------------------------------
$ 87,557 $17,891 $1,125 $19,883 $ 4,039 $ 97
- -------------------------------------------------------------------------------------------------------
8.57% 8.81% 9.20%(3) 8.62% 8.76% 9.36%(3)
2.04% 2.36% 2.21%(3) 2.04% 2.36% 2.26%(3)
N/A 2.26% 0.89%(3) N/A 2.25% 0.85%(3)
- -------------------------------------------------------------------------------------------------------
280.1% 273.3% 122.0% 280.1% 273.3% 122.0%
</TABLE>
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, 1997 were $533,744,496 and $409,121,282, respectively.
-3-
<PAGE>
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) for longer-term debt securities are generally denominated
in U.S. dollars, (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 ownership interest in the company issuing the security.
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.
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.
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."
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.
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 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 . These interests are acquired from banks or
brokers that have made the loan or are members of the lending syndicate. No more
than 5% of the Fund's net assets may be invested in participation interests of
the same borrower.
|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 principal and 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 Debt Securities." Convertible
securities may be less subject to some of these risks than other debt
securities, to the extent they can be converted into stock, which may be more
liquid and less affected by these other risk factors.
Securities rated by a rating organization represented the following
percentage of the Fund's total assets as of September 30, 1997 (securities rated
by any organization are included in the equivalent Standard & Poor's rating
category): AAA, 15.87%; AA, 7.12%; A, 0%; BBB, 5.50%; BB, 17.87%; B, 6.31%; and
CCC, 0%. Unrated fixed-income securities represented 34.49% of the Fund's total
assets. 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.
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 Debt 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
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.
|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. "Portfolio turnover" describes the rate at which the
Fund traded its portfolio securities during its last fiscal year. For example,
if a fund sold all of its securities during its last fiscal year, its portfolio
turnover rate would have been 100%. As most purchases made by the Fund are
principal transactions at net prices, the Fund incurs relatively little
brokerage costs. The Financial Highlights table above shows the Fund's portfolio
turnover rates during prior fiscal years. 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.
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 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 to determine whether to sell
any 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 value of
securities loaned, if any, is not expected to exceed 5% of the value of the
Fund's 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 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 on which the derivative is based, and the
derivative itself, may 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 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 securities indices, corporate debt securities indices or equity
securities indices (these are referred to as Financial Futures), (3) interest
rates (these are referred to as Interest Rate Futures) and (4) commodities
(these are referred to as commodity 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). A call or put option may not be
purchased if the value of all of the Fund's put and call options would exceed 5%
of the Fund's total assets. Calls the Fund buys or sells must be traded on a
securities or commodities exchange, or be quoted by recognized dealers in those
options.
The Fund may buy calls only on securities, broadly-based stock indices,
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. Each call the Fund writes
must be "covered" while it is outstanding. That means the Fund must own the
investment on which the call was written. The Fund may write calls on Futures it
owns, but these calls 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. When the Fund writes a call, it receives cash (called a premium). The
call gives the buyer the ability to buy the investment on which the call was
written from the Fund at the call price during the period in which the call may
be exercised. If the value of the investment does not rise above the call price,
it is likely that the call will lapse without being exercised, while the Fund
keeps the cash premium (and the investment). After the Fund writes a call, not
more than 50% of the Fund's total assets may be subject to calls.
The Fund may purchase put options. Buying a put on an investment gives the
Fund the right to sell the investment at a set price to a seller of a put on
that investment. The Fund can buy only those puts that relate to securities that
the Fund owns, broadly-based stock indices, foreign currencies or Futures. The
Fund can buy a put on a Future whether or not the Fund owns the particular
Future in its portfolio.
The Fund may write puts on securities, broadly-based stock indices,
foreign currencies or Futures in an amount up to 50% of its total assets but
only if those puts are covered by segregated
liquid 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 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 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. Each class has separate voting rights on any matter in
which the interests of one class differ from another. 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 subsidiaries) currently manages investment companies, including other
Oppenheimer funds, with assets of more than $75 billion as of September 30,
1997, 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.
The management services provided to the Fund by the Manager, and the
services provided by the Distributor and the Transfer Agent to shareholders,
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot distinguish the year 2000 from the year
1900 because of the way dates are encoded and calculated. That failure could
have a negative impact on handling securities trades, pricing and account
services. The Manager, the Distributor and Transfer Agent have been actively
working on necessary changes to their computer systems to deal with the year
2000 and expect that their systems will be adapted in time for that event.
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. Mr. Vasan joined the Manager in January, 1992 as a
securities analyst. Since June, 1993, he has been an officer and co-portfolio
manager of 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, 1997, 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, certain 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.
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.
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. Different types of yields may be quoted to show performance. Each
class of shares calculates its standardized 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 paid for a stated period by the
maximum offering price on the last day of the period and annualizing the result.
Yields for Class A shares normally reflect the deduction of the maximum initial
sales charge, but may also be shown without deducting sales charge. 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, 1997, followed by a
graphical comparison of the Fund's performance to an appropriate broad-based
market index and a secondary index.
o Management's Discussion of Performance. The Fund's performance during
its fiscal year ended September 30, 1997, was affected by the Portfolio
Manager's decision to limit investments by the Fund in Southeast Asia, where
several currencies were devalued during that period. The relatively low
inflationary pressures during the period helped keep interest rates low,
resulting in a decline of bond yields in many countries. The Fund's holdings in
Latin American countries were decreased during the fiscal year, and investments
were shifted to other parts of the world, in reaction to yield declines in Latin
American markets.
The Fund's portfolio holdings, allocations and 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, 1997.
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 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
9/30/97(1)
1 Year Life of Class
- -------------------------------------------------------------------
6.04% 13.05%
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
9/30/97(2)
1 Year Life of Class
- -------------------------------------------------------------------
5.52% 13.43%
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 6/15/95. Returns are shown net
of the applicable 5% and 3% 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 3% 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
9/30/97(3)
1 Year Life of Class
- -------------------------------------------------------------------
9.52% 14.54%
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 $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 12 months of buying them (18 months if the shares were purchased
prior to May 1, 1997), 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 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 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 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.
The Distributor may pay additional periodic compensation from its own resources
to securities dealers or financial institutions based upon the value of shares
of the Fund owned by the dealer or financial institution for its own account or
for its customers.
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.
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 Payments by Federal Funds Wire. Shares may be purchased by Federal Funds
wire. The minimum investment is $2,500. You must first call the Distributor's
Wire Department at 1-800-525-7041 to notify the Distributor of the wire and
receive further instructions.
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, or the order is received and transmitted to the Distributor by
an entity authorized by the Fund to accept purchase or redemption orders. The
Fund has authorized the Distributor, certain broker-dealers and agents or
intermediaries designated by the Distributor or those broker-dealers to accept
orders. In most cases, to enable you to receive that day's offering price, the
Distributor or an authorized entity must receive your order by the time of day
The New York Stock Exchange closes, which is normally 4:00 P.M., New York time,
but may be earlier on some days (all references to time in this Prospectus mean
"New York time"). The net asset value of each class of shares is determined as
of that time on each day The New York Stock Exchange is open (which is a
"regular business day").
If you buy shares through a dealer, the dealer must receive your order by the
close of The New York Stock Exchange on a regular business day and normally your
order must be transmitted 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, in its sole discretion, may reject any purchase order for the
Fund's shares.
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:
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
- ------------------------------------------------------------------------------
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%
- ------------------------------------------------------------------------------
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.
|X| Class A Contingent Deferred Sales Charge. There is
no initial sales charge on purchases of Class A shares of any one
or
more of the Oppenheimer funds in the following cases:
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,
employee benefit plan, group retirement plan (see "How to Buy Shares -
Retirement Plans" in the Statement of Additional Information for further
details), an 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; or
o Purchases by an OppenheimerFunds Rollover IRA if the purchases are made
(1) through a broker, dealer, bank or registered investment adviser 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, calculated on a calendar
year basis. That commission will be paid only on 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 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 investment options under a special arrangement with the
Distributor if the purchase occurs more than 30 days after the addition of the
Oppenheimer funds as an investment option to the Retirement Plan.
If you redeem any of those shares purchased prior to May 1, 1997, 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. A Class A contingent deferred
sales charge may be deducted from the proceeds of any of those shares purchased
on or after May 1, 1997 that are redeemed within 12 months of the end of the
calendar month of their purchase. 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.
|X| 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.
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 Distributor will add the value,
at current offering price, of the shares you previously purchased and currently
own to the value of the current purchases to determine the sales charge rate
that applies. 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. In
order to receive a waiver of the Class A contingent deferred sales charge, you
must notify the Transfer Agent as to which conditions apply.
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 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 investment advisors or financial
planners (that have entered into an agreement for this purpose with the
Distributor) 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 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 were
consummated and share purchases commenced 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 prior 30 days from a mutual fund (other than a fund managed by the Manager
or any of its subsidiaries) on which an initial sales charge or contingent sales
charge was paid (this waiver also applies to shares purchased by exchange of
shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid for
in this manner); this waiver must be requested when the purchase order is placed
for your shares of the Fund, and the Distributor may require evidence of your
qualification for this waiver; 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 of purchase of shares (prior to May 1, 1997) the dealer
agreed in writing to accept the dealer's portion of the sales commission 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 if, at the time of purchase of shares (on or after May 1, 1997) the
dealer agrees in writing to accept the dealer's portion of the sales commission
in installments of 1/12th of the commission per month (and no further commission
will be payable if the shares are redeemed within 12 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
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 for distributions from Retirement Plans having 500 or more eligible
participants, except distributions due to termination of all of the
Oppenheimer funds as an investment option under the Plan; and
o for distributions from 401(k) plans sponsored by broker-dealers that
have entered into a special agreement with the Distributor allowing this waiver.
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). 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:
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)
- -----------------------------------------------------------------------
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
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 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.
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.
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 its services and costs in
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 asset-based sales charge allows investors to buy Class B or Class C
shares without a front-end sales charge while allowing the Distributor to
compensate dealers that sell those shares. The Fund pays the asset-based sales
charges to the Distributor for its services rendered in distributing Class B and
Class C shares. Those payments are at a fixed rate that 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 and Class C shares.
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 sales of Class B shares is 4.00% of the
purchase price. The Distributor retains the Class B asset-based sales charge .
The Distributor may pay the Class B service fee and the asset-based sales charge
to the dealer quarterly in lieu of paying the sales commission and service fee
advance at the time of purchase.
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 Distributor plans to pay the asset-based sales charge as an
ongoing commission to the dealer on Class C shares that have been outstanding
for a year or more. The Distributor may pay the Class C service fee and
asset-based sales charge to the dealer quarterly in lieu of paying the sales
commission and service fee advance at the time of purchase.
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. At September 30, 1997
, the end of the Class B Plan year, the Distributor had incurred unreimbursed
expenses in connection with the sales of Class B shares of $4,441,423(equal to
3.61% of the Fund's net assets represented by Class B shares on that date). At
September 30, 1997, the end of the Class C Plan year, the Distributor had
incurred unreimbursed expenses in connection with sales of Class C shares of
$371,816(equal to 1.30% of the Fund's net assets represented by Class C shares
on that date) . If either Plan is terminated by the Fund, the Board of Trustees
may allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares before the Plan was terminated.
Waivers of Class B and Class C Sales Charges. The Class B and Class C contingent
deferred sales charges will not be applied to shares purchased in certain types
of transactions nor will it apply to 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.
In order to receive a waiver of the Class B or Class C contingent deferred sales
charge, you must notify the Transfer Agent as to which conditions apply.
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 :
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 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 and from
certain Massachusetts Mutual Life Insurance Company 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; (5) for separation from service; or (6) for loans to participants or
beneficiaries.
o Distributions from 401(k) plans sponsored by broker-dealers that have
entered into a special agreement with the Distributor allowing this waiver.
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.
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 your dealer's settlement
unstructions 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.
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.
Shareholder Transactions by Fax. Requests for certain account transactions
may be sent to the Transfer Agent by fax (telecopier). Please call
1-800-525-7048 for information about which transactions are included.
Transaction requests submitted by fax are subject to the same rules and
restrictions as written and telephone requests described in this
Prospectus.
OppenheimerFunds Internet Web Site. Information about the Fund, including
your account balance, daily share prices, market and Fund portfolio
information, may be obtained by visiting the OppenheimerFunds Internet Web
Site, at the following Internet address: http://www.oppenheimerfunds.com.
In 1998, the Transfer Agent anticipates offering certain account
transactions through the Internet Web Site. To find out more information
about those transactions and procedures, please visit the Web Site.
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.
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 and SIMPLE IRAs offered by employers
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.
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:
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, 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 10 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 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.
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 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 if you
purchase shares by federal funds wire or 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 correct and properly certified
Social Security or Employer Identification Number when you sign your
application, or if you underreport your income to the Internal Revenue Service .
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 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 September 30, 1997, 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
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 fund
account. You can reinvest all distributions in the same class of another
Oppenheimer fund 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. So that the Fund will not have
to pay taxes on the amounts it distributes to shareholders as dividends and
capital gains, the Fund intends to manage its investments so that it will
qualify as a "regulated investment company" under the Internal Revenue Code,
although it reserves the right not to qualify in a particular year.
o "Buying a Dividend". 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, respectively.
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 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.
-4-
<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 Index 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, 1997. 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
and the Salomon Brothers Brady Bond Index, is set forth in the Prospectus under
"Performance of the Fund --Comparing the Fund's Performance to the Market"
Salomon
Oppenheimer Salomon Brothers Brothers
Fiscal Year International Bond Non-US Dollar World Brady Bond
(Period) Ended Fund A Government Bond Index Index
- --------------- ------------------- ------------------------ ----------
06/15/95 9,525 10,000 10,000
09/30/95 10,014 9,757 10,666
09/30/96 11,898 10,150 14,677
09/30/97 13,247 10,063 18,722
Salomon
Oppenheimer Salomon Brothers 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 9,757 10,666
09/30/96 12,350 10,063 14,677
09/30/97 13,349 10,063 18,722
Salomon
Oppenheimer Salomon Brothers 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 9,757 10,666
09/30/96 12,350 10,150 14,677
09/30/97 13,649 10,063 18,722
-5-
<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 maintenance of other terms of
the contract over any long period of time may be small.
Caa: Bonds rated "Caa" are of poor standing and may be in default or there
may be present elements of danger with respect to principal or interest.
Ca: Bonds rated "Ca" represent obligations which are speculative in a high
degree and are often in default or have other marked shortcomings.
C: Bonds rated "C" can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Description of Standard & Poor's Bond Ratings
AAA: "AAA" is the highest rating assigned to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA: Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from "AAA" issues only in small degree.
A: Bonds rated "A" have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to adverse effects of change in
circumstances and economic conditions.
BBB: Bonds rated "BBB" are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the "A" category.
BB, B, CCC, CC: Bonds rated "BB," "B," "CCC" and "CC" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "CC" the highest degree.
While such bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C, D: Bonds on which no interest is being paid are rated "C." Bonds rated
"D" are in default and payment of interest and/or repayment of principal is in
arrears.
A-1
<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) plan, 403(b) plan, and SEP/IRA or IRA plan for employees of a single
employer.
B-1
<PAGE>
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
- ----------------------------------------------------------------
9 or fewer 2.50% 2.56% 2.00%
- ----------------------------------------------------------------
At least 10 but not
more than 49 2.00% 2.04% 1.60%
- ----------------------------------------------------------------
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 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 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
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.
B-2
<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 and Shareholder Servicing Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1-800-525-7048
OppenheimerFunds Internet Web Site
http://www.oppenheimerfunds.com
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.
PR0880.001.0198 *Printed on Recycled Paper
B-1
<PAGE>
Oppenheimer International Bond Fund
6803 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048
Statement of Additional Information dated January 9, 1998
This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated January 9, 1998. 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...........................................
Investment Policies and Strategies......................................
Other Investment Techniques and Strategies.............................
Other Investment Restrictions..........................................
How the Fund is Managed.....................................................
Organization and History...............................................
Trustees and Officers of the Fund......................................
The Manager and Its Affiliates.........................................
Brokerage Policies of the Fund..............................................
Performance of the Fund.....................................................
Distribution and Service Plans..............................................
About Your Account
How To Buy Shares...........................................................
How To Sell Shares..........................................................
How To Exchange Shares......................................................
Dividends, Capital Gains and Taxes..........................................
Additional Information About the Fund.......................................
Financial Information About the Fund
Independent Auditors' Report................................................
Financial Statements........................................................
Appendix A: Corporate Industry Classifications............................A-1
-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. 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.
The Fund may invest in U.S. dollar-denominated, collateralized "Brady
Bonds." These debt obligations of foreign entities may be fixed-rate par bonds
or floating- rate discount bonds and are generally collateralized in full as to
principal due at maturity by U.S. Treasury zero coupon obligations that have the
same maturity as the Brady Bonds. Brady Bonds are often viewed as having three
or four valuation components: (i) the collateralized repayment of principal at
final maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized repayment of
principal at maturity (these uncollateralized amounts constitute the "residual
risk"). In the event of a default with respect to collateralized Brady Bonds as
a result of which the payment obligations of the issuer are accelerated, the
zero coupon Treasury securities held as collateral for the payment of principal
will not be distributed to investors, nor will such obligations be sold and the
proceeds distributed. The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will equal the
principal payments which would have then been due on the Brady Bonds in the
normal course. In addition, in light of the residual risk of Brady Bonds and,
among other factors, the history of defaults with respect to commercial bank
loans to public and private entities of countries issuing Brady Bonds,
investments in Brady Bonds are to be viewed as speculative.
The obligations of foreign governmental entities may or may not be
supported by the full faith and credit of a foreign government. Obligations of
supranational entities include those of international organizations designated
or supported by governmental entities to promote economic reconstruction or
development and of international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the "World Bank"), the European Coal and Steel Community, the Asian
Development Bank and the Inter- American Development Bank. The governmental
members, or "stockholders," of these entities usually make initial capital
contributions to the supranational entity and in many cases are committed to
make additional capital contributions if the supranational entity is unable to
repay its borrowings. Each supranational entity's lending activities are limited
to a percentage of its total capital (including "callable capital" contributed
by members at the entity's call), reserves and net income. There is no assurance
that foreign governments will be able or willing to honor their commitments.
Investing in foreign securities involves considerations and possible risks
not typically associated with investing in securities in the U.S. The values of
foreign securities will be affected by changes in currency rates or exchange
control regulations or currency blockage, application of foreign tax laws,
including withholding taxes, changes in governmental administration or economic
or monetary policy (in the U.S. or abroad) or changed circumstances in dealings
between nations. Costs will be incurred in connection with conversions between
various currencies. Foreign brokerage commissions are generally higher than
commissions in the U.S., and foreign securities markets may be less liquid, more
volatile and less subject to governmental regulation than in the U.S.
Investments in foreign countries could be affected by other factors not
generally thought to be present in the U.S., including expropriation or
nationalization, confiscatory taxation and potential difficulties in enforcing
contractual obligations, and could be subject to extended settlement periods.
Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of any such currency against the U.S. dollar
will result in a change in the U.S. dollar value of the Fund's assets and its
income available for distribution. In addition, although a portion of the Fund's
investment income may be received or realized in foreign currencies, the Fund
will be required to compute and distribute its income in U.S. dollars, and
absorb the cost of currency fluctuations. The Fund may engage in foreign
currency exchange transactions for hedging purposes to protect against changes
in future exchange rates. See "Other Investment Techniques and Strategies
- -Hedging," below.
The values of foreign investments and the investment income derived from
them may also be affected unfavorably by changes in currency exchange control
regulations. Although the Fund will invest only in securities denominated in
foreign currencies that at the time of investment do not have significant
government-imposed restrictions on conversion into U.S. dollars, there can be no
assurance against subsequent imposition of currency controls.
In addition, the values of foreign
securities will fluctuate in response to a variety of factors, including
changes in U.S. and foreign
interest rates.
Investments in foreign securities offer potential benefits not available
from investing solely in securities of domestic issuers, by offering the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign bond or other markets that do not move in a manner parallel
to U.S. markets. From time to time, U.S. government policies have discouraged
certain investments abroad by U.S. investors, through taxation or other
restrictions, and it is possible that such restrictions could be reimposed.
o Debt Securities. 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)
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 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, in an amount at least equal to the Fund's obligation
under the security roll.
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 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.
(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 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 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 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.
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. 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 period between commitment by
the Fund and settlement (generally within two months but not to exceed 120
days), no payment is made for the securities purchased by the purchaser, and no
interest accrues to the purchaser from the transaction. Such securities are
subject to market fluctuation; the value at delivery may be less than the
purchase price. The Fund will be required to 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 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 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 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 premium payment and the right to
purchase the underlying investment.
When the Fund purchases a put, it pays a premium and, except as to puts on
indices, has the right to sell the underlying investment to a seller of a
corresponding put on the same investment during the put period at a fixed
exercise price. Buying a put on an investment the Fund owns enables the Fund to
protect itself during the put period against a decline in the value of the
underlying investment below the exercise price by selling such underlying
investment at the exercise price to a seller of a corresponding put. If the
market price of the underlying investment is equal to or above the exercise
price and as a result the put is not exercised or resold, the put will become
worthless at its expiration date, and the Fund will lose its premium payment and
the right to sell the underlying investment. The put may, however, be sold prior
to expiration (whether or not at a profit.)
Buying a put on an investment it does not own, either a put on an index or
a put on a Future not held by the Fund, permits the Fund either to resell the
put or buy the underlying investment and sell it at the exercise price. The
resale price of the put will vary inversely with the price of the underlying
investment. If the market price of the underlying investment is above the
exercise price and as a result the put is not exercised, the put will become
worthless on its expiration date. When the Fund purchases a put on an index, or
on a Future not held by it, the put protects the Fund to the extent that the
index moves in a similar pattern to the securities held. In the case of a put on
an index or Future, settlement is in cash rather than by delivery by the Fund of
the underlying investment.
Puts and calls on broadly-based indices or Futures are similar to puts and
calls on securities except that all settlements are in cash and gain or loss
depends on changes in the index or Future in question (and thus on price
movements in the securities markets generally) rather than on price movements in
individual securities or futures contracts. When the Fund buys a calls on an
index or Future, it pays a premium. During the call period, upon exercise of a
call by the Fund, a seller of a corresponding call on the same investment will
pay the Fund an amount of cash to settle the call if the closing level of the
index or Future upon which the call is based is greater than the exercise price
of the call. That cash payment is equal to the difference between the closing
price of the index or Future and the exercise price of the call times a
specified multiple (the "multiplier"), which determines the total dollar value
for each point of difference. When the Fund buys a put on an index or Future, it
pays a premium and has the right during the put period to require a seller of a
corresponding put, upon the Fund's exercise of its put, to deliver to the Fund
an amount of cash to settle the put if the closing level of the index or Future
upon which the put is based is less than the exercise price of the put. That
cash payment is determined by the multiplier, in the same manner as described
above as to calls.
An option position may be closed out only on a market which provides
secondary trading for options of the same series and there is no assurance that
a liquid secondary market will exist for any particular option. The Fund's
option activities may affect its turnover rate and brokerage commissions. The
exercise by the Fund of puts on securities will cause the sale of related
investments, increasing portfolio turnover. Although such exercise is within the
Fund's control, holding a put might cause the Fund to sell the related
investments for reasons which would not exist in the absence of the put. The
Fund will pay a brokerage commission each time it buys a put or call, sells a
put or call, or buys or sells an underlying investment in connection with the
exercise of a put or call. Such commissions may be higher than those which would
apply to direct purchases or sales of such underlying investments. Premiums paid
for options are small in relation to the market value of the related
investments, and consequently, put or call options offer large amounts of
leverage. The leverage offered by trading in options could result in the Fund's
net asset value being more sensitive to changes in the value of the underlying
investments.
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 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 Commodity Futures Contracts. The Fund intends to invest a portion of
its assets in commodity futures contracts (referred to as commodity futures).
Commodity futures may be linked to any of five main commodity groups: (1)
energy, which includes crude oil, natural gas, gasoline and heating oil; (2)
livestock, which includes cattle and hogs; (3) agriculture, which includes
wheat, corn, soybeans, cotton, coffee, sugar and cocoa; (4) industrial metals,
which includes aluminum, copper, lead, nickel, tin and zinc; and (5) precious
metals, which includes gold, platinum and silver. The Fund may purchase and sell
commodity futures contracts, options on futures contracts and options and
futures on commodity indices with respect to these five main commodity groups
and the individual commodities within each group, as well as other types of
commodities.
Comparison to forward contracts. Futures contracts and forward contracts achieve
the same economic effect: both are an agreement to purchase a specified amount
of a specified commodity at a specified future date for a price agreed upon
today. However, there are significant differences in the operation of the two
contracts. Forward contracts are individually negotiated transactions and are
not exchange traded. Therefore, with a forward contract, the Fund would make a
commitment to carry out the purchase or sale of the underlying commodity at
expiration.
Storage Costs. Similar to the financial futures markets, there are hedgers and
speculators in the commodity futures markets. However, unlike financial
instruments, there are costs of physical storage associated with purchasing the
underlying commodity. For instance, a large manufacturer of baked goods that
wishes to hedge against a rise in the price of wheat has two choices: (i) it can
purchase the wheat today in the cash market and store the commodity at a cost
until it needs the wheat for its manufacturing process, or (ii) it can buy
commodity futures contracts. The price of the commodity futures contract will
reflect the storage costs of purchasing the physical commodity. These storage
costs include the time value of money invested in the physical commodity plus
the actual costs of storing the commodity less any benefits from ownership of
the physical commodity that are not obtained by the holder of a futures contract
(this is sometimes referred to as the "convenience yield"). To the extent that
these storage costs change for an underlying commodity while the Fund is long
futures contracts on that commodity, the value of the futures contract may
change commensurately.
Reinvestment Risk. In the commodity futures markets, if producers of the
underlying commodity wish to hedge the price risk of selling the commodity, they
will sell futures contracts today to lock in the price of the commodity at
delivery tomorrow. In order to induce speculators to take the corresponding long
side of the same futures contract, the commodity producer must be willing to
sell the futures contract at a price which is below the expected future spot
price. Conversely, if the predominate hedgers in the futures market are the
purchasers of the underlying commodity who purchase futures contracts to hedge
against a rise in prices, then speculators will only take the short side of the
futures contract if the futures price is greater than the expected future spot
price of the commodity.
The changing nature of the hedgers and speculators in the commodity
markets can determine whether futures prices are above or below the expected
future spot price. This can have significant implications for the Fund when it
is time to reinvest the proceeds from a maturing futures contract into a new
futures contract. If the nature of hedgers and speculators in futures markets
has shifted such that commodity purchasers are the predominate hedgers in the
market, the Fund might reinvest at higher futures prices or choose other related
commodity investments.
Additional Economic Factors. The values of commodities which underlie commodity
futures contracts are subject to additional variables which may be less
significant to the values of traditional securities such as stocks and bonds.
Variables such as drought, floods, weather, livestock disease, embargoes and
tariffs may have a larger impact on commodity prices and commodity-linked
instruments, including futures contracts, Hybrid Instruments, commodity options
and commodity swaps, than on traditional securities. These additional variables
may create additional investment risks which subject the Fund's investments to
greater volatility than investments in traditional securities.
Leverage. There is much greater leverage in futures trading than in stocks. As a
registered investment company, the Fund must pay in full for all securities it
purchases. In other words, the Fund is not allowed to purchase securities on
margin. However, the Fund is allowed to purchase futures contracts on margin
where the initial margin requirements are typically between 3 and 6 percent of
the face value of the contract. That is, the Fund is only required to pay up
front between 3 to 6 percent of the face value of the futures contract.
Therefore, the Fund has a higher degree of leverage in its futures contract
purchases than in its stock purchases. As a result there may be differences in
the volatility of rates of return between securities purchases and futures
contract purchases, with the returns from futures contracts being more volatile.
Price volatility. Despite the daily price limits on the futures exchanges, the
price volatility of commodity futures contracts has been historically greater
than that for traditional securities such as stocks and bonds. To the extent
that the Fund invests in commodity futures contracts, the assets of the Fund,
and hence the Net Asset Value of Fund shares, may be subject to greater
volatility. Mark-to-market of futures positions. The futures clearinghouse marks
every futures contract to market at the end of each trading day, to ensure that
the outstanding futures obligations are limited by the maximum daily permissible
price movement. This process of marking-to-market is designed to prevent losses
from accumulating in any futures account. Therefore, if the Fund's futures
positions have declined in value, the Fund may be required to post additional
margin to cover this decline. Alternatively, if the Fund's futures positions
have increased in value, this increase will be credited to the Fund's account.
Characteristics of the commodity futures markets. Commodity futures contracts
are an agreement between two parties for one party to buy an asset from the
other party at a later date at a price and quantity agreed upon today. Commodity
futures contracts are traded on futures exchanges. These futures exchanges offer
a central marketplace in which to transact futures contracts, a clearing
corporation to process trades, a standardization of expiration dates and
contract sizes, and the availability of a secondary market. Futures markets also
specify the terms and conditions of delivery as well as the maximum permissible
price movement during a trading session. Additionally, the commodity futures
exchanges have position limit rules which limit the amount of futures contracts
that any one party may hold in a particular commodity at any point in time.
These position limit rules are designed to prevent any one participant from
controlling a significant portion of the market.
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 may 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 in the expectation that there is
a greater correlation between the foreign currency of the forward contract and
the foreign currency of the underlying investment than between the U.S. dollar
and the foreign currency of the underlying investment.
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 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 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 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 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 unless subject to a buy-back
agreement with the executing broker. The Securities and Exchange Commission is
evaluating whether OTC options should be considered liquid securities, and the
procedure described above could be affected by the outcome of that evaluation.
The Fund's option activities may affect its turnover rate and brokerage
commissions. The exercise of calls written by the Fund may cause the Fund to
sell related portfolio securities, thus increasing its turnover rate in a manner
beyond the Fund's control. The exercise by the Fund of puts on securities or
Futures may cause the sale of related investments, also increasing portfolio
turnover. Although such exercise is within the Fund's control, holding a put
might cause the Fund to sell the related investments for reasons which would not
exist in the absence of the put. The Fund will pay a brokerage commission each
time it buys or sells a put, a call, or an underlying investment in connection
with the exercise of a put or call. Such commissions may be higher than those
which would apply to direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of the
related investments, and consequently, put and call options offer large amounts
of leverage. The leverage offered by trading in options could result in the
Fund's net asset value being more sensitive to changes in the value of the
underlying investments.
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).
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 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.
Other Investment Restrictions
The Fund's most significant investment restrictions are set forth in the
Prospectus. There are additional investment restrictions that the Fund must
follow that are also fundamental policies. Fundamental policies and the Fund's
investment objectives cannot be changed without the vote of a "majority" of the
Fund's outstanding voting securities. Under the Investment Company Act, such a
"majority" vote is defined as the vote of the holders of the lesser of: (1) 67%
or more of the shares present or represented by proxy at a shareholder meeting
if the holders of more than 50% of the outstanding shares are present or
represented by proxy, or (2) more than 50% of the outstanding shares.
Under these additional restrictions, the Fund cannot:
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, as a non-fundamental policy,
the corporate industry classifications set forth in Appendix A to this Statement
of Additional Information. This is not a fundamental policy.
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.
Each share of the Fund represents an interest in the Fund proportionately
equal to the interest of each other share of the same class and entitles the
holder to one vote per share (and a fractional vote for a fractional share) on
matters submitted to their vote at shareholders' meetings. Shareholders of the
Fund vote together in the aggregate on certain matters at shareholder meetings,
such as the election of Trustees and ratification of appointment of auditors for
the Fund. Shareholders of a particular series or class vote separately on
proposals which affect that series or class, and shareholders of a series or
class which is not affected by that matter are not entitled to vote on the
proposal.
The Trustees are authorized to create new series and classes of series. The
Trustees may reclassify unissued shares of the Fund or its series or classes
into additional series or classes of shares. The Trustees may also divide or
combine the shares of a class into a greater or lesser number of shares without
thereby changing the proportionate beneficial interest of a shareholder in the
Fund. Shares do not have cumulative voting rights or preemptive or
subscription rights. Shares may be voted in person or by proxy.
The Fund's Declaration of Trust contains an express disclaimer of
shareholder or Trustee liability for the Fund's obligations, and provides for
indemnification and reimbursement of expenses out of its property for any
shareholder held personally liable for its obligations. The Declaration of Trust
also provides that the Fund shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Fund and satisfy
any judgment thereon. Thus, while Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances, the risk of a Fund shareholder incurring financial
loss on account of shareholder liability is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations
described above. Any person doing business with the Trust, and any shareholder
of the Trust, agrees under the Trust's Declaration of Trust to look solely to
the assets of the Trust for satisfaction of any claim or demand which may arise
out of any dealings with the Trust, and the Trustees shall have no personal
liability to any such person, to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations and occupations during the past
five years are listed below. All of the Trustees are also trustees, directors or
managing general partners of Oppenheimer Total Return Fund, Inc., Oppenheimer
Real Asset Fund, Oppenheimer Equity Income Fund, Oppenheimer High Yield Fund,
Oppenheimer Cash Reserves, Oppenheimer Municipal Fund, Oppenheimer Limited-Term
Government Fund, The New York Tax-Exempt Income Fund, Inc., Centennial America
Fund, L.P., Oppenheimer Champion Income Fund, Oppenheimer Main Street Funds,
Inc., Oppenheimer Strategic Income Fund, Oppenheimer Variable Account Funds,
Oppenheimer Integrity Funds, Centennial Money Market Trust, Centennial
Government Trust, Centennial New York Tax Exempt Trust, Centennial Tax Exempt
Trust, Centennial California Tax Exempt Trust and Panorama Series Fund, Inc.
(all of the foregoing funds are collectively referred to as the "Denver-based
Oppenheimer funds") except for (i) Ms. Macaskill, who is a Trustee, Director or
Managing General Partner of all the Denver-based Oppenheimer funds except
Oppenheimer Integrity Funds, Oppenheimer Strategic Income Fund, Panorama Series
Fund, Inc. and Oppenheimer Variable Account Funds, (ii) Mr. Fossel, who is not a
trustee of Centennial New York Tax-Exempt Trust or a Managing General Partner of
Centennial America Fund, L.P. and (iii) Mr. Bowen, who is not a Trustee,
Director or Managing General Partner of Oppenheimer Integrity Funds, Oppenheimer
Strategic Income Fund, Panorama Series Fund, Inc. , Oppenheimer Variable Account
Funds, Centennial New York Tax-Exempt Trust and Centennial America Fund, L.P.
All of the Fund's officers except Mr. Vasan are officers of the Denver-based
Oppenheimer funds. Ms. Macaskill is President and Mr. Swain is Chairman and
Chief Executive Officer of the Denver-based Oppenheimer funds. As of December
19, 1997, the Trustees and officers of the Fund as a group owned 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 officers of the Fund, Bridget A. Macaskill and
Andrew J. Donohue, are trustees), other than the shares beneficially owned under
that plan by officers of the Fund listed above.
Robert G. Avis, Trustee*; Age : 66
One North Jefferson Ave., St. Louis, Missouri 63103
Vice Chairman of A.G. Edwards & Sons, Inc. (a broker-dealer) and A.G.
Edwards, Inc. (its
parent holding company); Chairman of A.G.E. Asset Management and A.G. Edwards
Trust
Company (its affiliated investment adviser and trust company,
respectively).
William A. Baker, Trustee; Age : 82
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
- ---------------------
* A Trustee who is an "interested person" of the Fund.
George C. Bowen, Trustee, Vice President, Treasurer, and Assistant
Secretary*; Age: 61
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President (since September 1987) and Treasurer (since March 1985) of
the Manager; Vice President (since June 1983) and Treasurer (since March 1985)
of the Distributor; Vice President (since October 1989) and Treasurer (since
April 1986) of HarbourView; Senior Vice President (since February 1992),
Treasurer (since July 1991) and a director (since December 1991) of Centennial;
President, Treasurer and a director of Centennial Capital Corporation (since
June 1989); Vice President and Treasurer (since August 1978) and Secretary
(since April 1981) of SSI; Vice President, Treasurer and Secretary of SFSI
(since November 1989); Treasurer of OAC (since June 1990); Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989); Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996); Chief
Executive Officer, Treasurer and a director of MultiSource Services, Inc., a
broker-dealer (since December 1995); an officer of other Oppenheimer funds.
Charles Conrad, Jr., Trustee; Age: 67 1501 Quail Street, Newport Beach, CA 92660
Chairman and CEO of Universal Space Lines, Inc. (a space services management
company); formerly Vice President of McDonnell Douglas Space Systems Co. and
associated with the National Aeronautics and Space Administration.
Jon S. Fossel, Trustee; Age
: 55
P.O. 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"), the
Manager's parent holding company, and Shareholder Services, Inc. ("SSI") and
Shareholder Financial Services, Inc. ("SFSI"), transfer agent subsidiaries of
the Manager.
Sam Freedman, Trustee; Age : 57
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services ,
Chairman, Chief Executive Officer and a director of SSI, Chairman, Chief
Executive and Officer and director of SFSI, Vice President and director of OAC
and a director of
OppenheimerFunds, Inc.
Raymond J. Kalinowski, Trustee; Age : 68
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products
training company)
.
C. Howard Kast, Trustee; Age: 76
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Trustee; Age : 76
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
- ---------------------
* A Trustee who is an "interested person" of the Fund.
Bridget A. Macaskill , President and Trustee*; Age : 49 Two World Trade Center,
New York, New York 10048-0203 President (since June 1991), Chief Executive
Officer (since September 1995) and a Director (since December 1994) of the
Manager; President and director (since June 1991) of HarbourView; Chairman and a
director of SSI (since August 1994), and SFSI (September 1995); President (since
September 1995) and a director (since October 1990) of OAC; President (since
September 1995) and a director (since November 1989) of Oppenheimer Partnership
Holdings, Inc., a holding company subsidiary of the Manager; a director of
Oppenheimer Real Asset Management, Inc. (since July 1996) ; President and a
director (since October 1997) of OppenheimerFunds International Ltd., an
offshore fund manager subsidiary of the Manager ("OFIL") and Oppenheimer
Millennium Funds plc (since October 1997); President and a director of other
Oppenheimer funds; a director of the NASDAQ Stock Market, Inc. and of Hillsdown
Holdings plc (a U.K. food company); formerly an Executive Vice President of the
Manager.
Ned M. Steel, Trustee; Age : 82
3416 South Race Street, Englewood, Colorado 80110
Chartered Property and Casualty Underwriter; a director of Visiting
Nurse Corporation of Colorado
.
James C. Swain, Chairman, Chief Executive Officer and
Trustee*; Age : 64
6803 South Tucson Way, Englewood, Colorado 80112
Vice Chairman of the Manager (since September 1988); formerly President and a
director of Centennial Asset Management Corporation, an investment adviser
subsidiary of the Manager ("Centennial"), and Chairman of the Board of SSI.
Ashwin Vasan, Vice President and
Portfolio Manager; Age: 35
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since July 1993); an officer of other Oppenheimer
funds; formerly a Securities Analyst for the Manager (since January 1992).
Andrew J. Donohue, Vice President and Secretary; Age: 47
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President (since September 1993), and a director (since January 1992) of the
Distributor Centennial; Executive Vice President, General Counsel and a director
of HarbourView, SSI, SFSI and Oppenheimer Partnership Holdings , Inc. since
(September 1995) and MultiSource Services, Inc. (a broker-dealer) (since
December 1995); President and a director of Centennial (since September 1995);
President and a director of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of OAC;
Vice President of OFIL and Oppenheimer Millennium Funds plc (since October
1997); an officer of other Oppenheimer funds .
Robert J. Bishop, Assistant Treasurer; Age: 49
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
_________________ * A Trustee who is an "interested person" of the Fund.
Scott T. Farrar, Assistant Treasurer; Age: 32
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly an Assistant Vice President of the
Manager/Mutual Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager.
Robert G. Zack, Assistant Secretary; Age: 49
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since May
1981) of the Manager, Assistant Secretary of SSI (since May 1985), and SFSI
(since November 1989); Assistant Secretary of Oppenheimer Millennium Funds plc
(since October 1997);
an officer of
other Oppenheimer funds.
o Remuneration of Trustees. The officers of the Trust and certain
Trustees of the Fund (Ms. Macaskill and Messrs. Swain and Bowen)
who are affiliated with the Manager receive no salary or
fee 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
. The
compensation from the Fund was paid during its fiscal year ended September
30, 1997. The
compensation from all of the Denver-based Oppenheimer funds includes the Fund
and is
compensation received as a
Trustee, Director, Managing General Partner or member of a committee
of the Board of those funds during the calendar year 1997.
Total Compensation
Aggregate From All
Compensation
Denver-based
Name and Position from Fund
......Oppenheimer funds1
Robert
G. Avis $238 $63,501
Trustee
William A. Baker $290 ......
$77,502
Audit and Review
Committee Member,
Ex Officio Member2
and Trustee
Charles Conrad, Jr.
$271 $72,000
Trustee3
Jon S. Fossel $238 $63,277
Trustee
Sam Freedman $249 $66,501
Audit and Review
Committee Member2
and Trustee
Total Compensation
Aggregate From All
Compensation Denver-based
Name and Position from Fund Oppenheimer funds1
Raymond J. Kalinowski $268 $71,561
Audit and Review
Committee
Member2 and Trustee
C. Howard Kast
$287 $76,503
Audit and Review Committee
Chairman2 and Trustee
Robert M. Kirchner
$271 $72,000
Trustee3
Ned M. Steel $238 $63,501
Trustee
- ----------------------
1 For the 1997 calendar year. 2 Committee positions effective July 1, 1997.
3 Prior to July 1, 1997, Messrs. Conrad and Kirchner were also members of the
Audit and Review Committee.
Deferred Compensation Plan. The Board of Trustees has adopted a Deferred
Compensation plan for disinterested trustees that enables them to elect to defer
receipt of all or a portion of the annual fees they are entitled to receive from
the Fund. Under the plan, the compensation deferred by a Trustee is periodically
adjusted as though an equivalent amount had been invested in shares of one or
more Oppenheimer funds selected by the Trustee. The amount paid to the Trustee
under the plan will be determined based upon the performance of the selected
funds. Deferral of Trustees' fees under the plan will not materially affect the
Fund's assets, liabilities and net income per share. The plan will not obligate
the Fund to retain the services of any Trustee or to pay any particular level of
compensation to any Trustee. Pursuant to an Order issued by the Securities and
Exchange Commission, the Fund may invest in the funds selected by the Trustee
under the plan for the limited purpose of determining the value of the Trustee's
deferred fee account.
Major Shareholders. As of December 19, 1997, no person owned of record or was
known by the Fund to own beneficially 5% or more of the Fund's outstanding Class
A, Class B or Class C shares, except Merrill Lynch Pierce Fenner & Smith, Inc.,
4800 Deer Lake Drive East, Jacksonville, Florida 32246- 6484, which was the
record owner of 1,674,848.238 Class B shares and 1,185,123.000 Class C shares
(equal to approximately 6.96% and 21.86% of the Class B and Class C shares,
respectively, 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 three of
whom (Ms. Macaskill and Messrs. Bowen and Swain) serve as
Trustees of the Fund.
The Manager and the Fund have a Code of Ethics. It is designed to detect and
prevent improper personal trading by certain employees, including portfolio
managers, that would compete with or take advantage of the Fund's portfolio
transactions. Compliance with the Code of Ethics is carefully monitored and
strictly enforced by the Manager.
|X| Portfolio Management. The Portfolio Manager of the Fund is Ashwin Vasan,
who is principally responsible for the day-to-day management of the Fund's
portfolio. Mr. Vasan's background is described in the Prospectus under
"Portfolio Manager." Other members of the Manager's fixed income portfolio
department, particularly Arthur P. Steinmetz and portfolio analysts, traders and
other portfolio managers having broad experience with domestic and international
government and corporate fixed-income securities, provide the Fund's portfolio
manager with counsel and support in managing the Fund's portfolio.
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 fiscal
period from inception (June 13, 1995) through September 30, 1995 (the "fiscal
period ended September 30, 1995"), the management fees paid by the Fund to the
Manager totaled $8,252. For the Fund's fiscal years ended September 30, 1996 and
1997, the management fees paid by the Fund to the Manager totaled $311,128 and
$1,465,181, respectively. As a result of a 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 fiscal period ended September 30, 1995,
$13,764; and during the fiscal year ended September 30, 1996, $41,927.
The Investment
Advisory Agreement contains no expense limitation.
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 years ended
September 30, 1996 and 1997, the aggregate amount of sales charge on sales of
the Fund's Class A shares was $38,181 , $455,830 and $1,124,978, respectively,
of which the Distributor and an affiliated broker-dealer retained $11,736 ,
$126,085 and $273,182, in those respective periods. During the Fund's fiscal
years ended September 30, 1996 and 1997, the contingent deferred sales charge
collected on the Fund's Class B shares totaled $32,060 and $202,891,
respectively, all of which the Distributor retained. During the fiscal years
ended September 30, 1996 and 1997, sales charges advanced to broker/dealers by
the Distributor on sales of the Fund's Class B shares totaled $1,115,490 and
$3,225,657, respectively, of which $26,260 and $71,892, respectively, was paid
to an affiliated broker/dealer. During the fiscal year years ended September 30,
1996 and 1997, the contingent deferred sales charge collected on Class C shares
totaled $3,260 and $12,267, respectively, all of which the Distributor retained.
During the fiscal years ended September 30, 1996 and 1997, sales charge advanced
to broker/dealers by the Distributor on sales of the Fund's Class C shares
totaled $77,326 and $209,570, respectively, of which $1,600 and $3,333,
respectively, 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 under the advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers ("brokers") to effect the Fund's portfolio
transactions. In doing so, the Manager is authorized by the advisory agreement
to employ broker-dealers, including "affiliated" brokers, as that term is
defined in the Investment Company Act, as may, in its best judgment based on all
relevant factors, implement the policy of the Fund to obtain, at reasonable
expense, the "best execution" (prompt and reliable execution at the most
favorable price obtainable) of such transactions. The Manager need not seek
competitive commission bidding but is expected to minimize the commissions paid
to the extent consistent with the interest and policies of the Fund as
established by its Board of Trustees. Purchases of securities from underwriters
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers include a spread between the bid and asked price.
Under the advisory agreement, the Manager is authorized to select brokers
that provide brokerage and/or research services for the Fund and/or the other
accounts over which the Manager or its affiliates have investment discretion.
The commissions paid to such brokers may be higher than another qualified broker
would have charged if a good faith determination is made by the Manager that the
commission is fair and reasonable in relation to the services provided. Subject
to the foregoing considerations, the Manager may also consider sales of shares
of the Fund and other investment companies managed by the Manager or its
affiliates as a factor in the selection of brokers for the Fund's portfolio
transactions.
Description of Brokerage Practices Followed by the Manager. Subject to the
provisions of the advisory agreement, and the procedures and rules described
above, allocations of brokerage are generally made by the Manager's portfolio
traders based upon recommendations from the Manager's portfolio managers. In
certain instances, portfolio managers may directly place trades and allocate
brokerage, also subject to the provisions of the advisory agreement and the
procedures and rules described above. In either case, brokerage is allocated
under the supervision of the Manager's executive officers. Transactions in
securities other than those for which an exchange is the primary market are
generally done with principals or market makers. Brokerage commissions are paid
primarily for effecting transactions in listed securities or for certain
fixed-income agency transactions in the secondary market and are otherwise paid
only if it appears likely that a better price or execution can be obtained. When
the Fund engages in an option transaction, ordinarily the same broker will be
used for the purchase or sale of the option and any transaction in the
securities to which the option relates. When possible, concurrent orders to
purchase or sell the same security by more than one of the accounts managed by
the Manager or its affiliates are combined. The transactions effected pursuant
to such combined orders are averaged as to price and allocated in accordance
with the purchase or sale orders actually placed for each account.
Most purchases of money market instruments and debt obligations are
principal transactions at net prices. Instead of using a broker for those
transactions, the Fund normally deals directly with the selling or purchasing
principal or market maker unless it determines that a better price or execution
can be obtained by using a broker. Purchases of these securities from
underwriters include a commission or concession paid by the issuer to the
underwriter. Purchases from dealers include a spread between the bid and asked
prices. The Fund seeks to obtain prompt execution of these orders at the most
favorable net price. Options commissions may be relatively higher than those
which would apply to direct purchases and sales of portfolio securities.
The research services provided by a particular broker may be useful only to
one or more of the advisory accounts of the Manager and its affiliates, and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts. Such research,
which may be supplied by a third party at the instance of a broker, includes
information and analyses on particular companies and industries as well as
market or economic trends and portfolio strategy, receipt of market quotations
for portfolio evaluations, information systems, computer hardware and similar
products and services. If a research service also assists the Manager in a
non-research capacity (such as bookkeeping or other administrative functions),
then only the percentage or component that provides assistance to the Manager in
the investment decision-making process may be paid in commission dollars. The
Board of Trustees permits 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 years ended September 30, 1996 and 1997, total brokerage commissions paid
by the Fund (not including spreads or concessions on principal transactions on a
net trade basis) were $63 , $976, and $4,969, respectively. During the fiscal
year ended September 30, 1997, $2,381 was paid to brokers as commissions in
return for research services; the aggregate dollar amount of those transactions
was $2,347,774. The transactions giving rise to those commissions were allocated
in accordance with the Manager's internal allocation procedures.
Performance of the Fund
Yield and Total Return Information. As described in the Prospectus, from time to
time the "standardized yield," "dividend yield," "average annual total return,"
"cumulative total return," "average annual total return at net asset value" and
"cumulative total return at net asset value" of an investment in a class of
shares of the Fund may be advertised. An explanation of how these total returns
are calculated for each class and the components of those calculations is set
forth below.
The Fund's advertisements of its performance data must, under applicable
rules of the Securities and Exchange Commission, include the average annual
total returns for each class of shares of the Fund for the 1, 5, and 10-year
periods (or the life of the class, if less) ending as of the most recently-ended
calendar quarter prior to the publication of the advertisement. This enables an
investor to compare the Fund's performance to the performance of other funds for
the same periods. However, a number of factors should be considered before using
such information as a basis for comparison with other investments. An investment
in the Fund is not insured; its returns and share prices are not guaranteed and
normally will fluctuate on a daily basis. When redeemed, an investor's shares
may be worth more or less than their original cost. Returns for any given past
period are not a prediction or representation by the Fund of future returns. The
returns of Class A, Class B and Class C shares of the Fund are affected by
portfolio quality, the type of investments the Fund holds and its operating
expenses allocated to the particular class.
o Yields.
o Standardized Yield. The Fund's standardized "yield" (referred to as
"yield") is shown for a class of shares for a stated 30-day period. It 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 for that period. It may therefore differ from
the "dividend yield" for the same class for the same class of shares, described
below. It is calculated using the following formula set forth in rules adopted
by the Securities and Exchange Commission that apply to all funds that quote
yields designed to assure uniformity in the way that all funds calculate their
yields:
Standardized ~ Yield ~ = ~ 2~ [~ (~ {a-b} over cd ~ +~ 1~ ) SUP 6~ -~ 1~ ]
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 the class on the
last day of the period, adjusted for undistributed net
investment income.
The standardized yield for a 30-day period may differ from the yield for
other periods. The SEC formula assumes that the standardized yield for a period
occurs at a constant rate for a six-month period and is annualized at the end of
the six-month period. 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 any 30-day period. For the 30-day period ended
September 30, 1997, the standardized yields for the Fund's classes were as
follows:
Without
Deducting Sales Charge With Sales Charge Deducted
Class A: 9.56% 9.11%
Class B: 8.80% N/A
Class C: 8.76% N/A
o Dividend Yield. The Fund may quote a "dividend yield" for each class of
its shares. Dividend yield is based on the dividends paid on shares of a class
during the actual dividend period. To calculate dividend yield, the dividends of
a class declared during a stated period are added together and the sum is
multiplied by 12 (to annualize the yield) and divided by the maximum offering
price on the last day of the dividend period. The formula is shown below:
Dividend yield = dividends paid x 12/maximum offering price (payment date)
The maximum offering price for Class A shares includes the current maximum
initial sales charge. The maximum offering price for Class B and Class C shares
is the net asset value per share, without considering the effect of contingent
deferred sales charges. The Class A dividend yield may also be quoted without
deducting the maximum initial sales charge .
The dividend yields for the 30-day dividend period ended September 30, 1997
were as follows: Without Deducting Sales Charge With Sales Charge Deducted
Class A: 9.53% 9.08%
Class B: 8.83% N/A
Class C: 8.83% N/A
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:
LEFT ( {~ERV~} OVER P~ right) SUP
{1/n}~-1~=~Average~Annual~Total~ Return
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:
ALIGNC {ERV~-~ P~} over P~ =~Total~ Return
In calculating total returns for Class A shares, the current maximum sales
charge of 4.75% (as a percentage of the offering price) is deducted from the
initial investment ("P") (unless the return is shown at net asset value, as
described below). For Class B shares, payment of a contingent deferred sales
charge (5.0% for the first year, 4.0% for the second year, 3.0% for the third
and fourth years, 2.0% for the fifth year, and 1.0% for the sixth year, and none
thereafter) is applied to the investment result for the period shown (unless the
total return is shown at net asset value, as described below). For Class C
shares, a 1.0% contingent deferred sales charge is applied to the investment
result for the one-year period (or less). Total returns also assume that all
dividends and capital gains distributions during the period are reinvested to
buy additional shares, at net asset value per share, and that the investment is
redeemed at the end of the period.
The average "annual total return" on an investment in Class A shares of the
Fund (using the method described above) for the one year period ended September
30, 1997, and for the period from June 15, 1995 (commencement of operations)
through September 30, 1997, were 6.04% and 13.05%, 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, 1997, and
for the period from June 15, 1995 (commencement of operations) through September
30, 1997, were 5.52% and 13.43%, 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, 1997, and for the period from
June 15, 1995 (commencement of operations) through September 30, 1997, were
9.52% and 14.54%, 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, 1997, were 32.46%, 33.49% and 36.49%, 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,
1997, were 11.33%, 10.52% and 10.52%, 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, 1995 (commencement of
operations) through September 30, 1997, were 15.48%, 14.54% and 14.54%,
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, 1997 was 39.07%. 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, 1997 were 36.49% and 36.49%,
respectively. Absent the expense reimbursement, such performance would have been
lower.
Other Performance Comparisons. From time to time the Fund may publish the
ranking of its Class A, Class B or Class C shares by Lipper Analytical Services,
Inc. ("Lipper"), a widely-recognized independent mutual fund monitoring service.
Lipper monitors the performance of regulated investment companies, including the
Fund, and ranks their performance for various periods based on categories
relating to investment objectives. The performance of the Fund is ranked against
(i) all other funds, (ii) all other "international bond" funds, and (iii) all
other fixed-income funds, excluding money market funds. The Lipper performance
rankings are based on total returns that include the reinvestment of capital
gains distributions and income dividends but do not take sales charges or taxes
into consideration.
From time to time, the Fund may include in its advertisements and sales
literature performance information about the Fund cited in other newspapers and
periodicals, such as The New York Times, which may include performance
quotations from other sources, including Lipper.
From time to time the Fund may publish the ranking of the performance of its
Class A, Class B or Class C shares by Morningstar, Inc., an independent mutual
fund monitoring service. 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 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.
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 Recipients that received any such
payment. Those reports 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 years ended
September 30, 1996 and 1997, payments under the Class A Plan totaled $1,750,
$43,913 and $213,030, respectively, all of which was paid by the Distributor to
Recipients, including $32 , $2,532 and $11,216 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 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 years ended September 30, 1996 and 1997
totaled $3,267, $178,039 and $873,049, respectively, including $2,328 paid to an
affiliate of the Distributor during the fiscal year ended September 30, 1997, of
which $3,202, $168,499 and $799,151, respectively, was retained by the
Distributor. Payments made under the Class C Plan during the fiscal period ended
September 30, 1995 and the fiscal years ended September 30, 1996 and 1997
totaled $282 , $40,141 and $198,232, respectively, of which $277 , $36,849 and
$152,406, respectively, was retained by the Distributor. At fiscal year end,
September 30, 1997, the Distributor had incurred unreimbursed expenses under the
Class B and Class C Plans of $4,441,423 and $371,816, respectively (equal to
3.61% and 1.30% of the Fund's net assets represented by Class B and Class C
shares, respectively on that date) .
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 or Class C shares by Recipients, (iii) obtaining
financing or providing such financing from its own resources, or from an
affiliate, for interest and other borrowing costs of the Distributor's
unreimbursed expenses incurred in rendering distribution assistance for Class B
or Class C shares, and (iv) paying certain other distribution expenses.
ABOUT YOUR ACCOUNT
How To Buy Shares
Alternative Sales Arrangements - Class A, Class B and Class C Shares. The
availability of three classes of shares permits the individual investor to
choose the method of purchasing shares that is more beneficial to the investor
depending on the amount of the purchase, the length of time the investor expects
to hold shares and other relevant circumstances. Investors should understand
that the purpose and function of the deferred sales charge and asset-based sales
charge with respect to Class B and Class C shares are the same as those of the
initial sales charge with respect to Class A shares. Any salesperson or other
person entitled to receive compensation for selling Fund shares may receive
different compensation with respect to one class of shares than the other. The
Distributor will not accept any order for $500,000 or $1 million or more of
Class B or Class C shares, respectively, on behalf of a single investor (not
including dealer "street name" or omnibus accounts) because generally it will be
more advantageous for that investor to purchase Class A shares of the Fund
instead.
The three classes of shares each represent an interest in the same portfolio
investments of the Fund. However, each class has different shareholder
privileges and features.
The net income
attributable to Class B and Class C shares and the dividends payable on Class B
and Class C shares will be reduced by incremental expenses borne solely by that
class, including the asset-based sales charge to which Class B and Class C
shares are subject.
The conversion of Class B shares to Class A shares after six years is
subject to the continuing availability of a private letter ruling from the
Internal Revenue Service, or an opinion of counsel or tax adviser, to the effect
that the conversion of Class B shares does not constitute a taxable event for
the holder under Federal income tax law. If such a revenue ruling or opinion is
no longer available, the automatic conversion feature may be suspended, in which
event no further conversions of Class B shares would occur while such suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the holder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's Class A, Class B and Class C shares recognizes two
types of expenses. General expenses that do not pertain specifically to a class
are allocated pro rata to the shares of each class, based on the percentage of
the net assets of such class to the Fund's total assets, and then equally to
each outstanding share within a given class. Such general expenses include (i)
management fees, (ii) legal, bookkeeping and audit fees, (iii) printing and
mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, (iv) fees to
Independent Trustees, (v) custodian expenses, (vi) share issuance costs, (vii)
organization and start-up costs, (viii) interest, taxes and brokerage
commissions, and (ix) non-recurring expenses, such as litigation costs. Other
expenses that are directly attributable to a class are allocated equally to each
outstanding share within that class. Such expenses include (a) Distribution and
Service Plan fees, (b) 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 or after 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, Martin Luther King, Jr.
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 the principal exchange for such
security or NASDAQ that day (the "Valuation Date") or, in the absence of sales
that day, at the last reported sale price preceding the Valuation Date if it is
within the spread of the closing "bid" and "asked" prices on the Valuation Date
or, if not, the closing "bid" price on the Valuation Date; (ii) equity
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, if unavailable, 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) a non-money market fund will value (x)
debt instruments that had a maturity of more than 397 days when issued, (y) debt
instruments that had a maturity of 397 days or less when issued and have a
remaining maturity in excess of 60 days , and (z) non-money market type debt
instruments that had a maturity of 397 days or less when issued and have a
remaining maturity of sixty days or less, at the mean between "bid" and "asked"
prices determined by a pricing service approved by the Fund's Board of Trustees
or, if unavailable, obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry; (iv) money market-type debt
securities held by a non-money market fund that had a maturity of less than 397
days when issued and have a remaining maturity of 60 days or less , and debt
instruments held by a money market fund that have a remaining maturity of 397
days or less , shall be valued at cost, adjusted for amortization of premiums
and accretion of discount; and (v) 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) and (iii) 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) provided that the Manager is satisfied that the firm
rendering the quotes is reliable and that the quotes reflect the current market
value.
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 U.S.
Government Securities, foreign corporate securities or mortgage-backed
securities for which last sale information is not generally available. 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 and the Fund's net asset
value. 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 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. 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.
Relations by virtue of a remarriage (step-children, step-parents, etc.) are
included.
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:
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Integrity Funds (consisting of the following series:)
Oppenheimer Bond Fund
Oppenheimer International Bond Fund
Oppenheimer High Yield Fund
Oppenheimer Main Street Income & Growth Fund
Oppenheimer Main Street California Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Insured Municipal Fund
Oppenheimer Intermediate Municipal Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Enterprise Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Multiple Strategies Fund
Oppenheimer MidCap Fund
Oppenheimer Florida Municipal Fund
Oppenheimer New Jersey Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer New York Municipal Fund
Oppenheimer Disciplined Allocation Fund
Oppenheimer Disciplined Value Fund
Oppenheimer LifeSpan Growth Fund
Oppenheimer LifeSpan Balanced Fund
Oppenheimer LifeSpan Income Fund
Oppenheimer Municipal Bond Fund
Oppenheimer U.S. Government Trust
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Growth & Income Value Fund
Oppenheimer Quest Officers Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Bond Fund for Growth
Rochester Fund Municipals
Limited Term New York Municipal Fund
and the following "Money Market Funds":
Oppenheimer Cash Reserves
Oppenheimer Money Market Fund, Inc.
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
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 shares of the Fund (or Class A and
Class B shares of the Fund and other eligible Oppenheimer funds) sold with a
front-end sales charge during the 13-month period from the investor's first
purchase pursuant to the Letter (the "Letter of Intent period"), which may, at
the investor's request, include purchases made up to 90 days prior to the date
of the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases (excluding any purchases made by reinvestment of dividends
or distributions or purchases made at net asset value without sales charge),
which together with the investor's holdings of such funds (calculated at their
respective public offering prices calculated on the date of the Letter) will
equal or exceed the amount specified in the Letter. This enables the investor to
count the shares to be purchased under the Letter of Intent to obtain the
reduced sales charge rate (as set forth in the Prospectus) that applies under
the Right of Accumulation to current purchases of Class A shares. Each purchase
of Class A shares under the Letter will be made at the public offering price
(including the sales charge) that applies to a single lump-sum purchase of
shares in the amount intended to be purchased under the Letter.
In submitting a Letter, the investor makes no commitment to purchase shares,
but if the investor's purchases of shares within the Letter of Intent period,
when added to the value (at offering price) of the investor's holdings of shares
on the last day of that period, do not equal or exceed the intended purchase
amount, the investor agrees to pay the additional amount of sales charge
applicable to such purchases, as set forth in "Terms of Escrow," below (as those
terms may be amended from time to time). The investor agrees that shares equal
in value to 5% of the intended purchase amount will be held in escrow by the
Transfer Agent subject to the Terms of Escrow. Also, the investor agrees to be
bound by the terms of the Prospectus, this Statement of Additional Information
and the Application used for such Letter of Intent, and if such terms are
amended, as they may be from time to time by the Fund, that those amendments
will apply automatically to existing Letters of Intent.
For purchases of shares of the Fund and other Oppenheimer
funds by OppenheimerFunds prototype 401(k) plans under a Letter
of Intent, the Transfer Agent will not hold shares in escrow. If
the intended purchase amount under the Letter entered into by an
OppenheimerFunds prototype 401(k) plan is not purchased by the
plan by the end of the Letter of Intent period, there will be no
adjustment of commissions paid to the broker-dealer or financial
institution of record for accounts held in the name of that plan.
If the total eligible purchases made during the Letter of Intent period do
not equal or exceed the intended purchase amount, the commissions previously
paid to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to actual
purchases. If total eligible purchases during the Letter of Intent period exceed
the intended purchase amount and exceed the amount needed to qualify for the
next sales charge rate reduction set forth in the applicable prospectus, the
sales charges paid will be adjusted to the lower rate, but only if and when the
dealer returns to the Distributor the excess of the amount of commissions
allowed or paid to the dealer over the amount of commissions that apply to the
actual amount of purchases. The excess commissions returned to the Distributor
will be used to purchase additional shares for the investor's account at the net
asset value per share in effect on the date of such purchase, promptly after the
Distributor's receipt thereof.
In determining the total amount of purchases made under a Letter, shares
redeemed by the investor prior to the termination of the Letter of Intent period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter in placing any purchase
orders for the investor during the Letter of Intent period. All of such
purchases must be made through the Distributor.
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 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. If you make payments from your
bank account to purchase shares of the Fund, your bank account will be
automatically debited normally four to five business days prior to the
investment dates selected in the Account Application. Neither the Distributor
the Transfer Agent nor the Fund shall be responsible for any delays in
purchasing shares resulting from delays in ACH transmission.
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.
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 other than public school
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 or association has made special arrangements with the Distributor and
all members of the group or association participating in or who are eligible to
participate in the plan(s) purchase Class A shares of the Fund through a single
investment dealer, broker, or other financial institution designated by the
group. "Group retirement plan" also includes qualified retirement plans and
non-qualified deferred compensation plans and IRAs that purchase Class A shares
of the Fund through a single investment dealer, broker, or other financial
institution, if that broker-dealer has made special arrangements with the
Distributor enabling those plans to purchase Class A shares of the Fund at net
asset value but subject to a contingent deferred sales charge.
In addition to the discussion in the Prospectus relating to the ability of
Retirement Plans to purchase Class A shares at net asset value in certain
circumstances, there is no initial sales charge on purchases of Class A shares
of any one or more of the Oppenheimer funds by a Retirement Plan in the
following cases:
(i) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch")
and, on the date the plan sponsor signs the Merrill Lynch recordkeeping service
agreement, the Retirement Plan has $3 million or more in assets invested in
mutual funds other than those advised or managed by Merrill Lynch Asset
Management, L.P. ("MLAM") that are made available pursuant to a Service
Agreement between Merrill Lynch and the mutual fund's principal underwriter or
distributor and in funds advised or managed by MLAM (collectively, the
"Applicable Investments"); or
(ii) the recordkeeping for the Retirement Plan is performed on a daily
valuation basis by an independent record keeper whose services are provided
under a contract or arrangement between the Retirement Plan and Merrill Lynch.
On the date the plan sponsor signs the Merrill Lynch record keeping service
agreement, the Plan must have $3 million or more in assets, excluding assets
held in money market funds, invested in Applicable Investments; or
(iii) the Plan has 500 or more eligible employees, as determined by the
Merrill Lynch plan conversion manager on the date the plan sponsor signs the
Merrill Lynch
record keeping service agreement.
If a Retirement Plan's records are maintained on a daily valuation basis
by Merrill Lynch or an independent record keeper under a contract or alliance
arrangement with Merrill Lynch, and if on the date the plan sponsor signs the
Merrill Lynch record keeping service agreement the Retirement Plan has less than
$3 million in assets, excluding money market funds, invested in Applicable
Investments, then the Retirement Plan may purchase only Class B shares of one or
more of the Oppenheimer funds. Otherwise, the Retirement Plan will be permitted
to purchase Class A shares of one or more of the Oppenheimer funds. Any of those
Retirement Plans that currently invest in Class B shares of the Fund will have
their Class B shares be converted to Class A shares of the Fund once the Plan's
Applicable Investments have reached $5 million.
Any redemptions of shares of the Fund held by Retirement Plans whose
records are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch that are currently
invested in Class B shares of the Fund shall not be subject to the Class B CDSC.
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 Checkwriting. When a check is presented to the Bank for clearance, the
Bank will ask the Fund to redeem a sufficient number of full and fractional
shares in the shareholder's account to cover the amount of the check. This
enables the shareholder to continue receiving dividends on those shares until
the check is presented to the Fund. Checks may not be presented for payment at
the offices of the Bank or the Fund's Custodian. This limitation does not affect
the use of checks for the payment of bills or to obtain cash at other banks. The
Fund reserves the right to amend, suspend or discontinue offering check writing
privileges at any time without prior notice.
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 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 that you
purchased subject to an initial sales charge or the Class A contingent deferred
sales charge when you redeemed them, or (ii) Class B shares that were subject to
the Class B contingent deferred sales charge when you redeemed them. This
privilege does not apply to Class C shares. The reinvestment may be made without
sales charge only in Class A shares of the Fund or any of the other
OppenheimerFunds into which shares of the Fund are exchangeable as described
below, at the net asset value next computed after the Transfer Agent receives
the reinvestment order. The shareholder must ask the Distributor for that
privilege at the time of reinvestment. Any capital gain that was realized when
the shares were redeemed is taxable, and reinvestment will not alter any capital
gains tax payable on that gain. If there has been a capital loss on the
redemption, some or all of the loss may not be tax deductible, depending on the
timing and amount of the reinvestment. Under the Internal Revenue Code, if the
redemption proceeds of Fund shares on which a sales charge was paid are
reinvested in shares of the Fund or another of the Oppenheimer funds within 90
days of payment of the sales charge, the shareholder's basis in the shares of
the Fund that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the redemption.
However, in that case the sales charge would be added to the basis of the shares
acquired by the reinvestment of the redemption proceeds. The Fund may amend,
suspend or cease offering this reinvestment privilege at any time as to shares
redeemed after the date of such amendment, suspension or cessation.
Transfers of Shares. Shares are not subject to the payment of a contingent
deferred sales charge of any class at the time of transfer to the name of
another person or entity (whether the transfer occurs by absolute assignment,
gift or bequest, not involving, directly or indirectly, a public sale). The
transferred shares will remain subject to the contingent deferred sales charge,
calculated as if the transferee shareholder had acquired the transferred shares
in the same manner and at the same time as the transferring shareholder. If less
than all shares held in an account are transferred, and some but not all shares
in the account would be subject to a contingent deferred sales charge if
redeemed at the time of transfer, the priorities described in the Prospectus
under "How to Buy Shares" for the imposition of the Class B and Class C
contingent deferred sales charge will be followed in determining the order in
which shares are transferred.
Distributions From Retirement Plans. Requests for distributions from
OppenheimerFunds- sponsored IRAs, 403(b)(7) custodial plans, 401(k) plans, or
pension or profit-sharing plans should be addressed to "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of Additional Information. The request must: (i) state the reason for the
distribution; (ii) state the owner's awareness of tax penalties if the
distribution is premature; and (iii) conform to the requirements of the plan and
the Fund's other redemption requirements. Participants other than self-employed
persons maintaining a plan account in their own name in
OppenheimerFunds-sponsored prototype pension or profit-sharing or 401(k) plans
may not directly redeem or exchange shares held for their account under those
plans. The employer or plan administrator must sign the request.
Distributions from pension and profit sharing plans are subject to special
requirements under the Internal Revenue Code and certain documents (available
from the Transfer Agent) must be completed before the distribution may be made.
Distributions from retirement plans are subject to withholding requirements
under the Internal Revenue Code, and IRS Form W-4P (available from the Transfer
Agent) must be submitted to the Transfer Agent with the distribution request, or
the distribution may be delayed. Unless the shareholder has provided the
Transfer Agent with a certified tax identification number, the Internal Revenue
Code requires that tax be withheld from any distribution even if the shareholder
elects not to have tax withheld. The Fund, the Manager, the Distributor, the
Trustee and the Transfer Agent assume no responsibility to determine whether a
distribution satisfies the conditions of applicable tax laws and will not be
responsible for any tax penalties assessed in connection with a distribution.
Special Arrangements for Repurchase of Shares from Dealers and Brokers. The
Distributor is the Fund's agent to repurchase its shares from authorized dealers
or brokers 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. If a contingent
deferred sales charge applies to the redemption, the amount of the check or
payment will be reduced accordingly. The Fund cannot guarantee receipt of a
payment on the date requested and reserves the right to amend, suspend or
discontinue offering such plans at any time without prior notice. Because of the
sales charge assessed on Class A share purchases, shareholders should not make
regular additional Class A share purchases while participating in an Automatic
Withdrawal Plan. Class B and Class C shareholders should not establish
withdrawal plans, because of the imposition of the contingent deferred sales
charges on such withdrawals (except where the Class B and Class C contingent
deferred sales charges are waived as described in the Prospectus under "Waivers
of Class B and Class C Sales Charges."
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions applicable to such plans, as stated below ,
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.
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, Centennial Tax Exempt Trust 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 . 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 6 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 if the initial purchase was prior to May 1, 1997; or
within 12 months if the initial purchase was after that date, the Class A
contingent deferred sales charge is imposed on the redeemed shares. The Class B
contingent deferred sales charge is imposed on Class B shares acquired by
exchange if they are redeemed within 6 years of the initial purchase of the
exchanged Class B shares. The Class C contingent deferred sales charge is
imposed on Class C shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B and Class C contingent deferred sales charges will be followed in
determining the order in which the shares are exchanged. Shareholders should
take into account the effect of any exchange on the applicability and rate of
any contingent deferred sales charge that might be imposed in the subsequent
redemption of remaining shares. Shareholders owning shares of more than one
class must specify whether they intend to exchange Class A, Class B or Class C
shares.
The Fund reserves the right to reject telephone or written exchange
requests submitted in bulk by anyone on behalf of 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 income tax purposes, an
exchange transaction is treated as a redemption of shares of one fund and a
purchase of shares of another. "Reinvestment Privilege," above, discusses some
of the tax consequences of reinvestment of redemption proceeds in such cases.
The Fund, the Distributor, and the Transfer Agent are unable to provide
investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.
Dividends, Capital Gains and Taxes
Dividends and Distributions. Dividends will be payable on shares held of
record at the time of the previous determination of net asset value. Daily
dividends on newly purchased shares will not be
declared or paid until such time as Federal Funds (funds credited to a member
bank's account at the Federal Reserve Bank) are available from the purchase
payment for such shares. Normally, purchase checks received from investors are
converted to Federal Funds on the next business day. Dividends will be declared
on shares repurchased by a dealer or broker for four business days following the
trade date (i.e., to and including the day prior to settlement of the
repurchase). If all shares in an account are redeemed, all dividends accrued on
shares of the same class in the account will be paid together with the
redemption proceeds.
Dividends, distributions and the proceeds of the redemption of Fund shares
represented by checks returned to the Transfer Agent by the Postal Service as
undeliverable will be invested in shares of Oppenheimer Money Market Fund, Inc.,
as promptly as possible after the return of such checks to the Transfer Agent,
to enable the investor to earn a return on otherwise idle funds.
The amount of a class's distributions may vary from time to time depending
on market conditions, the composition of the Fund's portfolio, and expenses
borne by the Fund or borne separately by a class, as described in "Alternative
Sales Arrangements -- Class A, Class B and Class C Shares," above. Dividends are
calculated in the same manner, at the same time and on the same day for shares
of each class. However, dividends on Class B and Class C shares are expected to
be lower than dividends on Class A shares as a result of the asset-based sales
charges on Class B and Class C shares, and Class B and Class C dividends will
also differ in amount as a consequence of any difference in net asset value
between the classes.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is explained in the
Prospectus under the caption "Dividends, Capital Gains and Taxes." Special
provisions of the Internal Revenue Code govern the eligibility of the Fund's
dividends for the dividends-received deduction for corporate shareholders.
Long-term capital gains distributions are not eligible for the deduction. In
addition, the amount of dividends paid by the Fund which may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from its portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less. To the
extent the Fund's dividends are derived from gross income from option premiums,
interest income or short-term gains from the sale of securities or dividends
from foreign corporations, those dividends will not qualify for the deduction.
If the Fund qualifies as a "regulated investment company" under the
Internal Revenue Code, it will not be liable for Federal income taxes on amounts
paid by it as dividends and distributions. The Fund qualified during its last
fiscal period, and intends to qualify in current and future years, but reserves
the right not to qualify. The Internal Revenue Code contains a number of complex
tests to determine whether the Fund will qualify, and the Fund might not meet
those tests in a particular year.
Under the Internal Revenue Code, by December 31 each year, the Fund must
distribute 98% of its taxable investment income earned from January 1 through
December 31 of that year and 98% of its capital gains realized in the period
from November 1 of the prior year through October 31 of the current year, or
else the Fund must pay an excise tax on the amounts not distributed. While it is
presently anticipated that the Fund will meet those requirements, the Fund's
Board of Trustees and the Manager might determine in a particular year that it
would be in the best interest of shareholders for the Fund not to make such
distributions at the required levels and to pay the excise tax on the
undistributed amounts. That would reduce the amount of income or capital gains
available for distribution to shareholders.
Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds listed in "Reduced Sales Charges,"
above, at net asset value without sales charge. To elect this option, a
shareholder must notify the Transfer Agent in writing and either have an
existing account in the fund selected for reinvestment or must obtain a
prospectus for that fund and an application from the Distributor to establish an
account. The investment will be made at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
Dividends and/or distributions from shares of other Oppenheimer funds may be
invested in shares of this Fund on the same basis.
Additional Information About the Fund
The Custodian. The Bank of New York is the Custodian of the Fund's assets. The
Custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. The Manager has represented to the Fund that the banking relationships
between the Manager with the Custodian have been and will continue to be
unrelated to and unaffected by the relationship between the Fund and the
Custodian. It will be the practice of the Fund to deal with the Custodian in a
manner uninfluenced by any banking relationship the Custodian may have with the
Manager and its affiliates. The Fund's cash balances with the Custodian in
excess of $100,000 are not protected by Federal deposit insurance. Such
uninsured balances at times may be substantial.
Independent Auditors. The independent auditors of the Fund audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for the Manager and certain other funds advised by the Manager and its
affiliates.
<PAGE>
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, 1997, the related statement of operations for the year then ended,
and the statements of changes in net assets for the years ended September 30,
1997 and 1996, and the financial highlights for the period June 15, 1995 to
September 30, 1997. 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, 1997 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, 1997, 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, 1997
<PAGE>
Statement of Investments September 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Amount(1) See Note 1
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Mortgage-Backed Obligations--0.0%
- -------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Sr. Unsub. Medium-Term
Nts., 6.50%, 7/10/02(AUD) (Cost $134,497) 180,000 $ 134,657
- -------------------------------------------------------------------------------------------
Foreign Government Obligations--57.0%
- -------------------------------------------------------------------------------------------
Argentina--1.2%
Banco Hipotecario Nacional (Argentina)
Medium-Term Nts., 10.625%, 8/7/06(2) 600,000 665,250
- ---------------------------------------------------------- ---------- -----------
City of Buenos Aires Bonds, 10.50%, 5/28/04(3)(ARP) 2,450,000 2,548,474
-----------
3,213,724
- -------------------------------------------------------------------------------------------
Australia--2.0%
Queensland Treasury Corp. Exchangeable Gtd. Nts.:
8%, 5/14/03(AUD) 130,000 103,787
8%, 8/14/01(AUD) 60,000 47,114
- ---------------------------------------------------------- ---------- -----------
Treasury Corp. of Victoria Gtd. Bonds, 8.25%, 10/15/03(AUD) 6,255,000 5,061,676
-----------
5,212,577
- -------------------------------------------------------------------------------------------
Brazil--2.8%
Brazil (Federal Republic of) Bonds, 10.125%, 5/15/27(2) 2,500,000 2,510,000
- ---------------------------------------------------------- ---------- -----------
Brazil (Federal Republic of) Capitalization Bonds,
8%, 4/15/14(2) 5,849,793 4,980,550
-----------
7,490,550
- -------------------------------------------------------------------------------------------
Canada--2.7%
Canada (Government of) Bonds, 9.50%, 10/1/98(CAD) 5,155,000 3,924,875
- -------------------------------------------------------------------------------------------
Canada (Government of) Debs., 10%, 6/1/08(CAD) 3,475,000 3,340,743
-----------
7,265,618
- -------------------------------------------------------------------------------------------
Costa Rica--0.2%
Central Bank of Costa Rica Interest Claim Bonds:
Series A, 6.539%, 5/21/05(3)(4) 273,605 270,185
Series B, 6.539%, 5/21/05(3)(4) 132,601 130,612
-----------
400,797
- -------------------------------------------------------------------------------------------
Finland--0.4%
Finland (Republic of) Bonds, 9.50%, 3/15/04(FIM) 4,450,000 1,025,243
- -------------------------------------------------------------------------------------------
Germany--2.2%
Germany (Republic of) Bonds, Series JA07, Zero Coupon:
4.26%, 1/4/01(5)(DEM) 8,700,000 4,271,428
5.77%, 1/4/07(5)(DEM) 4,970,000 1,690,901
-----------
5,962,329
11 Oppenheimer International Bond Fund
<PAGE>
Statement of Investments (Continued)
- --------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ---------------------------------------------------------------------------------------------------
Great Britain--4.1%
United Kingdom Treasury Bonds, 9%, 8/6/12(GBP) 3,400,000 $ 6,729,865
- -------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 13%, 7/14/00(GBP) 2,300,000 4,284,349
------------
11,014,214
- ---------------------------------------------------------------------------------------------------
Hungary--0.8%
Hungary (Government of) Bonds:
Series 97AA, 23.50%, 11/6/97(HUF) 335,000,000 1,720,887
Series 98/I, 23.50%, 5/17/98(HUF) 55,000,000 288,115
------------
2,009,002
- ---------------------------------------------------------------------------------------------------
Indonesia--0.7%
PT Hutama Karya Promissory Nts., Zero Coupon,
14.63%, 4/9/98(5)(IDR) 5,000,000,000 1,341,487
- ---------------------------------------------------- --------------- ------------
Perusahaan Listr, 17%, 8/21/01(IDR) 2,000,000,000 558,282
------------
1,899,769
- ---------------------------------------------------------------------------------------------------
Italy--3.6%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro
Poliennali, 12%, 1/1/02(2)(ITL) 13,275,000,000 9,500,887
- ---------------------------------------------------------------------------------------------------
Jamaica--0.2%
Jamaica (Government of) Bonds, 9.625%, 7/2/02(6) 600,000 607,500
- ---------------------------------------------------------------------------------------------------
Jordan--2.0%
Hashemite (Kingdom of) Jordan Disc. Bonds, 6.75%,
12/23/23(2)(4) 6,250,000 5,261,719
- ---------------------------------------------------------------------------------------------------
Mexico--2.9%
Bonos de la Tesoreria de la Federacion, Zero Coupon:
26.25%, 10/2/97(5)(MXP) 12,869,330 1,654,403
22.67%, 3/5/98(5)(MXP) 9,500,000 1,127,949
19.94%, 7/2/98(5)(MXP) 10,339,830 1,156,829
21.01%, 7/30/98(5)(MXP) 11,750,000 1,297,745
- ---------------------------------------------------- --------------- ------------
Mexican Williams Bonds, 6.75%, 11/15/08(3)(4) 500,000 470,000
- ---------------------------------------------------- --------------- ------------
Petroleos Mexicanos Debs., 14.50%, 3/31/06(2)(GBP) 1,000,000 2,116,177
------------
7,823,103
- ---------------------------------------------------------------------------------------------------
Moldova--1.6%
Moldova (Republic of) Bonds:
9.875%, 6/13/02(2) 1,300,000 1,345,500
9.875%, 6/13/02(6) 1,300,000 1,345,500
- ---------------------------------------------------- --------------- ------------
Moldova (Republic of) Sr. Unsub. Nts., 8.465%, 12/10/99(2)(4) 1,430,000 1,460,030
------------
4,151,030
12 Oppenheimer International Bond Fund
<PAGE>
- ---------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ---------------------------------------------------------------------------------------
New Zealand--3.8%
New Zealand (Government of) Bonds:
10%, 3/15/02(2)(NZD) 11,730,000 $ 8,445,808
8%, 11/15/06(NZD) 2,300,000 1,608,805
------------
10,054,613
- ---------------------------------------------------------------------------------------
Norway--1.6%
Norway (Government of) Bonds, 9.50%, 10/31/02(NOK) 25,415,000 4,259,728
- ---------------------------------------------------------------------------------------
Pakistan--1.9%
Pakistan (Republic of) Bonds, 9.946%, 5/30/00(2)(4) 4,680,000 4,750,200
- ---------------------------------------------------------- ------------ ------------
Pakistan (Republic of) Debs., 11.50%, 12/22/99 268,000 282,070
------------
5,032,270
- ---------------------------------------------------------------------------------------
Peru--1.5%
Peru (Republic of) Past Due Interest Bonds:
4%, 3/7/17(4) 4,500,000 3,020,625
4%, 3/7/17(4) 1,650,000 1,107,563
------------
4,128,188
- ---------------------------------------------------------------------------------------
Poland--1.2%
Poland (Republic of) Bonds:
12%, 6/12/01(PLZ) 8,300,000 1,887,451
16%, 2/12/99(PLZ) 4,750,000 1,273,626
------------
3,161,077
- ---------------------------------------------------------------------------------------
Portugal--1.3%
Portugal (Republic of) Bonds, Obrigicion do
tes Medio Prazo, 11.875%, 2/23/00PTE 531,500,000 3,400,323
- ---------------------------------------------------------------------------------------
Romania--2.2%
Renel R.A. Nts., 8.50%, 2/21/02(3)(4) 2,000,000 2,008,750
- ---------------------------------------------------------------------------------------
Romanian Commercial Bank SA Bonds,
9.125%, 3/10/00(2) 3,745,000 3,740,319
------------
5,749,069
- ---------------------------------------------------------------------------------------
Russia--1.4%
City of St. Petersburg Sr. Unsub. Nts., 9.50%, 6/18/02(6) 2,720,000 2,808,400
- ----------------------------------------------------------------------------------------
Ministry of Finance (Russian Government) Debs.,
9%, 3/25/04(DEM) 1,650,000 986,999
------------
3,795,399
13 Oppenheimer International Bond Fund
<PAGE>
Statement of Investments (Continued)
- ---------------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ---------------------------------------------------------------------------------------------------------------
South Africa--4.1%
South Africa (Republic of) Bonds:
Series 150, 12%, 2/28/05(ZAR) 26,177,680 $ 5,137,548
Series 162, 12.50%, 1/15/02(ZAR) 16,707,590 3,434,706
Series 175, 9%, 10/15/02(ZAR) 13,202,890 2,338,987
-------------
10,911,241
- ---------------------------------------------------------------------------------------------------------------
Spain--2.1%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion
del Estado, 12.25%, 3/25/00(ESP) 710,000,000 5,554,295
- ---------------------------------------------------------------------------------------------------------------
Sweden--3.7%
Sweden (Kingdom of) Bonds, Series 1033,
10.25%, 5/5/03(SEK) 61,500,000 9,851,818
- ---------------------------------------------------------------------------------------------------------------
Turkey--2.3%
Turkey (Government of) Treasury Bills, Zero Coupon:
103.11%, 8/5/98(5)TRL 880,000,000,000 2,493,451
101.23%, 9/16/98(5)TRL 1,399,840,000,000 3,678,656
-------------
6,172,107
- ---------------------------------------------------------------------------------------------------------------
Venezuela--2.5%
Venezuela (Republic of) New Money Bonds, Series A,
6.875%, 12/18/05(4) 750,000 721,875
- --------------------------------------------------------- ------------------ -------------
Venezuela Synthetic Sovereign Sec. Bonds:
10.125%, 12/29/03(2)(DEM) 8,070,000 4,820,469
11.50%, 12/28/07(2)(DEM) 2,190,000 1,320,557
-------------
6,862,901
-------------
Total Foreign Government Obligations (Cost $150,859,806) 151,771,091
- ---------------------------------------------------------------------------------------------------------------
Loan Participations--4.7%
- ---------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Reprofiled Debt Loan Participation,
Tranche A:
1.75%, 9/4/06(4)JPY 104,400,000 723,679
7%, 9/4/06(4) 3,675,000 3,305,203
- --------------------------------------------------------- ------------------ -------------
AO Rostelecom Loan Facility Nts., 9.50%, 2/15/00(3)(4) 2,000,000 2,018,750
- --------------------------------------------------------- ------------------ -------------
Colombia (Republic of) Concorde Loan Participation,
8.625%, 1/31/98(3)(4) 30,000 29,400
- --------------------------------------------------------- ------------------ -------------
Jamaica (Government of) 1990 Refinancing Agreement Nts.:
Tranche A, 6.563%, 10/16/00(3)(4) 139,999 135,800
Tranche B, 6.563%, 11/15/04(3)(4) 2,875,000 2,702,500
14 Oppenheimer International Bond Fund
<PAGE>
- -------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- -------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement:
Tranche A, 1.575%, 9/30/00(3)(4)(5)(JPY) 140,290,909 $ 1,081,261
Tranche B, 1.575%, 9/30/00(3)(4)(5)(JPY) 333,329,913 2,569,066
------------
Total Loan Participations (Cost $11,916,393) 12,565,659
- -------------------------------------------------------------------------------------------
Corporate Bonds and Notes--19.0%
- -------------------------------------------------------------------------------------------
Basic Industry--2.6%
- -------------------------------------------------------------------------------------------
Chemicals--0.8%
Polytama International Finance BV, 11.25% Gtd. Sec. Nts.,
6/15/07(2) 2,085,000 2,069,362
- -------------------------------------------------------------------------------------------
Metals/Mining--0.1%
Royal Oak Mines, Inc., 11% Sr. Sub. Nts., 8/15/06 330,000 321,750
- -------------------------------------------------------------------------------------------
Paper--1.7%
Asia Pulp & Paper International Finance Co., Zero
Coupon Asian Currency Nts., 14.71%, 12/8/97(5)(IDR) 300,000,000 87,935
- -------------------------------------------------------------- ------------ ------------
Indah Kiat International Finance Co. BV, 12.50%
Gtd. Sec. Nts., 6/15/06(2) 2,637,000 2,917,181
- -------------------------------------------------------------- ------------ ------------
Tjiwi Kimia International Finance Co. BV:
13.25% Gtd. Sr. Nts., 8/1/01 200,000 222,000
3.25% Gtd. Sr. Nts., 8/1/01(2) 1,080,000 1,198,800
------------
4,425,916
- -------------------------------------------------------------------------------------------
Consumer Related--0.9%
- -------------------------------------------------------------------------------------------
Consumer Products--0.0%
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(3)(7) 70,000 82,775
- -------------------------------------------------------------------------------------------
Hotel/Gaming--0.7%
Grupo Posadas SA de CV, 10.375% Bonds, 2/13/02 (2)(3) 1,700,000 1,785,000
- -------------------------------------------------------------------------------------------
Textile/Apparel--0.2%
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts.,
9.39%, 7/14/98(5) 500,000 456,075
- -------------------------------------------------------------------------------------------
Financial Services--4.8%
- -------------------------------------------------------------------------------------------
Banks & Thrifts--2.6%
Banco de Colombia, 5.20% Cv. Jr. Unsec. Sub. Nts.,
2/1/99(2)(3) 2,050,000 2,121,750
- ------------------------------------------------------------- ------------ ------------
CEI Citicorp Holdings, 11.25% Bonds, 2/14/07(ARP) 2,730,000 2,788,531
- -------------------------------------------------------------- ------------ ------------
Ongko International Finance Co. BV, 10.50% Gtd. Nts.,
3/29/04(6) 850,000 886,125
- ------------------------------------------------------------- ------------ ------------
Tjiwi Kimia Finance Mauritius Ltd., 10% Gtd. Nts.,
8/1/04(2) 1,150,000 1,137,062
------------
6,933,468
15 Oppenheimer International Bond Fund
<PAGE>
Statement of Investments (Continued)
- --------------------------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- --------------------------------------------------------------------------------------------------------
Diversified Financial--2.2%
Bakrie Investindo, Zero Coupon Promissory Nts.:
17.38%, 3/16/98(5)(IDR) 5,990,000,000 $1,610,068
26.59%, 7/10/98(5)(IDR) 2,000,000,000 491,464
- ---------------------------------------------------------- -------------- -----------
Pindo Deli Finance Mauritius Ltd., 10.75% Gtd. Nts.,
10/1/07(2)(3)(8) 1,420,000 1,469,700
- ---------------------------------------------------------- -------------- -----------
PT Polysindo Eka Perkasa, Zero Coupon Promissory Nts.:
30.94%, 3/16/98(5)(IDR) 3,000,000,000 821,643
28.80%, 7/10/98(5)(IDR) 2,000,000,000 507,322
9.37%, 7/28/98(5) 1,000,000 908,011
-----------
5,808,208
- --------------------------------------------------------------------------------------------------------
Housing Related--0.7%
- --------------------------------------------------------------------------------------------------------
Homebuilders/Real Estate--0.7%
International de Ceramica SA, 9.75% Gtd. Unsec.
Unsub. Nts., 8/1/02(3) 700,000 708,750
- ---------------------------------------------------------- -------------- -----------
Trizec Hahn Corp., 7.45% Sr. Unsec. Debs., 6/1/04(CAD) 1,600,000 1,206,578
-----------
1,915,328
- --------------------------------------------------------------------------------------------------------
Media--3.4%
- --------------------------------------------------------------------------------------------------------
Broadcasting--2.6%
Azteca Holdings SA, 11% Sr. Nts., 6/15/02(6)(7) 1,980,000 2,093,850
- ---------------------------------------------------------- -------------- -----------
Conecel Holdings Ltd., Units (each unit consists of $1,000
principal amount of 14% sec. nts., 10/1/00 and one warrant
to purchase class B common stock)(2)(3)(8)(9) 1,110,000 1,143,300
- ---------------------------------------------------------- -------------- -----------
Consorcio Ecuatoriano, 14% Nts., 5/1/02(2)(3) 3,415,000 3,696,738
-----------
6,933,888
- --------------------------------------------------------------------------------------------------------
Cable Television--0.3%
Rogers Cablesystems Ltd., 10% Second Priority Sr. Sec.
Debs., 12/1/07 150,000 165,000
- ---------------------------------------------------------- -------------- -----------
Rogers Communications, Inc., 8.75% Sr. Nts., 7/15/07(CAD) 1,000,000 721,839
-----------
886,839
- --------------------------------------------------------------------------------------------------------
Diversified Media--0.5%
ITT Promedia, 9.125% Sr. Sub. Nts., 9/15/07(6)(DEM) 2,100,000 1,241,021
- --------------------------------------------------------------------------------------------------------
Other--0.7%
- --------------------------------------------------------------------------------------------------------
Conglomerates--0.7%
Cia Latino Americana de Infraestructura & Servicios
SA--CLISA, 11.625% Gtd. Sr. Nts., 6/1/04(3) 100,000 106,250
16 Oppenheimer International Bond Fund
<PAGE>
- ----------------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- ----------------------------------------------------------------------------------------
Mechala Group Jamaica Ltd.:
12% Bonds, 2/15/02(3) $ 250,000 $ 248,750
12.75% Bonds, 12/30/99(2) 1,500,000 1,522,500
------------
1,877,500
- ----------------------------------------------------------------------------------------
Retail--0.6%
- ----------------------------------------------------------------------------------------
Specialty Retailing--0.6%
Central Termica Guemes, 12% Bonds, 11/26/01(3) 1,600,000 1,742,000
- ----------------------------------------------------------------------------------------
Technology--2.7%
- ----------------------------------------------------------------------------------------
Information Technology--1.4%
Celcaribe SA, 0%/13.50% Sr. Sec. Nts., 3/15/04(3)(10) 275,000 265,375
- -------------------------------------------------------- ----------- ------------
Comunicacion Celular SA, 0%/13.125% Sr. Deferred
Coupon Bonds, 11/15/03(10) 2,600,000 2,028,000
- -------------------------------------------------------- ----------- ------------
Occidente y Caribe Celular SA, 0%/14% Sr. Disc. Nts.,
Series B, 3/15/04(2)(10) 2,000,000 1,590,000
------------
3,883,375
- ----------------------------------------------------------------------------------------
Telecommunications/Technology--1.3%
- ----------------------------------------------------------------------------------------
Call-Net Enterprises, Inc., 0%/13.25% Sr. Disc. Nts.,
12/1/04(10)(11) 500,000 452,500
- -------------------------------------------------------- ----------- ------------
PTC International Finance BV, 0%/10.75% Gtd. Sr. Sub.
Unsec. Bonds, 7/1/07(2)(6)(10) 2,448,000 1,499,400
- -------------------------------------------------------- ----------- ------------
Shaw Communications, Inc., 8.54% Debs., 9/30/27(8)(CAD) 2,000,000 1,442,485
------------
3,394,385
- ----------------------------------------------------------------------------------------
Transportation--1.5%
- ----------------------------------------------------------------------------------------
Shipping--0.4%
Transportacion Maritima Mexicana SA de CV, 9.25% Nts.,
5/15/03(2) 1,000,000 1,016,250
- ----------------------------------------------------------------------------------------
Trucking--1.1%
Road King Infrastructure Finance (1997) Ltd., 9.50% Gtd.
Unsec. Unsub. Bonds, 7/15/07(2)(3) 2,900,000 2,878,250
- ----------------------------------------------------------------------------------------
Utilities--1.1%
- ----------------------------------------------------------------------------------------
Electric Utilities--0.8%
Panda Global Energy Co., 12.50% Sr. Nts., 4/15/04(2)(3) 2,150,000 2,096,250
- ----------------------------------------------------------------------------------------
Gas Utilities--0.3%
CE Casecnan Water & Energy, Inc.:
11.45% Sr. Nts., Series A, 11/15/05 500,000 545,000
11.95% Sr. Nts., Series B, 11/15/10 200,000 222,000
------------
767,000
------------
Total Corporate Bonds and Notes (Cost $49,929,176) 50,514,640
17 Oppenheimer International Bond Fund
<PAGE>
Statement of Investments (Continued)
- ------------------------------------------------------------------------------------------
Market Value
Shares See Note 1
- ------------------------------------------------------------------------------------------
Common Stocks--0.1%
- ------------------------------------------------------------------------------------------
Air New Zealand Ltd., Cl. B (Cost $394,974) 145,000 $ 373,080
Units
- -------------------------------------------------------------------------------------------
Rights, Warrants and Certificates--0.0%
- -------------------------------------------------------------------------------------------
Comunicacion Celular SA Wts., Exp. 11/03(3) 1,600 88,000
- ------------------------------------------------------- ------- --------
Occidente y Caribe Celular SA Wts., Exp. 3/04(3) 8,000 80
--------
Total Rights, Warrants and Certificates (Cost $15,000) 88,080
</TABLE>
<TABLE>
<CAPTION>
Face
Amount(1)
-------------
<S> <C> <C>
Structured Instruments--13.5%
- -----------------------------------------------------------------------------------------
Canadian Imperial Bank of Commerce (New York Branch)
Canadian Dollar Three Month Banker's Acceptance Linked
Maximum Rate Nts., 8.66%, 4/13/98 $2,200,000 2,202,200
- --------------------------------------------------------------- ----------- ----------
Canadian Imperial Bank of Commerce:
U.S. Dollar Nts. Linked to the Colombian Peso, 18.25%, 9/29/98 5,000,000 4,924,500
U.S. Dollar Nts. Linked to the Ministry of Finance of the
Russian Federation GKO, Zero Coupon, 9.86%, 9/17/98(2)(5) 2,500,000 2,237,000
- --------------------------------------------------------------- ----------- ----------
Credit Suisse First Boston (Cayman) Ltd., City of Moscow,
Credit & Convertibility Linked Nts., Series EM 215, Zero
Coupon, 12.05%, 12/30/97(2)(5) 4,800,000 4,660,565
- --------------------------------------------------------------- ----------- ----------
ING (U.S.) Financial Holdings Corp.:
U.S. Dollar Hedged GKO Pass-Through Nts., Zero Coupon,
13.16%, 10/29/97(3)(5) 562,983 557,827
U.S. Dollar Hedged GKO Pass-Through Nts., Zero Coupon,
13.09%, 12/3/97(3)(5) 2,100,000 2,058,756
PT Polysindo Linked Nts., Zero Coupon, 10.45%,
7/15/98(3)(5) 1,250,000 1,122,187
- -------------------------------------------------------------- ----------- ----------
Lehman Brothers, Inc., Guatemalan Letras de Tesoreria
Linked Nts., Zero Coupon, 8.31%, 10/27/97(5) 1,650,000 1,639,935
- --------------------------------------------------------------- ----------- ----------
Morgan Guaranty Trust Co. of New York, Japanese
Government Bond 193 Currency Protected Bank Nts.,
8.14%, 4/29/98 115,000 87,515
- --------------------------------------------------------------- ----------- ----------
Salomon, Inc.:
Colombian Peso Linked Nts., Zero Coupon, 18.17%, 8/20/98(5)(8) 2,917,000 2,507,567
Russian S-Account Credit Linked Nts., Zero Coupon:
11.33%, 12/12/97(5) 1,200,000 1,174,080
14.16%, 5/22/98(5) 3,750,000 3,491,625
12.23%, 5/29/98(5) 300,000 278,730
18 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Face Market Value
Amount(1) See Note 1
- --------------------------------------------------------------------------------------------------------
Structured Instruments (continued)
Standard Chartered Bank, Indian Rupee Linked Nts.:
15%, 10/20/97 $ 441,000 $ 434,032
32.641%, 11/28/97 558,000 574,294
35.115%, 11/28/97 558,000 572,229
Zero Coupon, 17.73%, 10/1/02(5)(IDR) 9,231,000,000 1,166,631
- ------------------------------------------------------- --------------- ------------
Standard Chartered Bank:
Korean Wong Principal & Interest Linked Deposit,
11.62%, 6/30/98 976,055 917,492
Korean Wong Principal & Interest Linked Deposit,
11.68%, 7/3/98 1,081,605 1,016,817
Korean Wong Principal & Interest Linked Deposit,
12.86%, 1/12/98 1,224,258 1,165,249
Korean Wong Principal & Interest Linked Deposit,
13.51%, 12/17/97 1,575,192 1,511,869
U.S. Dollar/Chinese Yuan Linked Nts., 12.903%, 12/5/97 1,250,000 1,261,250
- ------------------------------------------------------- --------------- ------------
Union Bank of Switzerland, Indian Rupee Linked Nts.,
5.40%, 11/17/97 294,000 294,764
------------
Total Structured Instruments (Cost $36,252,532) 35,857,114
</TABLE>
<TABLE>
<CAPTION>
Date Strike Contracts
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Call Options Purchased--0.2%
===================================================================================================
Brazil (Federal Republic of)
Capitalization Bonds, 8%, 4/15/14
Call Opt. 10/97 83.625% 3,000 47,400
- --------------------------------------- ----- -------- ----------- -----------
Canadian Dollar Call Opt. 10/97 1.365(CAD) 1,230,000 172
- --------------------------------------- ----- --------- ----------- -----------
German Mark/Japanese Yen Call Opt. 10/97 68.34(DEM/JPY) 8,910,000 53,924
- --------------------------------------- ----- ------------- ----------- -----------
German Mark/Czech Koruna Call Opt. 12/97 19.22(DEM/CZK) 2,305,000 40,107
- --------------------------------------- ----- ------------- ----------- -----------
Finnish Markka/German Mark Call Opt. 1/98 2.949(FIM/DEM) 13,415,000 9,994
- --------------------------------------- ---- ------------- ----------- -----------
Norwegian Krone/German Mark Call Opt. 1/98 4.101(NOK/DEM) 18,900,000 291,211
- --------------------------------------- ---- ------------- ----------- -----------
Russian (Government of) Principal
Loans Debs., 5.80%, 12/29/49 Call Opt. 10/97 69.875% 1,850 91,483
- --------------------------------------- ----- -------- ----------- -----------
Russian (Government of) Principal
Loans Debs., 5.80%, 12/29/49 Call Opt. 11/97 75.125% 3,370 33,700
-----------
Total Call Options Purchased
(Cost $314,822) 567,991
</TABLE>
19 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--0.0%
- ----------------------------------------------------------------------------------------------------
Brazilian Rial Put Opt. 10/97 1.108(BRR) 5,000,000 $ 1,250
German Mark Put Opt. 10/97 1.788(DEM) 17,730,000 13,138
German Mark Put Opt. 10/97 1.87(DEM) 23,390,000 --
German Mark Put Opt. 10/97 1.89(DEM) 36,940,000 --
---------
Total Put Options Purchased
(Cost $638,910) 14,388
</TABLE>
<TABLE>
<CAPTION>
Face
Amount(1)
----------------
<S> <C> <C>
Repurchase Agreements--5.2%
- ----------------------------------------------------------------------------------------------
Repurchase agreement with Goldman, Sachs & Co., 6.125%, dated 9/30/97, to be
repurchased at $13,802,348 on 10/1/97, collateralized by U.S. Treasury Nts.,
5.125%-9.125%, 11/15/98-
9/30/99, with a value of $14,091,620 (Cost $13,800,000) $ 13,800,000 13,800,000
- ----------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $264,256,110) 99.7% 265,686,700
- ----------------------------------------------------------------------------------------------
Other Assets Net of Liabilities 0.3 717,604
------------ -------------
Net Assets 100.0% $266,404,304
============ =============
</TABLE>
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP -- Argentine Peso ITL -- Italian Lira AUD -- Australian Dollar JPY --
Japanese Yen BRR -- Brazilian Rial MXP -- Mexican Peso CAD -- Canadian Dollar
NOK -- Norwegian Krone CZK -- Czech Koruna NZD -- New Zealand Dollar DEM --
German Mark PLZ -- Polish Zloty ESP -- Spanish Peseta PTE -- Portuguese Escudo
FIM -- Finnish Markka SEK -- Swedish Krona GBP -- British Pound Sterling TRL --
Turkish Lira HUF -- Hungarian Forint ZAR -- South African Rand IDR -- Indonesian
Rupiah
20 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
2. A sufficient amount of liquid assets has been designated to cover outstanding
written options, as follows:
<TABLE>
<CAPTION>
Contracts/Face Expiration Exercise Premium Market Value
Subject to Call/Put Date Price Received See Note 1
--------------------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Banco Hipotecario Nacional
(Argentina) Medium-Term Nts.,
10.625%, 8/7/06 Call Option $ 600,000 8/7/00 100.00% $ 5,520 $ 72,000
- ----------------------------- ------------ --------- ------- --------- --------
Brazil (Federal Republic of)
Capitalization Bonds,
8%, 4/15/14 Call Option $ 3,000,000 10/6/97 83.625% 36,428 47,400
- ----------------------------- ------------ --------- --------- --------- ------
British Pound Sterling
Call Option 1,615,000 10/6/97 0.625 GBP 18,088 26,728
- ----------------------------- ------------ --------- --------- --------- ------
Canadian Dollar Put Option 1,230,000 10/10/97 1.365 CAD 8,017 19,496
- ----------------------------- ------------ --------- --------- --------- ------
Finnish Markka/German Mark
Cross Currency Put Option 13,415,000 1/22/98 3.00 FIM 15,480 36,449
- ----------------------------- ------------ --------- --------- --------- ------
German Mark Call Option 23,360,000 10/16/97 1.72 DEM 61,129 55,597
- ----------------------------- ------------ --------- -------- --------- ------
German Mark Call Option 4,610,000 10/29/97 1.72 DEM 11,391 10,866
- ----------------------------- ------------ --------- -------- --------- ------
German Mark Put Option 4,610,000 10/22/97 1.80 DEM 10,373 7,122
- ----------------------------- ------------ --------- -------- --------- -----
German Mark Put Option 4,805,000 10/22/97 1.82 DEM 14,389 3,239
- ----------------------------- ------------ --------- -------- --------- -----
Norwegian Krone/German Mark
Cross Currency Put Option 18,900,000 1/23/98 4.18 NOK 30,752 28,293
- ----------------------------- ------------ --------- -------- --------- ------
Russian (Government of)
Principal Loans Debs.,
5.80%, 12/29/49 Call Option $ 1,850,000 10/14/97 69.875% 75,850 91,482
--------- --------
$287,417 $398,672
========= ========
</TABLE>
3. Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.
4. Represents the current interest rate for a variable rate security.
5. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
6. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $10,481,796 or 3.93% of the Fund's net
assets, at September 30, 1997.
7. Securities with an aggregate market value of $717,275 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
8. When-issued security to be delivered and settled after September 30, 1997.
9. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units which
represent debt securities, face amount disclosed represents total underlying
principal.
10. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
11. A sufficient amount of securities has been designated to cover outstanding
forward foreign currency exchange contracts. See Note 5 of Notes to Financial
Statements.
See accompanying Notes to Financial Statements.
21 Oppenheimer International Bond Fund
<PAGE>
Statement of Assets and Liabilities September 30, 1997
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------
Investments, at value (cost $264,256,110)--see accompanying statement $265,686,700
- -----------------------------------------------------------------------------------------
Cash 1,882,166
- ------------------------------------------------------------------------ ----------
Unrealized appreciation on forward foreign currency
exchange contracts--Note 5 336,653
- ------------------------------------------------------------------------ -------------
Receivables:
Investments sold 10,038,744
Interest and principal paydowns 6,814,820
Shares of beneficial interest sold 1,533,019
Closed forward foreign currency exchange contracts 1,354,787
- ------------------------------------------------------------------------ -------------
Deferred organization costs--Note 1 8,283
- ------------------------------------------------------------------------ -------------
Other 2,331
-------------
Total assets 287,657,503
- -----------------------------------------------------------------------------------------
Liabilities
Unrealized depreciation on forward foreign
currency exchange contracts--Note 5 393,907
- ------------------------------------------------------------------------ -------------
Options written, at value (premiums received $287,417)--see accompanying
statement--Note 7 398,672
- ------------------------------------------------------------------------ -------------
Payables and other liabilities:
Investments purchased (including $10,070,243 purchased on a when-issued
basis)--Note 1 18,636,955
Dividends 765,845
Closed forward foreign currency exchange contracts 416,524
Shares of beneficial interest redeemed 302,482
Distribution and service plan fees 152,572
Transfer and shareholder servicing agent fees 37,239
Daily variation on futures contracts--Note 6 29,570
Other 119,433
-------------
Total liabilities 21,253,199
- -----------------------------------------------------------------------------------------
Net Assets $266,404,304
=============
- -----------------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital $263,282,243
- ------------------------------------------------------------------------ -------------
Accumulated net realized gain on investment transactions 1,855,055
- ------------------------------------------------------------------------ -------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 1,267,006
-------------
Net assets $266,404,304
=============
</TABLE>
22 Oppenheimer International Bond Fund
<PAGE>
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$114,846,834 and 20,850,172 shares of beneficial interest outstanding) $5.51
Maximum offering price per share (net asset value plus sales charge of 4.75%
of offering price) $5.78
- ------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $122,873,538 and
22,347,468 shares of beneficial interest outstanding) $5.50
- ------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $28,683,932 and
5,218,843 shares of beneficial interest outstanding) $5.50 </TABLE>
See accompanying Notes to Financial Statements.
23 Oppenheimer International Bond Fund
<PAGE>
Statement of Operations For the Year Ended September 30, 1997
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------
Investment Income
Interest (net of foreign withholding taxes of $58,572) $20,785,447
- ------------------------------------------------------------------------ ------------
Dividends (net of foreign withholding taxes of $1,428) 8,076
------------
Total income 20,793,523
- ---------------------------------------------------------------------------------------
Expenses
Management fees--Note 4 1,465,181
- ------------------------------------------------------------------------ ------------
Distribution and service plan fees--Note 4:
Class A 213,030
Class B 873,049
Class C 198,232
- ------------------------------------------------------------------------ ------------
Transfer and shareholder servicing agent fees--Note 4 296,229
- ------------------------------------------------------------------------ ------------
Shareholder reports 133,074
- ------------------------------------------------------------------------ ------------
Custodian fees and expenses 86,262
- ------------------------------------------------------------------------ ------------
Registration and filing fees 44,558
- ------------------------------------------------------------------------ ------------
Legal and auditing fees 13,436
- ------------------------------------------------------------------------ ------------
Trustees' fees and expenses 2,660
- ------------------------------------------------------------------------ ------------
Other 12,387
------------
Total expenses 3,338,098
- ---------------------------------------------------------------------------------------
Net Investment Income 17,455,425
- ---------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) Net realized gain (loss) on:
Investments 9,285,971
Closing of futures contracts (38,899)
Closing and expiration of options written--Note 7 (235,486)
Foreign currency transactions (6,782,396)
------------
Net realized gain 2,229,190
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 1,429,058
Translation of assets and liabilities denominated in foreign currencies (2,089,353)
------------
Net change (660,295)
------------
Net realized and unrealized gain 1,568,895
- ---------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $19,024,320
============
</TABLE>
See accompanying Notes to Financial Statements.
24 Oppenheimer International Bond Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended September 30,
1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $ 17,455,425 $ 3,832,783
- ------------------------------------------------------ ------------ ------------
Net realized gain 2,229,190 1,549,896
- ------------------------------------------------------ ------------ ------------
Net change in unrealized appreciation or depreciation (660,295) 1,839,250
------------ ------------
Net increase in net assets resulting from operations 19,024,320 7,221,929
- ------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders Dividends from net investment
income:
Class A (8,439,637) (1,931,780)
Class B (7,638,040) (1,609,969)
Class C (1,735,744) (360,475)
- ------------------------------------------------------ ------------ ------------
Distributions from net realized gain:
Class A (703,789) --
Class B (644,945) --
Class C (147,671) --
- ------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase in net assets resulting from beneficial interest transactions--Note
2:
Class A 62,811,767 46,551,563
Class B 77,812,810 40,565,844
Class C 18,447,362 9,758,157
- ------------------------------------------------------------------------------------
Net Assets
Total increase 158,786,433 100,195,269
- ------------------------------------------------------ ------------ ------------
Beginning of period 107,617,871 7,422,602
------------ ------------
End of period $266,404,304 $107,617,871
============ ============
</TABLE>
See accompanying Notes to Financial Statements.
25 Oppenheimer International Bond Fund
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------
Year Ended September 30,
1997 1996 1995(1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Operating Data:
Net asset value, beginning of period $5.49 $5.10 $5.00
- ----------------------------------------- -------- ------- ----------
Income from investment operations:
Net investment income .52 .52 .15
Net realized and unrealized gain .08 .40 .10
-------- ------- ----------
Total income from investment operations .60 .92 .25
- ----------------------------------------- -------- ------- ----------
Dividends to shareholders from net
investment income (.53) (.53) (.15)
Distributions from net realized gain (.05) -- --
-------- ------- ----------
Total dividends and distributions to
shareholders (.58) (.53) (.15)
- ---------------------------------------- -------- ------- ----------
Net asset value, end of period $5.51 $5.49 $5.10
======== ======= ==========
- ------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value(2) 11.33% 18.82% 5.13%
- ------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of period (in thousands) $114,847 $52,128 $3,984
- ----------------------------------------- -------- ------- ----------
Average net assets (in thousands) $ 89,112 $19,817 $2,566
- ----------------------------------------- -------- ------- ----------
Ratios to average net assets:
Net investment income 9.24% 9.60% 9.94%(3)
Expenses, before voluntary
reimbursement by the Manager 1.28% 1.59% 1.59%(3)
Expenses, net of voluntary
reimbursement by the Manager N/A 1.49% 0.41%(3)
- ----------------------------------------- -------- ------- ----------
Portfolio turnover rate(4) 280.1% 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.
26 Oppenheimer International Bond Fund
<PAGE>
<TABLE>
<CAPTION>
Class B Class C
- -------------------------------------------------- -------------------------------------------------------
Year Ended September 30, Year Ended September 30,
1997 1996 1995(1) 1997 1996 1995(1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$5.48 $5.10 $5.00 $5.48 $5.09 $5.00
-------- ------- ---------- ------- ------- ----------
.48 .48 .14 .48 .48 .14
.07 .39 .10 .07 .39 .09
-------- ------- ---------- ------- ------- ----------
.55 .87 .24 .55 .87 .23
-------- ------- ---------- ------- ------- ----------
(.48) (.49) (.14) (.48) (.48) (.14)
(.05) -- -- (.05) -- --
-------- ------- ---------- ------- ------- ----------
(.53) (.49) (.14) (.53) (.48) (.14)
- -------------------------------------------------------------------------------------------------------
$5.50 $5.48 $5.10 $5.50 $5.48 $5.09
====== ======= ======== ======= ======= =======
- -------------------------------------------------------------------------------------------------------
10.52% 17.71% 4.92% 10.52% 17.92% 4.73%
- -------------------------------------------------------------------------------------------------------
$122,874 $45,207 $3,238 $28,684 $10,282 $201
- -------------------------------------------------------------------------------------------------------
$ 87,557 $17,891 $1,125 $19,883 $ 4,039 $97
- -------------------------------------------------------------------------------------------------------
8.57% 8.81% 9.20%(3) 8.62% 8.76% 9.36%(3)
2.04% 2.36% 2.21%(3) 2.04% 2.36% 2.26%(3)
N/A 2.26% 0.89%(3) N/A 2.25% 0.85%(3)
- -------------------------------------------------------------------------------------------------------
280.1% 273.3% 122.0% 280.1% 273.3% 122.0%
</TABLE>
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, 1997 were $533,744,496 and $409,121,282, respectively.
See accompanying Notes to Financial Statements.
27 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 total return primarily from foreign debt
securities. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager). The Fund offers Class A, Class B and Class C shares. Class A shares
are sold with a front-end sales charge. Class B and Class C shares may be
subject to a contingent deferred sales charge. All 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 that class and exclusive voting rights with respect to matters
affecting that 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 an
approved portfolio pricing service are valued using dealer-supplied valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and that the quotes reflect current market value, or are valued under
consistently applied procedures established by the Board of Trustees to
determine fair value in good faith. Short-term "money market type" debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last determined market value) adjusted for amortization to maturity of any
premium or discount. Forward foreign currency 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.
28 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Securities Purchased on a When-Issued Basis. Delivery and payment for securities
that have been purchased by the Fund on a forward commitment or when-issued
basis can take place a month or more after the transaction date. During this
period, such securities do not earn interest, are subject to market fluctuation
and may increase or decrease in value prior to their delivery. The Fund
maintains, in a segregated account with its custodian, assets with a market
value equal to the amount of its purchase commitments. The purchase of
securities on a when-issued or forward commitment basis may increase the
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. As of September 30,
1997, the Fund had entered into outstanding when-issued or forward commitments
of $10,070,243.
In connection with its ability to purchase securities on a
when-issued or forward commitment basis, the Fund may enter into mortgage
"dollar-rolls" in which the Fund sells securities for delivery in the current
month and simultaneously contracts with the same counterparty to repurchase
similar (same type coupon and maturity) but not identical securities on a
specified future date. The Fund records each dollar-roll as a sale and a new
purchase transaction.
- --------------------------------------------------------------------------------
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 foreign 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.
29 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Significant Accounting Policies (continued)
Federal Taxes. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
- --------------------------------------------------------------------------------
Distributions to Shareholders. The Fund intends to declare dividends separately
for Class A, Class B and Class C shares from net investment income each day the
New York Stock Exchange is open for business and pay such dividends monthly.
Distributions from net realized gains on investments, if any, will be declared
at least once each year.
- --------------------------------------------------------------------------------
Organization Costs. The Manager advanced $14,488 for organization and start-up
costs of the Fund. Such expenses are being amortized over a five-year period
from the date operations commenced. In the event that all or part of the
Manager's initial investment in shares of the Fund is withdrawn during the
amortization period, the redemption proceeds will be reduced to reimburse the
Fund for any unamortized expenses, in the same ratio as the number of shares
redeemed bears to the number of initial shares outstanding at the time of such
redemption.
- --------------------------------------------------------------------------------
Classification of Distributions to Shareholders. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily because of the recognition of certain foreign currency gains (losses)
as ordinary income (loss) for tax purposes. The character of the distributions
made during the year from net investment income or net realized gains may differ
from its 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 fiscal year in which the income or realized gain
was recorded by the Fund.
The Fund adjusts the classification of distributions to
shareholders to reflect the differences between financial statement amounts and
distributions determined in accordance with income tax regulations.
Accordingly, during the year ended September 30, 1997, amounts have been
reclassified to reflect a decrease in overdistributed net investment income of
$357,996. Accumulated net realized gain on investments was decreased by the
same amount.
- --------------------------------------------------------------------------------
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.
30 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
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,
Year Ended September 30, 1997 1996
-------------------------------- ---------------------------
Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A:
Sold 18,015,830 $ 99,555,234 9,721,751 $51,914,821
Dividends and
distributions reinvested 1,145,316 6,327,582 246,015 1,320,886
Redeemed (7,805,542) (43,071,049) (1,254,497) (6,684,144)
----------- ------------- ----------- ------------
Net increase 11,355,604 $ 62,811,767 8,713,269 $46,551,563
=========== ============= =========== ============
- ---------------------------------------------------------------------------------------
Class B:
Sold 18,551,946 $102,345,548 8,129,566 $43,322,204
Dividends and
distributions reinvested 868,156 4,783,353 172,750 925,063
Redeemed (5,318,785) (29,316,091) (691,490) (3,681,423)
----------- ------------- ----------- ------------
Net increase 14,101,317 $ 77,812,810 7,610,826 $40,565,844
=========== ============= =========== ============
- ---------------------------------------------------------------------------------------
Class C:
Sold 4,180,150 $ 23,070,240 1,915,475 $10,177,624
Dividends and
distributions reinvested 235,688 1,298,290 35,740 192,431
Redeemed (1,073,077) (5,921,168) (114,564) (611,898)
----------- ------------- ----------- ------------
Net increase 3,342,761 $ 18,447,362 1,836,651 $ 9,758,157
=========== ============= =========== ============
</TABLE>
- --------------------------------------------------------------------------------
3. Unrealized Gains and Losses on Investments
At September 30, 1997, net unrealized appreciation on investments and options
written of $1,319,335 was composed of gross appreciation of $6,240,483, and
gross depreciation of $4,921,148.
31 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
For the year ended September 30, 1997, commissions (sales charges
paid by investors) on sales of Class A shares totaled $1,124,978, of which
$273,182 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 $3,225,657 and $209,570, respectively, of which
$71,982 and $3,333, respectively, was paid to an affiliated broker/dealer.
During the year ended September 30, 1997, OFDI received contingent deferred
sales charges of $202,891 and $12,267, 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 shareholder 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 maintaining accounts
of their customers that hold Class A shares. During the year ended September 30,
1997, OFDI paid $11,216 to an affiliated broker/dealer as reimbursement for
Class A personal service and maintenance expenses.
32 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
The Fund has adopted 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
Class C shares, as compensation for sales commissions paid from its own
resources at the time of sale and associated financing costs. 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, 1997, OFDI paid $2,328 to an
affiliated broker/dealer as reimbursement for Class B personal service and
maintenance expenses and retained $799,151 and $152,406, respectively, as
compensation for Class B and Class C sales commissions and service fee
advances, as well as financing costs. If either Plan is terminated by the Fund,
the Board of Trustees may allow the Fund to continue payments of the
asset-based sales charge to OFDI for distributing shares before the Plan was
terminated. At September 30, 1997, OFDI had incurred unreimbursed expenses of
$4,441,423 for Class B and $371,816 for Class C.
- --------------------------------------------------------------------------------
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.
33 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. Forward Contracts (continued)
At September 30, 1997, the Fund had outstanding forward contracts as follows:
<TABLE>
<CAPTION>
Expiration Contract Valuation as of Unrealized Unrealized
Date Amount (000s) Sept. 30, 1997 Appreciation Depreciation
- -----------------------------------------------------------------------------------------------------------------
Contracts to Purchase
- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Canadian Dollar (CAD) 10/2/97 2,000 CAD $ 1,446,390 $ 854 $ --
Indonesian Rupiah (IDR) 10/1/97 3,947,213 IDR 1,210,801 -- 36,343
Italian Lira (ITL) 12/17/97 9,265,796 ITL 5,378,619 51,258 --
Japanese Yen (JPY) 10/15/97 78,120 JPY 649,195 88 --
Portuguese Escudo (PTE) 12/17/97 959,726 PTE 5,355,255 27,895 --
Spanish Peseta (ESP) 12/17/97 797,677 ESP 5,368,745 41,385 --
Turkish Lira (TRL) 10/1/97 436,048,800 TRL 2,502,288 -- 2,876
--------- ---------
121,480 39,219
--------- ---------
Contracts to Sell
- -----------------
Australian Dollar (AUD) 10/8/97 1,455 AUD 1,053,874 14,706 --
Canadian Dollar (CAD) 10/16/97-
1/21/98 7,040 CAD 5,106,095 -- 24,953
German Mark (DEM) 10/17/97-
12/19/97 17,955 DEM 10,200,067 15,485 20,519
Hungarian Forint (HUF) 10/2/97 527,646 HUF 2,704,421 4,235 --
Japanese Yen (JPY) 11/12/97 1,155,120 JPY 9,647,584 151,267 --
Mexican Peso (MXP) 10/2/97-
11/3/97 64,930 MXP 8,306,731 865 51,336
New Zealand Dollar (NZD) 11/28/97 5,880 NZD 3,752,225 28,615 --
South African Rand (ZAR) 10/27/97 50,579 ZAR 10,770,741 -- 96,053
Swiss Franc (CHF) 12/17/97 23,190 CHF 16,143,908 -- 161,827
--------- ---------
215,173 354,688
--------- ---------
Total Unrealized Appreciation and Depreciation $336,653 $393,907
========= =========
</TABLE>
6. Futures Contracts
The Fund may buy and sell interest rate futures contracts in order to gain
exposure to or protect against changes in interest rates. The Fund may also buy
or write put or call options on these futures contracts.
The Fund generally sells futures contracts to hedge against
increases in interest rates and the resulting negative effect on the value of
fixed rate portfolio securities. The Fund may also purchase futures contracts to
gain exposure to changes in interest rates as it may be more efficient or cost
effective than actually buying fixed income securities.
Upon entering into a futures contract, the Fund is required to
deposit either cash or securities (initial margin) in an amount equal to a
certain percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day. The variation margin payments are
equal to the daily changes in the contract value and are recorded as unrealized
gains and losses. The Fund recognizes a realized gain or loss when the contract
is closed or expires.
34 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Securities held in collateralized accounts to cover initial margin requirements
on open futures contracts are noted in the Statement of Investments. The
Statement of Assets and Liabilities reflects a receivable or payable for the
daily mark to market for variation margin.
Risks of entering into futures contracts (and related options)
include the possibility that there may be an illiquid market and that a change
in the value of the contract or option may not correlate with changes in the
value of the underlying securities.
At September 30, 1997, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
Number of Valuation as of Unrealized
Contracts to Purchase Expiration Date Contracts September 30, 1997 Depreciation
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nikkei Index 12/97 17 $2,499,378 $19,713
- --------------------------------------------------------------------------------------------
</TABLE>
7. Option Activity
The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.
The Fund generally purchases put options or writes covered call
options to hedge against adverse movements in the value of portfolio holdings.
When an option is written, the Fund receives a premium and becomes obligated to
sell or purchase the underlying security at a fixed price, upon exercise of the
option.
Options are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.
Securities designated to cover outstanding call options are noted
in the Statement of Investments where applicable. Shares subject to call,
expiration date, exercise price, premium received and market value are detailed
in a footnote to the Statement of Investments. Options written are reported as a
liability in the Statement of Assets and Liabilities. Gains and losses are
reported in the Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and the
option is exercised. The risk in writing a put option is that the Fund may incur
a loss if the market price of the security decreases and the option is
exercised. The risk in buying an option is that the Fund pays a premium whether
or not the option is exercised. The Fund also has the additional risk of not
being able to enter into a closing transaction if a liquid secondary market does
not exist.
35 Oppenheimer International Bond Fund
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. Option Activity (continued)
Written option activity for the year ended September 30, 1997 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, 1996 10,900 $ 72,820 -- $ --
Options written 294,832,747 2,047,821 516,288,196 823,434
Options closed or expired (253,256,347) (1,800,280) (449,177,820) (612,152)
Options exercised (11,996,850) (111,955) (24,150,376) (132,271)
------------- ------------ ------------- ----------
Options outstanding at
September 30, 1997 29,590,450 $ 208,406 42,960,000 $ 79,011
============= ============ ============= ==========
</TABLE>
- --------------------------------------------------------------------------------
8. Illiquid and Restricted Securities
At September 30, 1997, investments in securities included issues that are
illiquid or restricted. Restricted securities are often purchased in private
placement transactions, are not registered under the Securities Act of 1933,
may have contractual restrictions on resale, and are valued under methods
approved by the Board of Trustees as reflecting fair value. A security may be
considered illiquid if it lacks a readily available market or if its valuation
has not changed for a certain period of time. The Fund intends to invest no
more than 10% of its net assets (determined at the time of purchase and
reviewed periodically) in illiquid or restricted securities. Certain restricted
securities, eligible for resale to qualified institutional investors, are not
subject to that limit. The aggregate value of illiquid or restricted securities
subject to this limitation at September 30, 1997 was $36,136,536, which
represents 13.56% of the Fund's net assets.
- --------------------------------------------------------------------------------
9. Bank Borrowings
The Fund may borrow from a bank for temporary or emergency purposes including,
without limitation, funding of shareholder redemptions provided asset coverage
for borrowings exceeds 300%. The Fund has entered into an agreement which
enables it to participate with other OppenheimerFunds in an unsecured line of
credit with a bank, which permits borrowings up to $400 million, collectively.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the Federal Funds Rate plus 0.35%. Borrowings are payable 30 days after such
loan is executed. The Fund also pays a commitment fee equal to its pro rata
share of the average unutilized amount of the credit facility at a rate of
0.0575% per annum.
The Fund had no borrowings outstanding during the year ended
September 30, 1997.
-2-
<PAGE>
Appendix A
Corporate Industry Classifications
Aerospace/Defense Air Transportation Auto Parts Distribution Automotive Bank
Holding Companies Banks Beverages Broadcasting Broker-Dealers Building Materials
Cable Television Chemicals Commercial Finance Computer Hardware Computer
Software Conglomerates Consumer Finance Containers Convenience Stores Department
Stores Diversified Financial Diversified Media Drug Stores Drug Wholesalers
Durable Household Goods Education Electric Utilities Electrical Equipment
Electronics
Energy Services & Producers
Entertainment/Film
Environmental
Food
Gas Utilities
Gold
Health Care/Drugs
Health Care/Supplies & Services Homebuilders/Real Estate Hotel/Gaming Industrial
Services Information Technology 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 Wireless
Services
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.
(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) Amended Distribution and Service Plan and
Agreement for Class B shares
, dated 6/5/95, under Rule 12b-1: Filed herewith.
(iii) Amended Distribution and Service Plan and Agreement for
Class C shares
, dated
6/5/95, under
Rule 12b-1: Filed herewith.
(16) Performance Data Computation Schedule: Filed
herewith.
(17) (i) Financial Data Schedule for Class A shares
for
the fiscal year ended
9/30/97: Filed herewith.
(ii) Financial Data Schedule for Class B shares
for
the fiscal year ended
9/30/97: Filed herewith.
(iii)Financial Data Schedule for Class C shares
for
the fiscal year ended
9/30/97: 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 George C. Bowen,
Trustee: Filed herewith. For Sam Freeman, Trustee:
Previously filed withRegistrant's Post-Effective
Amendment No. 2, 1/27/97, and incorporated herein
by reference. For all other Trustees, their
respective Power 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
19, 1997
--------------
- --------------------
Class A Shares of Beneficial Interest 6,341
Class B Shares of Beneficial Interest 6,941
Class C Shares of Beneficial Interest 1,321
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 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.
Name and Current Position
with OppenheimerFunds, Inc. Other Business and Connections
During
("OFI") the Past Two Years
- ---------------------------
- ------------------------------------
Mark J.P. Anson,
Vice President Vice President of Oppenheimer Real
Asset Management, Inc. ("ORAMI");
formerly Vice President of Equity
Derivatives at Salomon Brothers,
Inc.
Peter M. Antos,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a
Chartered Financial Analyst; Senior
Vice President of HarbourView Asset
Management Corporation
("HarbourView"); prior to March,
1996
he was the senior equity portfolio
manager for the Panorama Series
Fund,
Inc. (the "Company") and other
mutual
funds and pension funds managed by
G.R. Phelps & Co. Inc. ("G.R.
Phelps"), the Company's former
investment adviser, which was a
subsidiary of Connecticut Mutual
Life
Insurance Company; was also
responsible for managing the common
stock department and common stock
investments of Connecticut Mutual
Life Insurance Co.
Lawrence Apolito,
Vice President None.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
.
Formerly a Vice President and
Senior
Portfolio Manager at First of
America
Investment Corp.
Beichert, Kathleen None.
Rajeev Bhaman,
Vice President Formerly Vice President
(January 1992 - February, 1996) of
Asian Equities for Barclays de Zoete
Wedd
, Inc.
Robert J. Bishop,
Vice President
Vice President of
Mutual Fund Accounting (since May
1996); an
officer of other Oppenheimer funds;
formerly an Assistant Vice
President of OFI/Mutual Fund
Accounting (April
1994-May 1996), and a Fund
Controller
for
OFI.
George C. Bowen,
Senior Vice President & Treasurer
Vice President (since June
1983) and Treasurer (since March
1985) of
OppenheimerFunds Distributor, Inc.
(the "Distributor"); Vice
President
(since October 1989) and Treasurer
(since April 1986) of HarbourView;
Senior Vice President (since
February
1992), Treasurer (since July
1991)and
a director (since December 1991) of
Centennial; President, Treasurer
and
a director of Centennial Capital
Corporation (since June 1989);
Vice
President and Treasurer (since
August
1978) and Secretary (since April
1981) of Shareholder Services, Inc.
("SSI"); Vice President, Treasurer
and Secretary of Shareholder
Financial Services, Inc. ("SFSI")
(since November 1989); Treasurer of
Oppenheimer Acquisition Corp.
("OAC")
(since June 1990); Treasurer of
Oppenheimer Partnership Holdings,
Inc. (since November 1989); Vice
President and Treasurer of
ORAMI
(since July 1996); Chief Executive
Officer, Treasurer and a director
of
MultiSource Services, Inc.
, a broker-
dealer (since December 1995); a
trustee, director and officer of
other Oppenheimer funds.
Scott Brooks,
Vice President None.
Susan Burton,
Assistant Vice President None.
Adele Campbell,
Assistant Vice President
& Assistant
Treasurer: Rochester Division Formerly Assistant Vice President
of Rochester Fund Services, Inc.
Michael Carbuto,
Vice President An officer and/or portfolio
manager of certain Oppenheimer funds;
Vice President of Centennial.
Ruxandra Chivu,
Assistant Vice President None.
H.D. Digby Clements,
Assistant Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President Trustee (1993 present)
of Awhtolia College - Greece.
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Assistant Vice President None.
Robert Doll, Jr.,
Executive Vice President &
Director An officer and/or portfolio
manager of certain Oppenheimer
funds.
John Doney,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Andrew J. Donohue,
Executive Vice President,
General Counsel and Director
Executive Vice President (since
September 1993), and a director
(since January 1992) of the
Distributor; Executive Vice
President,
General Counsel
and a
director of HarbourView, SSI, SFSI
and Oppenheimer Partnership
Holdings,
Inc. since (September 1995) and
MultiSource Services, Inc.
(a broker-
dealer) (since December 1995);
President and a director of
Centennial (since September 1995);
President and a director of ORAMI
(since July 1996); General
Counsel
(since May 1996) and Secretary
(since
April 1997) of OAC; Vice President
of OppenheimerFunds International,
Ltd. ("OFIL") and Oppenheimer
Millennium Funds plc (since October
1997); an officer of other
Oppenheimer funds.
George Evans,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Edward Everett,
Assistant Vice President None.
Scott Farrar,
Vice President Assistant Treasurer of
Oppenheimer
Millennium Funds plc (since
October 1997); an officer of other
Oppenheimer funds; formerly an
Assistant Vice President of
OFI/Mutual Fund Accounting (April
1994-May 1996), and a Fund
Controller
for OFI.
Leslie A. Falconio,
Assistant Vice President None.
Katherine P. Feld,
Vice President and Secretary Vice President and Secretary of
the Distributor
; Secretary of
HarbourView
, MultiSource
and
Centennial
; Secretary, Vice
President
and Director of Centennial Capital
Corporation; Vice President and
Secretary of ORAMI.
Ronald H. Fielding,
Senior Vice President; Chairman:
Rochester Division An officer, Director and/or
portfolio manager of certain
Oppenheimer funds ;
Presently he holds the following
other positions: Director (since
1995) of ICI Mutual Insurance
Company; Governor (since 1994) of
St.
John's College; Director (since
1994
- present) of International Museum
of
Photography at George Eastman
House;
Director (since 1986) of GeVa
Theatre. Formerly he held the
following positions: formerly,
Chairman of the Board and Director
of
Rochester Fund Distributors, Inc.
("RFD") ; President and Director of
Fielding Management Company, Inc.
("FMC") ; President and Director of
Rochester Capital Advisors, Inc.
("RCAI") ; Managing Partner of
Rochester Capital Advisors, L.P.,
President and Director of Rochester
Fund Services, Inc. ("RFS") ;
President and Director of Rochester
Tax Managed Fund, Inc.; Director
(1993 - 1997) of VehiCare Corp.;
Director (1993 - 1996) of
VoiceMode.
John Fortuna,
Vice President None.
Patricia Foster,
Vice President Formerly she held the following
positions: An officer of certain
Oppenheimer funds (May, 1993
-January, 1996); Secretary
of Rochester
Capital Advisors,
Inc. and
General Counsel (June, 1993 -
January
1996) of Rochester Capital
Advisors,
L.P.
Jennifer Foxson,
Assistant Vice President None.
Paula C. Gabriele,
Executive Vice President Formerly, Managing Director (1990-
1996) for Bankers Trust Co.
Robert G. Galli,
Vice Chairman Trustee of the New York-based
Oppenheimer Funds
Funds.. Formerly Vice
President and General Counsel of
Oppenheimer Acquisition Corp.
Linda Gardner,
Vice President None.
Alan Gilston,
Vice President Formerly Vice President for
Schroder Capital Management
International.
Jill Glazerman,
Assistant Vice President None.
Jeremy Griffiths,
Chief Financial Officer Currently a Member and
Fellow of the
Institute of Chartered
Accountants;
formerly an accountant
for Arthur
Young (London, U.K.).
Robert Grill,
Vice President Formerly
Marketing Vice President for
Bankers Trust Company (1993-1996);
Steering Committee Member,
Subcommittee Chairman for American
Savings Education Council (1995-
1996).
Caryn Halbrecht,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds;
formerly Vice President of Fixed
Income Portfolio Management at
Bankers Trust.
Elaine T. Hamann,
Vice President Formerly Vice President
(September, 1989 - January, 1997)
of Bankers
Trust Company.
Glenna Hale,
Director of Investor Marketing Formerly, Vice President
(1994-1997) of Retirement Plans
Services for
OppenheimerFunds Services.
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Executive Vice President and
Chief Executive
Officer of
OppenheimerFunds
Services,
a division of the Manager President and Director of SFSI;
President and Chief
executive Officer
of SSI.
Dorothy Hirshman, None.
Assistant Vice President
Alan Hoden,
Vice President None.
Merryl Hoffman,
Vice President None.
Nicholas Horsley,
Vice President Formerly a Senior Vice President
and Portfolio Manager for Warburg,
Pincus
Counsellors, Inc. (1993-1997), Co-
manager of Warburg, Pincus Emerging
Markets Fund (12/94 - 10/97), Co-
manager Warburg, Pincus
Institutional
Emerging Markets Fund - Emerging
Markets Portfolio (8/96 - 10/97),
Warburg Pincus Japan OTC Fund,
Associate Portfolio Manager of
Warburg Pincus International Equity
Fund, Warburg Pincus Institutional
Fund - Intermediate Equity
Portfolio,
and Warburg Pincus EAFE Fund.
Scott T. Huebl,
Assistant Vice President None.
Richard Hymes,
Assistant Vice President None.
Jane Ingalls,
Vice President None.
Byron Ingram,
Assistant Vice President
None.
Ronald Jamison,
Vice President Formerly Vice President and
Associate General Counsel at
Prudential
Securities, Inc.
Frank Jennings,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
;
formerly, a Managing Director of
Global Equities at Paine Webber's
Mitchell Hutchins division.
Thomas W. Keffer,
Senior Vice President Formerly Senior Managing Director
(1994 - 1996) of Van Eck Global.
Avram Kornberg,
Vice President None.
Joseph Krist,
Assistant Vice President None.
Paul LaRocco,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
;
formerly, a Securities Analyst for
Columbus Circle Investors.
Michael Levine,
Assistant Vice President None.
Shanquan Li,
Vice President Director of Board (since 2/96),
Chinese Finance Society; formerly,
Chairman (11/94-2/96), Chinese
Finance Society; and Director
(6/94-
6/95), Greater China Business
Networks.
Stephen F. Libera,
Vice President An officer and/or portfolio
manager for certain Oppenheimer
funds; a
Chartered Financial Analyst; a Vice
President of HarbourView; prior to
March 1996 , the senior
bond portfolio
manager for Panorama Series Fund
Inc., other mutual funds and
pension
accounts managed by G.R. Phelps;
also
responsible for managing the public
fixed-income securities department
at
Connecticut Mutual Life Insurance
Co.
Mitchell J. Lindauer,
Vice President None.
David Mabry,
Assistant Vice President None.
Steve Macchia,
Assistant Vice President None.
Bridget Macaskill,
President, Chief Executive Officer
and Director
Chief Executive
Officer (since September 1995);
President and
director (since June 1991) of
HarbourView; Chairman and a
director
of SSI (since August 1994), and
SFSI
(September 1995); President (since
September 1995) and a director
(since October 1990) of OAC;
President (since September 1995)
and
a director (since November 1989)
of
Oppenheimer Partnership Holdings,
Inc.
, a holding company subsidiary
of OFI; a director of ORAMI (since
July 1996) ; President and a
director
(since October 1997) of OFIL, an
offshore fund manager subsidiary of
OFI and Oppenheimer Millennium
Funds
plc (since October 1997); President
and a a director of other
Oppenheimer
funds; a director of the NASDAQ
Stock Market, Inc. and of Hillsdown
Holdings plc (a U.K. food company);
formerly an Executive Vice
President
of OFI.
Wesley Mayer,
Vice President Formerly Vice President
(January, 1995 - June, 1996) of Manufacturers
Life Insurance Company.
Loretta McCarthy,
Executive Vice President None.
Kevin McNeil,
Vice President Treasurer (September, 1994 -
present) for the Martin Luther
King Multi-
Purpose Center (non-profit community
organization); Formerly Vice President
(January, 1995 - April, 1996) for
Lockheed Martin IMS.
Tanya Mrva,
Assistant Vice President None.
Lisa Migan,
Assistant Vice President None.
Robert J. Milnamow,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
;
formerly a Portfolio Manager
(August,
1989 - August, 1995) with Phoenix
Securities Group.
Denis R. Molleur,
Vice President None.
Linda Moore,
Vice President Formerly, Marketing Manager (July
1995-November 1996) for Chase
Investment Services Corp.
Tanya Mrva,
Assistant Vice President None.
Kenneth Nadler,
Vice President None.
David Negri,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Assistant Vice President None.
Robert E. Patterson,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
John Pirie,
Assistant Vice President Formerly, a Vice President with
Cohane
Rafferty Securities, Inc.
Tilghman G. Pitts III,
Executive Vice President
and Director Chairman and Director of the
Distributor.
Jane Putnam,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Russell Read,
Senior Vice President Formerly a
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 ;
formerly, a Securities Analyst for the
Manager.
David Robertson,
Vice President None.
Adam Rochlin,
Vice President
None.
Michael S. Rosen
Vice President; President,
Rochester Division An officer and/or portfolio
manager of certain Oppenheimer
;
Formerly, Vice President (June,
1983
- January, 1996) of RFS, President and
Director of RFD; Vice President and
Director of FMC; Vice President and
director of RCAI; General Partner of
RCA; Vice President and Director of
Rochester Tax Managed Fund
Richard H. Rubinstein,
Senior Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds;
formerly Vice President and
Portfolio
Manager/Security Analyst for
Oppenheimer Capital Corp., an
investment adviser.
Lawrence Rudnick,
Assistant Vice President
None.
James Ruff,
Executive Vice President None.
Valerie Sanders,
Vice President None.
Ellen Schoenfeld,
Assistant Vice President None.
Stephanie Seminara,
Vice President Formerly, Vice President of
Citicorp
Investment Services
Richard Soper,
Vice President None.
Nancy Sperte,
Executive Vice President None.
Donald W. Spiro,
Chairman Emeritus and Director Vice Chairman
and Trustee of the New York-based
Oppenheimer Funds; formerly Chairman
of the Manager and the Distributor.
Richard A. Stein,
Vice President: Rochester Division Assistant Vice President (since
1995) of Rochester Capitol
Advisors, L.P.
Arthur Steinmetz,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
Ralph Stellmacher,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds.
John Stoma,
Senior Vice President,
Director
Retirement Plans Formerly Vice President of U.S.
Group Pension Strategy and
Marketing for
Manulife Financial.
Michael C. Strathearn,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a
Chartered Financial Analyst; a Vice
President of HarbourView; prior to
March 1996 , an equity
portfolio
manager for Panorama Series Fund,
Inc. and other mutual funds and
pension accounts managed by G.R.
Phelps.
James C. Swain,
Vice Chairman of the Board Chairman, CEO and Trustee,
Director or Managing Partner of the
Denver-
based Oppenheimer Funds; President
and a Director
of Centennial;
formerly President and Director of
OAMC, and Chairman of the Board of
SSI.
James Tobin,
Vice President None.
Jay Tracey,
Vice President
An
officer and/or portfolio manager
of certain Oppenheimer funds;
formerly Managing Director of
Buckingham Capital Management.
Gary Tyc,
Vice President, Assistant
Secretary and Assistant Treasurer Assistant Treasurer of the
Distributor and SFSI.
Ashwin Vasan,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Dorothy Warmack,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds.
Jerry Webman,
Senior Vice President Director of New York-based
tax-exempt fixed income Oppenheimer
funds;
Formerly, Managing Director and
Chief
Fixed Income Strategist at
Prudential
Mutual Funds.
Christine Wells,
Vice President None.
Joseph Welsh,
Assistant Vice President None.
Kenneth B. White,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; a
Chartered Financial Analyst; Vice
President of HarbourView; prior to
March 1996 , an equity
portfolio
manager for Panorama Series Fund,
Inc. and other mutual funds and
pension funds managed by G.R.
Phelps.
William L. Wilby,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; Vice President of
HarbourView.
Carol Wolf,
Vice President An officer and/or portfolio
manager of certain Oppenheimer
funds; Vice
President of Centennial; Vice
President, Finance and Accounting
and
member of the Board of Directors of
the Junior League of Denver, Inc.;
Point of Contact: Finance
Supporters of Children; Member of
the Oncology
Advisory Board of the Childrens
Hospital; Member of the Board of
Directors of the Colorado Museum of
Contemporary Art.
Caleb Wong,
Assistant Vice President None.
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel Assistant
Secretary of
SSI (since May 1985), and SFSI
(since November
1989); Assistant Secretary of
Oppenheimer Millennium
Funds plc
(since October 1997); an officer
of
other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Arthur J. Zimmer,
Senior Vice President An officer and/or
portfolio manager of certain
Oppenheimer funds; Vice President of
Centennial.
The Oppenheimer Funds include the New York-based Oppenheimer
Funds,
the Denver-based Oppenheimer Funds and the
Oppenheimer/Quest Rochester Funds, as
set forth below:
New York-based Oppenheimer Funds
- --------------------------------
Oppenheimer California Municipal Fund Oppenheimer Capital Appreciation Fund
Oppenheimer Developing Markets Fund Oppenheimer Discovery Fund Oppenheimer
Enterprise Fund Oppenheimer Global Fund Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Growth Fund Oppenheimer
International Growth Fund Oppenheimer International Small Company Fund
Oppenheimer Money Market Fund, Inc. Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust Oppenheimer Multiple Strategies Fund
Oppenheimer Municipal Bond Fund Oppenheimer New York Municipal Fund Oppenheimer
Series Fund, Inc. Oppenheimer U.S.Government Trust Oppenheimer World Bond Fund
Quest/Rochester Funds
- ---------------------
Limited Term New York Municipal Fund
Oppenheimer Bond Fund For Growth
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Denver-based Oppenheimer Funds
- ------------------------------
Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Equity Income Fund
Oppenheimer High Yield Fund
Oppenheimer Integrity Funds
Oppenheimer International Bond Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Municipal Fund
Oppenheimer Real Asset Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Variable Account Funds
Panorama Series Fund, Inc.
The New York Tax-Exempt Income Fund, Inc.
The address of OppenheimerFunds, Inc., the New
York-based Oppenheimer Funds, the Quest Funds,
OppenheimerFunds Distributor, Inc.,
HarbourView Asset Management Corp.,
Oppenheimer Partnership Holdings, Inc., and
Oppenheimer Acquisition Corp. is Two World
Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder
Financial Services, Inc., Shareholder Services, Inc.,
OppenheimerFunds Services, Centennial Asset Management Corporation,
Centennial Capital Corp., and Oppenheimer Real Asset Management,
Inc. is 6803 South Tucson Way, Englewood,Colorado 80012.
The address of MultiSource Services, Inc. is
1700 Lincoln Street, Denver, Colorado 80203.
The address of the Rochester-based funds is 350 Linden Oaks,
Rochester, New York 14625- 2807.
Item 29. Principal Underwriter
- -------- ---------------------
(a) OppenheimerFunds Distributor, Inc. is the Distributor of
the Registrant's shares. It is also the Distributor of each
of the other registered open-end investment companies for which
OppenheimerFunds, Inc. is the investment adviser, as described in Part A
and B of this Registration Statement and listed in Item 28(b) above.
(b)The directors and officers of the Registrant's principal underwriter are:
Name & Principal Positions & Offices Positions &
Offices
Business Address with Underwriter with
Registrant
- ---------------- -------------------
- -----------------
- --
George C. Bowen(1) Vice President and Vice
President and
Treasurer Treasurer of
the
Oppenheimer
funds.
Julie Bowers Vice President None
21 Dreamwold Road
Scituate, MA 02066
Peter W. Brennan Vice President None
1940 Cotswold Drive
Orlando, FL 32825
Maryann Bruce(2) Senior Vice President; None
Director: Financial
Institution Division
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
Ronald T. Collins Vice President None
710-3 E. Ponce de Leon Ave.
Decatur, GA 30030
William Coughlin Vice President None
542 West Surf - #2N
Chicago, IL 60657
Mary Crooks(1)
E. Drew Devereaux(3) Assistant Vice President
None
Rhonda Dixon-Gunner(1) Assistant Vice President
None
Andrew John Donohue(2) Executive Vice Secretary of
President & Director the 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
Todd Ermenio Vice President None
11011 South Darlington
Tulsa, OK 74137
John Ewalt Vice President None
2301 Overview Dr. NE
Tacoma, WA 98422
George Fahey Vice President None
201 E. Rund Grove Rd.
#26-22
Lewisville, TX 75067
Katherine P. Feld(2) Vice President None
& Secretary
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
Reed F. Finley Vice President None
1657 Graefield
Birmingham, MI 48009
Wendy Fishler(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki Vice President None
950 First St., S.
Suite 204
Winter Haven, FL 33880
Luiggino Galleto Vice President None
10239 Rougemont Lane
Charlotte, NC 28277
Mark Giles Vice President None
5506 Bryn Mawr
Dallas, TX 75209
Ralph Grant(2) Vice President/National
None
Sales Manager
Sharon Hamilton Vice President None
720 N. Juanita Ave.,#1
Redondo Beach, CA 90277
Byron Ingram(2) Assistant Vice President
None
Mark D. Johnson Vice President None
129 Girard Place
Kirkwood, MO 63105
Michael Keogh(2) Vice President None
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Daniel Krause Vice President None
13416 Larchmere Square
Shaker Heights, OH 44120
Ilene Kutno(2) Assistant Vice President
None
Todd Lawson Vice President None
3333 E. Bayaud Avenue
Unit 714
Denver, CO 80209
Wayne A. LeBlang Senior Vice President
None
23 Fox Trail
Lincolnshire, IL 60069
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 John Street
Cranford, NJ 07016
Todd Marion Vice President None
21 N. Passaic Avenue
Chatham,N.J. 07928
Marie Masters Vice President None
520 E. 76th Street
New York, NY 10021
John McDonough Vice President None
P.O. Box 760
50 Riverview Road
New Castle, NH 03854
Tanya Mrva(2) Assistant Vice President
None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Chad V. Noel Vice President None
3238 W. Taro Lane
Phoenix, AZ 85027
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Patrick Palmer Vice President None
958 Blue Mountain Cr.
West Lake Village, CA 91362
Kevin Parchinski Vice President None
1105 Harney St., #310
Omaha, NE 68102
Randall Payne Vice President None
3530 Providence Plantation Way
Charlotte, NC 28270
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(2) Chairman & Director None
Elaine Puleo(2) Vice President None
Minnie Ra Vice President None
895 Thirty-First Ave.
San Francisco, CA 94121
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
John C. Reinhardt(3) Vice President None
Douglas Rentschler Vice President None
867 Pemberton
Grosse Pointe Park, MI
48230
Ian Robertson Vice President None
4204 Summit Wa
Marietta, GA 30066
Michael S. Rosen(3) Vice President None
Kenneth Rosenson Vice President None
3802 Knickerbocker Place
Apt. #3D
Indianapolis, IN 46240
James Ruff(2) President None
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Robert Shore Vice President None
26 Baroness Lane
Laguna Niguel, CA 92677
George Sweeney Vice President None
1855 O'Hara Lane
Middletown, PA 17057
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
7123 Cornelia Lane
Dallas, TX 75214
David G. Thomas Vice President None
8116 Arlingon Blvd.
#123
Falls Church, VA 22042
Philip St. John Trimble Vice President None
2213 West Homer
Chicago, IL 60647
Sarah Turpin Vice President None
2735 Dover Road
Atlanta,GA 30327
Gary Paul Tyc(1) Assistant Treasurer None
Mark Stephen Vandehey(1) Vice President None
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
(1) 6803 South Tucson Way, Englewood, Colorado 80112
(2) Two World Trade Center, New York, NY 10048-0203
(3) 350 Linden Oaks, Rochester, NY 14625-2807
(c) Not applicable.
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.
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
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
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
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
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
</TABLE>
* 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")
(c) Not applicable.
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-1
<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
County of Arapahoe and State of Colorado on the 2nd day of January, 1998.
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:
Signatures: Title Date
- ----------- ----------------- ----------------
/s/ James C. Swain * Chairman of January 2, 1998
- ---------------------- the Board of
James C. Swain Trustees, Principal
Executive Officer
/s/ Sam Freedman * Trustee January 2, 1998
- ----------------------
Sam Freedman
/s/ Jon S. Fossel * Trustee January 2, 1998
- ----------------------
Jon S. Fossel
/s/ George Bowen * Trustee, Treasurer January 2, 1998
- ---------------------- and Principal Financial
George Bowen and Accounting Officer
/s/ Robert G. Avis * Trustee January 2, 1998
- ----------------------
Robert G. Avis
/s/ William A. Baker * Trustee January 2, 1998
- ----------------------
William A. Baker
/s/ Charles Conrad, Jr.* Trustee January 2, 1998
- ----------------------
Charles Conrad, Jr.
/s/ Raymond J. Kalinowski* Trustee January 2, 1998
- ----------------------
Raymond J. Kalinowski
/s/ C. Howard Kast * Trustee January 2, 1998
- ----------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee January 2, 1998
- ----------------------
Robert M. Kirchner
/s/ Ned M. Steel * Trustee January 2, 1998
- ----------------------
Ned M. Steel
*By: /s/ Robert G. Zack
---------------------------------
Robert G. Zack, Attorney-in-Fact
C-2
<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)(15)(ii) Amended Distribution and Service Plan and
Agreement for Class B shares
24(b)(15)(iii) Amended Distribution and Service Plan and
Agreement for Class C shares
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 of
George C. Bowen, Trustee
<PAGE>
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
(centered at bottom)
1-1/2" diameter facsimile seal
with legend
OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
SEAL
----
COMMONWEALTH OF MASSACHUSETTS
(at lower right, printed vertically)
Countersigned
OPPENHEIMERFUNDS SERVICES
(A DIVISION OF OPPENHEIMERFUNDS, INC.)
Englewood (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 name(s) as
written upon the face of the certificate in every particular without alteration
or enlargement or any change whatever.
<PAGE>
(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
(centered at bottom)
<PAGE>
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.)
Englewood (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.
<PAGE>
(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
(centered at bottom)
<PAGE>
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.)
Englewood(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.
<PAGE>
(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
INDEPENDENT AUDITORS' CONSENT
Oppenheimer International Bond Fund:
We hereby consent to the use in this Post-Effective Amendment No. 3 to
Registration Statement No. 33-58383 of our report dated October 21, 1997
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
December 30, 1997
AMENDED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
FOR CLASS B SHARES OF
OPPENHEIMER INTERNATIONAL BOND FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 5th day
of June, 1995, by and between Oppenheimer International Bond Fund (the "Fund")
and OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan
for Class B shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it
may be amended from time to time (the "Rule") under the Investment Company Act
of 1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any amendment or successor to such rule (the "NASD
Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following
terms
shall have the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or
other
person or entity which: (i) has rendered assistance (whether
direct, administrative or both) in the distribution of Shares or
has provided administrative support services with respect to
Shares
held by Customers (defined below) of the Recipient; (ii) shall
furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to
answer
such questions as may arise concerning the sale of Shares; and
(iii) has been selected by the Distributor to receive payments
under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Fund and who have no direct or indirect financial interest in the operation of
this Plan or in any
agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other
customers
or investment advisory or other clients of a Recipient, and/or
1
<PAGE>
accounts as to which such Recipient provides administrative
support services or is a custodian or other fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. Payments for Distribution Assistance and
Administrative Support Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution assistance services to the
Fund. Such services include distribution assistance and administrative support
services rendered in connection with Shares acquired (1) by purchase, (2) in
exchange for shares of another investment company for which the Distributor
serves as distributor or subdistributor, or (3) pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Services Fees. Within forty-five (45) days of
the end of each calendar quarter, the Fund will make payments in the aggregate
amount of 0.0625% (0.25% on an annual basis) of the average during that calendar
quarter of the aggregate net asset value of the Shares computed as of the close
of each business day (the "Service Fee"). Such Service Fee payments received
from the Fund will compensate the Distributor for providing administrative
support services with respect to Accounts. The administrative support services
in connection with Accounts may include, but shall not be limited to, the
administrative support services that a Recipient may render as described in
Section 3(b)(ii) below.
(ii) Distribution Assistance Fees (Asset-Based Sales Charge). Within ten
(10) days of the end of each month, the Fund will make payments in the aggregate
amount of 0.0625% (0.75% on an annual basis) of the average during the month of
the aggregate net asset value of Shares computed as of the close of each
business day (the
2
<PAGE>
"Asset-Based Sales Charge") outstanding for no more than six years (the "Maximum
Holding Period"). Such Asset-Based Sales Charge payments received from the Fund
will compensate the Distributor for providing distribution assistance in
connection with the sale of Shares.
The distribution assistance to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectuses (other
than those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any such quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
(i) Service Fee. In consideration of the administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of
3
<PAGE>
record the Recipient or by its Customers for a period of more than the minimum
period (the "Minimum Holding Period"), if any, that may be set from time to time
by a majority of the Independent
Trustees.
Alternatively, the Distributor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter: (i) "Advance Service Fee Payments" at a rate
not to exceed 0.25% of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings, sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (ii) service fee payments at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year. At the Distributor's
sole option, the Advance Service Fee Payments may be made more often than
quarterly, and sooner than the end of the calendar quarter. In the event Shares
are redeemed less than one year after the date such Shares were sold, the
Recipient is obligated to and will repay the Distributor on demand a pro rata
portion of such Advance Service Fee Payments, based on the ratio of the time
such Shares were held to one (1) year.
The administrative support services to be rendered by
Recipients in connection with the Accounts may include, but
shall
not be limited to, the following: answering routine inquiries
concerning the Fund, assisting in the establishment and
maintenance
of accounts or sub-accounts in the Fund and processing Share
redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other
information and services in connection with the rendering of
personal services and/or the maintenance of Accounts, as the
Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fees: (Asset-Based Sales Charge) Payments. In
its sole discretion and irrespective of whichever alternative method of making
service fee payments to Recipients is selected by the Distributor, in addition
the Distributor may make distribution service fee payments to a Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of shares computed as of
the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for no more than six
years and for any minimum period that the Distributor may establish. Such
payments shall be made only to Recipients that are registered with the SEC as a
broker-dealer or are exempt from registration.
4
<PAGE>
The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and expenses of personnel of the
Recipient who support the distribution of Shares by the Recipient, and providing
such other information and services in connection with the distribution of
Shares as the Distributor or the Fund may reasonably request.
(c) A majority of the Independent Trustees may at any time or from time to
time increase or decrease the rate of fees to be paid to the Distributor or to
any Recipient, but not to exceed the rates set forth above, and/or direct the
Distributor to increase or decrease (the "Maximum Holding Period"), any Minimum
Holding Period or any Minimum Qualified Holdings. The Distributor shall notify
all Recipients of any Minimum Qualified Holdings, Maximum Holding Period and
Minimum Holding Period, if any, that are established and the rate of payments
hereunder applicable to Recipients, and shall provide each Recipient with
written notice within thirty (30) days after any change in these provisions.
Inclusion of such provisions or a change in such provisions in a revised current
prospectus shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under of the
NASD
Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings.
(f) Recipients are intended to have certain rights as third-party
beneficiaries under this Plan, subject to the limitations set forth below. It
may be presumed that a Recipient has provided distribution assistance or
administrative support services qualifying for payment under the Plan if it has
Qualified Holdings of Shares that entitle it to payments under the Plan. In the
event that either the Distributor or the Board should have reason to believe
that, notwithstanding the level of Qualified Holdings, a Recipient may not be
rendering appropriate distribution assistance in connection with the sale of
Shares or administrative support services for Accounts, then the Distributor, at
the request of the Board shall require the Recipient to provide a written report
or other information to verify that said Recipient is providing appropriate
distribution assistance and/or services in this regard. If the Distributor or
the Board of Trustees still is not satisfied after the receipt of such report,
either may take the appropriate
5
<PAGE>
steps to terminate the Recipient's status as such under the Plan, whereupon such
Recipient's rights as a third-party beneficiary hereunder shall terminate.
Additionally, in their discretion, a majority of the Fund's Independent Trustees
at any time may remove any broker, dealer, bank or other person or entity as a
Recipient, where upon such person's or entity's rights as a third-party
beneficiary hereof shall terminate. Notwithstanding any other provision of this
Plan, this Plan does not obligate or in any way make the Fund liable to make any
payment whatsoever to any person or entity other than directly to the
Distributor.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nominations as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made under this Plan and the purpose for which the payments were made.
The reports shall be provided quarterly, and shall state whether all provisions
of Section 3 of this Plan have been complied with.
6. Related Agreements. Any agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at any
time, without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding Class B voting shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in effect
from year to year only so long as such continuance is specifically approved at
least annually by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has
been approved by a vote of the Board and its Independent Trustees cast in person
at meetings called for the purpose of voting on this Plan, and shall take effect
on the date first set forth above and shall replace the Fund's prior
6
<PAGE>
Distribution and Service Plan for the Shares. Unless terminated as hereinafter
provided, it shall continue in effect thereafter from year to year or as the
Board may otherwise determine but only so long as such continuance is
specifically approved at least annually by a vote of the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
This Plan may note be amended to increase materially the amount of
payments to be made under this Plan, without approval of the Class B
Shareholders in the manner described above, and all material amendments must be
approved by a vote of the Board and of the Independent Trustees.
This Plan may be terminated at any time by vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class B voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor
understands that the obligations of the fund under this Plan are not binding
upon any Trustee or shareholder of the Fund personally, but bind only the Fund
and the Fund's property. The Distributor represents that it has notice of the
provisions of the Declaration of Trust of the Fund disclaiming shareholder and
Trustee liability for acts or obligations of the Fund.
Oppenheimer International Bond
Fund
By: /s/ Andrew J. Donohue
-------------------------
Vice President and Secretary
OppenheimerFunds Distributor, Inc.
By: /s/ Andrew J. Donohue
------------------------
Executive Vice President
ofmi\12b-1-b.oib
7
<PAGE>
AMENDED DISTRIBUTION AND SERVICE PLAN AND AGREEMENT
WITH
OPPENHEIMERFUNDS DISTRIBUTOR, INC.
FOR CLASS C SHARES OF
OPPENHEIMER INTERNATIONAL BOND FUND
DISTRIBUTION AND SERVICE PLAN AND AGREEMENT (the "Plan") dated the 5th day
of June, 1995, by and between Oppenheimer International Bond Fund (the "Fund")
and OppenheimerFunds Distributor, Inc. (the "Distributor").
1. The Plan. This Plan is the Fund's written distribution and service plan
for Class C shares of the Fund (the "Shares"), contemplated by Rule 12b-1 as it
may be amended from time to time (the "Rule") under the Investment Company Act
of 1940 (the "1940 Act"), pursuant to which the Fund will compensate the
Distributor for its services in connection with the distribution of Shares, and
the personal service and maintenance of shareholder accounts that hold Shares
("Accounts"). The Fund may act as distributor of securities of which it is the
issuer, pursuant to the Rule, according to the terms of this Plan. The terms and
provisions of this Plan shall be interpreted and defined in a manner consistent
with the provisions and definitions contained in (i) the 1940 Act, (ii) the
Rule, (iii) Rule 2830 of the Conduct Rules of the National Association of
Securities Dealers, Inc., or any applicable amendment or successor to such rule
(the "NASD Conduct Rules") and (iv) any conditions pertaining either to
distribution-related expenses or to a plan of distribution to which the Fund is
subject under any order on which the Fund relies, issued at any time by the U.S.
Securities and Exchange Commission ("SEC").
2. Definitions. As used in this Plan, the following
terms
shall have the following meanings:
(a) "Recipient" shall mean any broker, dealer, bank or
other
person or entity which: (i) has rendered assistance (whether
direct, administrative or both) in the distribution of Shares or
has provided administrative support services with respect to
Shares
held by Customers (defined below) of the Recipient; (ii) shall
furnish the Distributor (on behalf of the Fund) with such
information as the Distributor shall reasonably request to
answer
such questions as may arise concerning the sale of Shares; and
(iii) has been selected by the Distributor to receive payments
under the Plan.
(b) "Independent Trustees" shall mean the members of the Fund's Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
fund and who have no direct or indirect financial interest in the operation of
this Plan or in any
agreement relating to this Plan.
(c) "Customers" shall mean such brokerage or other
customers
or investment advisory or other clients of a Recipient, and/or
1
<PAGE>
accounts as to which such Recipient provides administrative
support
services or is a custodian or other fiduciary.
(d) "Qualified Holdings" shall mean, as to any Recipient, all Shares owned
beneficially or of record by: (i) such Recipient, or (ii) such Recipient's
Customers, but in no event shall any such Shares be deemed owned by more than
one Recipient for purposes of this Plan. In the event that more than one person
or entity would otherwise qualify as Recipients as to the same Shares, the
Recipient which is the dealer of record on the Fund's books as determined by the
Distributor shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. Payments for Distribution Assistance and
Administrative
Support Services.
(a) Payments to the Distributor. In consideration of the payments made by
the Fund to the Distributor under this Plan, the Distributor shall provide
administrative support services and distribution services to the Fund. Such
services include distribution assistance and administrative support services
rendered in connection with Shares (1) sold in purchase transactions, (2) issued
in exchange for shares of another investment company for which the Distributor
serves as distributor or sub-distributor, or (3) issued pursuant to a plan of
reorganization to which the Fund is a party. If the Board believes that the
Distributor may not be rendering appropriate distribution assistance or
administrative support services in connection with the sale of Shares, then the
Distributor, at the request of the Board, shall provide the Board with a written
report or other information to verify that the Distributor is providing
appropriate services in this regard. For such services, the Fund will make the
following payments to the Distributor:
(i) Administrative Support Service Fees. Within forty-five (45) days of
the end of each calendar quarter, the Fund will make payments in the aggregate
amount of 0.0625% (0.25% on an annual basis) of the average during that calendar
quarter of the aggregate net asset value of the Shares computed as of the close
of each business day (the "Service Fee"). Such Service Fee payments received
from the Fund will compensate the Distributor for providing administrative
support services with respect to Accounts. The administrative support services
in connection with Accounts may include, but shall not be limited to, the
administrative support services that a Recipient may render as described in
Section 3(b)(i) below.
(ii) Distribution Assistance Fees (Asset-Basad Sales Charge). Within ten
(10) days of the end of each month, the Fund will make payments in the aggregate
amount of 0.0625% (0.75% on an annual basis) of the average during the month of
the aggregate net asset value of Shares computed as of the close of each
business day (the
2
<PAGE>
"Asset-Based Sales Charge"). Such Asset-Based Sales Charge
payments received from the Fund will compensate the Distributor
for
providing distribution assistance in connection with the sale of
Shares.
The distribution assistance services to be rendered by the Distributor in
connection with the Shares may include, but shall not be limited to, the
following: (i) paying sales commissions to any broker, dealer, bank or other
person or entity that sells Shares, and/or paying such persons "Advance Service
Fee Payments" (as defined below) in advance of, and/or in amounts greater than,
the amount provided for in Section 3(b) of this Agreement; (ii) paying
compensation to and expenses of personnel of the Distributor who support
distribution of Shares by Recipients; (iii) obtaining financing or providing
such financing from its own resources, or from an affiliate, for the interest
and other borrowing costs of the Distributor's unreimbursed expenses incurred in
rendering distribution assistance and administrative support services to the
Fund; and (iv) paying other direct distribution costs, including without
limitation the costs of sales literature, advertising and prospectus (other than
those prospectuses furnished to current holders of the Fund's shares
("Shareholders")) and state "blue sky" registration expenses.
(b) Payments to Recipients. The Distributor is authorized under the Plan
to pay Recipients (1) distribution assistance fees for rendering distribution
assistance in connection with the sale of Shares and/or (2) service fees for
rendering administrative support services with respect to Accounts. However, no
such payments shall be made to any Recipient for any quarter in which its
Qualified Holdings do not equal or exceed, at the end of such quarter, the
minimum amount ("Minimum Qualified Holdings"), if any, that may be set from time
to time by a majority of the Independent Trustees. All fee payments made by the
Distributor hereunder are subject to reduction or chargeback so that the
aggregate service fee payments and Advance Service Fee Payments do not exceed
the limits on payments to Recipients that are, or may be, imposed by the NASD
Conduct Rules. The Distributor may make Plan payments to any "affiliated person"
(as defined in the 1940 Act) of the Distributor if such h affiliated person
qualifies as a Recipient or retain such payments if the Distributor qualifies as
a Recipient.
In consideration of the services provided by Recipients, the Distributor
shall make the following payments to Recipients:
(i) Service Fee. In consideration of administrative support services
provided by a Recipient during a calendar quarter, the Distributor shall make
service fee payments to that Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter, at a rate not to exceed 0.0625% (0.25% on an
annual basis) of the average during the calendar quarter of the aggregate net
asset value of Shares, computed as of the close of each business
3
<PAGE>
day, constituting Qualified Holdings owned beneficially or of record by the
Recipient or by its Customers for a period of more than the minimum period (the
"Minimum Holding Period"), if any, that may be set from time to time by a
majority of the Independent Trustees.
Alternatively, the Distributor may, at its sole option, make the following
service fee payments to any Recipient quarterly, within forty-five (45) days of
the end of each calendar quarter: (A) "Advance Service Fee Payments" at a rate
not to exceed 0.25% of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of business on the day such
Shares are sold, constituting Qualified Holdings, sold by the Recipient during
that quarter and owned beneficially or of record by the Recipient or by its
Customers, plus (B) service fee payments at a rate not to exceed 0.0625% (0.25%
on an annual basis) of the average during the calendar quarter of the aggregate
net asset value of Shares, computed as of the close of each business day,
constituting Qualified Holdings owned beneficially or of record by the Recipient
or by its Customers for a period of more than one (1) year. At the Distributor's
sole option, Advance Service Fee Payments may be made more often than quarterly,
and sooner than the end of the calendar quarter. In the event Shares are
redeemed less than one year after the date such Shares were sold, the Recipient
is obligated to and will repay the Distributor on demand a pro rata portion of
such Advance Service Fee Payments, based on the ratio of the time such Shares
were held to one (1) year.
The administrative support services to be rendered by
Recipients in connection with the Accounts may include, but
shall
not be limited to, the following: answering routine inquiries
concerning the Fund, assisting in the establishment and
maintenance
of accounts or sub-accounts in the Fund and processing Share
redemption transactions, making the Fund's investment plans and
dividend payment options available, and providing such other
information and services in connection with the rendering of
personal services and/or the maintenance of Accounts, as the
Distributor or the Fund may reasonably request.
(ii) Distribution Assistance Fee (Asset-Based Sales Charge)
Payments. Irrespective of whichever alternative method of
making
service fee payments to Recipients is selected by the Distributor, in addition
the Distributor shall make distribution service fee payments to each Recipient
quarterly, within forty-five (45) days after the end of each calendar quarter,
at a rate not to exceed 0.1875% (0.75% on an annual basis) of the average during
the calendar quarter of the aggregate net asset value of Shares computed as of
the close of each business day constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers for a period of more
than one (1) year. Alternatively, at its sole option, the Distributor may make
distribution assistance fee payments to a Recipient quarterly, at
4
<PAGE>
the rate described above, on Shares constituting Qualified Holdings owned
beneficially or of record by the Recipient or its Customers without regard to
the 1-year holding period described above. Such payments shall be made only to
Recipients that are registered with the SEC as a broker-dealer or are exempt
from registration.
The distribution assistance to be rendered by the Recipients in connection
with the sale of Shares may include, but shall not be limited to, the following:
distributing sales literature and prospectuses other than those furnished to
current Shareholders, providing compensation to and expenses of personnel of the
Recipient who support the distribution of Shares by the Recipient, and providing
such other information and services in connection with the distribution of
Shares as the Distributor or the Fund may reasonably request.
(c) A majority of the Independent Trustees may at any time or from time to
time (i) increase or decrease the rate of fees to be paid to the Distributor or
to any Recipient, but not to exceed the rates set forth above, and/or (ii)
direct the Distributor to increase or decrease any Minimum Holding Period, any
maximum period set by a majority of the Independent Trustees during which fees
will be paid on Shares constituting Qualified Holdings owned beneficially or of
record by a Recipient or by its Customers (the "Maximum Holding Period") or
Minimum Qualified Holdings. The Distributor shall notify all Recipients of any
Minimum Qualified Holdings, Maximum Holding Period and Minimum Holding Period,
if any, that are established and the rate of payments hereunder applicable to
Recipients, and shall provide each Recipient with written notice within thirty
(30) days after any change in these provisions. Inclusion of such provisions or
a change in such provisions in a supplement or amendment to or revision of the
prospectus of the Fund shall constitute sufficient notice.
(d) The Service Fee and the Asset-Based Sales Charge on Shares are subject
to reduction or elimination under the limits to which the Distributor is, or may
become, subject under the NASD
Conduct Rules.
(e) Under the Plan, payments may be made to Recipients: (i) by
OppenheimerFunds, Inc. ("OFI") from its own resources (which may include profits
derived from the advisory fee it receives from the Fund), or (ii) by the
Distributor (a subsidiary of OFI), from its own resources, from Asset-Based
Sales Charge payments or from the proceeds of its borrowings.
(f) Recipients are intended to have certain rights as
third-
party beneficiaries under this Plan, subject to the limitations
set
forth below. It may be presumed that a Recipient has provided
distribution assistance or administrative support services
qualifying for payment under the Plan if it has Qualified
Holdings
of Shares that entitle it to payments under the Plan. If either
5
<PAGE>
the Distributor or the Board believe that, notwithstanding the level of
Qualified Holdings, a Recipient may not be rendering appropriate distribution
assistance in connection with the sale of Shares or administrative support
services for Accounts, then the Distributor, at the request of the Board, shall
require the Recipient to provide a written report or other information to verify
that said Recipient is providing appropriate distribution assistance and/or
services in this regard. If the Distributor or the Board of Trustees still is
not satisfied after the receipt of such report, either may take appropriate
steps to terminate the Recipient's status as a Recipient under the Plan,
whereupon such Recipient's rights as a third-party beneficiary hereunder shall
terminate. Additionally, in their discretion a majority of the Fund's
Independent Trustees at any time may remove any broker, dealer, bank or other
person or entity as a Recipient, whereupon such person's or entity's rights as a
third-party beneficiary hereof shall terminate. Notwithstanding any other
provision of this Plan, this Plan does not obligate or in any way make the Fund
liable to make any payment whatsoever to any person or entity other than
directly to the Distributor.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of persons to be Trustees of the Fund who are not
"interested persons" of the Fund ("Disinterested Trustees") shall be committed
to the discretion of the incumbent Disinterested Trustees. Nothing herein shall
prevent the incumbent Disinterested Trustees from soliciting the views or the
involvement of others in such selection or nomination as long as the final
decision on any such selection and nomination is approved by a majority of the
incumbent Disinterested Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide written reports to the Fund's Board for its review, detailing services
rendered in connection with the distribution of the Shares, the amount of all
payments made under this Plan and the purpose for which the payments were made.
The reports shall be provided quarterly, and shall state whether all provisions
of Section 3 of this Plan have been complied with.
6. Related Agreements. An agreement related to this Plan shall be in
writing and shall provide that: (i) such agreement may be terminated at any
time, without payment of any penalty, by a vote of a majority of the Independent
Trustees or by a vote of the holders of a "majority" (as defined in the 1940
Act) of the Fund's outstanding voting Class C shares; (ii) such termination
shall be on not more than sixty days' written notice to any other party to the
agreement; (iii) such agreement shall automatically terminate in the event of
its "assignment" (as defined in the 1940 Act); (iv) such agreement shall go into
effect when approved by a vote of the Board and its Independent Trustees cast in
person at a meeting called for the purpose of voting on such agreement; and (v)
such agreement shall, unless terminated as herein provided, continue in
6
<PAGE>
effect from year to year only so long as such continuance is specifically
approved at least annually by a vote of the Board and its Independent Trustees
cast in person at a meeting called for the
purpose of voting on such continuance.
7. Effectiveness, Continuation, Termination and Amendment. This Plan has
been approved by a vote of the Board and its Independent Trustees cast in person
at a meeting called for the purpose of voting on this Plan, and shall take
effect as of the date first set forth above, at which time it shall replace the
Fund's prior Distribution and Service Plan for the Shares. Unless terminated as
hereinafter provided, it shall continue in effect and thereafter from year to
year or as the Board may otherwise determine but only so long as such
continuance is specifically approved at least annually by a vote of the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance.
This Plan may not be amended to increase materially the amount of payments
to be made under this Plan, without approval of the Class C Shareholders in the
manner described above, and all material amendments must be approved by a vote
of the Board and of the Independent Trustees.
This Plan may be terminated at any time by a vote of a majority of the
Independent Trustees or by the vote of the holders of a "majority" (as defined
in the 1940 Act) of the Fund's outstanding Class C voting shares. In the event
of such termination, the Board and its Independent Trustees shall determine
whether the Distributor shall be entitled to payment from the Fund of all or a
portion of the Service Fee and/or the Asset-Based Sales Charge in respect of
Shares sold prior to the effective date of such termination.
8. Disclaimer of Shareholder and Trustee Liability. The Distributor
understands that the obligations of the Fund under this Plan are not binding
upon any Trustee or shareholder of the Fund personally, but bind only the Fund
and the Fund's property. The Distributor represents that it has notice of the
provisions of the
7
<PAGE>
Declaration of Trust of the Fund disclaiming shareholder and Trustee liability
for acts or obligations of the Fund.
Oppenheimer International Bond
Fund
By: /s/ Andrew J. Donohue
--------------------------
Vice President and Secretary
OppenheimerFunds Distributor, Inc.
By: /s/ Andrew J. Donohue
---------------------------
Executive Vice President
ofmi\12b1-c.oib
8
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:
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
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
10/31/96 0.0437500 0.0000000 5.550
11/29/96 0.0437500 0.0000000 5.630
12/31/96 0.0437500 0.0000000 5.580
01/31/97 0.0437500 0.0000000 5.580
02/28/97 0.0437500 0.0000000 5.570
03/31/97 0.0437500 0.0000000 5.490
04/30/97 0.0437500 0.0000000 5.450
05/30/97 0.0437500 0.0000000 5.500
06/30/97 0.0437500 0.0000000 5.510
07/31/97 0.0437500 0.0000000 5.490
08/29/97 0.0437500 0.0000000 5.450
09/30/97 0.0437500 0.0000000 5.510
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
10/31/96 0.0402014 0.0000000 5.540
11/29/96 0.0401815 0.0000000 5.620
12/31/96 0.0402689 0.0511000 5.570
01/31/97 0.0399092 0.0000000 5.570
02/28/97 0.0404879 0.0000000 5.560
<PAGE>
Oppenheimer International Bond Fund
Page 2
Distribution Amount From Amount From
Reinvestment Investment Long or Short-Term Reinvestment
(Ex)Date Income Capital Gains Price
Class B Shares (Continued)
03/31/97 0.0404381 0.0000000 5.480
04/30/97 0.0403351 0.0000000 5.440
05/30/97 0.0400926 0.0000000 5.490
06/30/97 0.0404583 0.0000000 5.500
07/31/97 0.0402261 0.0000000 5.480
08/29/97 0.0401569 0.0000000 5.440
09/30/97 0.0404772 0.0000000 5.500
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
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
10/31/96 0.0401433 0.0000000 5.540
11/29/96 0.0402497 0.0000000 5.620
12/31/96 0.0401855 0.0511000 5.570
01/31/97 0.0400303 0.0000000 5.560
02/28/97 0.0404178 0.0000000 5.560
03/31/97 0.0403527 0.0000000 5.470
04/30/97 0.0403604 0.0000000 5.440
05/30/97 0.0401530 0.0000000 5.490
06/30/97 0.0404540 0.0000000 5.500
07/31/97 0.0402343 0.0000000 5.480
08/29/97 0.0401615 0.0000000 5.440
09/30/97 0.0404804 0.0000000 5.500
<PAGE>
Oppenheimer International Bond Fund
Page 3
1. Average Annual Total Returns for the Periods Ended 09/30/97:
The formula for calculating average annual total return is as follows:
1/number of years = n {(ERV/P)^n} - 1 = average annual total return
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 Examples at NAV:
charge of 4.75%:
One Year One Year
{($1,060.42/$1,000)^ 1} - 1 = 6.04% {($1,113.29/$1,000)^ 1} - 1 = 11.33%
Inception Inception
{($1,324.63/$1,000)^.4364}-1 = 13.05% {($1,390.70/$1,000)^.4364}-1 = 15.48%
Class B Shares
Example assuming a maximuExamples at NAV: contingent deferred sales charge of
5.00% for the first year, and 3.00% for the inception year:
One Year One Year
{($1,055.18/$1,000)^ 1} - 1 = 5.52% {($1,105.18/$1,000)^ 1} - 1 = 10.52%
Inception Inception
{($1,334.89/$1,000)^.4364}-1 = 13.43% {($1,364.89/$1,000)^.4364}-1 = 14.54%
Class C Shares
Example assuming a maximuExamples at NAV: contingent deferred sales charge of
1.00% for the first year, and 0.00% for the inception year:
One Year One Year
{($1,095.21/$1,000)^ 1} - 1 = 9.52% {($1,105.21/$1,000)^ 1} - 1 = 10.52%
Inception Inception
{($1,364.91/$1,000)^.4364}-1 = 14.54% {($1,364.91/$1,000)^.4364}-1 = 14.54%
<PAGE>
Oppenheimer International Bond Fund
Page 4
2. Cumulative Total Returns for the Periods Ended 09/30/97:
The formula for calculating cumulative total return is as follows:
(ERV - P) / P = Cumulative Total Return
Class A Shares
Examples, assuming a maximum sales Examples at NAV:
charge of 4.75%:
One Year One Year
$1,060.42 - $1,000/$1,000 = 6.04% $1,113.29 - $1,000/$1,000 = 11.33%
Inception Inception
$1,324.63 - $1,000/$1,000 = 32.46% $1,390.70 - $1,000/$1,000 = 39.07%
Class B Shares
Example assuming a maximuExamples at NAV: contingent deferred sales charge of
5.00% for the first year, and 3.00% for the inception year:
One Year One Year
$1,055.18 - $1,000/$1,000 = 5.52% $1,105.18 - $1,000/$1,000 = 10.52%
Inception Inception
$1,334.89 - $1,000/$1,000 = 33.49% $1,364.89 - $1,000/$1,000 = 36.49%
Class C Shares
Example assuming a maximuExamples at NAV: contingent deferred sales charge of
1.00% for the first year, and 0.00% for the inception year:
One Year One Year
$1,095.21 - $1,000/$1,000 = 9.52% $1,105.21 - $1,000/$1,000 = 10.52%
Inception Inception
$1,364.91 - $1,000/$1,000 = 36.49% $1,364.91 - $1,000/$1,000 = 36.49%
Oppenheimer International Bond Fund
Page 5
<PAGE>
3. Standardized Yield for the 30-Day Period Ended 09/30/97:
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%:
$ 986,543.60 - $114,607.86 6
2{(--------------------------- + 1) - 1} = 9.11%
20,247,345 x $ 5.78
Class B Shares
Example at NAV:
$1,056,290.40 - $197,425.98 6
2{(--------------------------- + 1) - 1} = 8.80%
21,669,217 x $ 5.50
Class C Shares
Example at NAV:
$ 246,004.83 - $ 46,120.90 6
2{(--------------------------- + 1) - 1} = 8.76%
5,071,066 x $ 5.50
<PAGE>
Oppenheimer International Bond Fund
Page 6
4. DIVIDEND YIELDS FOR THE 30-DAY PERIOD ENDED 09/30/97:
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 last dividend earned during the period. b = The Fund's maximum
offering price (including sales charge)
per share on dividend payable date.
c = The Fund's net asset value (excluding sales charge) per share on
dividend payable date.
Examples :
Class A Shares
Dividend Yield ($0.0437500 * 12 ) / $5.78 = 9.08%
at Maximum Offer:
Dividend Yield ($0.0437500 * 12 ) / $5.51 = 9.53%
at Net Asset Value:
Class B Shares
Dividend Yield ($0.0404772 * 12 ) / $5.50 = 8.83%
at Net Asset Value:
Class C Shares
Dividend Yield ($0.0404804 * 12 ) / $5.50 = 8.83%
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-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 264,256,110
<INVESTMENTS-AT-VALUE> 265,686,700
<RECEIVABLES> 19,741,370
<ASSETS-OTHER> 2,331
<OTHER-ITEMS-ASSETS> 2,227,102
<TOTAL-ASSETS> 287,657,503
<PAYABLE-FOR-SECURITIES> 18,636,955
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,616,244
<TOTAL-LIABILITIES> 21,253,199
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 263,282,243
<SHARES-COMMON-STOCK> 20,850,172
<SHARES-COMMON-PRIOR> 9,494,568
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,855,055
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,267,006
<NET-ASSETS> 114,846,834
<DIVIDEND-INCOME> 8,076
<INTEREST-INCOME> 20,785,447
<OTHER-INCOME> 0
<EXPENSES-NET> 3,338,098
<NET-INVESTMENT-INCOME> 17,455,425
<REALIZED-GAINS-CURRENT> 2,229,190
<APPREC-INCREASE-CURRENT> (660,295)
<NET-CHANGE-FROM-OPS> 19,024,320
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,439,637
<DISTRIBUTIONS-OF-GAINS> 703,789
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,015,830
<NUMBER-OF-SHARES-REDEEMED> 7,805,542
<SHARES-REINVESTED> 1,145,316
<NET-CHANGE-IN-ASSETS> 158,786,433
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,480,266
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,465,181
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,338,098
<AVERAGE-NET-ASSETS> 89,112,000
<PER-SHARE-NAV-BEGIN> 5.49
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.08
<PER-SHARE-DIVIDEND> 0.53
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.51
<EXPENSE-RATIO> 1.28
<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-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 264,256,110
<INVESTMENTS-AT-VALUE> 265,686,700
<RECEIVABLES> 19,741,370
<ASSETS-OTHER> 2,331
<OTHER-ITEMS-ASSETS> 2,227,102
<TOTAL-ASSETS> 287,657,503
<PAYABLE-FOR-SECURITIES> 18,636,955
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,616,244
<TOTAL-LIABILITIES> 21,253,199
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 263,282,243
<SHARES-COMMON-STOCK> 22,347,468
<SHARES-COMMON-PRIOR> 8,246,151
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,855,055
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,267,006
<NET-ASSETS> 122,873,538
<DIVIDEND-INCOME> 8,076
<INTEREST-INCOME> 20,785,447
<OTHER-INCOME> 0
<EXPENSES-NET> 3,338,098
<NET-INVESTMENT-INCOME> 17,455,425
<REALIZED-GAINS-CURRENT> 2,229,190
<APPREC-INCREASE-CURRENT> (660,295)
<NET-CHANGE-FROM-OPS> 19,024,320
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,638,040
<DISTRIBUTIONS-OF-GAINS> 644,945
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,551,946
<NUMBER-OF-SHARES-REDEEMED> 5,318,785
<SHARES-REINVESTED> 868,156
<NET-CHANGE-IN-ASSETS> 158,786,433
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,480,266
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,465,181
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,338,098
<AVERAGE-NET-ASSETS> 87,557,000
<PER-SHARE-NAV-BEGIN> 5.48
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0.07
<PER-SHARE-DIVIDEND> 0.48
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.50
<EXPENSE-RATIO> 2.04
<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-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 264,256,110
<INVESTMENTS-AT-VALUE> 265,686,700
<RECEIVABLES> 19,741,370
<ASSETS-OTHER> 2,331
<OTHER-ITEMS-ASSETS> 2,227,102
<TOTAL-ASSETS> 287,657,503
<PAYABLE-FOR-SECURITIES> 18,636,955
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,616,244
<TOTAL-LIABILITIES> 21,253,199
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 263,282,243
<SHARES-COMMON-STOCK> 5,218,843
<SHARES-COMMON-PRIOR> 1,876,082
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,855,055
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,267,006
<NET-ASSETS> 28,683,932
<DIVIDEND-INCOME> 8,076
<INTEREST-INCOME> 20,785,447
<OTHER-INCOME> 0
<EXPENSES-NET> 3,338,098
<NET-INVESTMENT-INCOME> 17,455,425
<REALIZED-GAINS-CURRENT> 2,229,190
<APPREC-INCREASE-CURRENT> (660,295)
<NET-CHANGE-FROM-OPS> 19,024,320
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,735,744
<DISTRIBUTIONS-OF-GAINS> 147,671
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,180,150
<NUMBER-OF-SHARES-REDEEMED> 1,073,077
<SHARES-REINVESTED> 235,688
<NET-CHANGE-IN-ASSETS> 158,786,433
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,480,266
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,465,181
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,338,098
<AVERAGE-NET-ASSETS> 19,883,000
<PER-SHARE-NAV-BEGIN> 5.48
<PER-SHARE-NII> 0.48
<PER-SHARE-GAIN-APPREC> 0.07
<PER-SHARE-DIVIDEND> 0.48
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.50
<EXPENSE-RATIO> 2.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
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
attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his capacity
as Trustee and/or as Treasurer (Principal Financial and Accounting Officer) 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 he 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 29th day of December, 1997.
/s/ George C. Bowen
----------------------------
George C. Bowen
POWERS\BOWEN
