Registration No. 33-58383
File No. 811-07255
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [ x ]
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 6 [ x ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 8 [ ]
OPPENHEIMER INTERNATIONAL BOND FUND
(Exact Name of Registrant as Specified in Charter)
6803 South Tucson Way, Englewood, Colorado 80112
(Address of Principal Executive Offices) (Zip Code)
303-671-3200
(Registrant's Telephone Number, including Area Code)
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 (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[ x ] On January 28, 2000 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
If appropriate, check the following box:
[ ]This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
Oppenheimer
INTERNATIONAL BOND FUND
Prospectus dated January 28, 2000
Oppenheimer International Bond Fund is a mutual fund that seeks total return as
its primary goal. As a secondary goal, it seeks income when consistent with
total return. It invests primarily in foreign government and corporate bonds, in
both developed and emerging markets. This Prospectus contains important
information about the Fund's objectives, its investment policies, strategies and
risks. It also contains important information about how to buy and sell shares
of the Fund and other account features. Please read this Prospectus carefully
before you invest and keep it for future reference about your account.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the Fund's securities nor has it determined that this
Prospectus is accurate or complete. It is a criminal offense to represent
otherwise.
<PAGE>
Contents
ABOUT THE FUND
The Fund's Investment Objectives and Strategies
Main Risks of Investing in the Fund
The Fund's Past Performance
Fees and Expenses of the Fund
About the Fund's Investments
How the Fund is Managed
ABOUT YOUR ACCOUNT
How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Special Investor Services
AccountLink
PhoneLink
OppenheimerFunds Internet Web Site
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
Financial Highlights
<PAGE>
A B O U T T H E F U N D
The Fund's Investment Objectives and Strategies
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES? The Fund's primary objective is to
seek total return. As a secondary objective, the Fund seeks income when
consistent with total return.
WHAT DOES THE FUND INVEST IN? The Fund invests mainly in debt securities of
foreign government and corporate issuers. Those debt securities, generally
referred to as "bonds," include long-term and short-term government bonds,
participation interests in loans, corporate debt obligations, "structured" notes
and other debt obligations. They may include "zero coupon" or "stripped"
securities. Under normal market conditions, the Fund invests at least 65% of its
total assets in "bonds" and invests in at least three countries other than the
United States. The Fund does not limit its investments to securities of issuers
in a particular market capitalization or maturity range or rating category, and
can hold rated and unrated securities below investment grade.
The Fund invests in debt securities of issuers in both developed and
emerging markets throughout the world. These investments are more fully
explained in "About the Fund's Investments," below.
HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the Fund's portfolio manager analyzes the
overall investment opportunities and risks in individual national economies by
analyzing the business cycle in developed countries and political and exchange
rate factors of emerging markets. The overall strategy is to build a broadly
diversified portfolio of bonds, emphasizing government bonds in developed and
emerging markets, to help moderate the special risks of foreign investing. The
portfolio manager currently focuses on the factors below (which may vary in
particular cases and may change over time), looking for:
o Opportunities for higher yields than are available in U.S. markets,
o Overall country and currency diversification for the portfolio,
o Opportunities in government bonds in both developed and emerging
markets.
The Fund's diversification strategies, with respect to securities of
different issuers, securities denominated in different currencies and securities
issued in different countries, are intended to reduce the volatility of the
value of the overall portfolio while seeking total return (the overall increase
in the value of the portfolio).
WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors
seeking total return in their investment over the long term, with the
opportunity for some income, from a fund that will invest mainly in foreign debt
securities. Those investors should be willing to assume the risks of short-term
share price fluctuations that are typical for a fund focusing on debt
investments in foreign securities, particularly those in emerging markets. Since
the Fund's income level will fluctuate, it is not designed for investors needing
an assured level of current income. Because of its focus on long-term total
return, the Fund may be appropriate for a part of an investor's retirement plan
portfolio. However, the Fund is not a complete investment program.
Main Risks of Investing in the Fund
All investments carry risks to some degree. The Fund's investments are
subject to changes in their value from a number of factors, described below.
There is also the risk that poor security selection by the Fund's investment
Manager, OppenheimerFunds, Inc., will cause the Fund to underperform other funds
having similar objectives.
CREDIT RISK. Debt securities are subject to credit risk. Credit risk is the risk
that the issuer of a security might not make interest and principal payments on
the security as they become due. If the issuer fails to pay interest, the Fund's
income might be reduced, and if the issuer fails to repay principal, the value
of that bond and of the Fund's shares might fall. A downgrade in an issuer's
credit rating or other adverse news about an issuer can reduce the market value
of that issuer's securities.
o Special Risks of Lower-Grade Securities. The Fund can invest without limit in
securities below investment grade (commonly called "junk bonds") to seek total
return and higher income. Therefore the Fund's credit risks are greater than
those of funds that buy only investment-grade bonds. Lower-grade debt securities
may be subject to greater market fluctuations and greater risks of loss of
income and principal than investment-grade debt securities. Securities that are
(or that have fallen) below investment grade are exposed to a greater risk that
the issuers of those securities might not meet their debt obligations. There may
be less of a market for these securities, making it harder to sell them at an
acceptable price. These risks can reduce the Fund's share prices and the income
it earns.
RISKS OF FOREIGN INVESTING. While foreign securities offer special investment
opportunities, there are also special risks that can reduce the Fund's share
prices and returns. The change in 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 can also affect the
distributions the Fund makes from the income it receives from foreign securities
as foreign currency values change against the U.S. dollar. Foreign investing can
result in higher transaction and operating costs for the Fund. Foreign issuers
are not subject to the same accounting and disclosure requirements that U.S.
companies are subject to.
The value of foreign investments may be affected by 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.
o Special Risks of Emerging and Developing Markets. Securities in
emerging and developing markets present risks not found in more
mature markets. Those securities may be more difficult to sell at
an acceptable price and their prices may be more volatile than
securities of issuers in more developed markets. Settlements of
trades may be subject to greater delays so that the Fund may not
receive the proceeds of a sale of a security on a timely basis.
Emerging markets might have less developed trading markets,
exchanges and legal and accounting systems. Investments may be
subject to greater risks of government restrictions on withdrawing
the sales proceeds of securities from the country. Economies of
developing countries may be more dependent on relatively few
industries that may be highly vulnerable to local and global
changes. Governments may be more unstable and present greater
risks of nationalization or restrictions on foreign ownership of
securities of local companies. These investments may be
substantially more volatile than debt securities of issuers in the
U.S. and other developed countries and may be very speculative.
INTEREST RATE RISKS. The values of debt securities are subject to change when
prevailing interest rates change. When interest rates fall, the values of
already-issued debt securities generally rise. When interest rates rise, the
values of already-issued debt securities generally fall. The magnitude of these
fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities. The Fund's share prices can go up or down when
interest rates change because of the effect of the changes on the value of the
Fund's investments in debt securities. Also, if interest rates fall, the Fund's
investments in new securities at lower yields will reduce the Fund's income.
RISKS OF DERIVATIVE INVESTMENTS. The Fund can use derivatives to seek increased
returns or to try to hedge investment and interest rate risks. In general terms,
a derivative investment is one whose value depends on (or is derived from) the
value of an underlying asset, interest rate or index. Options, futures,
structured notes and forward contracts are examples of derivatives the Fund
uses.
If the issuer of the derivative does not pay the amount due, the Fund
can lose money on the investment. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, might not perform the
way the Manager expected it to perform. If that happens, the Fund's share price
could fall and the Fund could get less income than expected. Some derivatives
may be illiquid, making it difficult to sell them at an acceptable price. Using
derivatives can increase the volatility of the Fund's share prices.
HOW RISKY IS THE FUND OVERALL? The risks described above collectively
form the overall risk profile of the Fund, and can affect the value of the
Fund's investments, its investment performance and its price per share.
Particular investments and investment strategies also have risks. These risks
mean that you can lose money by investing in the Fund. When you redeem your
shares, they may be worth more or less than what you paid for them. There is no
assurance that the Fund will achieve its investment objectives. In the short
term, the values of foreign debt securities, particularly those of issuers in
emerging markets, can be volatile, and the price of the Fund's shares can go up
and down substantially. The income from some of the Fund's investments may help
cushion the Fund's total return from changes in prices, but debt securities are
subject to credit and interest rate risks that can affect their values and
income and the share prices of the Fund. In the OppenheimerFunds spectrum, the
Fund is generally more aggressive and has more risks than bond funds that focus
on U. S. government securities and investment-grade bonds but is less aggressive
than funds that invest solely in emerging markets.
An investment in the Fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
The Fund's Past Performance
The bar chart and table below show one measure of the risks of
investing in the Fund, by showing changes in the Fund's performance (for its
Class A shares) from year to year for the full calendar years since the Fund's
inception and by showing how the average annual total returns of the Fund's
shares compare to those of a broad-based market index. The Fund's past
investment performance is not necessarily an indication of how the Fund will
perform in the future.
Annual Total Returns (Class A) (as of 12/31 each year)
[See appendix to prospectus for data in bar chart showing annual total returns]
Sales charges are not included in the calculations of return in this bar chart,
and if those charges were included, the returns would be less than those shown.
During the period shown in the bar chart, the highest return (not annualized)
for a calendar quarter was 6.01% (4Q'99) and the lowest return (not annualized)
for a calendar quarter was -9.80% (3Q'98).
Average Annual Total
Returns for the periods
ended December 31, 1999 1 Year Life of class*
Class A Shares 5.73% 6.98%
Salomon Brothers Non-
U.S. World Gov't Bond -5.07% 2.40%
Index
Class B Shares 5.31% 7.00%
Class C Shares 9.24% 7.30%
*Inception date of all classes: 6/15/95. Index performance is shown
from 5/31/95.
The Fund's average annual total returns include the applicable sales charge: for
Class A, the current maximum initial sales charge of 4.75%; for Class B, the
contingent deferred sales charges of 5% (1-year) and 2% (life of class); and for
Class C, the 1% contingent deferred sales charge for the 1-year period.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in additional
shares. The Salomon Brothers Non-U.S. Dollar World Government Bond Index is a
market-capitalization-weighted index that tracks performance of 13 government
bond markets in developed countries. The index performance reflects the
reinvestment of income but does not consider the effects of transaction costs.
Also, the index does not include corporate bonds or bonds from emerging markets,
and the Fund has investments that differ from those in the index.
Fees and Expenses of the Fund
The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services. 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 meant to help you understand the
fees and expenses you may pay if you buy and hold shares of the Fund. The
numbers below are based on the Fund's expenses during its fiscal year ended
September 30, 1999.
Shareholder Fees (charges paid directly from your investment):
Class A Class B Class C
Shares Shares Shares
Maximum Sales Charge (Load) on
purchases 4.75% None None
(as % of offering price)
Maximum Deferred Sales Charge
(Load) (as % of the lower of the
original offering price or None 1 5% 2 1% 3
redemption proceeds)
1. A contingent deferred sales charge may apply to redemptions of investments
of $1 million or more ($500,000 for retirement plan accounts) of Class A
shares. See "How to Buy Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent
deferred sales charge declines to 1% in the sixth year and is eliminated
after that.
3. Applies to shares redeemed within 12 months of purchase.
Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
Class A Shares Class B Shares Class C Shares
Management Fees 0.74% 0.74% 0.74%
Distribution and/or
Service (12b-1) Fees 0.24% 1.00% 1.00%
Other Expenses 0.27% 0.27% 0.27%
Total Annual Operating
Expenses 1.25% 2.01% 2.01%
Expenses may vary in future years. "Other expenses" include transfer agent fees,
custodial expenses, and accounting and legal expenses the Fund pays.
EXAMPLES. The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in a class of shares of the Fund for the
time periods indicated and reinvest your dividends and distributions.
The first example assumes that you redeem all of your shares at the end
of those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that the
class's operating expenses remain the same. Your actual costs may be higher or
lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:
<TABLE>
<CAPTION>
If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
<S> <C> <C> <C> <C>
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
Class A Shares $596 $853 $1,129 $1,915
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
Class B Shares $704 $930 $1,283 $1,962
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
Class C Shares $304 $630 $1,083 $2,338
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
If shares are not redeemed: 1 Year 3 Years 5 Years 10 Years1
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
Class A Shares $596 $853 $1,129 $1,915
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
Class B Shares $204 $630 $1,083 $1,962
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
Class C Shares $204 $630 $1,083 $2,338
- ------------------------------------ --------------------- -------------------- ------------------ -------------------
</TABLE>
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B or Class C contingent deferred sales charges. In the
second example, the Class A expenses include the sales charge, but Class B and
Class C expenses do not include the contingent deferred sales charges. 1. Class
B expenses for years 7 through 10 are based on Class A expenses, since Class B
shares automatically convert to Class A after 6 years.
About the Fund's Investments
THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio
among different investments will vary over time based upon the Manager's
evaluation of economic and market trends. The Fund's portfolio might not always
include all of the different types of investments described below. At times the
Fund may focus more on investing for growth with less emphasis on income, while
at other times it may have both growth and income investments to seek total
return. The Statement of Additional Information contains more detailed
information about the Fund's investment policies and risks.
The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund attempts to reduce its exposure to market risks by diversifying its
investments, that is, by not holding a substantial amount of securities of any
one issuer and by not investing too great a percentage of its assets in any one
issuer. Also, the Fund does not concentrate 25% or more of its total assets in
investments in the securities of any one foreign government or in the debt and
equity securities of companies in any one foreign country or in any one
industry.
The debt securities the Fund buys may be rated by nationally recognized
rating organizations or they may be unrated securities assigned an equivalent
rating by the Manager. The Fund's investments may be above or below investment
grade in credit quality, and the Fund can invest without limit in
below-investment-grade debt securities, commonly called "junk bonds."
Foreign Debt Securities. The Fund's foreign debt investments can be denominated
in U.S. dollars or in foreign currencies and can include "Brady Bonds." Those
are U.S.-dollar denominated debt securities collateralized by zero-coupon U.S.
Treasury securities. They are typically issued by emerging markets countries and
are considered speculative securities with higher risks of default. The Fund
will buy foreign currency only in connection with the purchase and sale of
foreign securities and not for speculation.
Participation Interests in Loans. These securities represent an undivided
fractional interest in a loan obligation of a borrower. They are typically
purchased from banks or dealers that have made the loan or are members of the
loan syndicate. The loans may be to foreign or U.S. companies. They are subject
to the risk of default by the borrower. If the borrower fails to pay interest or
repay principal, the Fund can lose money on its investment. The Fund does not
invest more than 5% of its net assets in participation interests of any one
borrower.
Derivative Investments. The Fund can invest in a number of different kinds of
"derivative" investments. In the broadest sense, structured notes, options,
futures contracts, and other hedging instruments the Fund uses may be considered
"derivative investments." In addition to using derivatives for hedging, the Fund
may use other derivative investments because they offer the potential for
increased income and principal value.
o "Structured" Notes. The Fund buys "structured" notes, which are
specially-designed derivative debt investments whose principal
payments or interest payments are linked to the value of an index
(such as a currency or securities index) or commodity. The terms
of the instrument may be "structured" by the purchaser (the Fund)
and the borrower issuing the note.
The values of these notes will fall or rise in response to the
changes in the values of the underlying security or index. They
are subject to both credit and interest rate risks and therefore
the Fund could receive more or less than it originally invested
when a note matures, or it might receive less interest than the
stated coupon payment if the underlying investment or index does
not perform as anticipated. The prices of these notes may be very
volatile and they may have a limited trading market, making it
difficult for the Fund to sell its investment at an acceptable
price.
o Hedging. The Fund can buy and sell futures contracts, put and call
options, and forward contracts. These are all referred to as
"hedging instruments." The Fund is not required to hedge to seek
its objectives. The Fund does not use hedging instruments for
speculative purposes, and has limits on its use of them.
The Fund could hedge for a number of purposes. It might do
so to try to manage its exposure to the possibility that the
prices of its portfolio securities may decline, or to establish a
position in the securities market as a temporary substitute for
purchasing individual securities. It might do so to try to manage
its exposure to changing interest rates. Forward contracts can be
used to try to manage foreign currency risks on the Fund's foreign
investments.
Options trading involves the payment of premiums and has
special tax effects on the Fund. There are also special risks in
particular hedging strategies. In writing a put, there is a risk
that the Fund may be required to buy the underlying security at a
disadvantageous price. If the Manager used a hedging instrument at
the wrong time or judged market conditions incorrectly, the
strategy could reduce the Fund's return. The Fund could also
experience losses if the price 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.
Portfolio Turnover. The Fund engages in short-term trading to seek its
objective. Portfolio turnover affects brokerage and transaction costs the Fund
pays. If the Fund realizes capital gains when it sells portfolio investments, it
must generally pay those gains out to shareholders, increasing their taxable
distributions. The Financial Highlights table at the end of this Prospectus
shows the Fund's portfolio turnover rates during recent fiscal years.
CAN THE FUND'S INVESTMENT OBJECTIVES AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies cannot be changed without the approval of a
majority of the Fund's outstanding voting shares. The Fund's investment
objectives are fundamental policies. Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information. An
investment policy is not fundamental unless this Prospectus or the Statement of
Additional Information says that it is.
OTHER INVESTMENT STRATEGIES. To seek its objectives, the Fund can use the
investment techniques and strategies described below. The Fund might not always
use all of them. These techniques have risks, although some are designed to help
reduce overall investment or market risks.
Other Debt Securities. Under normal market conditions, the Fund can invest (up
to 35% of its total assets) in debt securities issued by U.S. companies or the
U.S. government to seek the Fund's goals. However, these are not expected to be
a significant part of the Fund's normal long term investment strategy. The
Fund's investments in U.S. government securities can include U.S. Treasury
securities and securities issued or guaranteed by agencies or instrumentalities
of the U.S. government, such as collateralized mortgage obligations (CMOs) and
other mortgage-related securities. Mortgage-related securities are subject to
additional risks of unanticipated prepayments of the underlying mortgages, which
can affect the income stream to the Fund from those securities as well as their
values.
The Fund can also buy U.S. commercial paper, which is short-term
corporate debt, and asset-backed securities, which are interests in pools of
consumer loans and other trade receivables. Prepayments on the underlying loans
may reduce the Fund's income on the securities and reduce their values, as with
CMOs.
Zero-Coupon and "Stripped Securities. Some of the government and corporate debt
securities the Fund buys are zero-coupon bonds that pay no interest and are
issued at a substantial discount from their face value. "Stripped" securities
are the separate income or principal components of a debt security. Some CMOs or
other mortgage related securities may be stripped, with each component having a
different proportion of principal or interest payments. One class might receive
all the interest and the other all the principal payments. The values of these
stripped mortgage related securities are very sensitive to prepayments of
underlying mortgages.
Zero-coupon and stripped securities are subject to greater fluctuations
in price from interest rate changes than interest-bearing securities. The Fund
may have to pay out the imputed income on zero coupon securities without
receiving the actual cash currently. Interest-only securities are particularly
sensitive to changes in interest rates.
Illiquid and Restricted Securities. Investments may be illiquid because they do
not have 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 can
increase that limit to 15%). Certain restricted securities that are eligible for
resale to qualified institutional purchasers may not be subject to that limit.
The Manager monitors holdings of illiquid securities on an ongoing basis to
determine whether to sell any holdings to maintain adequate liquidity.
Temporary Defensive Investments. For cash management purposes the Fund may hold
cash equivalents such as commercial paper, repurchase agreements, Treasury bills
and other short-term U.S. government securities. In times of adverse or unstable
market or economic conditions, the Fund may invest up to 100% of its assets in
temporary defensive investments. These would ordinarily be short-term U. S.
government securities, highly-rated commercial paper, bank obligations or
repurchase agreements. To the extent the Fund invests defensively in these
securities, it may not achieve its primary investment objective of total return.
How the Fund Is Managed
THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business. The Manager carries out its duties, subject to the policies
established by the Fund's Board of Trustees, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the
fees the Fund pays 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 January 1960.
The Manager (including subsidiaries and affiliates) managed more than $120
billion in assets as of December 31, 1999, including other Oppenheimer funds
with more than 5 million shareholder accounts. The Manager is located at Two
World Trade Center, 34th Floor, New York, New York 10048-0203.
Portfolio Manager. The portfolio manager of the Fund is Arthur P. Steinmetz. He
became the portfolio manager on May 20, 1999, and is the person principally
responsible for the day-to-day management of the Fund's portfolio. He is a Vice
President of the Fund and Senior Vice President of the Manager. He is an officer
and portfolio manager for other Oppenheimer funds. Mr. Steinmetz has been
employed by the Manager since 1986 and has been a portfolio manager since 1989.
Advisory Fees. Under the investment advisory agreement, the Fund pays the
Manager an advisory fee at an annual rate that declines on additional assets as
the Fund grows: 0.75% of the first $200 million of average annual net assets of
the Fund, 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
last fiscal year ended September 30, 1999 was 0.74% of average annual net assets
for each class of shares.
A B O U T Y O U R A C C O U N T
How to Buy Shares
HOW DO YOU BUY SHARES? You can buy shares several ways, as described below. The
Fund's Distributor, OppenheimerFunds Distributor, Inc., may appoint servicing
agents to accept purchase (and redemption) orders. The Distributor, in its sole
discretion, may reject any purchase order for the Fund's shares.
Buying Shares Through Your Dealer. You can buy shares through any dealer, broker
or financial institution that has a sales agreement with the Distributor. Your
dealer will place your order with the Distributor on your behalf.
Buying Shares Through the Distributor. Complete an OppenheimerFunds New Account
Application and return it with a check payable to "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, we recommend that you discuss your investment with a financial
advisor before you make a purchase to be sure that the Fund is appropriate for
you.
o Paying by Federal Funds Wire. Shares purchased through the
Distributor may be paid for by Federal Funds wire. The minimum
investment is $2,500. Before sending a wire, call the Distributor's
Wire Department at 1.800.525.7048 to notify the Distributor of the
wire, and to receive further instructions.
o Buying Shares Through OppenheimerFunds AccountLink. With
AccountLink, you pay for shares by electronic funds transfer from
your bank account. Shares are purchased for your account by a
transfer of money from your bank account through the Automated
Clearing House (ACH) system. You can provide those instructions
automatically, under an Asset Builder Plan, described below, or by
telephone instructions using OppenheimerFunds PhoneLink, also
described below. Please refer to "AccountLink," below for more
details.
o Buying Shares Through 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 Asset Builder Application and the Statement of
Additional Information.
HOW MUCH MUST YOU INVEST? You can buy Fund shares with a minimum initial
investment of $1,000. You can make additional investments at any time with as
little as $25. There are reduced minimum investments under special investment
plans.
o With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans
and military allotment plans, you can make initial and subsequent
investments for as little as $25. You can make additional purchases
of at least $25 by telephone through AccountLink.
o Under retirement plans, such as IRAs, pension and profit-sharing
plans and 401(k) plans, you can start your account with as little
as $250. If your IRA is started under an Asset Builder Plan, the
$25 minimum applies. Additional purchases may be as little as $25.
o The minimum investment requirement does not apply to 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 reinvesting
distributions from unit investment trusts that have made
arrangements with the Distributor.
AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next calculation
of the net asset value per share that is made after the Distributor receives the
purchase order at its offices in Colorado, or after any agent appointed by the
Distributor receives the order and sends it to the Distributor.
Net Asset Value. The Fund calculates the net asset value of each class of shares
determined as of the close of The New York Stock Exchange, on each day the
Exchange is open for trading (referred to in this Prospectus as a "regular
business day"). The Exchange normally closes at 4:00 P.M., New York time, but
may close earlier on some days. All references to time in this Prospectus mean
"New York time".
The net asset value per share is determined 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. To determine net asset value, the Fund's Board of Trustees has
established procedures to value the Fund's securities, in general based on
market value. The Board has adopted special procedures for valuing illiquid and
restricted securities and obligations for which market values cannot be readily
obtained. Because foreign securities trade in markets and exchanges that operate
on holiday and weekends, the value of some of the Fund's foreign investments
might change significantly on days when investors cannot buy or redeem shares.
The Offering Price. To receive the offering price for a particular day, in most
cases the Distributor or its designated agent must receive your order by the
time of day The New York Stock Exchange closes that day. If your order is
received on a day when the Exchange is closed or after it has closed, the order
will receive the next offering price that is determined after your order is
received.
Buying Through a Dealer. If you buy shares through a dealer, your dealer must
receive the order by the close of The New York Stock Exchange and transmit it to
the Distributor so that it is received before the Distributor's close of
business on a regular business day (normally 5:00 P.M.) to receive that day's
offering price. Otherwise, the order will receive the next offering price that
is determined.
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors three
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
investments up to $1 million for regular accounts or $500,000 for certain
retirement plans). The amount of that sales charge will vary depending on the
amount you invest. The sales charge rates are listed in "How Can You Buy Class A
Shares?" below.
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. If you sell
your shares within six years of buying them, you will normally pay a contingent
deferred sales charge. That contingent deferred sales charge varies depending on
how long you own your shares, as described in "How Can You Buy Class B Shares?"
below.
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
of purchase, but you will pay an annual asset-based sales charge. 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 "How Can You Buy 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 best
suited to your needs depends on a number of factors that you should discuss with
your financial advisor. Some 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.
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 discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
You should review these factors with your financial advisor. The discussion
below assumes that you will purchase only one class of shares, and not a
combination of shares of different classes.
How Long Do You Expect to Hold Your Investment? While future financial needs
cannot be predicted with certainty, knowing how long you expect to hold your
investment will assist you in selecting the appropriate class of shares. Because
of the effect of class-based expenses, your choice will also depend on how much
you plan to invest. For example, the reduced sales charges available for larger
purchases of Class A shares may, over time, offset the effect of paying an
initial sales charge on your investment, compared to the effect over time of
higher class-based expenses on shares of Class B or Class C .
o Investing for the Shorter Term. While the Fund is meant to be a long-term
investment, if you have a relatively 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. That
is because of the effect of the Class B contingent deferred sales charge if you
redeem within six 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 as 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.
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
more of Class B shares or $1 million or more of Class C shares from
a single investor.
o Investing for the Longer Term. If you are investing less than
$100,000 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 appropriate.
Of course, these examples are based on approximations of the effect
of current sales charges and expenses projected over time, and do
not detail all of the considerations in selecting a class of
shares. You should analyze your options carefully with your
financial advisor before making that choice.
Are There Differences in Account Features That Matter to You? Some account
features may not be available to Class B or Class C shareholders. Other features
may not be advisable (because of the effect of the contingent deferred sales
charge) for Class B or Class C shareholders. Therefore, you should carefully
review how you plan to use your investment account before deciding which class
of shares to buy.
Additionally, the dividends payable to Class B and Class C shareholders
will be reduced by the additional expenses borne by those classes that are not
borne by Class A shares, such as the Class B and Class C asset-based sales
charge described below and in the Statement of Additional Information. 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.
How Does It Affect Payments to My Broker? A salesperson, such as a broker, may
receive different compensation for selling one class of shares than for selling
another class. It is important to remember that Class B and Class C contingent
deferred sales charges and asset-based sales charges have the same purpose as
the front-end sales charge on sales of Class A shares: to compensate the
Distributor for commissions and expenses it pays to dealers and financial
institutions for selling shares. The Distributor may pay additional 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.
SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified retirement
plan arrangements or in other special types of transactions. To receive a waiver
or special sales charge rate, you must advise the Distributor when purchasing
shares or the Transfer Agent when redeeming shares that the special conditions
apply.
HOW CAN YOU BUY 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 other cases, reduced
sales charges may be available, as described below or in the Statement of
Additional Information. 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 or allocated to
your dealer as commission. The Distributor reserves the right to reallow the
entire commission to dealers. The current sales charge rates and commissions
paid to dealers and brokers are as follows:
<TABLE>
<CAPTION>
Front-End Sales Charge As Front-End Sales Charge As
a Percentage of a Percentage of Net Amount Commission As Percentage
Offering Price Invested of Offering Price
Amount of Purchase
<S> <C> <C> <C>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Less than $50,000 4.75% 4.98% 4.00%
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
$50,000 or more but less than
$100,000 4.50% 4.71% 3.75%
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
$100,000 or more but less
than $250,000 3.50% 3.63% 2.75%
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
$250,000 or more but less
than $500,000 2.50% 2.56% 2.00%
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
$500,000 or more but less
than $1 million 2.00% 2.04% 1.60%
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
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
aggregating $1 million or more or for certain purchases by particular types of
retirement plans described in the Appendix to the Statement of Additional
Information. The Distributor pays dealers of record commissions in an amount
equal to 1.0% of purchases of $1 million or more other than by those retirement
accounts. For those retirement plan accounts, the commission is 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, based on the cumulative purchases during the prior 12 months
ending with the current purchase. In either case, the commission will be paid
only on purchases that were not previously subject to a front-end sales charge
and dealer commission.1 That commission will not be paid on purchases of shares
in amounts of $1 million or more (including any rights of accumulation) by a
retirement plan that pays for the purchase with the redemption proceeds of Class
C shares of one or more Oppenheimer funds held by the plan for more than one
year.
If you redeem any of those shares within an 18-month "holding period"
measured from the end of the calendar month of their purchase, a contingent
deferred sales charge (called the "Class A contingent deferred sales charge")
may be deducted from the redemption proceeds. That sales charge will be equal to
1.0% of the lesser of (1) the aggregate net asset value of the redeemed shares
at the time of redemption (excluding shares purchased by reinvestment of
dividends or capital gain distributions) or (2) 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 purchases of Class A shares of all Oppenheimer funds you made that
were subject to the Class A contingent deferred sales charge.
Can You Reduce Class A Sales Charges? You may be eligible to buy Class A shares
at reduced sales charge rates under the Fund's "Right of Accumulation" or a
Letter of Intent, as described in "Reduced Sales Charges" in the Statement of
Additional Information:
HOW CAN YOU BUY 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. The Class B contingent deferred sales
charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B
shares.
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 for the Class B contingent deferred sales
charge holding period:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge on Redemptions in That
Years Since Beginning of Month in Which Purchase Order was Year
Accepted (as % of amount subject to charge)
<S> <C>
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
0 - 1 5.0%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
1 - 2 4.0%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
2 - 3 3.0%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
3 - 4 3.0%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
4 - 5 2.0%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
5 - 6 1.0%
- ------------------------------------------------------------ ---------------------------------------------------------
- ------------------------------------------------------------ ---------------------------------------------------------
6 and following None
- ------------------------------------------------------------ ---------------------------------------------------------
</TABLE>
In the table, a "year" is a 12-month period. In applying the sales charge, all
purchases are considered to have been made on the first regular business day of
the month in which the purchase was made.
Automatic Conversion of Class B Shares. Class B shares automatically convert to
Class A shares 72 months after you purchase them. This conversion feature
relieves Class B shareholders of the asset-based sales charge that applies to
Class B shares under the Class B Distribution and Service Plan, described below.
The conversion is based on the relative net asset value of the two classes, and
no sales load or other charge is imposed. When any Class B shares you hold
convert, any other Class B shares that were acquired by reinvesting dividends
and distributions on the converted shares will also convert to Class A shares.
For further information on the conversion feature and its tax implications, see
"Class B Conversion" in the Statement of Additional Information.
HOW CAN YOU BUY 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 a holding period of 12 months from their purchase, a contingent deferred
sales charge of 1.0% will be deducted from the redemption proceeds. The Class C
contingent deferred sales charge is paid to compensate the Distributor for its
expenses of providing distribution-related services to the Fund in connection
with the sale of Class C shares.
DISTRIBUTION AND SERVICE (12b-1) PLANS.
Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses all of those fees to
pay dealers, brokers, banks and other financial institutions quarterly for
providing personal service and maintenance of accounts of their customers that
hold Class A shares.
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 pay 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 and on Class
C shares. The Distributor also receives a service fee of 0.25% per year under
each plan.
The asset-based sales charge and service fees increase Class B and
Class C expenses by 1.00% of the net assets per year of the respective class.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than other types of sales charges.
The Distributor uses the service fees to compensate dealers for
providing personal services for accounts that hold Class B or Class C shares.
The Distributor pays the 0.25% service fees to dealers in advance for the first
year after the shares are sold by the dealer. After the shares have been held
for a year, the Distributor pays the service fees to dealers on a quarterly
basis.
The Distributor currently pays sales commission 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 therefore
4.00% of the purchase price. The Distributor retains the Class B asset-based
sales charge.
The Distributor currently pays sales commissions of 0.75% of the
purchase price of Class C shares to dealers from its own resources at the time
of sale. Including the advance of the service fee, the total amount paid by the
Distributor to the dealer at the time of sale of Class C shares is therefore
1.00% of the purchase price. The Distributor pays 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.
Special Investor Services
ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a
service representative or by PhoneLink) or automatically under Asset Builder
Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and
distributions directly to your bank account. Please call the Transfer Agent for
more information.
You may purchase shares 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.
AccountLink privileges should be requested on your Application or your
dealer's settlement instructions if you buy your shares through a 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.
PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling the
special PhoneLink number, 1.800.533.3310.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone,
by calling 1.800.533.3310. You must have established AccountLink privileges to
link your bank account with the Fund to pay for these purchases.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described
below, you can exchange shares automatically by phone from your Fund account to
another OppenheimerFunds account you have already established by calling the
special PhoneLink number.
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.
CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.525.7048 for information about which transactions may be handled this
way. 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. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet web site, at
http://www.oppenheimerfunds.com. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account
transactions through a special section of that web site. To perform account
transactions, you must first obtain a personal identification number (PIN) by
calling the Transfer Agent at 1.800.533.3310. If you do not want to have
Internet account transaction capability for your account, please call the
Transfer Agent at 1.800.525.7048.
AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.
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 only 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.
RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals
and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
SIMPLE IRAs, rollover IRAs and Education IRAs.
SEP-IRAs. These are Simplified Employee Pensions Plan IRAs for small business
owners or self-employed individuals.
403(b)(7) Custodial Plans. These plans are tax deferred plans for employees of
eligible tax-exempt organizations, such as schools, hospitals and charitable
organizations.
401(k) Plans. These plans are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.
How to Sell Shares
You can sell (redeem) 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 in proper form (which means that it must comply
with the procedures described below) and is accepted by the Transfer Agent. The
Fund lets you sell your shares by writing a letter, by using the Fund's
checkwriting privilege or by telephone. You can also set up Automatic Withdrawal
Plans to redeem shares on a regular basis. 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
account, please call the Transfer Agent first, at 1.800.525.7048, for
assistance.
Certain Requests Require a Signature Guarantee. To protect you and the Fund from
fraud, the following redemption requests must be in writing and must include a
signature guarantee (although there may be other situations that also require a
signature guarantee): o You wish to redeem more than $100,000 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 being redeemed by someone (such as an
Executor) other than the owners
Where Can You Have Your Signature Guaranteed The Transfer Agent will accept a
guarantee of your signature by a number of financial institutions. Including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal
securities or government securities, or o 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.
Retirement Plan Accounts. There are special procedures to sell shares in an
OppenheimerFunds retirement plan account. Call the Transfer Agent for a
distribution request form. Special income tax withholding requirements apply to
distributions from retirement plans.
You must submit a withholding form with your redemption request to avoid delay
in getting your money and if you do not want tax withheld. If your employer
holds your retirement plan account for you in the name of the plan, you must ask
the plan trustee or administrator to request the sale of the Fund shares in your
plan account.
HOW DO YOU SELL 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 documents requested by the Transfer Agent to assure proper
authorization of the person asking to sell the shares.
Use the following address for requests by mail:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
Send courier or express mail requests to:
OppenheimerFunds Services
10200 E. Girard Avenue, Building D
Denver, Colorado 80231
HOW DO YOU SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular 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 may be earlier on some days. You may not redeem shares
held in an OppenheimerFunds retirement plan account 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.
ARE THERE LIMITS ON AMOUNTS REDEEMED BY TELEPHONE?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone
in any 7-day period. The check must be payable to all owners of record of the
shares and must be sent to the address on the account statement. This service is
not available within 30 days of changing the address on an account.
Telephone Redemptions Through AccountLink. There are no dollar limits on
telephone redemption proceeds sent to a bank account designated when you
establish AccountLink. Normally the ACH transfer to your bank is initiated on
the business day after the redemption. You do not receive dividends on the
proceeds of the shares you redeemed while they are waiting to be transferred.
CHECKWRITING. To write checks against your Fund account, request that privilege
on your account Application, or contact the Transfer Agent for signature cards.
They 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. If you previously signed a signature card to
establish checkwriting in another Oppenheimer fund, simply call 1.800.525.7048
to request checkwriting for an account in this Fund with the same registration
as the other account.
o Checks can be written to the order of whomever you wish, but may
not be cashed at the bank the checks are payable through or the
Fund's bank or custodian bank.
o Checkwriting privileges are not available for accounts holding
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, until you
receive new checks.
HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase shares
subject to a Class A, Class B or Class C contingent deferred sales charge and
redeem any of those shares during the applicable holding period for the class of
shares you own, the contingent deferred sales charge will be deducted from the
redemption proceeds (unless you are eligible for a waiver of that sales charge
based on the categories listed in Appendix C to the Statement of Additional
Information and you advise the Transfer Agent of your eligibility for the waiver
when you place your redemption request).
A 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 net
asset value. A contingent deferred sales charge is not imposed on: o the amount
of your account value represented by an increase in net asset value over the
initial purchase price
o shares purchased by the reinvestment of dividends or capital gains
distributions, or
o shares redeemed in the special circumstances described in Appendix C to the
Statement of Additional Information.
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 the holding period that applies to the class, and
(3) shares held the longest during the holding period.
Contingent deferred sales charges are not charged when you exchange
shares of the Fund for shares of other Oppenheimer funds. However, if you
exchange them within the applicable contingent deferred sales charge holding
period, the holding period will carry over to the Fund whose shares you acquire.
Similarly, if you acquire shares of this Fund by exchanging shares of another
Oppenheimer fund that are still subject to a contingent deferred sales charge
holding period, that holding period will carry over to this Fund.
CAN YOU SELL 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. If your shares are held in the
name of your dealer, you must redeem them through your dealer.
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. Shares of the Fund can be purchased by exchange of shares of other
Oppenheimer funds on the same basis. 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 both funds 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 whose shares you
purchase by exchange.
o Before exchanging into a fund, you must 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. In
some cases, sales charges may be imposed on exchange transactions. For tax
purposes, exchanges of shares involve a sale 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. Please refer to "How to Exchange Shares" in the Statement of
Additional Information for more details.
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.
HOW DO YOU SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or by
telephone:
|X| Written Exchange Requests. Submit an OppenheimerFunds Exchange
Request form, signed by all owners of the account. Send it to the Transfer Agent
at the address on the Back Cover. Exchanges of shares held under certificates
cannot be processed unless the Transfer Agent receives the certificates with the
request.
|X| 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.
ARE THERE LIMITATIONS ON EXCHANGES? 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 conforms to the policies
described above. It must be received 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 seven days if it determines it would be disadvantaged by a same-day
exchange. For example, the receipt of multiple exchange requests from a "market
timer" might require the Fund to sell securities at a disadvantageous time
and/or price.
o Because excessive trading can hurt fund performance and harm shareholders, the
Fund reserves the right to refuse any exchange request that it believes 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.
The Fund will provide you notice whenever it is required to do so by applicable
law, but it may impose changes at any time for emergency purposes.
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
More information about the Fund's policies and procedures for buying, selling
and exchanging shares is contained in the Statement of Additional Information.
The offering of shares may be suspended during any period in which the
determination of net asset value is suspended, and the offering may be suspended
by the Board of Trustees at any time the Board believes it is in the Fund's best
interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may be
modified, suspended or terminated by the Fund at any time. If an account has
more than one owner, the Fund and the Transfer Agent may rely on the
instructions of any one owner. Telephone privileges apply to each owner of the
account and the dealer representative of record for the account unless the
Transfer Agent receives cancellation instructions from an owner of the account.
The Transfer Agent will record any telephone calls to verify data concerning
transactions and has adopted other procedures to confirm that telephone
instructions are genuine, by requiring callers to provide tax identification
numbers and other account data or by using PINs, and by confirming such
transactions in writing. The Transfer Agent and the Fund will not be liable for
losses or expenses arising out of telephone instructions reasonably believed to
be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
receives all required documents in proper form. From time to time, the Transfer
Agent in its discretion may waive certain of the requirements for redemptions
stated in this Prospectus.
Dealers that can perform account transactions for their clients by participating
in NETWORKING through the National Securities Clearing Corporation are
responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of the
Fund if the dealer performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day because the value of
the securities in the Fund's portfolio fluctuates. The redemption price, which
is the net asset value per share, will normally differ for each class of shares.
The redemption value of your shares may be more or less than their original
cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by check
or by AccountLink (as elected by the shareholder) within seven days after the
Transfer Agent receives redemption instructions in proper form. However, under
unusual circumstances determined by the Securities and Exchange Commission,
payment may be delayed or suspended. For accounts registered in the name of a
broker-dealer, payment will normally be forwarded within three business days
after redemption.
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.
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. In some cases involuntary redemptions may be made
to repay the Distributor for losses from the cancellation of share purchase
orders.
Shares may be "redeemed in kind" under unusual circumstances (such as a lack of
liquidity in the Fund's portfolio to meet redemptions). This means that the
redemption proceeds will be paid with liquid securities from the Fund's
portfolio.
"Backup withholding" of Federal income tax may be applied against taxable
dividends, distributions and redemption proceeds (including exchanges) if you
fail to furnish the Fund your correct, certified Social Security or Employer
Identification Number when you sign your application, or if you under-report
your income to the Internal Revenue Service.
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 intends to declare dividends separately for each class of
shares from net investment income on each regular business day and to pay those
dividends to shareholders monthly on a date selected by the Board of Trustees.
Daily dividends will not be declared or paid on newly-purchased shares until
Federal Funds are available to the Fund from the purchase payment for the
shares.
Dividends and distributions paid on Class A shares will generally be
higher than dividends for Class B and Class C shares, which normally have higher
expenses than Class A. The Fund has no fixed dividend rate and cannot guarantee
that it will pay any dividends or distributions.
CAPITAL GAINS. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make supplemental
distributions of dividends and capital gains following the end of its fiscal
year. There can be no assurance that the Fund will pay any capital gains
distributions in a particular year.
WHAT ARE YOUR CHOICES FOR RECEIVING DISTRIBUTIONS? When you open your account,
specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends
and capital gains distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
distributions (dividends, short-term capital gains or long-term capital gains
distributions) in the Fund while receiving the other types of distributions by
check or having them sent to your bank account through AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
dividends and capital gains distributions or have them sent to your bank through
AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
reinvest all distributions in the same class of shares of another
OppenheimerFunds account you have established.
TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income. Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders. It does not matter how
long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.
If more than 50% of the Fund's assets are invested in foreign
securities at the end of any fiscal year, the Fund may elect under the Internal
Revenue Code to permit shareholders to take a credit or deduction on their
federal income tax returns for foreign taxes paid by the Fund.
Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information the
Fund sends you after the end of the calendar year.
Avoid "Buying a Distribution". If you buy shares on or just before the Fund
declares a capital gain distribution, you will pay the full price for the shares
and then receive a portion of the price back as a taxable capital gain.
Remember, There Can be Taxes on Transactions. Because the Fund's share price
fluctuates, you may have a capital gain or loss when you sell or exchange your
shares. A capital gain or loss is the difference between the price you paid for
the shares and the price you received when you sold them. Any capital gain is
subject to capital gains tax.
Returns of Capital Can Occur. 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.
This information is only a summary of certain federal income tax
information about your investment. You should consult with your tax adviser
about the effect of an investment in the Fund on your particular tax situation.
Financial Highlights
The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the fiscal years since the Fund's inception. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP, the
Fund's independent auditors, whose report, along with the Fund's financial
statements, is included in the Statement of Additional Information, which is
available on request.
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995(1)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $4.32 $5.51 $5.49 $5.10 $5.00
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .58 .56 .52 .52 .15
Net realized and unrealized gain (loss) (.14) (1.20) .08 .40 .10
----------------------------------------------------------------
Total income (loss) from
investment operations .44 (.64) .60 .92 .25
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.53) (.53) (.53) (.53) (.15)
Distributions from net realized gain -- (.02) (.05) -- --
----------------------------------------------------------------
Total dividends and distributions
to shareholders (.53) (.55) (.58) (.53) (.15)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.23 $4.32 $5.51 $5.49 $5.10
----------------------------------------------------------------
----------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 10.58% (12.50)% 11.33% 18.82% 5.13%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $102,236 $ 97,404 $114,847 $52,128 $3,984
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $101,948 $108,264 $ 89,112 $19,817 $2,566
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 13.47% 11.09% 9.24% 9.60% 9.94%
Expenses, before voluntary assumption
and indirect expenses 1.26% 1.24%(4) 1.28%(4) 1.59%(4) 1.59%(4)
Expenses, net of voluntary assumption
and indirect expenses 1.25% N/A N/A 1.49% 0.41%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 285% 446% 280% 273% 122%
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. 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, 1999, were $628,527,274 and $544,904,486, respectively.
28 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
CLASS B YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995(1)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $4.31 $5.50 $5.48 $5.10 $5.00
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .55 .52 .48 .48 .14
Net realized and unrealized gain (loss) (.14) (1.20) .07 .39 .10
----------------------------------------------------------------
Total income (loss) from
investment operations .41 (.68) .55 .87 .24
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.50) (.49) (.48) (.49) (.14)
Distributions from net realized gain -- (.02) (.05) -- --
----------------------------------------------------------------
Total dividends and distributions
to shareholders (.50) (.51) (.53) (.49) (.14)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.22 $4.31 $5.50 $5.48 $5.10
----------------------------------------------------------------
----------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 9.79% (13.16)% 10.52% 17.71% 4.92%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $118,632 $119,998 $122,874 $45,207 $3,238
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $122,878 $128,789 $ 87,557 $17,891 $1,125
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 12.70% 10.33% 8.57% 8.81% 9.20%
Expenses, before voluntary assumption
and indirect expenses 2.02% 2.00%(4) 2.04%(4) 2.36%(4) 2.21%(4)
Expenses, net of voluntary assumption
and indirect expenses 2.01% N/A N/A 2.26% 0.89%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 285% 446% 280% 273% 122%
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. 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, 1999, were $628,527,274 and $544,904,486, respectively.
29 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
FINANCIAL HIGHLIGHTS Continued
<TABLE>
<CAPTION>
CLASS C YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995(1)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $4.31 $5.50 $5.48 $5.09 $5.00
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .55 .52 .48 .48 .14
Net realized and unrealized gain (loss) (.14) (1.20) .07 .39 .09
----------------------------------------------------------------
Total income (loss) from
investment operations .41 (.68) .55 .87 .23
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.50) (.49) (.48) (.48) (.14)
Distributions from net realized gain -- (.02) (.05) -- --
----------------------------------------------------------------
Total dividends and distributions
to shareholders (.50) (.51) (.53) (.48) (.14)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.22 $4.31 $5.50 $5.48 $5.09
----------------------------------------------------------------
----------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 9.80% (13.16)% 10.52% 17.92% 4.73%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $29,456 $27,636 $28,684 $10,282 $201
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $28,918 $29,336 $19,883 $ 4,039 $ 97
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 12.76% 10.33% 8.62% 8.76% 9.36%
Expenses, before voluntary assumption
and indirect expenses 2.02% 2.00%(4) 2.04%(4) 2.36%(4) 2.26%(4)
Expenses, net of voluntary assumption
and indirect expenses 2.01% N/A N/A 2.25% 0.85%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 285% 446% 280% 273% 122%
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to September
30, 1995.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. 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, 1999, were $628,527,274 and $544,904,486,
respectively.
<PAGE>
For More Information About Oppenheimer International Bond Fund:
The following additional information about the Fund is available without charge
upon request:
STATEMENT OF ADDITIONAL INFORMATION
This document includes additional information about the Fund's investment
policies, risks, and operations. It is incorporated by reference into this
Prospectus (which means it is legally part of this Prospectus).
ANNUAL AND SEMI-ANNUAL REPORTS
Additional information about the Fund's investments and performance is available
in the Fund's Annual and Semi-Annual Reports to shareholders. The Annual Report
includes a discussion of market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
How to Get More Information:
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, and other information about the Fund or your account:
By Telephone:
Call OppenheimerFunds Services toll-free:
1.800.525.7048
By Mail:
Write to:
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217-5270
On the Internet:
You can send us a request by e-mail or read or down-load documents on the
OppenheimerFunds web site: http://www.oppenheimerfunds.com You can also obtain
copies of the Statement of Additional Information and other Fund documents and
reports by visiting the SEC's Public Reference Room in Washington, D.C. (Phone
1.202.942.8090) or the EDGAR database on the SEC's Internet web site at
http://www.sec.gov. Copies may be obtained after payment of a duplicating fee by
electronic request at the SEC's e-mail address: [email protected] or by writing
to the SEC's Public Reference Section, Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.
The Fund's shares are distributed by:
OppenheimerFunds Distributor, Inc.
SEC File No. 811-07255
PR0880.001.2000 Printed on recycled paper.
<PAGE>
Appendix to Prospectus of
Oppenheimer International Bond Fund
Graphic material included in the Prospectus of Oppenheimer International Bond
Fund (the "Fund") under the heading: "Annual Total Return (Class A) (% as of
12/31 each year)":
A bar chart will be included in the Prospectus of the Fund depicting the annual
total returns of a hypothetical investment in Class A shares of the Fund for
each of the four most recent calendar years, without deducting sales charges.
Set forth below is the relevant data point that will appear on the bar chart:
Year
Ended: Annual Total Return:
12/31/96 19.29%
12/31/97 2.46%
12/31/98 -4.36%
12/31/99 11.00%
<PAGE>
Oppenheimer International Bond Fund
6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048
Statement of Additional Information dated January 28, 2000
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 28, 2000. It should be read together
with the Prospectus. You can obtain the Prospectus 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, or
by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.
Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.... 2
The Fund's Investment Policies...................................... 2
Other Investment Techniques and Strategies.......................... 7
Investment Restrictions............................................. 28
How the Fund is Managed ................................................. 30
Organization and History............................................ 30
Trustees and Officers............................................... 31
The Manager......................................................... 37
Brokerage Policies of the Fund........................................... 38
Distribution and Service Plans........................................... 40
Performance of the Fund.................................................. 44
About Your Account
How To Buy Shares........................................................ 49
How To Sell Shares....................................................... 58
How To Exchange Shares................................................... 64
Dividends, Capital Gains and Taxes....................................... 67
Additional Information About the Fund.................................... 69
Financial Information About the Fund
Independent Auditors' Report............................................. 70
Financial Statements..................................................... 71
Appendix A: Ratings Definitions ........................................ A-1
Appendix B: Industry Classifications.................................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers............... C-1
A B O U T T H E F U N D
Additional Information About the Fund's Investment Policies and Risks
The investment objective, the principal investment policies and the
main risks of the Fund are described in the Prospectus. This Statement of
Additional Information contains supplemental information about those policies
and risks and the types of securities that the Fund's investment Manager,
OppenheimerFunds, Inc., can select for the Fund. Additional information is also
provided about the strategies that the Fund may use to try to achieve its
objective.
The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Fund's Manager may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below at all times in seeking its
goal. It may use some of the special investment techniques and strategies at
some times or not at all.
In selecting securities for the Fund's portfolio, the Manager evaluates
the merits of particular securities primarily through the exercise of its own
investment analysis. That process may include, among other things, evaluation of
the issuer's historical operations, prospects for the industry of which the
issuer is part, the issuer's financial condition, its pending product
developments and business (and those of competitors), the effect of general
market and economic conditions on the issuer's business, and legislative
proposals that might affect the issuer.
|X| Foreign Securities. The Fund expects to invest primarily in foreign
securities. For the most part, these will be debt securities issued or
guaranteed by foreign companies or governments, including supra-national
entities. "Foreign securities" include equity and debt securities of companies
organized under the laws of countries other than the United States and debt
securities issued or guaranteed by governments other than the U.S. government or
by foreign supra-national entities. They also include securities of companies
(including those that are located in the U.S. or organized under U.S. law) that
derive a significant portion of their revenue or profits from foreign
businesses, investments or sales, or that have a significant portion of their
assets abroad. They may be traded on foreign securities exchanges or in the
foreign over-the-counter markets.
Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or traded
in the U.S. over-the-counter markets are not considered "foreign securities" for
the purpose of the Fund's investment allocations, because they are not subject
to many of the special considerations and risks, discussed below, that apply to
foreign securities traded and held abroad.
Because the Fund may purchase securities denominated in foreign currencies,
a change in the value of such foreign currency against the U.S. dollar will
result in a change in the amount of income the Fund has available for
distribution. Because a portion of the Fund's investment income may be received
in foreign currencies, the Fund will be required to compute its income in U.S.
dollars for distribution to shareholders, and therefore the Fund will absorb the
cost of currency fluctuations. After the Fund has distributed income, subsequent
foreign currency losses may result in the Fund's having distributed more income
in a particular fiscal period than was available from investment income, which
could result in a return of capital to shareholders.
Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer growth potential,
or in foreign countries with economic policies or business cycles different from
those of the U.S., or to reduce fluctuations in portfolio value by taking
advantage of foreign stock markets that do not move in a manner parallel to U.S.
markets. The Fund will hold foreign currency only in connection with the
purchase or sale of foreign securities.
|_| Foreign Debt Obligations. The debt obligations of foreign
governments and entities may or may not be supported by the full faith and
credit of the foreign government. The Fund may buy securities issued by certain
"supra-national" entities, which include entities designated or supported by
governments to promote economic reconstruction or development, international
banking organizations and related government agencies. Examples are the
International Bank for Reconstruction and Development (commonly called the
"World Bank"), the Asian Development bank and the Inter-American Development
Bank.
The governmental members of these supranational entities are
"stockholders" that typically make capital contributions and may be committed to
make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able or
willing to honor their capitalization commitments for those entities.
The Fund can invest in U.S. dollar-denominated "Brady Bonds." These
foreign debt obligations may be fixed-rate par bonds or floating-rate discount
bonds. They are generally collateralized in full as to repayment of principal at
maturity by U.S. Treasury zero coupon obligations that have the same maturity as
the Brady Bonds. Brady Bonds can be 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.
Those uncollateralized amounts constitute what is called the "residual risk."
If there is a default on collateralized Brady Bonds resulting in
acceleration of the payment obligations of the issuer, the zero coupon U.S.
Treasury securities held as collateral for the payment of principal will not be
distributed to investors, nor will those obligations be sold to distribute the
proceeds. The collateral will be held by the collateral agent to the scheduled
maturity of the defaulted Brady Bonds. The defaulted bonds will continue to
remain outstanding, and 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. Because of the residual risk of Brady Bonds and the history of
defaults with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, Brady Bonds are considered speculative
investments.
|_| Risks of Foreign Investing. Investments in foreign securities may offer
special opportunities for investing but also present special additional risks
and considerations not typically associated with investments in domestic
securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in
currency rates or currency control regulations (for example,
currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting
standards in foreign countries comparable to those applicable to
domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, stock exchanges and brokers
than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or loss of
certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory taxation,
political, financial or social instability or adverse diplomatic developments;
and
o unfavorable differences between the U.S. economy and foreign economies.
In the past, U.S. Government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other restrictions,
and it is possible that such restrictions could be re-imposed.
|_| Special Risks of Emerging Markets. Emerging and developing
markets abroad may also offer special opportunities for growth investing but
have greater risks than more developed foreign markets, such as those in Europe
and Canada, Australia, New Zealand and Japan. There may be even less liquidity
in their securities markets, and settlements of purchases and sales of
securities may be subject to additional delays. They are subject to greater
risks of limitations on the repatriation of income and profits because of
currency restrictions imposed by local governments. Those countries may also be
subject to the risk of greater political and economic instability, which can
greatly affect the volatility of prices of securities in those countries. The
Manager will consider these factors when evaluating securities in these markets,
because the selection of those securities must be consistent with the Fund's
goal of preservation of principal.
|_| Risks of Conversion to Euro. There may be transaction costs and
risks relating to the conversion of certain European currencies to the Euro that
commenced in January 1999. However, their current currencies (for example, the
franc, the mark, and the lira) will also continue in use until January 1, 2002.
After that date, it is expected that only the euro will be used in those
countries. A common currency is expected to confer some benefits in those
markets, by consolidating the government debt market for those countries and
reducing some currency risks and costs. But the conversion to the new currency
will affect the Fund operationally and also has potential risks, some of which
are listed below. Among other things, the conversion will affect:
o issuers in which the Fund invests, because of changes in the
competitive environment from a consolidated currency market and
greater operational costs from converting to the new currency.
This might depress securities values.
o vendors the Fund depends on to carry out its business, such as its
Custodian (which holds the foreign securities the Fund buys), the
Manager (which must price the Fund's investments to deal with the
conversion to the euro) and brokers, foreign markets and
securities depositories. If they are not prepared, there could be
delays in settlements and additional costs to the Fund.
o exchange contracts and derivatives that are outstanding during the
transition to the euro. The lack of currency rate calculations
between the affected currencies and the need to update the Fund's
contracts could pose extra costs to the Fund.
The Manager is upgrading (at its expense) its computer and bookkeeping
systems to deal with the conversion. The Fund's Custodian has advised the
Manager of its plans to deal with the conversion, including how it will update
its record keeping systems and handle the redenomination of outstanding foreign
debt. The Fund's portfolio manager will also monitor the effects of the
conversion on the issuers in which the Fund invests. The possible effect of
these factors on the Fund's investments cannot be determined with certainty at
this time, but they may reduce the value of some of the Fund's holdings and
increase its operational costs.
|X| Debt Securities. The Fund can invest in a variety of debt securities to
seek its objectives. Foreign debt securities are subject to the risks of foreign
securities described above. In general, debt securities are also subject to two
additional types of risk: credit risk and interest rate risk.
|_| Credit Risks. Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due. In general,
lower-grade, higher-yield bonds are subject to credit risk to a greater extent
that lower-yield, higher-quality bonds.
The Fund's debt investments can include investment-grade and
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors
Service, Inc., at least "BBB" by Standard & Poor's Ratings Group or Duff &
Phelps, Inc., or have comparable ratings by another nationally recognized
statistical rating organization.
In making investments in debt securities, the Manager may rely
to some extent on the ratings of ratings organizations or it may use its own
research to evaluate a security's credit-worthiness. If the securities are
unrated, to be considered part of the Fund's holdings of investment-grade
securities, they must be judged by the Manager to be of comparable quality to
bonds rated as investment grade by a rating organization.
|_| Interest Rate Risks. Interest rate risk refers to the
fluctuations in value of fixed-income securities resulting from the inverse
relationship between price and yield. For example, an increase in general
interest rates will tend to reduce the market value of already-issued
fixed-income investments, and a decline in general interest rates will tend to
increase their value. In addition, debt securities with longer maturities, which
tend to have higher yields, are subject to potentially greater fluctuations in
value from changes in interest rates than obligations with shorter maturities.
Fluctuations in the market value of fixed-income securities after the
Fund buys them will not affect the interest payable on those securities, nor the
cash income from them. However, those price fluctuations will be reflected in
the valuations of the securities, and therefore the Fund's net asset values will
be affected by those fluctuations.
|_| Special Risks of Lower-Grade Securities. The Fund can
invest without limit in lower-grade debt securities, if the Manager believes it
is consistent with the Fund's objectives. Because lower-rated securities tend to
offer higher yields than investment grade securities, the Fund may invest in
lower grade securities if the Manager is trying to achieve greater income. In
some cases, the appreciation possibilities of lower-grade securities may be a
reason they are selected for the Fund's portfolio. However, these investments
will be made only when consistent with the Fund's overall goal of total return.
"Lower-grade" debt securities are those rated below "investment grade"
which means they have a rating lower than "Baa" by Moody's or lower than "BBB"
by Standard & Poor's or Duff & Phelps, or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be of
comparable quality to debt securities rated below investment grade, they are
considered part of the Fund's portfolio of lower-grade securities. The Fund can
invest in securities rated as low as "C" or "D" or which may be in default at
the time the Fund buys them.
Some of the special credit risks of lower-grade securities are
discussed below. There is a greater risk that the issuer may default on its
obligation to pay interest or to repay principal than in the case of investment
grade securities. The issuer's low creditworthiness may increase the potential
for its insolvency. An overall decline in values in the high yield bond market
is also more likely during a period of a general economic downturn. An economic
downturn or an increase in interest rates could severely disrupt the market for
high yield bonds, adversely affecting the values of outstanding bonds as well as
the ability of issuers to pay interest or repay principal. In the case of
foreign high yield bonds, these risks are in addition to the special risk of
foreign investing discussed in the Prospectus and in this Statement of
Additional Information.
To the extent they can be converted into stock, convertible securities
may be less subject to some of these risks than non-convertible high yield
bonds, since stock may be more liquid and less affected by some of these risk
factors.
While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's
or Duff & Phelps are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics. A description of the debt security ratings categories of the
principal rating organizations is included in Appendix A to this Statement of
Additional Information.
|X| 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 the year, its portfolio
turnover rate would have been 100%. The Fund's portfolio turnover rate will
fluctuate from year to year, and the Fund may continue to have a portfolio
turnover rate of more than 100% annually.
Increased portfolio turnover creates higher brokerage and transaction
costs for the Fund, which may reduce its overall performance. Additionally, the
realization of capital gains from selling portfolio securities may result in
distributions of taxable long-term capital gains to shareholders, since the Fund
will normally distribute all of its capital gains realized each year, to avoid
excise taxes under the Internal Revenue Code.
Other Investment Techniques and Strategies. In seeking its objective, the Fund
may from time to time use the types of investment strategies and investments
described below. It is not required to use all of these strategies at all times,
and at times may not use them.
|X| Zero Coupon Securities. The Fund may buy zero-coupon and delayed
interest securities, and "stripped" securities. Stripped securities are debt
securities whose interest coupons are separated from the security and sold
separately. The Fund can buy different types of zero-coupon or stripped
securities, including, among others, foreign debt securities and U.S. Treasury
notes or bonds that have been stripped of their interest coupons, U.S. Treasury
bills issued without interest coupons, and certificates representing interests
in stripped securities.
Zero-coupon securities do not make periodic interest payments and are
sold at a deep discount from their face value. The buyer recognizes a rate of
return determined by the gradual appreciation of the security, which is redeemed
at face value on a specified maturity date. This discount depends on the time
remaining until maturity, as well as prevailing interest rates, the liquidity of
the security and the credit quality of the issuer. In the absence of threats to
the issuer's credit quality, the discount typically decreases as the maturity
date approaches. Some zero-coupon securities are convertible, in that they are
zero-coupon securities until a predetermined date, at which time they convert to
a security with a specified coupon rate.
Because zero-coupon securities pay no interest and compound
semi-annually at the rate fixed at the time of their issuance, their value is
generally more volatile than the value of other debt securities. Their value may
fall more dramatically than the value of interest-bearing securities when
interest rates rise. When prevailing interest rates fall, zero-coupon securities
tend to rise more rapidly in value because they have a fixed rate of return.
The Fund's investment in zero-coupon securities may cause the Fund to
recognize income and make distributions to shareholders before it receives any
cash payments on the zero-coupon investment. To generate cash to satisfy those
distribution requirements, the Fund may have to sell portfolio securities that
it otherwise might have continued to hold or to use cash flows from other
sources such as the sale of Fund shares.
|X| U.S. Government Securities. These are securities issued or
guaranteed by the U.S. Treasury or other government agencies or corporate
entities referred to as "instrumentalities." The obligations of U.S. government
agencies or instrumentalities in which the Fund may invest may or may not be
guaranteed or supported by the "full faith and credit" of the United States.
"Full faith and credit" means generally that the taxing power of the U.S.
government is pledged to the payment of interest and repayment of principal on a
security. If a security is not backed by the full faith and credit of the United
States, the owner of the security must look principally to the agency issuing
the obligation for repayment. The owner might be able to assert a claim against
the United States if the issuing agency or instrumentality does not meet its
commitment. The Fund will invest in securities of U.S. government agencies and
instrumentalities only if the Manager is satisfied that the credit risk with
respect to such instrumentality is minimal.
|_| U.S. Treasury Obligations. These include Treasury bills
(maturities of one year or less when issued), Treasury notes (maturities of from
one to ten years), and Treasury bonds (maturities of more than ten years).
Treasury securities are backed by the full faith and credit of the United States
as to timely payments of interest and repayments of principal. They also can
include U. S. Treasury securities that have been "stripped" by a Federal Reserve
Bank, zero-coupon U.S. Treasury securities described below, and Treasury
Inflation-Protection Securities ("TIPS").
|_| Obligations Issued or Guaranteed by U.S. Government
Agencies or Instrumentalities. These include direct obligations and mortgage
related securities that have different levels of credit support from the
government. Some are supported by the full faith and credit of the U.S.
government, such as Government National Mortgage Association pass-through
mortgage certificates (called "Ginnie Maes"). Some are supported by the right of
the issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association bonds ("Fannie Maes"). Others are
supported only by the credit of the entity that issued them, such as Federal
Home Loan Mortgage Corporation obligations ("Freddie Macs").
|_| Mortgage-Related U.S. Government Securities. These include interests in
pools of residential or commercial mortgages, in the form of collateralized
mortgage obligations ("CMOs") and other "pass-through" mortgage securities. CMOs
that are U.S. government securities have collateral to secure payment of
interest and principal. They may be issued in different series with different
interest rates and maturities. The collateral is either in the form of mortgage
pass-through certificates issued or guaranteed by a U.S. agency or
instrumentality or mortgage loans insured by a U.S. government agency. The Fund
can have significant amounts of its assets invested in mortgage related U.S.
government securities.
The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying mortgages.
Changes in interest rates may cause the rate of expected prepayments of those
mortgages to change. In general, prepayments increase when general interest
rates fall and decrease when interest rates rise.
If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO will be reduced.
Additionally, the Fund may have to reinvest the prepayment proceeds in other
securities paying interest at lower rates, which could reduce the Fund's yield.
When interest rates rise rapidly, if prepayments occur more slowly than
expected, a short- or medium-term CMO can in effect become a long-term security,
subject to greater fluctuations in value. These are the prepayment risks
described above and can make the prices of CMOs very
volatile when interest rates change. The prices of longer-term debt securities
tend to fluctuate more than those of shorter-term debt securities. That
volatility will affect the Fund's share prices.
|X| Commercial (Privately-Issued) Mortgage Related Securities. The Fund
may invest in commercial mortgage related securities issued by private entities.
Generally these are multi-class debt or pass through certificates secured by
mortgage loans on commercial properties. They are subject to the credit risk of
the issuer. These securities typically are structured to provide protection to
investors in senior classes from possible losses on the underlying loans. They
do so by having holders of subordinated classes take the first loss if there are
defaults on the underlying loans. They may also be protected to some extent by
guarantees, reserve funds or additional collateralization mechanisms.
|X| "Stripped" Mortgage Related Securities. The Fund may invest in
stripped mortgage-related securities that are created by segregating the cash
flows from underlying mortgage loans or mortgage securities to create two or
more new securities. Each has a specified percentage of the underlying
security's principal or interest payments. These are a form of derivative
investment.
Mortgage securities may be partially stripped so that each class
receives some interest and some principal. However, they may be completely
stripped. In that case all of the interest is distributed to holders of one type
of security, known as an "interest-only" security, or "I/O," and all of the
principal is distributed to holders of another type of security, known as a
"principal-only" security or "P/O." Strips can be created for pass through
certificates or CMOs.
The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially. The market for some of these securities may be limited, making it
difficult for the Fund to dispose of its holdings at an acceptable price.
|X| Floating Rate and Variable Rate Obligations. Variable rate demand
obligations have a demand feature that allows the Fund to tender the obligation
to the issuer or a third party prior to its maturity. The tender may be at par
value plus accrued interest, according to the terms of the obligations.
The interest rate on a floating rate demand note is based on a stated
prevailing market rate, such as a bank's prime rate, the 91-day U.S. Treasury
Bill rate, or some other standard, and is adjusted automatically each time such
rate is adjusted. The interest rate on a variable rate demand note is also based
on a stated prevailing market rate but is adjusted automatically at specified
intervals of not less than one year. Generally, the changes in the interest rate
on such securities reduce the fluctuation in their market value. As interest
rates decrease or increase, the potential for capital appreciation or
depreciation is less than that for fixed-rate obligations of the same maturity.
The Manager may determine that an unrated floating rate or variable rate demand
obligation meets the Fund's quality standards by reason of being backed by a
letter of credit or guarantee issued by a bank that meets those quality
standards.
Floating rate and variable rate demand notes that have a stated
maturity in excess of one year may have features that permit the holder to
recover the principal amount of the underlying security at specified intervals
not exceeding one year and upon no more than 30 days' notice. The issuer of that
type of note normally has a corresponding right in its discretion, after a given
period, to prepay the outstanding principal amount of the note plus accrued
interest. Generally the issuer must provide a specified number of days' notice
to the holder.
|X| When-Issued and Delayed-Delivery Transactions. The Fund may invest
in securities on a "when-issued" basis and may purchase or sell securities on a
"delayed-delivery" basis. When-issued and delayed-delivery are terms that refer
to securities whose terms and indenture are available and for which a market
exists, but which are not available for immediate delivery.
When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made. Delivery
and payment for the securities take place at a later date (generally within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in interest
rates in a direction other than that expected by the Manager before settlement
will affect the value of such securities and may cause a loss to the Fund.
During the period between purchase and settlement, no payment is made by the
Fund to the issuer and no interest accrues to the Fund from the investment. No
income begins to accrue to the Fund on a when-issued security until the Fund
receives the security at settlement of the trade.
The Fund will engage in when-issued transactions to secure what the
Manager considers to be an advantageous price and yield at the time of entering
into the obligation. When the Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause the Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.
When the Fund engages in when-issued and delayed-delivery transactions,
it does so for the purpose of acquiring or selling securities consistent with
its investment objective and policies or for delivery pursuant to options
contracts it has entered into, and not for the purpose of investment leverage.
Although the Fund will enter into delayed-delivery or when-issued purchase
transactions to acquire securities, it may dispose of a commitment prior to
settlement. If the Fund chooses to dispose of the right to acquire a when-issued
security prior to its acquisition or to dispose of its right to delivery or
receive against a forward commitment, it may incur a gain or loss.
At the time the Fund makes the commitment to purchase or sell a
security on a when-issued or delayed-delivery basis, it records the transaction
on its books and reflects the value of the security purchased in determining the
Fund's net asset value. In a sale transaction, it records the proceeds to be
received. The Fund will identify on its books liquid assets at least equal in
value to the value of the Fund's purchase commitments until the Fund pays for
the investment.
When-issued and delayed-delivery transactions can be used by the Fund
as a defensive technique to hedge 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
delayed-delivery basis to obtain the benefit of currently higher cash yields.
|X| Participation Interests. The Fund may invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments. A participation interest is an undivided interest in a loan made by
the issuing financial institution in the proportion that the buyers
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. There is a risk that a borrower
may have difficulty making payments. If a borrower fails to pay scheduled
interest or principal payments, the Fund could experience a reduction in its
income. The value of that participation interest might also decline, which could
affect the net asset value of the Fund's shares. If the issuing financial
institution fails to perform its obligations under the participation agreement,
the Fund might incur costs and delays in realizing payment and suffer a loss of
principal and/or interest.
|X| Repurchase Agreements. The Fund may acquire securities subject to
repurchase agreements. It may do so for liquidity purposes to meet anticipated
redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or pending the settlement of portfolio securities transactions,
or for temporary defensive purposes, as described below.
In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor 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. Approved vendors include U.S. commercial
banks, U.S. branches of foreign banks, or broker-dealers that have been
designated as primary dealers in government securities. They must meet credit
requirements set by the Fund's Board of Trustees from time to time.
The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the purchase.
Repurchase agreements having a maturity beyond seven days are subject to the
Fund's limits on holding illiquid investments. The Fund will not enter into a
repurchase agreement that causes more than 10% of its net assets to be subject
to repurchase agreements having a maturity beyond seven days. There is no limit
on the amount of the Fund's net assets that may be subject to repurchase
agreements having maturities of seven days or less.
Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price to
fully collateralize the repayment obligation. 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 Manager will monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will continuously monitor the collateral's
value.
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. To enable the Fund to sell its
holdings of a restricted security not registered under the Securities Act of
1933, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.
The Fund may also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public
resale. Those restrictions might limit the Fund's ability to dispose of the
securities and might lower the amount the Fund could realize upon the sale.
The Fund has limitations that apply to purchases of restricted
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 under Rule 144A of the Securities Act of 1933, if those
securities have been determined to be liquid 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 holdings of that security may be considered to be illiquid.
Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable within
seven days.
|X| Forward Rolls. The Fund can enter into "forward roll" transactions
with respect to mortgage related securities. In this type of transaction, the
Fund sells a mortgage related security to a buyer and simultaneously agrees to
repurchase a similar security (the same type of security, and having the same
coupon and maturity) at a later date at a set price. The securities that are
repurchased will have the same interest rate as the securities that are sold,
but typically will be collateralized by different pools of mortgages (with
different prepayment histories) than the securities that have been sold.
Proceeds from the sale are invested in short-term instruments, such as
repurchase agreements. The income from those investments, plus the fees from the
forward roll transaction, are expected to generate income to the Fund in excess
of the yield on the securities that have been sold.
The Fund will only enter into "covered" rolls. To assure its future
payment of the purchase price, the Fund will identify on its books cash, U.S.
government securities or other high-grade debt securities in an amount equal to
the payment obligation under the roll.
These transactions have risks. During the period between the sale and
the repurchase, the Fund will not be entitled to receive interest and principal
payments on the securities that have been sold. It is possible that the market
value of the securities the Fund sells may decline below the price at which the
Fund is obligated to repurchase securities.
|X| Investments in Equity Securities. Under normal market conditions
the Fund can invest up to 35% of its assets in securities other than debt
securities, including equity securities of both foreign and U.S. companies.
However, it does not anticipate investing significant amounts of its assets in
these securities as part of its normal investment strategy. Equity securities
include common stocks, preferred stocks, rights and warrants, and securities
convertible into common stock. The Fund's investments can include stocks of
companies in any market capitalization range, if the Manager believes the
investment is consistent with the Fund's objectives of total return and income.
Certain equity securities may be selected not only for their appreciation
possibilities but because they may provide dividend income.
|_| Risks of Investing in Stocks. Stocks fluctuate in price,
and their short-term volatility at times may be great. To the extent that the
Fund invests in equity securities, the value of the Fund's portfolio will be
affected by changes in the stock markets. Market risk can affect the Fund's net
asset value per share, which will fluctuate as the values of the Fund's
portfolio securities change. The prices of individual stocks do not all move in
the same direction uniformly or at the same time. Different stock markets may
behave differently from each other.
Other factors can affect a particular stock's price, such as poor
earnings reports by the issuer, loss of major customers, major litigation
against the issuer, or changes in government regulations affecting the issuer or
its industry. The Fund can invest in securities of large companies and mid-size
companies, but may also buy stocks of small companies, which may have more
volatile stock prices than large companies.
|_| Convertible Securities. The value of a convertible
security is a function of its "investment value" and its "conversion value." If
the investment value exceeds the conversion value, the security will behave more
like a debt security and the security's price will likely increase when interest
rates fall and decrease when interest rates rise. If the conversion value
exceeds the investment value, the security will behave more like an equity
security. In that case it will likely sell at a premium over its conversion
value and its price will tend to fluctuate directly with the price of the
underlying security.
While some convertible securities are a form of debt security, in many
cases their conversion feature (allowing conversion into equity securities)
causes them to be regarded by the Manager more as "equity equivalents." As a
result, the rating assigned to the security has less impact on the Manager's
investment decision than in the case of non-convertible debt fixed income
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 conversion of 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.
|_| Rights and Warrants. The Fund may invest up to 5% of its
total assets in warrants or rights. That limit does not apply to warrants and
rights the Fund has acquired as part of units of securities or that are attached
to other securities that the Fund buys. The Fund does not expect that it will
have significant investments in warrants and rights.
Warrants basically are options to purchase equity securities at
specific prices valid for a specific period of time. Their prices do not
necessarily move parallel to the prices of the underlying securities. 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.
|X| Loans of Portfolio Securities. To raise cash for liquidity purposes
or income, the Fund can lend its portfolio securities to brokers, dealers and
other types of financial institutions approved by the Fund's Board of Trustees.
These loans are limited to not more than 25% of the value of the Fund's net
assets. The Fund currently does not intend to engage in loans of securities in
the coming year, but if it does so, such loans will not likely exceed 5% of the
Fund's total assets.
There are some risks in connection with securities lending. The Fund
might experience a delay in receiving additional collateral to secure a loan, or
a delay in recovery of the loaned securities if the borrower defaults. The Fund
must receive collateral for a loan. Under current applicable regulatory
requirements (which are subject to change), on each business day the loan
collateral must be at least equal to the value of the loaned securities. It must
consist of cash, bank letters of credit, securities of the U.S. Government or
its agencies or instrumentalities, 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. The terms of the letter of credit and the issuing bank both
must be satisfactory to the Fund.
When it lends securities, the Fund receives amounts equal to the
dividends or interest on loaned securities. It also receives one or more of (a)
negotiated loan fees, (b) interest on securities used as collateral, and (c)
interest on any short-term debt securities purchased with such loan collateral.
Either type of interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees in connection with these
loans. The terms of the Fund's loans must meet applicable tests under the
Internal Revenue Code and must permit the Fund to reacquire loaned securities on
five days' notice or in time to vote on any important matter.
|X| Borrowing for Leverage. The Fund has the ability to borrow up to
one third of the value of its net assets from banks on an unsecured basis to
invest the borrowed funds in portfolio securities. This speculative technique is
known as "leverage." The Fund may borrow only from banks. Under current
regulatory requirements, borrowings can be made only to the extent that the
value of the Fund's assets, less its liabilities other than borrowings, is equal
to at least 300% of all borrowings (including the proposed borrowing). If the
value of the Fund's assets fails to meet this 300% asset coverage requirement,
the Fund will reduce its bank debt within three days to meet the requirement. To
do so, the Fund might have to sell a portion of its investments at a
disadvantageous time.
The Fund will pay interest on these loans, and that interest expense
will raise the overall expenses of the Fund and reduce its returns. If it does
borrow, its expenses will be greater than comparable funds that do not borrow
for leverage. Additionally, the Fund's net asset value per share might fluctuate
more than that of funds that do not borrow. Currently, the Fund does not
contemplate using this technique in the next year but if it does so, it will not
likely be to a substantial degree.
|X| Asset-Backed Securities. Asset-backed securities are fractional
interests in pools of assets, typically accounts receivable or consumer loans.
They are issued by trusts or special-purpose corporations. They are similar to
mortgage-backed securities, described above, and are backed by a pool of assets
that consist of obligations of individual borrowers. The income from the pool is
passed through to the holders of participation interest in the pools. The pools
may offer a credit enhancement, such as a bank letter of credit, to try to
reduce the risks that the underlying debtors will not pay their obligations when
due. However, the enhancement, if any, might not be for the full par value of
the security. If the enhancement is exhausted and any required payments of
principal are not made, the Fund could suffer losses on its investment or delays
in receiving payment.
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 related to 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 in the case of mortgage-backed
securities and CMOs, described above. Unlike mortgage-backed securities,
asset-backed securities typically do not have the benefit of a security interest
in the underlying collateral.
|X| Bank Obligations and Securities That Are Secured By Them. The Fund
can invest in bank obligations, including time deposits, certificates of
deposit, and bankers' acceptances. They must be either obligations of a domestic
bank with total assets of at least $1 billion or obligations of a foreign bank
with total assets of at least U.S. $1 billion. The Fund may also invest in
instruments secured by bank obligations (for example, debt which is guaranteed
by the bank). For purposes of this policy, the term "bank" includes commercial
banks, savings banks, and savings and loan associations that 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. They may or may not be 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.
Bankers' acceptances are marketable short-term credit instruments used
to finance the import, export, transfer or storage of goods. They are deemed
"accepted" when a bank guarantees their payment at maturity.
|X| Derivatives. The Fund can invest in a variety of derivative
investments to seek income or for hedging purposes. Some derivative investments
the Fund may use are the hedging instruments described below in this Statement
of Additional Information.
Among the derivative investments the Fund can invest in are
"index-linked" or "currency-linked" notes. Principal and/or interest payments on
index-linked notes depend on the performance of an underlying index.
Currency-indexed securities are typically short-term or intermediate-term debt
securities. Their value at maturity or the rates at which they pay income are
determined by the change in value of the U.S. dollar against one or more foreign
currencies or an index. In some cases, these securities may pay an amount at
maturity based on a multiple of the amount of the relative currency movements.
This type of index security offers the potential for increased income or
principal payments but at a greater risk of loss than a typical debt security of
the same maturity and credit quality.
Other derivative investments the Fund can use include "debt
exchangeable for common stock" of an issuer or "equity-linked debt securities"
of an issuer. At maturity, the debt security is exchanged for common stock of
the issuer or it is payable in an amount based on the price of the issuer's
common stock at the time of maturity. Both alternatives present a risk that the
amount payable at maturity will be less than the principal amount of the debt
because the price of the issuer's common stock might not be as high as the
Manager expected.
|X| Hedging. Although the Fund does not anticipate the extensive use of
hedging instruments, the Fund can use hedging instruments. It is not obligated
to use them in seeking its objective. 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 could: o sell
futures contracts, o buy puts on such futures or on securities, or o write
covered calls on securities or futures. Covered calls may also be used to
increase the Fund's income, but the Manager does not expect to engage
extensively in that practice.
The Fund can use hedging to establish a position in the securities
market as a temporary substitute for purchasing particular securities. In that
case the Fund wouldl normally seek to purchase the securities and then terminate
that hedging position. The Fund might also use this type of hedge to attempt to
protect against the possibility that its portfolio securities would not be fully
included in a rise in value of the market. To do so the Fund could: o buy
futures, or o buy calls on such futures or on securities.
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. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective and
are permissible under applicable regulations governing the Fund.
|_| Futures. The Fund can buy and sell futures contracts that relate to
(1) broadly-based bond or stock indices (these are referred to as "financial
futures"),
(2) commodities (these are referred to as "commodity futures"),
(3) debt securities (these are referred to as "interest rate futures"), and
(4) foreign currencies (these are referred to as "forward contracts").
A broadly-based stock index is used as the basis for trading stock
index futures. They may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the securities included in the index and its value fluctuates in
response to the changes in value of the underlying securities. A stock index
cannot be purchased or sold directly. Bond index futures are similar contracts
based on the future value of the basket of securities that comprise the index.
These contracts obligate the seller to deliver, and the purchaser to take, cash
to settle the futures transaction. There is no delivery made of the underlying
securities to settle the futures obligation. Either party may also settle the
transaction by entering into an offsetting contract.
An interest rate future obligates the seller to deliver (and the
purchaser to take) cash or a specified type of debt security to settle the
futures transaction. Either party could also enter into an offsetting contract
to close out the position.
The Fund can invests a portion of its assets in commodity futures
contracts. Commodity futures may be based upon commodities within 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.
No money is paid or received by the Fund on the purchase or sale of a
future. 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"). Initial margin payments will be deposited with the Fund's
Custodian bank 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 (that is, its value on the Fund's
books is changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures broker
daily.
At any time prior to expiration of the future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be paid
by or released to the Fund. Any loss or gain on the future is then realized by
the Fund for tax purposes. All futures transactions are effected through a
clearinghouse associated with the exchange on which the contracts are traded.
|_| Put and Call Options. The Fund can buy and sell certain
kinds of put options ("puts") and call options ("calls"). The Fund can buy and
sell exchange-traded and over-the-counter put and call options, including index
options, securities options, currency options, commodities options, and options
on the other types of futures described above.
|_| Writing Covered Call Options. The Fund may write (that is,
sell) covered calls. If the Fund sells a call option, it must be covered. That
means the Fund must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may be covered by
identifying liquid assets on the Fund's books to enable the Fund to satisfy its
obligations if the call is exercised. Up to 50% of the Fund's total assets may
be subject to calls the Fund writes.
When the Fund writes a call on a security, it receives cash (a
premium). The Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may differ
from the market price of the underlying security. The Fund has the risk of loss
that the price of the underlying security may decline during the call period.
That risk may be offset to some extent by the premium the Fund receives. If the
value of the investment does not rise above the call price, it is likely that
the call will lapse without being exercised. In that case the Fund would keep
the cash premium and the investment.
When the Fund writes a call on an index, it receives cash (a premium).
If the buyer of the call exercises it, the Fund will pay an amount of cash equal
to the difference between the closing price of the call and the exercise price,
multiplied by a specified multiple that determines the total value of the call
for each point of difference. If the value of the underlying investment does not
rise above the call price, it is likely that the call will lapse without being
exercised. In that case, the Fund would keep the cash premium.
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 calls traded on exchanges or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions. OCC
will release the securities on the expiration of the option or when the Fund
enters into a closing transaction.
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 will
establish a formula price at which the Fund will have the absolute right to
repurchase that OTC option. The formula price will 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 option is "in the money"). When the Fund writes an OTC option, it will
treat as illiquid (for purposes of its restriction on holding illiquid
securities) the mark-to-market value of any OTC option it holds, unless the
option is subject to a buy-back agreement by the executing broker.
To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund will
then realize a profit or loss, depending upon whether the net of the amount of
the option transaction costs and the premium received on the call the Fund wrote
is more or less than the price of the call the Fund purchases to close out the
transaction. The Fund may realize a profit if the call expires unexercised,
because the Fund will retain the underlying security and the premium it received
when it wrote the call. Any such profits are considered short-term capital gains
for Federal income tax purposes, as are the premiums on lapsed calls. When
distributed by the Fund they are taxable as ordinary income. If the Fund cannot
effect a closing purchase transaction due to the lack of a market, it will have
to hold the callable securities until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at the
time the call is written, the Fund must cover the call by identifying an
equivalent dollar amount of liquid assets on the Fund's books. The Fund will
identify additional liquid assets on the Fund's books if the value of the
identified assets drops below 100% of the current value of the future. Because
of this segregation requirement, in no circumstances would the Fund's receipt of
an exercise notice as to that future require the Fund to deliver a futures
contract. It would simply put the Fund in a short futures position, which is
permitted by the Fund's hedging policies.
|_| Writing Put Options. The Fund can sell put options on
securities, broadly-based securities indices, foreign currencies and futures. 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. The Fund will not write puts if, as a result, more than 50%
of the Fund's net assets would be required to be identified to cover such put
options.
If the Fund writes a put, the put must be covered by liquid assets
identified on the Fund's books. The premium the Fund receives from writing a put
represents a profit, as long as the price of the underlying investment remains
equal to or above the exercise price of the put. However, the Fund also assumes
the obligation during the option period to buy the underlying investment from
the buyer of the put at the exercise price, even if the value of the investment
falls below the exercise price.
If a put the Fund has written expires unexercised, the Fund realizes a
gain in the amount of the premium less the transaction costs incurred. If the
put is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price. That price will usually exceed the
market value of the investment at that time. In that case, the Fund may incur a
loss if it sells the underlying investment. That loss will be equal to the sum
of the sale price of the underlying investment and the premium received minus
the sum of the exercise price and any transaction costs the Fund incurred.
When writing a put option on a security, 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 underlying
securities. The Fund therefore forgoes the opportunity of investing the
identified assets or writing calls against those assets.
As long as the Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was sold.
That notice will require the Fund to take delivery of the underlying security
and pay 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.
That obligation terminates upon expiration of the put. It may also terminate if,
before it receives an exercise notice, the Fund effects a closing purchase
transaction by purchasing a put of the same series as it sold. Once the Fund has
been assigned an exercise notice, it cannot effect a closing purchase
transaction.
The Fund may decide to effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent the
underlying security from being put. Effecting a closing purchase transaction
will also permit the Fund to write another put option on the security, or to
sell the security and use the proceeds from the sale for other investments. The
Fund will realize a profit or loss from a closing purchase transaction depending
on whether the cost of the transaction is less or more than the premium received
from writing the put option. Any profits from writing puts are considered
short-term capital gains for Federal tax purposes, and when distributed by the
Fund, are taxable as ordinary income.
|_| Purchasing Calls and Puts. The Fund can purchase calls
only on securities, broadly-based securities indices, foreign currencies and
futures. It may do so to protect against the possibility that the Fund's
portfolio will not participate in an anticipated rise in the securities market.
When the Fund buys a call (other than in a closing purchase transaction), it
pays a premium. The Fund then 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.
The Fund benefits only if it sells the call at a profit or if, during
the call period, the market price of the underlying investment is above the sum
of the call price plus the transaction costs and the premium paid for the call
and the Fund exercises the call. If the Fund does not exercise the call or sell
it (whether or not at a profit), the call will become worthless at its
expiration date. In that case the Fund will have paid the premium but lost the
right to purchase the underlying investment.
The Fund can buy puts only on securities that it owns, broadly-based
securities indices, foreign currencies and futures. 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 put on a corresponding investment
during the put period at a fixed exercise price. Buying a put on securities or
futures the Fund owns enables the Fund to attempt to protect itself during the
put period against a decline in the value of the underlying investment below the
exercise price by selling the 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. In
that case the Fund will have paid the premium but lost the right to sell the
underlying investment. However, the Fund may sell the put prior to its
expiration. That sale may or may not be at a profit.
When the Fund purchases a call or put 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. Gain or loss depends on changes in the index in question
(and thus on price movements in the securities market generally) rather than on
price movements in individual securities or futures contracts.
The Fund may buy a call or put only if, after the purchase, the value
of all call and put options held by the Fund will not exceed 5% of the Fund's
total assets.
|_| Buying and Selling Options on Foreign Currencies. The Fund
can buy and sell calls and puts on foreign currencies. They include puts and
calls that trade on a securities or commodities exchange or in the
over-the-counter markets or are quoted by major recognized dealers in such
options. The Fund could use these calls and puts to try to protect against
declines in the dollar value of foreign securities and increases in the dollar
cost of foreign securities the Fund wants to acquire.
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 those securities may be partially offset by purchasing calls or writing puts
on that foreign currency. If the Manager anticipates a decline in the dollar
value of a foreign currency, the decline in the dollar value of portfolio
securities denominated in that currency might be partially offset by writing
calls or purchasing puts on that foreign currency. However, the currency rates
could fluctuate in a direction adverse to the Fund's position. The Fund will
then have incurred option premium payments and transaction costs without a
corresponding benefit.
A call the Fund writes on a foreign currency 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 it can do so for additional cash consideration held in an
identified account by its Custodian bank) upon conversion or exchange of other
foreign currency held in its portfolio.
The Fund could write a call 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. That decline might be one that occurs due to an expected adverse change
in the exchange rate. This is known as a "cross-hedging" strategy. In those
circumstances, the Fund covers the option by maintaining cash, U.S. government
securities or other liquid, high grade debt securities in an amount equal to the
exercise price of the option, in an identified account with the Fund's Custodian
bank.
|_| Risks of Hedging with Options and Futures. The use of
hedging instruments requires special skills and knowledge of investment
techniques that are different than what is required for normal portfolio
management. If the 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.
The Fund's option activities could affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund might cause
the Fund to sell related portfolio securities, thus increasing its turnover
rate. The exercise by the Fund of puts on securities will cause the sale of
underlying investments, increasing portfolio turnover. Although the decision
whether to exercise a put it holds is within the Fund's control, holding a put
might cause the Fund to sell the related investments for reasons that would not
exist in the absence of the put.
The Fund could pay a brokerage commission each time it buys a call or
put, sells a call or put, or buys or sells an underlying investment in
connection with the exercise of a call or put. Those commissions could be higher
on a relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. 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 investment.
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. It will not be able to realize any profit if the investment has
increased in value above the call price.
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. The Fund might
experience losses if it could not close out a position because of an illiquid
market for the future or option.
There is a risk in using short hedging by selling futures or purchasing
puts on broadly-based indices or futures to attempt to protect against declines
in the value of the Fund's portfolio securities. The risk is that the prices of
the futures or the applicable index will correlate imperfectly with the behavior
of the cash prices of the Fund's securities. For example, it is possible that
while the Fund has used hedging instruments in a short hedge, the market might
advance and the value of the securities held in the Fund's portfolio might
decline. If that occurred, the Fund would lose money on the hedging instruments
and also experience a decline in the value of 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 securities will tend to move in the
same direction as the indices upon which the hedging instruments are based.
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
portfolio securities being hedged and movements in the price of the hedging
instruments, the Fund might use hedging instruments in a greater dollar amount
than the dollar amount of portfolio securities being hedged. It might do so if
the historical volatility of the prices of the portfolio securities being hedged
is more than the historical volatility of the applicable index.
The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit and
maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends 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 market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities markets. Therefore,
increased participation by speculators in the futures market may cause temporary
price distortions.
The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund does
so the market might decline. If the Fund then concludes not to invest in
securities because of concerns that the market might decline further 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 securities purchased.
|_| 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 "lock in" the U.S. dollar price
of a security denominated in a foreign currency that the Fund has bought or
sold, or to protect against possible losses from changes in the relative values
of the U.S. dollar and a foreign currency. The Fund limits its exposure in
foreign currency exchange contracts in a particular foreign currency to the
amount of its assets denominated in that currency or a closely-correlated
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.
Under a forward contract, one party agrees to purchase, and another
party agrees to sell, a specific currency at a future date. That date may be any
fixed number of days from the date of the contract agreed upon by the parties.
The transaction price is set at the time the contract is entered into. These
contracts are traded in the inter-bank market conducted directly among currency
traders (usually large commercial banks) and their customers.
The Fund may use forward contracts to protect against uncertainty in
the level of future exchange rates. The use of forward contracts does not
eliminate the risk of 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. Although forward contracts may reduce the risk of loss from a decline
in the value of the hedged currency, at the same time they limit any potential
gain if the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund might enter into a forward contract for the
purchase or sale of the amount of foreign currency involved in the underlying
transaction, in a fixed amount of U.S. dollars per unit of the foreign currency.
This is called a "transaction hedge." The transaction hedge will protect the
Fund against a loss from an adverse change in 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 the payments are made or
received.
The Fund could also use forward contracts to lock in the U.S. dollar
value of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency might suffer a substantial decline against the
U.S. dollar, it might enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar could suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund could enter into a forward contract to
sell a different foreign currency for a fixed U.S. dollar amount if the Fund
believes that the U.S. dollar value of the foreign currency to be sold pursuant
to its forward contract will fall whenever there is a decline in the U.S. dollar
value of the currency in which portfolio securities of the Fund are denominated.
That is referred to as a "cross hedge."
The Fund will cover its short positions in these cases by identifying
to its Custodian bank assets having a value equal to the aggregate amount of the
Fund's commitment under forward contracts. The Fund will not enter into forward
contracts or maintain a net exposure to such contracts if 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 the subject of the
hedge.
However, to avoid excess transactions and transaction costs, the Fund
may maintain a net exposure to forward contracts in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess. As
one 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. As another alternative,
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 contact price.
The precise matching of the amounts under forward contracts and the
value of the securities involved generally will not be possible because the
future value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is entered
into and the date it is sold. In some cases the Manager might decide to sell the
security and deliver foreign currency to settle the original purchase
obligation. If the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver, the Fund might have to
purchase additional foreign currency on the "spot" (that is, cash) market to
settle the security trade. If the market value of the security instead exceeds
the amount of foreign currency the Fund is obligated to deliver to settle the
trade, the Fund might have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will be additional
transaction costs on the spot market in those cases.
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 to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are
unanticipated changes in currency prices to a greater degree than if the Fund
had not entered into such contracts.
At or before the maturity of a forward contract requiring the Fund to
sell a currency, the Fund might sell a portfolio security and use the sale
proceeds to make delivery of the currency. In the alternative the Fund might
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract. Under that contract the Fund will
obtain, on the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund might 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. The
gain or loss will depend on the extent to which the exchange rate or rates
between the currencies involved moved between the execution dates of the first
contract and offsetting contract.
The costs 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 brokerage fees or commissions are
involved. Because these contracts are not traded on an exchange, the Fund must
evaluate the credit and performance risk of the counterparty under each 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
will incur costs in doing so. 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 might
offer to sell a foreign currency to the Fund at one rate, while offering a
lesser rate of exchange if the Fund desires to resell that currency to the
dealer.
|_| Interest Rate Swap Transactions. The Fund can enter into
interest rate swap agreements. 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 might swap the right to receive floating rate
payments for fixed rate payments. The Fund can enter into swaps only on
securities that it owns. The Fund will not enter into swaps with respect to more
than 25% of its total assets. Also, the Fund will identify liquid assets on the
Fund's books (such as cash or U.S. government securities) to cover any amounts
it could owe under swaps that exceed the amounts it is entitled to receive, and
it will adjust that amount daily, as needed.
Swap agreements entail both interest rate risk and credit risk. There
is a risk that, based on movements of interest rates in the future, the payments
made by the Fund under a swap agreement will be greater than the payments it
received. Credit risk arises from the possibility that the counterparty will
default. If the counterparty 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 can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral agreement. If amounts are payable on a particular date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that currency shall be the net amount. In addition, the master
netting agreement may provide that if one party defaults generally or on one
swap, the counterparty can terminate all of the swaps with that party. Under
these agreements, if a default results 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 for each swap. It is measured by 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."
|_| Regulatory Aspects of Hedging Instruments. When using
futures and options on futures, the Fund is required to operate within certain
guidelines and restrictions with respect to the use of futures as established by
the Commodities Futures Trading Commission (the "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 Rule 4.5 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 not 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 must also use short futures and options
on futures 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 the option exchanges. The exchanges limit the maximum number of
options that may be written or held by a single investor or group of investors
acting in concert. Those limits apply 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 that 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. An exchange may order the liquidation of positions
found to be in violation of those limits and may impose certain other sanctions.
Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future, less
the margin deposit applicable to it.
|_| Tax Aspects of Hedging Instruments. Certain foreign
currency exchange contracts in which the Fund may invest are treated as "Section
1256 contracts" under the Internal Revenue Code. In general, gains or losses
relating to Section 1256 contracts are characterized as 60% long-term and 40%
short-term capital gains or losses under the Code. However, foreign currency
gains or losses arising from Section 1256 contracts that are 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," and unrealized gains or losses are treated as though they
were realized. These contracts also may be marked-to-market for purposes of
determining 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 those transactions from this
marked-to-market treatment.
Certain forward contracts the Fund enters into 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 that the 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, the following gains or losses are
treated as ordinary income or loss:
(1) 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, and
(2) gains or losses attributable to fluctuations in the value of a
foreign currency between the date of acquisition of a debt
security denominated in a foreign currency or foreign currency
forward contracts and the date of disposition.
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 income available for distribution to its shareholders.
|X| Temporary Defensive Investments. When market conditions are unstable,
or the Manager believes it is otherwise appropriate to reduce holdings in
stocks, the Fund can invest in a variety of debt securities for defensive
purposes. The Fund can also purchase these securities for liquidity purposes to
meet cash needs due to the redemption of Fund shares, or to hold while waiting
to invest cash received from the sale of other portfolio securities. The Fund
can buy: o obligations issued or guaranteed by the U. S. government or its
instrumentalities or agencies,
o commercial paper (short-term, unsecured, promissory notes of
domestic or foreign companies) rated in the three top rating
categories of a nationally recognized rating organization,
o short-term debt obligations of corporate issuers, rated investment
grade (rated at least Baa by Moody's Investors Service, Inc. or at
least BBB by Standard & Poor's Corporation, or a comparable rating
by another rating organization), or unrated securities judged by
the Manager to have a comparable quality to rated securities in
those categories,
o certificates of deposit and bankers' acceptances of domestic and
foreign banks having total assets in excess of $1 billion, and
o repurchase agreements.
Short-term debt securities would normally be selected for defensive or
cash management purposes because they can normally be disposed of quickly, are
not generally subject to significant fluctuations in principal value and their
value will be less subject to interest rate risk than longer-term debt
securities.
Investment Restrictions
|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
o 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
o more than 50% of the outstanding shares.
The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of Trustees
can change non-fundamental policies without shareholder approval. However,
significant changes to investment policies will be described in supplements or
updates to the Prospectus or this Statement of Additional Information, as
appropriate. The Fund's most significant investment policies are described in
the Prospectus.
|X| Does the Fund Have Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund.
o The Fund cannot buy securities issued or guaranteed by any one
issuer if more than 5% of its total assets would be invested in
securities of that issuer or if it would then own more than 10% of
that issuer's voting securities. That restriction applies to 75%
of the Fund's total assets. The limit does not apply to securities
issued by the U.S. Government or any of its agencies or
instrumentalities.
o The Fund cannot lend money. However, it can invest in debt
securities and enter into delayed-delivery or when-issued
transactions and forward rolls or similar securities transactions.
The Fund may also lend its portfolio securities and may enter into
repurchase agreements.
o The Fund cannot buy or sell real estate. However, the Fund can
purchase debt securities secured by real estate or interests in
real estate or issued by companies, including real estate
investment trusts, which invest in real estate or interests in
real estate.
o The Fund cannot underwrite securities of other companies. A
permitted exception is in case it is deemed to be an underwriter
under the Securities Act of 1933 when reselling any securities
held in its own portfolio.
o The Fund cannot invest in the securities issued by any company for
the purpose of exercising management control of that company,
except in connection with a merger, consolidation, reorganization
or acquisition of assets.
o The Fund cannot invest in or hold securities of any issuer if
officers and Directors or Trustees of the Fund or the Manager
individually beneficially own more than 1/2 of 1% of the
securities of that issuer and together own more than 5% of the
securities of that issuer.
o The Fund cannot mortgage, pledge or otherwise encumber, transfer
or assign any of its assets to secure a debt. However, this does
not prohibit the Fund from segregating its assets for premium and
margin payments in connection with any of the hedging instruments
it uses.
o The Fund cannot buy securities on margin. However, the Fund can
make margin deposits in connection with its use of hedging
instruments.
o The Fund cannot invest in oil, gas or other mineral exploration or development
programs or leases.
o The Fund cannot issue "senior securities," but this does not prohibit certain
investment activities for which assets of the Fund are designated as segregated,
or margin, collateral or escrow arrangements are established, to cover the
related obligations. Examples of those activities include borrowing money,
reverse repurchase agreements, delayed-delivery and when-issued arrangements for
portfolio securities transactions, and contracts to buy or sell derivatives,
hedging instruments, options or futures.
Unless the Prospectus or this Statement of Additional Information
states that a percentage restriction applies on an ongoing basis, it applies
only at the time the Fund makes an investment. 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.
The Fund cannot concentrate investments. That means it cannot invest
25% or more of its total assets in any one industry. The Fund will not invest
25% or more of its total assets in government securities of any one foreign
company or in debt and equity securities issued by companies organized under the
laws of any one foreign country. Obligations of the U.S. government, its
agencies and instrumentalities are not considered to be part of an "industry"
for the purposes of this policy. For purposes of the Fund's policy not to
concentrate its investments, the Fund has adopted the industry classifications
set forth in Appendix B to this Statement of Additional Information. This is not
a fundamental policy.
How the Fund is Managed
Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of beneficial
interest. The Fund was organized as a Massachusetts business trust in 1995.
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. 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.
|X| Classes of Shares. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Fund into two 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 of shares: o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one class are
different from interests of another class, and
o votes as a class on matters that affect that class alone.
Shares are freely transferable, and each share of each class has one
vote at shareholder meetings, with fractional shares voting proportionally on
matters submitted to the vote of shareholders. Each share of the Fund represents
an interest in the Fund proportionately equal to the interest of each other
share of the same class.
The Trustees are authorized to create new series and classes of shares.
The Trustees may reclassify unissued shares of the Fund into additional series
or classes of shares. The Trustees also may divide or combine the shares of a
class into a greater or lesser number of shares without 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 at shareholder meetings.
|X| Meetings of Shareholders. 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. It will also do so 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.
If the Trustees receive a request from at least 10 shareholders 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. The shareholders making the request
must have been shareholders for at least six months and must hold shares of the
Fund valued at $25,000 or more or constituting at least 1% of the Fund's
outstanding shares, whichever is less. The Trustees may also take other action
as permitted by the Investment Company Act.
|X| Shareholder and Trustee Liability. The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally liable
for its obligations. The Declaration of Trust also states that upon request, the
Fund shall assume the defense of any claim made against a shareholder for any
act or obligation of the Fund and shall satisfy any judgment on that claim.
Massachusetts law permits a shareholder of a business trust (such as the Fund)
to be held personally liable as a "partner" under certain circumstances.
However, the risk that a Fund shareholder will incur financial loss from being
held liable as a "partner" of the Fund is limited to the relatively remote
circumstances in which the Fund would be unable to meet its obligations.
The Fund's contractual arrangements state that any person doing
business with the Fund (and each shareholder of the Fund) agrees under its
Declaration of Trust to look solely to the assets of the Fund for satisfaction
of any claim or demand that may arise out of any dealings with the Fund.
Additionally, the Trustees shall have no personal liability to any such person,
to the extent permitted by law.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their
principal occupations and business affiliations during the past five years are
listed below. Trustees denoted with an asterisk (*) below are deemed to be
"interested persons" of the Fund under the Investment Company Act. All of the
Trustees are also trustees, directors or managing general partners of the
following Denver-based Oppenheimer funds1:
Oppenheimer Cash Reserves Oppenheimer Strategic Income Fund
Oppenheimer Champion Income Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Capital Income Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer High Yield Fund Oppenheimer Variable Account Funds
Oppenheimer International Bond
Fund Panorama Series Fund, Inc.
Oppenheimer Integrity Funds Centennial America Fund, L.P.
Oppenheimer Limited-Term Government
Fund Centennial California Tax-Exempt Trust
Oppenheimer Main Street Funds, Inc. Centennial Government Trust
Oppenheimer Main Street Small Cap
Fund Centennial Money Market Trust
Oppenheimer Municipal Fund Centennial New York Tax Exempt Trust
Oppenheimer Real Asset Fund Centennial Tax Exempt Trust
Ms. Macaskill and Messrs. Swain, Bishop, Wixted, Donohue, Farrar and Zack,
who are officers of the Fund, respectively hold the same offices with the other
Denver-based Oppenheimer funds. As of January 11, 2000, the Trustees and
officers of the Fund as a group owned less than 1% of the outstanding shares of
the Fund. The foregoing statement does not reflect shares held of record by an
employee benefit plan for employees of the Manager other than shares
beneficially owned under that plan by the officers of the Fund listed below. Ms.
Macaskill and Mr. Donohue are trustees of that plan.
Robert G. Avis*, Trustee, Age: 68.
One North Jefferson Ave., St. Louis, Missouri 63103
Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc.
(general partnership of private equity funds), Director of A.G. Edwards & Sons,
Inc. (a broker-dealer) and Director of A.G. Edwards Trust Companies (trust
companies), formerly, Vice Chairman of A.G. Edwards & Sons, Inc. and A.G.
Edwards, Inc. (its parent holding company) and Chairman of A.G.E. Asset
Management (an investment advisor).
William A. Baker, Trustee, Age: 85.
197 Desert Lakes Drive, Palm Springs, California 92264
Management Consultant.
William L. Armstrong, Trustee, Age: 62.
11 Carriage Lane, Littleton, Colorado 80121
Chairman of the following private mortgage banking companies: Cherry Creek
Mortgage Company (since 1991), Centennial State Mortgage Company (since 1994),
The El Paso Mortgage Company (since 1993), Transland Financial Services, Inc.
(since 1997), and Ambassador Media Corporation (since 1984); Chairman of the
following private companies: Frontier Real Estate, Inc. (residential real estate
brokerage) (since 1994), Frontier Title (title insurance agency) (since 1995)
and Great Frontier Insurance (insurance agency) (since 1995); Director of the
following public companies: Storage Technology Corporation (computer equipment
company) (since 1991), Helmerich & Payne, Inc. (oil and gas drilling/production
company) (since 1992), UNUMProvident (insurance company) (since 1991); formerly
Director of the following public companies: International Family Entertainment
(television channel) (1991 - 1997) and Natec Resources, Inc. (air pollution
control equipment and services company) (1991 - 1995); formerly U.S. Senator
(January 1979 - January 1991).
George C. Bowen, Trustee, Age: 63
6803 South Tucson Way, Englewood, Colorado 80112
Formerly (until April 1999) Mr. Bowen held the following positions: 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 Asset Management Corporation; Senior Vice President (since
February 1992), Treasurer (since July 1991) Assistant Secretary and a director
(since December 1991) of Centennial Asset Management Corporation; 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.; Vice President, Treasurer and Secretary of
Shareholder Financial Services, Inc. (since November 1989); Assistant Treasurer
of Oppenheimer Acquisition Corp. (since March 1998); Treasurer of Oppenheimer
Partnership Holdings, Inc. (since November 1989); Vice President and Treasurer
of Oppenheimer Real Asset Management, Inc. (since July 1996); Treasurer of
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since
October 1997).
Edward L. Cameron, Trustee, Age: 61.
Spring Valley Road, Morristown, New Jersey 07960
Formerly (from 1974-1999) a partner with PricewaterhouseCoopers LLC (an
accounting firm) and Chairman, Price Waterhouse LLP Global Investment management
Industry Services Group (from 1994-1998).
Jon S. Fossel, Trustee, Age: 57.
P.O. Box 44, Mead Street, Waccabuc, New York 10597
Formerly Chairman and a director of the Manager, President and a director of
Oppenheimer Acquisition Corp., the Manager's parent holding company, and
Shareholder Services, Inc. and Shareholder Financial Services, Inc., transfer
agent subsidiaries of the Manager.
Sam Freedman, Trustee, Age: 59.
4975 Lakeshore Drive, Littleton, Colorado 80123
Formerly Chairman and Chief Executive Officer of OppenheimerFunds Services,
Chairman, Chief Executive Officer and a director of Shareholder Services, Inc.,
Chairman, Chief Executive Officer and director of Shareholder Financial
Services, Inc., Vice President and director of Oppenheimer Acquisition Corp. and
a director of OppenheimerFunds, Inc.
Raymond J. Kalinowski, Trustee, Age: 70.
44 Portland Drive, St. Louis, Missouri 63131
Director of Wave Technologies International, Inc. (a computer products training
company), self-employed consultant (securities matters).
C. Howard Kast, Trustee, Age: 78.
2552 East Alameda, Denver, Colorado 80209
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).
Robert M. Kirchner, Trustee, Age: 78.
7500 E. Arapahoe Road, Englewood, Colorado 80112
President of The Kirchner Company (management consultants).
Bridget A. Macaskill*, President and Trustee, Age: 51.
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 Asset Management Corporation, an investment adviser
subsidiary of the Manager; Chairman and a director of Shareholder Services, Inc.
(since August 1994) and Shareholder Financial Services, Inc. (since September
1995), transfer agent subsidiaries of the Manager; President (since September
1995) and a director (since October 1990) of Oppenheimer Acquisition Corp., the
Manager's parent holding company; 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 management
subsidiary of the Manager and of Oppenheimer Millennium Funds plc; President and
a director of other Oppenheimer funds; a director of Prudential Corporation plc
(a U.K. financial service company).
Ned M. Steel, Trustee, Age: 84.
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: 66.
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 and Chairman of the Board of Shareholder Services,
Inc.
Arthur P. Steinmetz, Vice President and Portfolio Manager, Age: 41.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since March 1993); an officer of other
Oppenheimer funds.
Andrew J. Donohue, Vice President and Secretary, Age: 49.
Executive Vice President (since January 1993), General Counsel (since October
1991) and a Director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corporation, Shareholder Services,
Inc., Shareholder Financial Services, Inc. and (since September 1995)
Oppenheimer Partnership Holdings, Inc.; President and a director of Centennial
Asset Management Corporation (since September 1995); President, General Counsel
and a director of Oppenheimer Real Asset Management, Inc. (since July 1996);
General Counsel (since May 1996) and Secretary (since April 1997) of Oppenheimer
Acquisition Corp.; Vice President and a director of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Oppenheimer funds.
Robert J. Bishop, Assistant Treasurer, Age: 41.
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.
Scott T. Farrar, Assistant Treasurer, Age: 34.
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: 51.
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 Shareholder Services, Inc. (since
May 1985), and Shareholder Financial Services, Inc. (since November 1989);
Assistant Secretary of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since October 1997); an officer of other Oppenheimer
funds.
Brian W. Wixted, Vice President, Treasurer and Assistant Secretary, Age: 40.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since April 1999) of the Manager; Treasurer
of HarbourView Asset Management Corporation, Shareholder Services, Inc.,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings, Inc.
(since April 1999); Assistant Treasurer of Oppenheimer Acquisition Corp. (since
April 1999); Assistant Secretary of Centennial Asset Management Corporation
(since April 1999); formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment Management
Corp. (September 1991 - March 1995); and Vice President and Accounting Manager,
Merrill Lynch Asset Management (November 1987 - September 1991).
|X| Remuneration of Trustees. The officers of the Fund and two Trustees of
the Fund (Ms. Macaskill and Mr. Swain) are affiliated with the Manager and
receive no salary or fee from the Fund. 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, 1999. The compensation from all of
the Denver-based Oppenheimer funds includes the compensation from the Fund and
represents compensation received as a director, trustee, managing general
partner or member of a committee of the Board during the calendar year 1999.
<TABLE>
<CAPTION>
Trustee's Name and
Other Positions Aggregate Compensation Total Compensation
from Fund From all Denver-Based
Oppenheimer Funds 1
(22 Funds)
<S> <C> <C>
William L. Armstrong2 $40 $14,542
- -------------------------------------- -------------------------------------- --------------------------------------
- -------------------------------------- -------------------------------------- --------------------------------------
Robert G. Avis $257 $67,998
- -------------------------------------- -------------------------------------- --------------------------------------
- -------------------------------------- -------------------------------------- --------------------------------------
William A. Baker $262 $67,998
- -------------------------------------- -------------------------------------- --------------------------------------
- -------------------------------------- -------------------------------------- --------------------------------------
George C. Bowen $43 $23,879
- -------------------------------------- -------------------------------------- --------------------------------------
- -------------------------------------- -------------------------------------- --------------------------------------
Edward Cameron2 $ 0 $ 2,430
- -------------------------------------- -------------------------------------- --------------------------------------
- -------------------------------------- -------------------------------------- --------------------------------------
Jon. S. Fossel $260 $66,586
Review Committee Member
- -------------------------------------- -------------------------------------- --------------------------------------
- -------------------------------------- -------------------------------------- --------------------------------------
Sam Freedman
Audit and Review Committee Member $279 $73,998
- -------------------------------------- -------------------------------------- --------------------------------------
- -------------------------------------- -------------------------------------- --------------------------------------
Raymond J. Kalinowski
Audit and Review Committee Member $277 $73,248
- -------------------------------------- -------------------------------------- --------------------------------------
- -------------------------------------- -------------------------------------- --------------------------------------
C. Howard Kast $294 $78,873
Audit and Review Committee Chairman
- -------------------------------------- -------------------------------------- --------------------------------------
- -------------------------------------- -------------------------------------- --------------------------------------
Robert M. Kirchner $259 $69,248
Audit Committee Member
- -------------------------------------- -------------------------------------- --------------------------------------
- -------------------------------------- -------------------------------------- --------------------------------------
Ned M. Steel $257 $67,998
- -------------------------------------- -------------------------------------- --------------------------------------
</TABLE>
1. For the 1999 calendar year. There were 22 investment companies included.
2. Mr. Armstrong and Mr. Cameron were not Trustees or Directors of the
Denver-based Oppenheimer funds prior to August 24, 1999 and December 14,
1999, respectively.
|X| 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 Trustee's 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 without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
|X| Major Shareholders. As of January 11, 2000, the only persons who
owned of record or were known by the Fund to own beneficially 5% or more of the
Fund's outstanding securities of any class were the following: Merrill Lynch,
Pierce & Smith, 4800 Deer Lake Drive, E., Floor 3, Jacksonville, Florida 32246,
which owned 1,594,063.840 Class B shares (5.69% of the Class B shares then
outstanding) and 848,267.381 Class C shares (11.23% of the Class C shares then
outstanding) for the benefit of its customers.
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
|X| Code of Ethics. The Fund, the Manager and the Distributor 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. Covered persons include
persons with knowledge of the investments and investment intentions of the Fund
and other funds advised by the Manager. The Code of Ethics does permit personnel
subject to the Code to invest in securities, including securities that may be
purchased or held by the Fund, subject to a number of restrictions and controls.
Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.
|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. The portfolio manager
of the Fund is employed by the Manager and is the person who is principally
responsible for the day-to-day management of the Fund's portfolio. Other members
of the Manager's Fixed-Income Portfolio Team provide the portfolio manager with
counsel and support in managing the Fund's portfolio.
The agreement requires the Manager, at its expense, to provide the Fund
with adequate office space, facilities and equipment. It also requires the
Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Fund.
Those responsibilities include 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.
The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories relate to interest, taxes, brokerage commissions,
fees to certain Trustees, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs. The management fees paid by
the Fund to the Manager are calculated at the rates described in the Prospectus,
which are applied to the assets of the Fund as a whole. The fees are allocated
to each class of shares based upon the relative proportion of the Fund's net
assets represented by that class.
Fiscal Year ended 9/30: Management Fees Paid to OppenheimerFunds, Inc.
1997 $1,465,1811
1998 $1,978,423
1999 $1,886,864
1. After a reduction in the management fee in the amount of $41,927 pursuant to
a voluntary waiver of expenses by the Manager that is no longer in effect.
The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment 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 under the
agreement.
The 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 Manager may withdraw the right of the Fund to use the
name "Oppenheimer" as part of its name.
Brokerage Policies of the Fund
Brokerage Provisions of the Investment Advisory Agreement. One of the duties of
the Manager under the investment advisory agreement is to arrange the portfolio
transactions for the Fund. The advisory agreement contains provisions relating
to the employment of broker-dealers to effect the Fund's portfolio transactions.
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. The Manager may employ broker-dealers that the Manager thinks in
its best judgment based on all relevant factors, will implement the policy of
the Fund to obtain, at reasonable expense, the "best execution" of portfolio
transactions. "Best execution" means prompt and reliable execution at the most
favorable price obtainable. The Manager need not seek competitive commission
bidding. However, it is expected to be aware of the current rates of eligible
brokers and to minimize the commissions paid to the extent consistent with the
interests and policies of the Fund as established by its Board of Trustees.
Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) 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 charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment Adviser.
Brokerage Practices Followed by the Manager. The Manager allocates brokerage for
the Fund subject to the provisions of the investment advisory agreement and the
procedures and rules described above. Generally, the Manager's portfolio traders
allocate brokerage based upon recommendations from the Manager's portfolio
managers. In certain instances, portfolio managers may directly place trades and
allocate brokerage. In either case, the Manager's executive officers supervise
the allocation of brokerage.
Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid primarily
for transactions in listed securities or for certain fixed-income agency
transactions in the secondary market. Otherwise brokerage commissions are paid
only if it appears likely that a better price or execution can be obtained by
doing so. In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates.
Other funds advised by the Manager have investment policies similar to
those of the Fund. Those other funds may purchase or sell the same securities as
the Fund at the same time as the Fund, which could affect the supply and price
of the securities. If two or more funds advised by the
Manager purchase the same security on the same day from the same dealer, the
transactions under those 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 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
the Manager determines that a better price or execution can be obtained by using
the services of a broker. Purchases of portfolio securities from underwriters
include a commission or concession paid by the issuer to the underwriter.
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.
The investment advisory agreement permits the Manager to allocate
brokerage for research services. 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. The investment research received for the commissions of
those other accounts may be useful both to the Fund and one or more of the
Manager's other accounts. Investment research may be supplied to the Manager by
a third party at the instance of a broker through which trades are placed.
Investment research services include information and analysis on
particular companies and industries as well as market or economic trends and
portfolio strategy, 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 stated commissions on
secondary fixed-income agency trades to obtain research if the broker represents
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 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 research services provided by brokers broadens the scope and
supplements the research activities of the Manager. That research provides
additional views and comparisons for consideration, and helps the Manager to
obtain market information for the valuation of securities that are either held
in the Fund's portfolio or are being considered for purchase. The Manager
provides information to the Board about the commissions paid to brokers
furnishing such services, together with the Manager's representation that the
amount of such commissions was reasonably related to the value or benefit of
such services.
Fiscal Year Ended 9/30: Total Brokerage Commissions Paid by the Fund 1
1997 $4,969
1998 $31,991
1999 $71,0902
1. Amounts do not include spreads or concessions on principal transactions on a
net trade basis.
2. In the fiscal year ended 9/30/99, the amount of transactions directed to
brokers for research services was $297,086 and the amount of the
commissions paid to broker-dealers for those services was $1,493.
Distribution and Service Plans
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 different classes of shares. The Distributor is not
obligated to sell a specific number of shares. Expenses normally attributable to
sales are borne by the Distributor.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares during the Fund's three most recent fiscal
years is shown in the table below.
<TABLE>
<CAPTION>
Aggregate Class A Front-End Commissions on Commissions on Commissions on
Fiscal Year Front-End Sales Sales Charges Class A Shares Class B Shares Class C Shares
Ended 9/30: Charges on Class Retained by Advanced by Advanced by Advanced by
A Shares Distributor Distributor 1 Distributor 1 Distributor 1
<S> <C> <C> <C> <C> <C>
- --------------- ------------------- ------------------- -------------------- ------------------- -------------------
- --------------- ------------------- ------------------- -------------------- ------------------- -------------------
1997 $1,124,978 $273,182 $23,126 $3,225,657 $209,570
- --------------- ------------------- ------------------- -------------------- ------------------- -------------------
- --------------- ------------------- ------------------- -------------------- ------------------- -------------------
1998 $758,818 $197,195 $45,052 $2,036,881 $145,913
- --------------- ------------------- ------------------- -------------------- ------------------- -------------------
- --------------- ------------------- ------------------- -------------------- ------------------- -------------------
1999 $427,421 $118,394 $41,586 $ 887,632 $ 83,883
- --------------- ------------------- ------------------- -------------------- ------------------- -------------------
1. The Distributor advances commission payments to dealers for certain sales
of Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
- ----------------- ------------------------------- -------------------------------- ---------------------------------
Class A Contingent Deferred Class B Contingent Deferred Class C Contingent Deferred
Fiscal Year Sales Charges Retained by Sales Charges Retained by Sales Charges Retained by
Ended 9/30 Distributor Distributor Distributor
- ----------------- ------------------------------- -------------------------------- ---------------------------------
- ----------------- ------------------------------- -------------------------------- ---------------------------------
1999 $266 $435,700 $8,730
- ----------------- ------------------------------- -------------------------------- ---------------------------------
</TABLE>
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. Under those plans the Fund pays the
Distributor for all or a portion of its costs incurred in connection with the
distribution and/or servicing of the shares of the particular class.
Each plan has been approved by a vote of the Board of Trustees, including
a majority of the Independent Trustees2, cast in person at a meeting called for
the purpose of voting on that plan. The shareholder votes for the plans were
cast by the Manager as the sole initial holder of each class of shares of the
Fund.
Under the plans, the Manager and the Distributor may make payments to
affiliates and, in their sole discretion, from time to time may use their own
resources (at no direct cost to the Fund) to make payments to brokers, dealers
or other financial institutions for distribution and administrative services
they perform. The Manager may use its profits from the advisory fee it receives
from the Fund. In their sole discretion, the Distributor and the Manager may
increase or decrease the amount of payments they make from their own resources
to plan recipients.
Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose of
voting on continuing the plan. A 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.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares after six years, the Fund must obtain the approval
of both Class A and Class B shareholders for a proposed material amendment to
the Class A Plan that would materially increase payments under the Plan. That
approval must be by a "majority" (as defined in the Investment Company Act) of
the shares of each Class, voting separately by class.
While the plans are in effect, the Treasurer of the Fund shall provide
separate written reports on the plans to the Board of Trustees at least
quarterly for its review. The Reports shall detail the amount of all payments
made under a plan, and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Trustees.
Each Plan states 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 the selection and nomination process as long as the
final decision as to selection or nomination is approved by a majority of the
Independent Trustees.
Under the plan for a class, no payment will be made to any recipient in
any quarter in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Trustees. The Board of Trustees has set no minimum amount of assets
to qualify for payments under the plans.
|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as "recipients")
for personal services and account maintenance services they provide for their
customers who hold Class A shares. The services 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. While the plan
permits the Board to authorize payments to the Distributor to reimburse itself
for services under the plan, the Board has not yet done so. The Distributor
makes payments to plan recipients quarterly at an annual rate not to exceed
0.25% of the average annual net assets consisting of Class A shares held in the
accounts of the recipients or their customers.
For the fiscal period ended September 30, 1999 payments under the Class A
Plan totaled $248,547, all of which was paid by the Distributor to recipients.
That included $15,717 paid to an affiliate of the Distributor's parent company.
Any unreimbursed expenses the Distributor incurs with respect to Class A shares
in any fiscal year cannot be recovered in subsequent years. The Distributor may
not use payments received under the Class A Plan to pay any of its interest
expenses, carrying charges, or other financial costs, or allocation of overhead.
|X| Class B and Class C Service and Distribution Plan Fees. Under each
plan, service fees and distribution 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 Class B and Class C plans
provide for the Distributor to be compensated at a flat rate, whether the
Distributor's distribution expenses are more or less than the amounts paid by
the Fund under the plan during the period for which the fee is paid. The types
of services that Recipients provide are similar to the services provided under
the Class A service plan, described above.
The Class B and the Class C Plans permit the Distributor to retain both
the asset-based sales charges and the service fees or to pay recipients the
service fee on a quarterly basis, without payment in advance. However, the
Distributor currently intends to pay the service fee to recipients in advance
for the first year after the shares are purchased. After the first year shares
are outstanding, the Distributor makes service fee payments quarterly on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee payment.
If Class B or Class C shares are redeemed during the first year after their
purchase, the recipient of the service fees on those shares will be obligated to
repay the Distributor a pro rata portion of the advance payment of the service
fee made on those shares.
The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. It pays the asset-based sales charge
as an ongoing commission to the recipient on Class C shares outstanding for a
year or more. If a dealer has a special agreement with the Distributor, the
Distributor will pay the Class B and/or Class C service fee and the asset-based
sales charge to the dealer quarterly in lieu of paying the sales commissions and
service fee in advance at the time of purchase.
The asset-based sales charges on Class B and Class C shares allow investors
to buy 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. The payments are made to the Distributor in recognition that the
Distributor: o pays sales commissions to authorized brokers and dealers at the
time of sale and pays service fees as described above,
o may finance payment of sales commissions and/or the advance of the
service fee payment to recipients under the plans, or may provide such
financing from its own resources or from the resources of an affiliate,
o employs personnel to support distribution of Class B and Class C shares,
and
o bears the costs of sales literature, advertising and prospectuses (other
than those furnished to current shareholders) and state "blue sky"
registration fees and certain other distribution expenses.
Distribution Fees Paid to the Distributor in the Fiscal Year Ended 9/30/99
<TABLE>
<CAPTION>
Distributor's
Distributor's Unreimbursed Expenses
Total Payments Under Amount Retained by Aggregate Unreimbursed as % of Net Assets of
Class: Plan Distributor Expenses Under Plan Class
<S> <C> <C> <C> <C>
---------------- ------------------------ ------------------------ ------------------------ ------------------------
---------------- ------------------------ ------------------------ ------------------------ ------------------------
Class B $1,228,808 $1,008,649 $5,605,885 4.73%
Plan
---------------- ------------------------ ------------------------ ------------------------ ------------------------
---------------- ------------------------ ------------------------ ------------------------ ------------------------
Class C Plan $ 289,134 $ 154,968 $ 554,577 1.88%
---------------- ------------------------ ------------------------ ------------------------ ------------------------
</TABLE>
All payments under the Class B and the Class C plans are subject to the
limitations imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and service
fees.
Performance of the Fund
Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield," "dividend
yield," "average annual total return," "cumulative total return," "average
annual total return at net asset value" and "total return at net asset value."
An explanation of how yields and total returns are calculated is set forth
below. The charts below show the Fund's performance as of the Fund's most recent
fiscal year end. You can obtain current performance information by calling the
Fund's Transfer Agent at 1-800-525-7048 or by visiting the OppenheimerFunds
Internet web site at http://www.oppenheimerfunds.com.
The Fund's illustrations of its performance data in advertisements must
comply with rules of the Securities and Exchange Commission. Those rules
describe the types of performance data that may be used and how it is to be
calculated. In general, any advertisement by the Fund of its performance data
must include the average annual total returns for the advertised class of shares
of the Fund. Those returns must be shown 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 (or its submission for
publication). Certain types of yields may also be shown, provided that they are
accompanied by standardized average annual total returns.
Use of standardized performance calculations 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 the
Fund's performance information as a basis for comparison with other investments:
o Yields and total 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. Your account's
performance will vary from the model performance data if your
dividends are received in cash, or you buy or sell shares during
the period, or you bought your shares at a different time and
price than the shares used in the model.
o The Fund's performance returns do not reflect the effect of taxes
on dividends and capital gains distributions.
o An investment in the Fund is not insured by the FDIC or any other
government agency.
o The principal value of the Fund's shares, and its yields and total
returns are not guaranteed and normally will fluctuate on a daily
basis.
o When an investor's shares are redeemed, they may be worth more or less than
their original cost.
o Yields and total returns for any given past period represent
historical performance information and are not, and should not be
considered, a prediction of future yields or returns.
The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The yields and
total returns of each class of shares of the Fund are affected by market
conditions, the quality of the Fund's investments, the maturity of those
investments, the types of investments the Fund holds, and its operating expenses
that are allocated to the particular class.
|X| Yields. The Fund uses a variety of different yields to illustrate
its current returns. Each class of shares calculates its yield separately
because of the different expenses that affect each class.
|_| Standardized Yield. The "standardized yield" (sometimes
referred to just 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 of shares, described below.
Standardized yield is calculated using the following formula set forth
in rules adopted by the Securities and Exchange Commission, designed to assure
uniformity in the way that all funds calculate their yields:
a-b 6
Standardized Yield = 2 [ ( --- + 1) -1 ]
cd
The symbols above represent the following factors:
a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense assumptions).
c = the average daily number of shares of that class outstanding
during the 30-day period that were entitled to receive dividends.
d = the maximum offering price per share of that class on the last
day of the period, adjusted for undistributed net investment
income.
The standardized yield for a particular 30-day period may differ from
the yield for other periods. The SEC formula assumes that the standardized yield
for a 30-day period occurs at a constant rate for a six-month period and is
annualized at the end of the six-month period. 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.
|_| Dividend Yield. The Fund may quote a "dividend yield" for
each class of its shares. Dividend yield is based on the dividends paid on a
class of shares 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 Fund's Yields for the 30-Day Periods Ended 9/30/99
Standardized Yield Dividend Yield
Class of Shares
<TABLE>
<CAPTION>
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
<S> <C> <C> <C> <C>
---------------- ------------------- ---------------------- ---------------------- ------------------------------
---------------- ------------------- ---------------------- ---------------------- ------------------------------
Class A 16.21% 15.42% 13.69% 13.05%
---------------- ------------------- ---------------------- ---------------------- ------------------------------
---------------- ------------------- ---------------------- ---------------------- ------------------------------
Class B 15.43% N/A 13.03% N/A
---------------- ------------------- ---------------------- ---------------------- ------------------------------
---------------- ------------------- ---------------------- ---------------------- ------------------------------
Class C 15.43% N/A 13.02% N/A
---------------- ------------------- ---------------------- ---------------------- ------------------------------
</TABLE>
|X| Total Return Information. There are different types of "total
returns" 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
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. 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 actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.
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 without sales charge,
as described below). For Class B shares, payment of the applicable contingent
deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth years, 2.0% in the fifth year, 1.0% in the sixth year and none
thereafter. For Class C shares, the 1% contingent deferred sales charge is
deducted for returns for the 1-year period.
|_| Average Annual Total Return. 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" in the formula) to achieve an
Ending Redeemable Value ("ERV" in the formula) of that investment, according to
the following formula:
1/n
( )
( ERV ) - 1 = Average Annual Total Return
( ------ )
( P )
|_| Cumulative Total Return. The "cumulative total return"
calculation measures the change in value of a hypothetical investment of $1,000
over an entire period of years. Its calculation uses some of the same factors as
average annual total return, but it does not average the rate of return on an
annual basis.
Cumulative total return is determined as follows:
ERV - P
__________ = Total Return
P
|_| Total Returns at Net Asset Value. From time to time the
Fund may also quote a cumulative or an average annual total return "at net asset
value" (without deducting sales charges) 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 Fund's Total Returns for the Periods Ended 9/30/99
Cumulative Total Average Annual Total Returns
Class of Returns (Life of Class)
Shares
1-Year Life-of-Class
<TABLE>
<CAPTION>
After Without After Without After Without
Sales Sales Sales Sales Sales Sales Charge
Charge Charge Charge Charge Charge
<S> <C> <C> <C> <C> <C> <C>
- -------------- ------------ ------------ ------------ ------------ ------------ -------------
- -------------- ------------ ------------ ------------ ------------ ------------ -------------
Class A 28.17%1 34.57%1 5.33% 10.58% 5.95%1 7.16%1
- -------------- ------------ ------------ ------------ ------------ ------------ -------------
- -------------- ------------ ------------ ------------ ------------ ------------ -------------
Class B 28.44%2 30.13%2 4.90% 9.79% 6.01%2 6.33%2
- -------------- ------------ ------------ ------------ ------------ ------------ -------------
- -------------- ------------ ------------ ------------ ------------ ------------ -------------
Class C 30.14%3 30.14%3 8.82% 9.80% 6.33%3 6.33%3
- -------------- ------------ ------------ ------------ ------------ ------------ -------------
</TABLE>
1. Inception of Class A: 6/15/95
2. Inception of Class B: 6/15/95
3. Inception of Class C: 6/15/95
Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.
|X| Lipper Rankings. From time to time the Fund may publish the ranking
of the performance of its classes of shares by Lipper Analytical Services, Inc.
Lipper is 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 in categories based on
investment style. The Lipper performance rankings are based on total returns
that include the reinvestment of capital gain distributions and income dividends
but do not take sales charges or taxes into consideration. Lipper also publishes
"peer-group" indices of the performance of all mutual funds in a category that
it monitors and averages of the performance of the funds in particular
categories.
|X| Morningstar Rankings. From time to time the Fund may publish the
ranking and/or star rating of the performance of its classes of shares by
Morningstar, Inc., an independent mutual fund monitoring service. Morningstar
rates and ranks mutual funds in broad investment categories: domestic stock
funds, international stock funds, taxable bond funds and municipal bond funds.
The Fund is included in the taxable bond funds category.
Morningstar star proprietary star ratings reflect historical
risk-adjusted total investment return. 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 a fund's (or class's) performance below the 90-day U.S. Treasury
bill returns. Risk and investment return are combined to produce star rankings
reflecting performance relative to the other funds in a fund's category. Five
stars is the "highest" ranking (top 10% of funds in a category), 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) overall rating, which is the fund's
3-year rating, or its combined 3- , 5- and 10-year rating (weighted 60%/40%
respectively), or its combined 3-, 5-, and 10-year rating (weighted 40%/30%/30%,
respectively), depending on the inception date of the fund (or class). Rankings
are subject to change monthly.
The Fund may also compare its total return ranking to that of other
funds in its Morningstar category, in addition to its star rankings. Those total
return rankings are percentages from one percent to one hundred percent and are
not risk adjusted. For example, if a fund is in the 94th percentile, that means
that 94% of the funds in the same category performed better than it did.
|X| Performance Rankings and Comparisons by Other Entities and
Publications. From time to time the Fund may include in its advertisements and
sales literature performance information about the Fund cited in newspapers and
other periodicals such as The New York Times, The Wall Street Journal, Barron's,
or similar publications. That information may include performance quotations
from other sources, including Lipper and Morningstar. The performance of the
Fund's classes of shares may be compared in publications to the performance of
various market indices or other investments, and averages, performance rankings
or other benchmarks prepared by recognized mutual fund statistical services.
Investors may also wish to compare the returns on the Fund's share
classes to the return on fixed-income investments available from banks and
thrift institutions. Those include 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 or insured 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.
Repayment of principal and payment of interest on Treasury securities is backed
by the full faith and credit of the U.S. government.
From time to time, the Fund may publish rankings or ratings of the
Manager or Transfer Agent, and of the investor services provided by them to
shareholders of the Oppenheimer funds, other than performance rankings of the
Oppenheimer funds themselves. Those ratings or rankings of shareholder and
investor services by third parties may include comparisons of their services to
those provided by other mutual fund families selected by the rating or ranking
services. They may be based upon the opinions of the rating or ranking service
itself, using its research or judgment, or based upon surveys of investors,
brokers, shareholders or others.
A B O U T Y O U R A C C O U N T
How to Buy Shares
Additional information is presented below about the methods that can be
used to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances in
which sales charges may be reduced or waived for certain classes of investors.
AccountLink. When shares are purchased through AccountLink, each purchase must
be at least $25. Shares will be purchased on the regular business day you
instruct the Distributor to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased
with the proceeds of ACH transfers on the business day the Distributor is
instructed to initiate the ACH transfer 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. The proceeds of ACH transfers are normally received by the Fund 3
days after the transfers are initiated. If the proceeds of the ACH transfer are
not received on a timely basis, the Distributor reserves the right to cancel the
purchase order. 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 Appendix C to this
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.
|X| 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:
o Class A and Class B shares you purchase for your individual
accounts, or for your joint accounts, or for trust or custodial
accounts on behalf of your children who are minors, and
o 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, and
o 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.
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.
The Distributor will add the value, at current offering price, of the shares you
previously purchased and currently own to the value of current purchases to
determine the sales charge rate that applies. The reduced sales charge will
apply only to current purchases. You must request it when you buy shares.
|X| The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for
which the Distributor acts as the distributor or the sub-distributor and
currently include the following:
Oppenheimer Bond Fund Oppenheimer Main Street California
Municipal Fund
Oppenheimer California Municipal
Fund Oppenheimer Main Street Growth & Income Fund
Oppenheimer Capital Appreciation
Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer Capital Preservation
Fund Oppenheimer MidCap Fund
Oppenheimer Champion Income Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Convertible Securities
Fund Oppenheimer Municipal Bond Fund
Oppenheimer Developing Markets
Fund Oppenheimer New York Municipal Fund
Oppenheimer Disciplined Allocation
Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Disciplined Value Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Discovery Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Enterprise Fund Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Equity Income Fund Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Europe Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Florida Municipal Fund Oppenheimer Quest Small Cap Value Fund
Oppenheimer Global Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Global Growth & Income
Fund Oppenheimer Real Asset Fund.
Oppenheimer Gold & Special Minerals
Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Insured Municipal
Fund Oppenheimer Trinity Core Fund
Oppenheimer Intermediate Municipal
Fund Oppenheimer Trinity Growth Fund
Oppenheimer International Bond
Fund Oppenheimer Trinity Value Fund
Oppenheimer International Growth
Fund Oppenheimer U.S. Government Trust
Oppenheimer International Small
Company Fund Oppenheimer World Bond Fund
Oppenheimer Large Cap Growth Fund Limited-Term New York Municipal Fund
Oppenheimer Limited-Term Government
Fund Rochester Fund Municipals
<PAGE>
and the following money market funds:
Centennial America Fund, L. P.
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust
Centennial Tax Exempt Trust
Centennial Government Trust
Oppenheimer Cash Reserves
Centennial Money Market Trust
Oppenheimer Money Market Fund, Inc.
There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds except the money market funds. Under certain
circumstances described in this Statement of Additional Information, redemption
proceeds of certain money market fund shares may be subject to a contingent
deferred sales charge.
Letters 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. You can include purchases made up
to 90 days before the date of the Letter.
A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A shares or Class A and Class B
shares of the Fund (and other Oppenheimer funds) during a 13-month period (the
"Letter of Intent period"). At the investor's request, this may 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 of shares
which, when added to the investor's holdings of shares of those funds, will
equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and purchases made
at net asset value without sales charge do not count toward satisfying the
amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on purchases
of Class A shares of the Fund (and other Oppenheimer funds) 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 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. However, 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. That amount is described in "Terms of
Escrow," below (those terms may be amended by the Distributor 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 a Letter of Intent. If those terms are amended, as they may be from time to
time by the Fund, the investor agrees to be bound by the amended terms and that
those amendments will apply automatically to existing Letters of Intent.
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
total 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 Prospectus, the sales
charges paid will be adjusted to the lower rate. That adjustment will be made
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.
The Transfer Agent will not hold shares in escrow for purchases of
shares of the Fund and other Oppenheimer funds by OppenheimerFunds prototype
401(k) plans under a Letter of Intent. If the intended purchase amount under a
Letter of Intent 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.
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.
|X| 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 up 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
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 total minimum investment 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. That sales
charge adjustment will apply to any shares redeemed prior to the completion
of the Letter. If the 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 of other Oppenheimer funds acquired subject to a
contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1) 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 (2) 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 to buy shares directly
from a bank account, you must enclose a check (the minimum is $25) for the
initial purchase with your application. Shares purchased by Asset Builder Plan
payments from bank accounts are subject to the redemption restrictions for
recent purchases described in the Prospectus. Asset Builder Plans are available
only if your bank is an ACH member. Asset Builder Plans may not be used to buy
shares for OppenheimerFunds employer-sponsored qualified retirement accounts.
Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use
their fund account to make 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 debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected on your
Application. Neither the Distributor, the Transfer Agent nor the Fund shall be
responsible for any delays in purchasing shares that result from delays in ACH
transmissions.
Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or your can terminate these automatic investments at any time by writing
to the Transfer Agent. The Transfer Agent requires a reasonable period
(approximately 10 days) after receipt of your instructions to implement them.
The Fund reserves the right to amend, suspend, or discontinue offering Asset
Builder plans at any time without prior notice.
Retirement Plans. Certain types of Retirement Plans are entitled to purchase
shares of the Fund without sales charge or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent record keeper that has a contract
or special arrangement with Merrill Lynch. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable investments, then the retirement plan may purchase only Class B
shares of the Oppenheimer funds. Any retirement plans in that category that
currently invest in Class B shares of the Fund will have their Class B shares
converted to Class A shares of the Fund when the plan's applicable investments
reach $5 million.
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.
Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder privileges and features. The net income attributable to Class B or
Class C shares and the dividends payable on Class B or Class C shares will be
reduced by incremental expenses borne solely by that class. Those expenses
include the asset-based sales charges to which Class B and Class C are subject.
The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time the
investor expects to hold shares, and other relevant circumstances. Class A
shares normally are sold subject to an initial sales charge. While Class B and
Class C shares have no initial sales charge, the purpose of the deferred sales
charge and asset-based sales charge on Class B and Class C shares is the same as
that of the initial sales charge on Class A shares - to compensate the
Distributor and brokers, dealers and financial institutions that sell shares of
the Fund. A salesperson who is entitled to receive compensation from his or her
firm for selling Fund shares may receive different levels of compensation for
selling one class of shares rather than another.
The Distributor will not accept any order in the amount of $500,000 or
more for Class B shares or $1 million or more for Class C shares on behalf of a
single investor (not including dealer "street name" or omnibus accounts). That
is because generally it will be more advantageous for that investor to purchase
Class A shares of the Fund.
|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares after six years is not treated as a taxable event for
the shareholder. If those laws or the IRS interpretation of those laws should
change, the automatic conversion feature may be suspended. In the event, no
further conversions of Class B shares would occur while that 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
shareholder, and absent such exchange, Class B shares might continue to be
subject to the asset-based sales charge for longer than six years.
|X| Allocation of Expenses. The Fund pays expenses related to its daily
operations, such as custodian fees, Trustees' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset value of shares, and therefore are indirectly borne by shareholders
through their investment.
The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general
expenses include management fees, legal, bookkeeping and audit fees, printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current shareholders, fees to unaffiliated
Trustees, custodian expenses, share issuance costs, organization and start-up
costs, interest, taxes and brokerage commissions, and non-recurring expenses,
such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of such
expenses include distribution and service plan (12b-1) fees, transfer and
shareholder servicing agent fees and expenses, and shareholder meeting expenses
(to the extent that such expenses pertain only to a specific class).
Determination of Net Asset Values Per Share. The net asset values per share of
each class of shares of the Fund are determined as of the close of business of
The New York Stock Exchange on each day that the Exchange is open. The
calculation is done 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
Exchange normally closes at 4:00 P.M., New York time, but may close earlier on
some other days (for example, in case of weather emergencies or on days falling
before a holiday). The Exchange's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Presidents' Day,
Martin Luther King, Jr. Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. It may also close on other days.
Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and U.S.
holidays) or after 4:00 P.M. on a regular business day. The Fund's net asset
values will not be calculated on those days, and the values of some of the
Fund's portfolio securities may change significantly on those days, when
shareholders may not purchase or redeem shares. Additionally, trading on
European and Asian stock exchanges and over-the-counter markets normally is
completed before the close of The New York Stock Exchange.
Changes in the values of securities traded on foreign exchanges or
markets as a result of events that occur after the prices of those securities
are determined, but before the close of The New York Stock Exchange, will not be
reflected in the Fund's calculation of its net asset values that day unless the
Manager determines that the event is likely to effect a material change in the
value of the security. The Manager may make that determination, under procedures
established by the Board.
|X| Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
o Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which they are traded
or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date,
they are valued 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, at the closing
"bid" price on the valuation date.
o Equity securities traded on a foreign securities exchange
generally are valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Trustees, or
(2) at the last sale price obtained by the Manager from the report of the
principal exchange on which the security is traded at its last trading session
on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on the
basis of reasonable inquiry, from two market makers in the
security.
o Long-term debt securities having a remaining maturity in excess of
60 days are valued based on the mean between the "bid" and "asked"
prices determined by a portfolio pricing service approved by the
Fund's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable
inquiry.
o The following securities are valued at the mean between the "bid"
and "asked" prices determined by a pricing service approved by the
Fund's Board of Trustees or obtained by the Manager from two
active market makers in the security on the basis of reasonable
inquiry:
(1) debt instruments that have a maturity of more than 397 days when
issued,
(2) debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or less.
o The following securities are valued at cost, adjusted for amortization of
premiums and accretion of discounts: (1) money market debt securities held
by a non-money market fund that had a maturity of less than 397 days when
issued that have a remaining maturity of 60 days or less, and (2) debt
instruments held by a money market fund that have a remaining maturity of
397 days or less. o 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, a security may be priced at the mean between
the "bid" and "asked" prices provided by a single active market maker
(which in certain cases may be the "bid" price if no "asked" price is
available).
In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information is
not generally available, the Manager may use pricing services approved by the
Board of Trustees. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.
The closing prices in the London foreign exchange market on a
particular business day that are provided to the Manager by a bank, dealer or
pricing service that the Manager has determined to be reliable are used to value
foreign currency, including forward contracts, and to convert to U.S. dollars
securities that are denominated in foreign currency.
Puts, calls, and futures are valued at the last sale 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, they shall be valued at 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. If not, the 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 by the mean between "bid" and
"asked" prices obtained by the Manager from two active market makers. In certain
cases that may be at 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. An
equivalent credit is included in the liability section. The credit is adjusted
("marked-to-market") to reflect the current market value of the option. 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.
How to Sell Shares
Information on how to sell shares of the Fund is stated in the
Prospectus. The information below provides additional information about the
procedures and conditions for redeeming shares.
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 checkwriting
privileges at any time without prior notice.
In choosing to take advantage of the Checkwriting privilege, by signing
the Account Application or by completing a Checkwriting card, each individual
who signs:
(1) for individual accounts, represents that they are the
registered owner(s) of the shares of the Fund in that account;
(2) for accounts for corporations, partnerships, trusts and other
entities, represents that they are an officer, general
partner, trustee or other fiduciary or agent, as applicable,
duly authorized to act on behalf of the registered owner(s);
(3) authorizes the Fund, its Transfer Agent and any bank through
which the Fund's drafts (checks) are payable to pay all checks
drawn on the Fund account of such person(s) and to redeem a
sufficient amount of shares from that account to cover payment
of each check;
(4) specifically acknowledges that if they choose to permit checks
to be honored if there is a single signature on checks drawn
against joint accounts, or accounts for corporations,
partnerships, trusts or other entities, the signature of any
one signatory on a check will be sufficient to authorize
payment of that check and redemption from the account, even if
that account is registered in the names of more than one
person or more than one authorized signature appears on the
Checkwriting card or the Application, as applicable;
(5) understands that the Checkwriting privilege may be terminated
or amended at any time by the Fund and/or the Fund's bank; and
(6) acknowledges and agrees that neither the Fund nor its bank
shall incur any liability for that amendment or termination of
checkwriting privileges or for redeeming shares to pay checks
reasonably believed by them to be genuine, or for returning or
not paying checks that have not been accepted for any reason.
Reinvestment Privilege. Within six months of a redemption, a shareholder
may reinvest all or part of the redemption proceeds of:
o Class A shares purchased subject to an initial sales charge or Class A
shares on which a contingent deferred sales charge was paid, or
o Class B shares that were subject to the Class B contingent deferred sales
charge when redeemed.
The reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which shares of
the Fund are exchangeable as described in "How to Exchange Shares" below.
Reinvestment will be at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the Transfer
Agent for that privilege at the time of reinvestment. This privilege does not
apply to Class C shares. 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.
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.
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 liquid securities from the
portfolio of the Fund, in lieu of cash.
The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, 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 Fund will value securities used to pay redemptions in
kind using the same method the Fund uses to value its portfolio securities
described above under "Determination of Net Asset Values Per Share." That
valuation will be made as of the time the redemption price is determined.
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 will not cause the involuntary redemption of shares in an
account if the aggregate net asset value of such shares has fallen below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the requirements for any notice to be given to the
shareholders in question (not less than 30 days). The Board may alternatively
set requirements for the shareholder to increase the investment, or set other
terms and conditions so that the shares would not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not an
event that triggers the payment of sales charges. Therefore, 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. It does not matter
whether the transfer occurs by absolute assignment, gift or bequest, as long as
it does not involve, directly or indirectly, a public sale of the shares. When
shares subject to a contingent deferred sales charge are transferred, the
transferred shares will remain subject to the contingent deferred sales charge.
It will be 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 or
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:
(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution is
premature; and
(3) conform to the requirements of the plan and the Fund's other redemption
requirements.
Participants (other than self-employed persons) in
OppenheimerFunds-sponsored pension or profit-sharing plans with shares of the
Fund held in the name of the plan or its fiduciary may not directly request
redemption of their accounts. The plan administrator or fiduciary 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 and submitted to the
Transfer Agent 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, 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. Shareholders should contact their
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
an order placed by the dealer or broker. However, 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, the Exchange closes at 4:00 P.M., but
may do so earlier on some days. Additionally, the order must have been
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 business days after the shares have
been redeemed upon the Distributor's receipt of the required redemption
documents in proper form. The signature(s) of the registered owners on the
redemption documents must be guaranteed 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
(having a value of at least $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. Payments must also be sent to the address of record for
the account and the address must not have 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
Account Application or by signature-guaranteed instructions sent to the Transfer
Agent. Shares are normally redeemed pursuant to an Automatic Withdrawal Plan
three business days before the payment transmittal date you select in the
Account Application. 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.
The Fund reserves the right to amend, suspend or discontinue offering these
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 charge on such withdrawals (except
where the contingent deferred sales charge is waived as described in Appendix C
to this Statement of Additional Information).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to existing
Plans.
|X| Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent 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.
Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. 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.
|X| Automatic Withdrawal Plans. Fund shares will be redeemed as
necessary to meet withdrawal payments. Shares acquired without a sales charge
will be redeemed first. 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 these plans should not be considered as a yield or income on your
investment.
The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the Plan
authorization and application submitted to the Transfer Agent. Neither the Fund
nor the Transfer Agent shall incur any liability to the Planholder for any
action taken or not taken by the Transfer Agent in good faith to administer the
Plan. Share 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.
Shares will be redeemed to make withdrawal payments at the net asset
value per share determined on the redemption date. Checks or AccountLink
payments representing the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment, according to the choice specified in writing by the Planholder. Receipt
of payment on the date selected cannot be guaranteed.
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 after 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 to redeem all, or any part of, the
shares held under the Plan. That notice must be in proper form in accordance
with the requirements of the then-current Prospectus of the Fund. In that case,
the Transfer Agent will redeem the number of shares requested at the net asset
value per share in effect and will mail a check for the proceeds to the
Planholder.
The Planholder may terminate a Plan at any time by writing to the
Transfer Agent. The Fund may also give directions to the Transfer Agent to
terminate a Plan. The Transfer Agent will also terminate a Plan upon its receipt
of evidence satisfactory to it that the Planholder has died or is legally
incapacitated. Upon termination of a Plan by the Transfer Agent or the Fund,
shares that have not been redeemed will be held in uncertificated form in the
name of the Planholder. The account will continue as a dividend-reinvestment,
uncertificated account unless and until proper instructions are received from
the Planholder, his or her executor or guardian, or another 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. 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
Oppenheimer funds that have a single class without a class designation
are deemed "Class A" shares for this purpose. You can obtain a current
list showing which funds offer which classes by calling the Distributor
at 1.800.525.7048.
o All of the Oppenheimer funds currently offer Class A, B and C shares
except Oppenheimer Money Market Fund, Inc., Centennial Money Market Trust,
Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New
York Tax Exempt Trust, Centennial California Tax Exempt Trust, and
Centennial America Fund, L.P., which only offer Class A shares.
o Oppenheimer Main Street California Municipal Fund currently offers only
Class A and Class B shares. o 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.
o Only certain Oppenheimer funds currently offer Class Y shares.
Class Y shares of Oppenheimer Real Asset Fund may not be exchanged
for shares of any Class M Shares of Oppenheimer Convertible
Securities Fund may be exchanged only for Class A shares of other
Oppenheimer funds. They may not be acquired by exchange of shares
of any class of any other Oppenheimer funds except Class A shares
of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves
acquired by exchange of Class M shares.
o Class A shares of Senior Floating Rate Fund are not available by
exchange of Class A shares of other Oppenheimer funds. Class A
shares of Senior Floating Rate Fund that are exchanged for shares
of the other Oppenheimer funds may not be exchanged for Class A
shares of Senior Floating Rate Fund.
o Class X shares of Limited Term New York Municipal Fund can be
exchanged only for Class B shares of other Oppenheimer funds and
no exchanges may be made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be
exchanged for shares of Oppenheimer Money Market Fund, Inc.,
Oppenheimer Cash Reserves or Oppenheimer Limited-Term Government
Fund. Only participants in certain retirement plans may purchase
shares of Oppenheimer Capital Preservation Fund, and only those
participants may exchange shares of other Oppenheimer funds for
shares of Oppenheimer Capital Preservation Fund.
Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. 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. They may also be used to purchase shares of Oppenheimer funds subject to
an early withdrawal charge or contingent deferred sales charge.
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 30 days 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. 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. If requested, they must
supply proof of entitlement to this privilege.
Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other 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.
The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by applicable
law. It may be required to provide 60 days notice prior to materially amending
or terminating the exchange privilege. That 60 day notice is not required in
extraordinary circumstances.
|X| How Exchanges Affect Contingent Deferred Sales Charges. No
contingent deferred sales charge is imposed on exchanges of shares of any class
purchased subject to a contingent deferred sales charge. However, when Class A
shares acquired by exchange of Class A shares of other Oppenheimer funds
purchased subject to a Class A contingent deferred sales charge are redeemed
within 18 months of the end of the calendar month of the initial purchase of the
exchanged Class A shares, the Class A contingent deferred sales charge is
imposed on the redeemed shares. The Class B contingent deferred sales charge is
imposed on Class B shares acquired by exchange if they are redeemed within 6
years of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by
exchange if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares.
When Class B or Class C shares are redeemed to effect an exchange, the
priorities described in "How To Buy Shares" in the Prospectus for the imposition
of the Class B or the Class C contingent deferred sales charge will be followed
in determining the order in which the shares are exchanged. Before exchanging
shares, shareholders should take into account how the exchange may affect 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 which
class of shares they wish to exchange.
|X| Limits on Multiple Exchange Orders. 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.
|X| Telephone Exchange Requests. When exchanging shares by telephone, a
shareholder must have an existing account in the fund to which the exchange is
to be made. Otherwise, the investors must obtain a Prospectus of that fund
before the exchange request may be submitted. 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.
|X| Processing 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 Fund may refuse the
request. When you exchange some or all of your shares from one fund to another,
any special account feature such as an Asset Builder Plan or Automatic
Withdrawal Plan, will be switched to the new fund account unless you tell the
Transfer Agent not to do so. However, special redemption and exchange features
such as Automatic Exchange Plans and Automatic Withdrawal Plans cannot be
switched to an account in Oppenheimer Senior Floating Rate Fund.
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.
The different Oppenheimer funds available for exchange have different
investment objectives, policies and risks. 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, or as otherwise
described in "How to Buy Shares." Daily dividends will not be declared or paid
on newly purchased shares 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. Shares
purchased through dealers or brokers normally are paid for by the third business
day following the placement of the purchase order.
Shares redeemed through the regular redemption procedure will be paid
dividends through and including the day on which the redemption request is
received by the Transfer Agent in proper form. Dividends will be declared on
shares repurchased by a dealer or broker for three business days following the
trade date (that is, up 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.
The Fund has no fixed dividend rate. There can be no assurance as to
the payment of any dividends or the realization of any capital gains. The
dividends and distributions paid by a class of shares will 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. Dividends are
calculated in the same manner, at the same time, and on the same day for each
class of shares. However, dividends on Class B and Class C shares are expected
to be lower than dividends on Class A shares. That is because of the effect of
the asset-based sales charge on Class B and Class C shares. Those dividends will
also differ in amount as a consequence of any difference in the net asset values
of the different classes of shares.
Dividends, distributions and 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.
Reinvestment will be made 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. Unclaimed accounts may be subject to state escheatment
laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.
Tax Status of the Fund's Dividends and Distributions. The Federal tax treatment
of the Fund's dividends and capital gains distributions is briefly highlighted
in the Prospectus.
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. The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from 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.
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.
If it does not, the Fund must pay an excise tax on the amounts not distributed.
It is presently anticipated that the Fund will meet those requirements. However,
the Board of Trustees and the Manager might determine in a particular year that
it would be in the best interests 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.
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). 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 as a regulated
investment company in its last fiscal year. The Internal Revenue Code contains a
number of complex tests relating to qualification which the Fund might not meet
in any particular year. If it did not so qualify, the Fund would be treated for
tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.
If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the
effect of the Fund's investment policies, they will be identified as such in
notices sent 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 above. Reinvestment will be
made without sales charge at the net asset value per share in effect at the
close of business on the payable date of the dividend or distribution. To elect
this option, the shareholder must notify the Transfer Agent in writing and must
have an existing account in the fund selected for reinvestment. Otherwise the
shareholder first must obtain a prospectus for that fund and an application from
the Distributor to establish an account. Dividends and/or distributions from
shares of certain other Oppenheimer funds (other than Oppenheimer Cash Reserves)
may be invested in shares of this Fund on the same basis.
Additional Information About the Fund
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.
The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a
division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It acts on an "at-cost" basis. It also
acts as shareholder servicing agent for the other Oppenheimer funds.
Shareholders should direct inquiries about their accounts to the Transfer Agent
at the address and toll-free numbers shown on the back cover.
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. 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. Those
uninsured balances at times may be substantial. Independent Auditors. Deloitte &
Touche LLP are the independent auditors of the Fund. They audit the Fund's
financial statements and perform other related audit services. They also act as
auditors for the Manager and for certain other funds advised by the Manager and
its affiliates.
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
TO 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, 1999, the related statement of operations for the year then ended,
the statements of changes in net assets for the years ended September 30, 1999
and September 30, 1998, and the financial highlights for the period June 15,
1995, to September 30, 1999. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1999, 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 as of September 30, 1999, 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, 1999
- -------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MORTGAGE-BACKED OBLIGATIONS--1.0%
Nykredit AS, 7% Cv. Bonds, 10/1/29 [DKK] (Cost $2,624,089) 18,690,000 $ 2,599,924
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--0.7%
Federal National Mortgage Assn. Sr. Unsub. Medium-Term Nts.,
6.50%, 7/10/02 [AUD] 1,310,000 864,779
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. Sr. Unsub. Nts., 6.375%, 8/15/07 [AUD] 1,365,000 867,944
-----------
Total U.S. Government Obligations (Cost $1,667,637) 1,732,723
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--58.7%
- -------------------------------------------------------------------------------------------------------------------
ARGENTINA--5.5%
Argentina (Republic of) Bonds, Bonos de Consolidacion de
Deudas, Series I, 2.828%, 4/1/07(2) [ARP] 5,096,437 3,390,992
- -------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Global Unsec. Unsub. Bonds,
Series BGL5, 11.375%, 1/30/17 2,450,000 2,309,125
- -------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Nts., Series REGS, 11.75%, 2/12/07 [ARP] 7,425,000 6,349,645
- -------------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds, Series PBA1, 2.828%, 4/1/07(2) [ARP] 2,681,784 1,667,202
-----------
13,716,964
- -------------------------------------------------------------------------------------------------------------------
BRAZIL--5.7%
Brazil (Federal Republic of) Bonds, 11.625%, 4/15/04 520,000 486,226
- -------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Capitalization Bonds, 20 yr., 8%, 4/15/14 8,797,260 5,509,285
- -------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Debt Conversion Bonds, 5.938%, 4/15/12(2) 8,342,000 5,026,055
- -------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Interest Due & Unpaid Bonds, 6.50%, 1/1/01(2) 2,127,654 2,063,824
- -------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Unsec. Bonds, 9.375%, 4/7/08 1,530,000 1,204,875
-----------
14,290,265
- -------------------------------------------------------------------------------------------------------------------
BULGARIA--1.8%
Bulgaria (Republic of) Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 2.75%, 7/28/12(3) 7,255,000 4,570,650
- -------------------------------------------------------------------------------------------------------------------
CANADA--1.5%
Canada (Government of) Bonds, Series J24, 10.25%, 2/1/04 4,650,000 3,714,652
- -------------------------------------------------------------------------------------------------------------------
COLOMBIA--0.4%
Colombia (Republic of) Nts., 7.25%, 2/23/04 665,000 536,315
- -------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) Unsec. Bonds, 10.875%, 3/9/04 560,000 552,168
-----------
1,088,483
- -------------------------------------------------------------------------------------------------------------------
ECUADOR--0.1%
Ecuador (Republic of) Debs., 2/27/15(4) 110,613 18,528
- -------------------------------------------------------------------------------------------------------------------
Ecuador (Republic of) Past Due Interest Bonds, 2/27/15(4) 948,945 158,948
-----------
177,476
</TABLE>
14 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GERMANY--3.6%
Germany (Republic of) Bonds:
6.25%, 4/26/06 [EUR] 952,484 $1,090,476
6.75%, 5/13/04 [DEM] 510,000 591,490
Series 98, 5.25%, 1/4/08 [DEM] 4,645,000 4,982,048
Zero Coupon, 5.66%, 7/4/27(5)[EUR] 5,000,000 989,385
- -------------------------------------------------------------------------------------------------------------------
Germany (Republic of) Stripped Bonds, Series JA24,
Zero Coupon, 5.54%, 1/4/24(5)[EUR] 5,865,000 1,472,157
-----------
9,125,556
- -------------------------------------------------------------------------------------------------------------------
GREAT BRITAIN--1.7%
United Kingdom Treasury Bonds, 10%, 9/8/03 [GBP] 2,285,000 4,233,562
- -------------------------------------------------------------------------------------------------------------------
INDONESIA--0.4%
Bank Negara Indonesia Unsec. Nts., 6.405%, 10/25/01(2) 1,000,000 765,000
- -------------------------------------------------------------------------------------------------------------------
Perusahaan Listr, 17% Nts., 8/21/01(6) [IDR] 2,000,000,000 125,673
- -------------------------------------------------------------------------------------------------------------------
PT Hutama Karya Promissory Nts., Zero Coupon, 4/9/99(4,6) [IDR] 5,000,000,000 164,572
-----------
1,055,245
- -------------------------------------------------------------------------------------------------------------------
ITALY--3.4%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali:
9.50%, 2/1/06 [EUR] 5,330,000 7,040,501
10.50%, 9/1/05 [EUR] 1,044,254 1,427,309
-----------
8,467,810
- -------------------------------------------------------------------------------------------------------------------
IVORY COAST--1.8%
Ivory Coast (Government of) Front Loaded Interest Reduction Bonds:
2%, 3/29/18(3) [FRF] 21,325,000 701,114
2%, 3/29/18(3) 6,915,000 1,417,575
-----------
Ivory Coast (Government of) Past Due Interest Bonds, Series F,
1.90%, 3/29/18(3) [FRF] 55,748,000 2,353,298
-----------
4,471,987
- -------------------------------------------------------------------------------------------------------------------
JAPAN--2.3%
Japan (Government of) Bonds, Series 141, 6.50%, 6/20/01 [JPY] 545,000,000 5,658,336
- -------------------------------------------------------------------------------------------------------------------
JORDAN--2.0%
Hashemite (Kingdom of Jordan) Bonds, Series DEF, 5.50%, 12/23/23(3) 890,000 539,563
- -------------------------------------------------------------------------------------------------------------------
Hashemite (Kingdom of Jordan) Disc. Bonds, 6.188%, 12/23/23(2) 6,815,000 4,463,825
-----------
5,003,388
</TABLE>
15 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MEXICO--3.7%
Mexican Williams Sr. Nts., 5.83%, 11/15/08(2,8) $ 500,000 $ 442,500
- -------------------------------------------------------------------------------------------------------------------
Petroleos Mexicanos Debs., 14.50%, 3/31/06(6) [GBP] 1,280,000 2,382,076
- -------------------------------------------------------------------------------------------------------------------
United Mexican States Bonds, 11.375%, 9/15/16 6,000,000 6,345,000
-----------
9,169,576
- -------------------------------------------------------------------------------------------------------------------
MOROCCO--0.0%
Morocco (Kingdom of) Loan Participation Agreement, Tranche A,
2.018%, 1/1/09(2) [JPY] 18,095,235 126,299
- -------------------------------------------------------------------------------------------------------------------
NEW ZEALAND--0.7%
New Zealand (Government of) Bonds, 7%, 7/15/09 [NZD] 3,265,000 1,692,902
- -------------------------------------------------------------------------------------------------------------------
NIGERIA--1.0%
Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10 4,092,394 2,401,151
- -------------------------------------------------------------------------------------------------------------------
NORWAY--4.0%
Norway (Government of) Bonds, 9.50%, 10/31/02 [NOK] 69,930,000 9,926,858
- -------------------------------------------------------------------------------------------------------------------
PANAMA--0.7%
Panama (Republic of) Interest Reduction Bonds, 4.25%, 7/17/14(2) 625,000 453,125
- -------------------------------------------------------------------------------------------------------------------
Panama (Republic of) Past Due Interest Debs., 5.819%, 7/17/16(2) 1,824,725 1,309,241
-----------
1,762,366
- -------------------------------------------------------------------------------------------------------------------
PERU--1.9%
Peru (Republic of) Sr. Nts., Zero Coupon, 4.53%, 2/28/16(5) 11,209,525 4,794,314
- -------------------------------------------------------------------------------------------------------------------
POLAND--0.4%
Poland (Republic of) Bonds, 12%, 6/12/01 [PLZ] 4,800,000 1,137,181
- -------------------------------------------------------------------------------------------------------------------
RUSSIA--1.7%
Russia (Government of) Principal Loan Debs., Series 24 yr., 12/15/20(4) 17,760,000 1,653,900
- -------------------------------------------------------------------------------------------------------------------
Russia (Government of) Sr. Unsec. Unsub. Nts., 11.75%, 6/10/03 720,000 379,080
- -------------------------------------------------------------------------------------------------------------------
Russia (Government of) Unsec. Bonds, 11%, 7/24/18 2,565,000 1,083,713
- -------------------------------------------------------------------------------------------------------------------
Russian Federation Unsec. Unsub. Nts.:
8.75%, 7/24/05 1,775,000 736,625
12.75%, 6/24/28 720,000 340,416
-----------
4,193,734
</TABLE>
16 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SLOVAKIA--1.0%
Slovenska Sporitelna AS Bank Sub. Nts., 6.61%, 12/20/06(2) $ 1,800,000 $ 1,350,000
- -------------------------------------------------------------------------------------------------------------------
Vseobenona Uverova Banka Unsec. Sub. Nts., 7.011%, 12/28/06(2) 1,640,000 1,164,400
-----------
2,514,400
- -------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA--2.2%
South Africa (Republic of) Bonds:
Series 153, 13%, 8/31/10 [ZAR] 28,724,000 4,277,147
Series 175, 9%, 10/15/02 [ZAR] 8,100,000 1,199,214
-----------
5,476,361
- -------------------------------------------------------------------------------------------------------------------
SPAIN--1.8%
Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
8.80%, 4/30/06 [EUR] 1,700,000 2,187,989
10%, 2/28/05 [EUR] 1,760,000 2,325,802
-----------
4,513,791
- -------------------------------------------------------------------------------------------------------------------
THE NETHERLANDS--2.4%
The Netherlands (Government of) Bonds:
6%, 1/15/06 [EUR] 1,070,000 1,206,214
7.75%, 3/1/05 [EUR] 3,950,000 4,797,798
-----------
6,004,012
- -------------------------------------------------------------------------------------------------------------------
TURKEY--2.6%
Turkey (Republic of) Treasury Bills, Zero Coupon,
78.57%, 8/23/00(5) [TRL] 5,610,000,000,000 6,625,225
- -------------------------------------------------------------------------------------------------------------------
VENEZUELA--3.6%
Venezuela (Republic of) Disc. Bonds, Series DL,
6.312%, 12/18/07(2) 9,452,804 7,337,739
- -------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Front-Loaded Interest Reduction Bonds,
Series A, 6.875%, 3/31/07(2) 892,857 676,339
- -------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Unsec. Bonds, 9.25%, 9/15/27 1,350,000 891,000
-----------
8,905,078
- -------------------------------------------------------------------------------------------------------------------
VIETNAM--0.8%
Vietnam (Government of) Bonds, 3%, 3/12/28(2) 7,095,000 1,995,469
-----------
Total Foreign Government Obligations (Cost $155,782,210) 146,813,091
</TABLE>
17 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LOAN PARTICIPATIONS--6.6%
Algeria (Republic of) Reprofiled Debt Loan Participation Nts.:
Tranche 1, 1.063%, 9/4/06(2) [JPY] 56,945,454 $ 248,705
Tranche 1, 6.812%, 9/4/06(2,6) 6,854,363 5,106,501
Tranche A, 2.175%, 3/4/00(2) [JPY] 9,490,909 86,468
Tranche A, 7.50%, 3/4/00(2,6) 179,424 176,060
- -------------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Unrestructured Nts.,
6.615%, 1/22/01(6) [JPY] 286,100,000 2,586,374
- -------------------------------------------------------------------------------------------------------------------
Jamaica (Government of) 1990 Refinancing
Agreement Nts., Tranche A, 6.125%, 10/16/00(2,6) 49,999 47,625
- -------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation
Agreement, Tranche B, 5.906%, 1/1/09(2,6) 1,674,000 1,514,970
- -------------------------------------------------------------------------------------------------------------------
Panama Working Capital Loan Sinking Fund Nts.,
5.597%, 1/13/00(2,6) 250,000 228,750
- -------------------------------------------------------------------------------------------------------------------
PT Bank Negara Indonesia Gtd. Nts.:
Series 3 yr., 9.156%, 8/25/01(2,6) 1,670,000 1,411,150
Series 4 yr., 9.406%, 8/25/02(2,6) 890,000 725,350
- -------------------------------------------------------------------------------------------------------------------
PT Lippo Bank Nts.:
8.906%, 8/25/00(2,6) 1,050,000 934,500
9.156%, 8/25/01(2,6) 1,575,000 1,330,875
9.406%, 8/25/02(2,6) 350,000 285,250
- -------------------------------------------------------------------------------------------------------------------
Trinidad & Tobago Loan Participation Agreement:
Tranche A, 1.148%, 9/30/00(2,6) [JPY] 46,763,636 399,689
Tranche B, 1.148%, 9/30/00(2,6) [JPY] 155,863,426 1,332,166
-----------
Total Loan Participations (Cost $14,825,954) 16,414,433
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--12.3%
- -------------------------------------------------------------------------------------------------------------------
CHEMICALS--1.3%
Reliance Industries Ltd.:
10.25% Unsec. Debs., Series B, 1/15/2097 3,900,000 3,126,412
10.25% Unsec. Nts., Series B, 1/15/20977 250,000 200,411
-----------
3,326,823
- -------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES--0.0%
TAG Heuer International SA, 12% Sr. Sub. Nts., 12/15/05(6,8) 70,000 77,987
- -------------------------------------------------------------------------------------------------------------------
ENERGY--0.5%
Empresa Electrica del Norte Grande SA, 7.75%
Bonds, 3/15/06(6,8) 2,310,000 1,229,992
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL--6.8%
Aktiebolaget Spintab, 5.50% Bonds, Series 169, 9/17/03 [SEK] 13,800,000 1,655,083
- -------------------------------------------------------------------------------------------------------------------
Allgemeine Hypotheken Bank AG, 5% Sec. Nts.,
Series 501, 9/2/09 [EUR] 1,400,000 1,425,023
- -------------------------------------------------------------------------------------------------------------------
Bakrie Investindo:
Zero Coupon Promissory Nts., 3/16/99(4,6) [IDR] 5,990,000,000 107,540
Zero Coupon Promissory Nts., 7/10/1998(4,6) [IDR] 2,000,000,000 35,907
</TABLE>
18 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCIAL CONTINUED
Bayerische Vereinsbank AG, 5% Sec. Nts.,
Series 661, 7/28/04 [DEM] 4,990,208 $ 5,365,592
- -------------------------------------------------------------------------------------------------------------------
Dresdner Funding Trust II, 5.79% Sub. Nts.,
6/30/11(6,8) [EUR] 2,670,000 2,622,037
- -------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.,
6.875% Sr. Unsec. Nts., 6/7/02 [GBP] 2,370,000 3,917,790
- -------------------------------------------------------------------------------------------------------------------
Ongko International Finance Co. BV, 10.50%
Gtd. Nts., 3/29/04(4,6) 365,000 12,775
- -------------------------------------------------------------------------------------------------------------------
PT Polysindo Eka Perkasa:
11% Nts., 6/18/03(4,6) 500,000 65,000
11% Nts., 7/2/03(4,6) 1,000,000 130,000
20% Nts., 3/6/00(4) [IDR] 3,000,000,000 46,679
24% Nts., 6/16/03(4) [IDR] 2,000,000,000 31,119
24% Nts., 6/19/03(4) [IDR] 4,107,500,000 63,911
- -------------------------------------------------------------------------------------------------------------------
SanLuis Corp., SA de CV, 8.875% Sr. Unsec. Nts.,
3/18/08 1,770,000 1,500,075
-----------
16,978,531
- -------------------------------------------------------------------------------------------------------------------
HOUSING--0.5%
Internacional de Ceramica SA, 9.75% Unsec
Unsub. Nts., 8/1/02(7,9,10) 700,000 563,500
- -------------------------------------------------------------------------------------------------------------------
Internacional de Ceramica SA, 9.75% Unsec
Unsub. Nts., 8/1/02 750,000 603,750
-----------
1,167,250
- -------------------------------------------------------------------------------------------------------------------
MANUFACTURING--0.0%
Mechala Group Jamaica Ltd., 12% Bonds,
2/15/02(4,6,8) 250,000 93,125
- -------------------------------------------------------------------------------------------------------------------
MEDIA/ENTERTAINMENT: TELECOMMUNICATIONS--2.9%
Netia Holdings BV, 0%/11% Sr. Disc. Nts.,
11/1/07(11) [DEM] 1,300,000 440,657
- -------------------------------------------------------------------------------------------------------------------
Netia Holdings II BV, 13.50% Sr. Nts.,
6/15/09(7) [EUR] 2,650,000 2,804,611
- -------------------------------------------------------------------------------------------------------------------
NTL, Inc., 9.50% Sr. Unsec. Unsub. Nts., Series B,
4/1/08 [GBP] 580,000 940,874
- -------------------------------------------------------------------------------------------------------------------
Telewest Communications plc, 0%/9.875% Sr. Nts.,
4/15/09(7,11) [GBP] 3,110,000 3,073,115
-----------
7,259,257
- -------------------------------------------------------------------------------------------------------------------
TRANSPORTATION--0.3%
General Motors Acceptance Corp., 6.875% Nts., Series EC,
9/9/04 [GBP] 430,000 696,447
-----------
Total Corporate Bonds and Notes (Cost $35,178,491) 30,829,412
</TABLE>
19 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STRUCTURED INSTRUMENTS--12.5%
Citibank (New York) Mexican Linked Nts.:
27.40%, 9/20/01 $ 2,775,000 $ 2,769,450
28.60%, 9/13/01 2,570,000 2,564,860
- -------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Indonesian Rupiah Linked Nts., 13.86%, 8/3/00 2,220,000 1,777,110
Indonesian Rupiah Linked Nts., 13.667%, 6/30/00 2,665,000 2,097,355
New York, Philippine Peso/Japanese Yen Linked Nts.,
10.55%, 5/12/00 2,600,000 2,097,420
Russian OFZ Linked Nts.:
25%, 2/6/02(2) [RUR] 625,200 2,029
25%, 5/22/02(2) [RUR] 625,200 1,920
25%, 6/5/02(2) [RUR] 625,200 1,930
25%, 9/18/02(2) [RUR] 625,200 1,823
25%, 10/9/02(2) [RUR] 625,200 1,779
25%, 1/22/03(2) [RUR] 625,200 1,670
25%, 2/5/03(2) [RUR] 625,200 1,685
25%, 5/21/03(2) [RUR] 625,200 1,630
25%, 6/4/03(2) [RUR] 625,200 1,623
25%, 9/17/03(2) [RUR] 625,200 1,598
25%, 10/8/03(2) [RUR] 625,200 1,563
25%, 1/21/04(2) [RUR] 625,200 1,494
- -------------------------------------------------------------------------------------------------------------------
Deutsche Morgan Grenfell, Russian OFZ Linked Nts.,
Zero Coupon, 187.65%, 12/15/01(5) [RUR] 2,143,000 3,864
- -------------------------------------------------------------------------------------------------------------------
Hong Kong & Shanghai Banking Corp. Linked Receipt Nts.,
Linked to the Korean Exchange Bank Floating Nts.
due 12/23/99, Zero Coupon, 13.32%, 12/28/99(5) 2,900,000 2,831,125
- -------------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc. Russian OFZ Linked Nts.:
Series L, 25%, 2/6/02(2) [RUR] 566,080 10,812
Series L, 25%, 5/22/02(2) [RUR] 566,080 10,229
Series L, 25%, 6/5/02(2) [RUR] 566,080 10,274
Series L, 25%, 9/18/02(2) [RUR] 566,080 9,713
Series L, 25%, 10/9/02(2) [RUR] 566,080 9,473
Series L, 25%, 1/22/03(2) [RUR] 566,080 8,888
Series L, 25%, 2/5/03(2) [RUR] 566,080 8,973
Series L, 25%, 5/21/03(2) [RUR] 566,080 8,681
Series L, 25%, 6/4/03(2) [RUR] 566,080 8,636
Series L, 25%, 9/17/03(2) [RUR] 566,080 8,513
Series L, 25%, 10/8/03(2) [RUR] 566,080 8,210
Series L, 25%, 1/21/04(2) [RUR] 566,080 7,986
Series L, Zero Coupon, 53.77%, 12/15/01(5) [RUR] 1,940,000 20,588
- -------------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co. Inc. Turkey Treasury Bond Linked Nts.:
81%, 1/9/01(2) [TRL] 1,926,700,000,000 4,455,825
85.25%, 1/7/01(2) [TRL] 1,110,000,000,000 2,567,066
87.165%, 1/7/01(2) [TRL] 541,348,794,013 1,237,731
</TABLE>
20 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE MARKET VALUE
AMOUNT(1) SEE NOTE 1
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STRUCTURED INSTRUMENTS CONTINUED
Standard Chartered Bank:
Argentine Peso Linked Nts., 13.512%, 3/10/00 $ 2,612,000 $ 2,632,635
Argentine Peso Linked Nts., 16.10%, 3/3/00 1,300,000 1,312,740
Indian Rupee/Japanese Yen Linked Nts.,
Zero Coupon, 12.73%, 8/17/01(5) 3,525,000 2,586,998
Indonesian Rupiah Linked Nts., 18.19%, 8/18/00 1,300,000 1,251,250
Philippine Peso/Japanese Yen Linked Nts.,
16.04%, 5/10/00 1,300,000 974,350
-----------
Total Structured Instruments (Cost $34,690,328) 31,311,499
DATE STRIKE CONTRACTS
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
OPTIONS PURCHASED--0.0%
European Monetary Unit Call Opt. 10/4/99 EUR 1.078 26,840,000 66,832
- -------------------------------------------------------------------------------------------------------------------
Hong Kong Dollar Put Opt. 1/11/00 HKD 7.894 22,497,900 2,025
- -------------------------------------------------------------------------------------------------------------------
Japanese Yen Call Opt. 10/6/99 JPY 100.000 259,000,000 --
- -------------------------------------------------------------------------------------------------------------------
Japanese Yen Call Opt. 10/27/99 JPY 106.600 128,000,000 25,728
- -------------------------------------------------------------------------------------------------------------------
Japanese Yen Call Opt. 10/20/99 JPY 108.500 533,000,000 15,457
- -------------------------------------------------------------------------------------------------------------------
Mexican Peso Put Opt.6 10/8/99 MXN 11.000 29,810,000 2,981
-----------
Total Options Purchased (Cost $778,039) 113,023
FACE
AMOUNT(1)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--3.8%
Repurchase agreement with PaineWebber, Inc., 5.29%,
dated 9/30/99, to be repurchased at $9,401,381 on 10/1/99,
collateralized by U.S. Treasury Bills, 12/23/99--7/20/00, with
a value of $8,629,184, U. S. Treasury Nts., 7.875%, 11/15/04,
with a value of $964,883 (Cost $9,400,000) $ 9,400,000 9,400,000
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $254,946,748) 95.6% 239,214,105
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES 4.4 11,110,186
----------- -----------
NET ASSETS 100.0% $250,324,291
----------- -----------
----------- -----------
</TABLE>
21 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS CONTINUED
- --------------------------------------------------------------------------------
FOOTNOTES TO STATEMENT OF INVESTMENTS
1. Face amount is reported in U.S. Dollars, except for those denoted in the
following currencies:
ARP Argentine Peso IDR Indonesian Rupiah
AUD Australian Dollar JPY Japanese Yen
CAD Canadian Dollar MXN Mexican Nuevo Peso
DEM German Mark NOK Norwegian Krone
DKK Danish Krone NZD New Zealand Dollar
EUR Euro PLZ Polish Zloty
FRF French Franc RUR Russian Ruble
GBP British Pound Sterling SEK Swedish Krona
HKD Hong Kong Dollar TRL Turkish Lira
2. Represents the current interest rate for a variable rate security.
3. Represents the current interest rate for an increasing rate security.
4. Non-income-producing--issuer is in default.
5. For zero coupon bonds, the interest rate shown is the effective yield on the
date of purchase.
6. Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.
7. 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 $6,641,637 or 2.65% of the Fund's net
assets as of September 30, 1999.
8. Securities with an aggregate market value of $479,250 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
9. A sufficient amount of liquid assets has been designated to cover outstanding
written options, as follows:
<TABLE>
<CAPTION>
FACE CONTRACTS EXPIRATION EXERCISE PREMIUM MARKET VALUE
SUBJECT TO PUT DATE PRICE RECEIVED SEE NOTE 1
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mexican Nuevo Peso Put Option 29,810,000 10/8/99 MXN 11.00 $ 66,937 $ --
Polish Zloty Put Option 22,273,537 11/4/99 PLZ 4.18 121,790 54,080
----------------------------
$188,727 $54,080
----------------------------
----------------------------
</TABLE>
10. A sufficient amount of securities has been designated to cover outstanding
foreign currency exchange contracts. See Note 5 of Notes to Financial
Statements.
11. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.
22 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
FOOTNOTES TO STATEMENT OF INVESTMENTS CONTINUED
DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC DIVERSIFICATION, AS A
PERCENTAGE OF TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS:
<TABLE>
<CAPTION>
GEOGRAPHIC DIVERSIFICATION MARKET VALUE PERCENT
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Germany $ 18,538,210 7.7%
Argentina 17,662,338 7.4
Mexico 17,171,211 7.2
United States 15,068,133 6.3
Turkey 14,885,847 6.2
Brazil 14,290,265 6.0
Indonesia 11,361,016 4.7
Norway 9,926,858 4.1
Venezuela 8,905,079 3.7
Italy 8,467,809 3.5
Algeria 8,204,107 3.4
Great Britain 7,306,678 3.1
The Netherlands 6,004,012 2.5
India 5,913,820 2.5
Japan 5,658,336 2.4
South Africa 5,476,361 2.3
Jordan 5,003,388 2.1
Peru 4,794,314 2.0
Bulgaria 4,570,650 1.9
Spain 4,513,792 1.9
Ivory Coast 4,471,986 1.9
Poland 4,382,450 1.8
Russia 4,349,319 1.8
Canada 3,714,652 1.6
Philippines 3,071,770 1.3
Korea, Republic of (South) 2,831,125 1.2
Denmark 2,599,924 1.1
Slovakia 2,514,400 1.1
Nigeria 2,401,151 1.0
Vietnam 1,995,469 0.8
Panama 1,991,116 0.8
Australia 1,732,723 0.7
Trinidad & Tobago 1,731,855 0.7
New Zealand 1,692,902 0.7
Sweden 1,655,083 0.7
Morocco 1,641,269 0.7
Chile 1,229,992 0.5
Colombia 1,088,482 0.5
Ecuador 177,476 0.1
Jamaica 140,750 0.1
Switzerland 77,987 0.0
--------------------------------
Total $239,214,105 100.0%
--------------------------------
--------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
23 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Investments, at value (cost $254,946,748)--see accompanying statement $ 239,214,105
- ----------------------------------------------------------------------------------------------------
Cash 195,474
- ----------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency exchange contracts--Note 5 1,271,564
- ----------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and principal paydowns 6,194,641
Investments sold 5,428,257
Shares of beneficial interest sold 1,718,895
Daily variation on futures contracts--Note 6 99,997
Other 302,339
---------------
Total assets 254,425,272
- ----------------------------------------------------------------------------------------------------
LIABILITIES
Unrealized depreciation on foreign currency exchange contracts--Note 5 139,602
- ----------------------------------------------------------------------------------------------------
Options written, at value (premiums received $188,727)--
see accompanying statement--Note 7 54,080
- ----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 1,717,292
Dividends 1,289,101
Shares of beneficial interest redeemed 564,799
Distribution and service plan fees 148,440
Closed foreign currency exchange contracts 75,197
Transfer and shareholder servicing agent fees 37,037
Daily variation on futures contracts--Note 6 10,507
Other 64,926
---------------
Total liabilities 4,100,981
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
NET ASSETS $250,324,291
---------------
---------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
Paid-in capital $317,506,115
- ----------------------------------------------------------------------------------------------------
Undistributed net investment income 744,959
- ----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (53,337,044)
- ----------------------------------------------------------------------------------------------------
Net unrealized depreciation on investments and translation of assets and
liabilities denominated in foreign currencies (14,589,739)
---------------
Net assets $250,324,291
---------------
---------------
</TABLE>
24 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE PER SHARE
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$102,236,116 and 24,151,631 shares of beneficial interest outstanding) $4.23
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price) $4.44
- -------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $118,632,046
and 28,102,977 shares of beneficial interest outstanding) $4.22
- -------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $29,456,129 and 6,980,102 shares of beneficial interest outstanding) $4.22
</TABLE>
See accompanying Notes to Financial Statements.
25 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Year Ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME
Interest (net of foreign withholding taxes of $89,821) $ 37,345,712
- ----------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $1,627) 9,222
---------------
Total income 37,354,934
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
EXPENSES
Management fees--Note 4 1,886,864
- ----------------------------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A 248,547
Class B 1,228,808
Class C 289,134
- ----------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4 414,642
- ----------------------------------------------------------------------------------------------------
Shareholder reports 127,249
- ----------------------------------------------------------------------------------------------------
Custodian fees and expenses 68,597
- ----------------------------------------------------------------------------------------------------
Legal, auditing and other professional fees 18,327
- ----------------------------------------------------------------------------------------------------
Trustees' compensation 2,423
- ----------------------------------------------------------------------------------------------------
Other 78,633
---------------
Total expenses 4,363,224
Less expenses paid indirectly--Note 1 (40,358)
---------------
Net expenses 4,322,866
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 33,032,068
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (12,342,461)
Closing of futures contracts (1,258,647)
Closing and expiration of option contracts written--Note 7 1,080,328
Foreign currency transactions (13,602,130)
---------------
Net realized loss (26,122,910)
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on:
Investments 15,641,368
Translation of assets and liabilities denominated in foreign currencies 1,895,302
---------------
Net change 17,536,670
---------------
Net realized and unrealized loss (8,586,240)
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $24,445,828
---------------
---------------
</TABLE>
See accompanying Notes to Financial Statements.
26 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999 1998
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income $ 33,032,068 $ 28,345,575
- ----------------------------------------------------------------------------------------------------------------
Net realized loss (26,122,910) (32,072,921)
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation 17,536,670 (33,393,415)
--------------------------------------
Net increase (decrease) in net assets resulting from operations 24,445,828 (37,120,761)
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A (12,490,131) (11,278,509)
Class B (14,069,900) (12,501,126)
Class C (3,315,800) (2,851,020)
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A -- (464,690)
Class B -- (544,637)
Class C -- (123,007)
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial
interest transactions--Note 2:
Class A 7,013,720 8,857,621
Class B 1,272,305 28,481,664
Class C 2,430,203 6,178,227
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) 5,286,225 (21,366,238)
- ----------------------------------------------------------------------------------------------------------------
Beginning of period 245,038,066 266,404,304
--------------------------------------
End of period (including undistributed net investment
income of $744,959 and $1,061,401, respectively) $250,324,291 $245,038,066
--------------------------------------
--------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
27 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995(1)
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $4.32 $5.51 $5.49 $5.10 $5.00
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .58 .56 .52 .52 .15
Net realized and unrealized gain (loss) (.14) (1.20) .08 .40 .10
----------------------------------------------------------------
Total income (loss) from
investment operations .44 (.64) .60 .92 .25
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.53) (.53) (.53) (.53) (.15)
Distributions from net realized gain -- (.02) (.05) -- --
----------------------------------------------------------------
Total dividends and distributions
to shareholders (.53) (.55) (.58) (.53) (.15)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.23 $4.32 $5.51 $5.49 $5.10
----------------------------------------------------------------
----------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 10.58% (12.50)% 11.33% 18.82% 5.13%
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $102,236 $ 97,404 $114,847 $52,128 $3,984
- ----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $101,948 $108,264 $ 89,112 $19,817 $2,566
- ---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 13.47% 11.09% 9.24% 9.60% 9.94%
Expenses, before voluntary assumption
and indirect expenses 1.26% 1.24%(4) 1.28%(4) 1.59%(4) 1.59%(4)
Expenses, net of voluntary assumption
and indirect expenses 1.25% N/A N/A 1.49% 0.41%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 285% 446% 280% 273% 122%
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. 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, 1999, were $628,527,274 and $544,904,486, respectively.
See accompanying Notes to Financial Statements
28 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
<TABLE>
<CAPTION>
CLASS B YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995(1)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $4.31 $5.50 $5.48 $5.10 $5.00
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .55 .52 .48 .48 .14
Net realized and unrealized gain (loss) (.14) (1.20) .07 .39 .10
----------------------------------------------------------------
Total income (loss) from
investment operations .41 (.68) .55 .87 .24
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.50) (.49) (.48) (.49) (.14)
Distributions from net realized gain -- (.02) (.05) -- --
----------------------------------------------------------------
Total dividends and distributions
to shareholders (.50) (.51) (.53) (.49) (.14)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.22 $4.31 $5.50 $5.48 $5.10
----------------------------------------------------------------
----------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 9.79% (13.16)% 10.52% 17.71% 4.92%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $118,632 $119,998 $122,874 $45,207 $3,238
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $122,878 $128,789 $ 87,557 $17,891 $1,125
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 12.70% 10.33% 8.57% 8.81% 9.20%
Expenses, before voluntary assumption
and indirect expenses 2.02% 2.00%(4) 2.04%(4) 2.36%(4) 2.21%(4)
Expenses, net of voluntary assumption
and indirect expenses 2.01% N/A N/A 2.26% 0.89%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 285% 446% 280% 273% 122%
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to
September 30, 1995.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. 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, 1999, were $628,527,274 and $544,904,486, respectively.
See accompanying Notes to Financial Statements
29 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
FINANCIAL HIGHLIGHTS Continued
<TABLE>
<CAPTION>
CLASS C YEAR ENDED SEPTEMBER 30, 1999 1998 1997 1996 1995(1)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING DATA
Net asset value, beginning of period $4.31 $5.50 $5.48 $5.09 $5.00
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .55 .52 .48 .48 .14
Net realized and unrealized gain (loss) (.14) (1.20) .07 .39 .09
----------------------------------------------------------------
Total income (loss) from
investment operations .41 (.68) .55 .87 .23
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income (.50) (.49) (.48) (.48) (.14)
Distributions from net realized gain -- (.02) (.05) -- --
----------------------------------------------------------------
Total dividends and distributions
to shareholders (.50) (.51) (.53) (.48) (.14)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $4.22 $4.31 $5.50 $5.48 $5.09
----------------------------------------------------------------
----------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE(2) 9.80% (13.16)% 10.52% 17.92% 4.73%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) $29,456 $27,636 $28,684 $10,282 $201
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $28,918 $29,336 $19,883 $ 4,039 $ 97
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income 12.76% 10.33% 8.62% 8.76% 9.36%
Expenses, before voluntary assumption
and indirect expenses 2.02% 2.00%(4) 2.04%(4) 2.36%(4) 2.26%(4)
Expenses, net of voluntary assumption
and indirect expenses 2.01% N/A N/A 2.25% 0.85%
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(5) 285% 446% 280% 273% 122%
</TABLE>
1. For the period from June 15, 1995 (commencement of operations) to September
30, 1995.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the reinvestment
date, and redemption at the net asset value calculated on the last business day
of the fiscal period. Sales charges are not reflected in the total returns.
Total returns are not annualized for periods of less than one full year.
3. Annualized for periods of less than one full year.
4. Expense ratio reflects the effect of expenses paid indirectly by the Fund.
5. 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, 1999, were $628,527,274 and $544,904,486,
respectively.
See accompanying Notes to Financial Statements
30 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. 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 on
investments up to $1 million. Class B and Class C shares may be subject to a
contingent deferred sales charge (CDSC). All classes of shares have identical
rights to earnings, assets and voting privileges, except that each class has its
own expenses directly attributable to that class and exclusive voting rights
with respect to matters affecting that class. Classes A, B and C have separate
distribution and/or service plans. 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.
- --------------------------------------------------------------------------------
SECURITIES 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. Foreign currency exchange contracts are valued based on the
closing prices of the foreign currency contract rates in the London foreign
exchange markets on a daily basis as provided by a reliable bank or dealer.
Options are valued based upon the last sale price on the principal exchange on
which the option is traded or, in the absence of any transactions that day, the
value is based upon the last sale price on the prior trading date if it is
within the spread between the closing bid and asked prices. If the last sale
price is outside the spread, the closing bid is used.
- --------------------------------------------------------------------------------
STRUCTURED NOTES. The Fund invests in foreign currency-linked structured notes
whose market value and redemption price are linked to foreign currency exchange
rates. The structured notes may be leveraged, which increases the notes'
volatility relative to the face of the security. Fluctuations in value of these
securities are recorded as unrealized gains and losses in the accompanying
financial statements. As of September 30, 1999, the market value of these
securities comprised 12.50% of the Fund's net assets and resulted in realized
and unrealized losses of $4,894,003. The Fund also hedges a portion of the
foreign currency exposure generated by these securities, as discussed in Note 5.
31 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued
SECURITY CREDIT RISK. The Fund invests in high yield securities, which may be
subject to a greater degree of credit risk, greater market fluctuations and risk
of loss of income and principal, and may be more sensitive to economic
conditions than lower yielding, higher rated fixed income securities. The Fund
may acquire securities in default, and is not obligated to dispose of securities
whose issuers subsequently default. As of September 30, 1999, securities with an
aggregate market value of $2,581,104, representing 1.03% of the Fund's net
assets, were in default.
- --------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The accounting records of the Fund are maintained
in U.S. dollars. Prices of securities denominated in foreign currencies are
translated into U.S. dollars at the closing rates of exchange. Amounts related
to the purchase and sale of 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 an insolvency proceeding, realization of the value of the
collateral by the Fund may be delayed or limited.
- --------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each class of shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.
- --------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to shareholders. Therefore, no federal
income or excise tax provision is required. As of September 30, 1999, the Fund
had available for federal tax purposes an unused capital loss carryover of
approximately $27,469,000, which expires between 2006 and 2007.
32 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.
- --------------------------------------------------------------------------------
CLASSIFICATION OF DISTRIBUTIONS TO SHAREHOLDERS. Net investment income (loss)
and net realized gain (loss) may differ for financial statement and tax
purposes. The character of 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, 1999, amounts have been reclassified to reflect a
decrease in undistributed net investment income of $3,472,679. Accumulated net
realized loss on investments was decreased by the same amount.
- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.
- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of 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. Dividends-in-kind are recognized as income on the ex-dividend date, at
the current market value of the underlying security. Interest on payment-in-kind
debt instruments is accrued as income at the coupon rate and a market adjustment
is made periodically.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
33 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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, 1999 YEAR ENDED SEPTEMBER 30, 1998
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------
CLASS A
<S> <C> <C> <C> <C>
Sold 11,247,933 $ 48,852,991 11,871,238 $ 60,193,894
Dividends and/or
distributions reinvested 1,806,309 7,837,034 1,567,641 7,767,951
Redeemed (11,446,723) (49,676,305) (11,744,939) (59,104,224)
-----------------------------------------------------------
Net increase 1,607,519 $ 7,013,720 1,693,940 $ 8,857,621
-----------------------------------------------------------
-----------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
CLASS B
<S> <C> <C> <C> <C>
Sold 7,369,029 $ 32,003,600 12,461,105 $ 62,756,778
Dividends and/or
distributions reinvested 1,549,542 6,704,118 1,334,005 6,596,728
Redeemed (8,655,920) (37,435,413) (8,302,252) (40,871,842)
-----------------------------------------------------------
Net increase 262,651 $ 1,272,305 5,492,858 $ 28,481,664
-----------------------------------------------------------
-----------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------
CLASS C
<S> <C> <C> <C> <C>
Sold 2,727,759 $ 11,829,225 3,210,030 $ 16,168,643
Dividends and/or
distributions reinvested 450,539 1,948,375 387,861 1,917,981
Redeemed (2,613,007) (11,347,397) (2,401,923) (11,908,397)
-----------------------------------------------------------
Net increase 565,291 $ 2,430,203 1,195,968 $ 6,178,227
-----------------------------------------------------------
-----------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
3. UNREALIZED GAINS AND LOSSES ON SECURITIES
As of September 30, 1999, net unrealized depreciation on securities and options
written of $15,597,996 was composed of gross appreciation of $5,185,272, and
gross depreciation of $20,783,268.
34 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEES. 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 annual net assets of the Fund, 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 the year ended September
30, 1999 was 0.74% of average annual net assets for each class of shares.
- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
is the transfer and shareholder servicing agent for the Fund and other
Oppenheimer funds. OFS's total costs of providing such services are allocated
ratably to these funds.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.
The compensation paid to (or retained by) the Distributor from the sale of
shares or on the redemption of shares is shown in the table below for the period
indicated.
<TABLE>
<CAPTION>
AGGREGATE CLASS A COMMISSIONS COMMISSIONS COMMISSIONS
FRONT-END FRONT-END ON CLASS A ON CLASS B ON CLASS C
SALES CHARGES SALES CHARGES SHARES SHARES SHARES
ON CLASS A RETAINED BY ADVANCED BY ADVANCED BY ADVANCED BY
YEAR ENDED SHARES DISTRIBUTOR DISTRIBUTOR(1) DISTRIBUTOR(1) DISTRIBUTOR(1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
September 30, 1999 $427,421 $118,394 $41,586 $887,632 $83,883
</TABLE>
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
CONTINGENT DEFERRED CONTINGENT DEFERRED CONTINGENT DEFERRED
SALES CHARGES SALES CHARGES SALES CHARGES
YEAR ENDED RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR RETAINED BY DISTRIBUTOR
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
September 30, 1999 $-- $435,700 $8,730
</TABLE>
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. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
35 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares. The Distributor makes payments to plan recipients quarterly at an annual
rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares of the Fund. For the fiscal year ended September 30, 1999, payments under
the Class A Plan totaled $248,547, all of which was paid by the Distributor to
recipients. That included $15,717 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to
Class A shares in any fiscal year cannot be recovered in subsequent years.
- --------------------------------------------------------------------------------
CLASS B AND CLASS C DISTRIBUTION AND SERVICE PLAN FEES. Under each plan, service
fees and distribution 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 Class B and Class C plans provide for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund under
the plan during the period for which the fee is paid.
The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The asset-based sales charges on Class B
and Class C shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
The Distributor's actual expenses in selling Class B and Class C shares may
be more than the payments it receives from the contingent deferred sales charges
collected on redeemed shares and from the Fund under the plans. If either the
Class B or the Class C 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. The plans
allow for the carry-forward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.
Distribution fees paid to the Distributor for the year ended September 30, 1999,
were as follows:
<TABLE>
<CAPTION>
DISTRIBUTOR'S DISTRIBUTOR'S
AGGREGATE UNREIMBURSED
UNREIMBURSED EXPENSES AS %
TOTAL PAYMENTS AMOUNT RETAINED EXPENSES OF NET ASSETS
UNDER PLAN BY DISTRIBUTOR UNDER PLAN OF CLASS
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class B Plan $1,228,808 $1,008,649 $5,605,885 4.73%
Class C Plan 289,134 154,968 554,577 1.88
</TABLE>
36 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
5. 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.
As of September 30, 1999, the Fund had outstanding foreign currency contracts as
follows:
<TABLE>
<CAPTION>
VALUATION
CONTRACT AS OF
EXPIRATION AMOUNT SEPTEMBER UNREALIZED UNREALIZED
CONTRACT DESCRIPTION DATES (000'S) 30, 1999 APPRECIATION DEPRECIATION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONTRACTS TO PURCHASE
Euro (EUR) 11/19/99 EUR 2,481 $ 2,653,276 $ 54,716 $ --
Euro (EUR) 11/24/99 EUR 2,430 2,599,383 52,572 --
Japanese Yen (JPY) 10/4/99 JPY 1,725,000 16,211,683 1,056,522 --
-----------------------------
1,163,810 --
-----------------------------
CONTRACTS TO SELL
Australian Dollar (AUD) 11/17/99 AUD 1,450 947,010 -- 5,771
British Pound Sterling (GBP) 10/12/99 GBP 3,505 5,772,481 -- 93,961
British Pound Sterling (GBP) 11/29/99 GBP 1,480 2,437,606 -- 3,213
British Pound Sterling (GBP) 11/19/99 GBP 1,600 2,635,217 -- 36,657
Japanese Yen (JPY) 11/24/99 JPY 262,829 2,489,801 157,010 --
New Zealand Dollar (NZD) 11/15/99 NZD 3,320 1,716,077 50,744 --
-----------------------------
107,754 139,602
-----------------------------
Total Unrealized Appreciation and Depreciation $1,271,564 $139,602
-----------------------------
-----------------------------
</TABLE>
37 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. FUTURES CONTRACTS
The Fund may buy and sell futures contracts in order to gain exposure to or to
seek to 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 may recognize a realized gain or loss when the contract is
closed or expires.
Securities held in collateralized accounts to cover initial margin
requirements on open futures contracts are noted in the Statement of
Investments. The Statement of Assets and Liabilities reflects a receivable
and/or payable for the daily mark to market for variation margin.
Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.
As of September 30, 1999, the Fund had outstanding futures contracts as follows:
<TABLE>
<CAPTION>
VALUATION AS OF UNREALIZED
EXPIRATION NUMBER OF SEPTEMBER 30, APPRECIATION
CONTRACT DESCRIPTION DATE CONTRACTS 1999 (DEPRECIATION)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CONTRACTS TO PURCHASE
Euro-German Foreign Government 12/8/99 384 $42,875,367 $ (75,764)
U.S. Long Bond 12/20/99 49 5,582,938 (80,774)
U.S. Treasury 10 yr. 12/20/99 1 110,125 266
----------
(156,272)
----------
CONTRACTS TO SELL
U.K. Long Gilt 12/24/99 11 1,928,438 44,746
----------
$(111,526)
----------
----------
</TABLE>
38 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
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 note
to the Statement of Investments. Options written are reported as a liability in
the Statement of Assets and Liabilities. Gains and losses are reported in the
Statement of Operations.
The risk in writing a call option is that the Fund gives up the opportunity
for profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
in buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist.
Written option activity for the year ended September 30, 1999, 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 as of
September 30, 1998 1,783,440,000 $ 404,348 2,105,362,820 $ 318,516
Options written 2,687,021,594 1,262,262 2,240,924,421 1,734,986
Options closed or expired (2,686,295,380) (935,602) (4,281,896,081) (1,324,600)
Options exercised (1,784,166,214) (731,008) (12,307,623) (540,175)
-----------------------------------------------------------------------------------------
Options outstanding as of
September 30, 1999 -- $ -- 52,083,537 $ 188,727
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
</TABLE>
39 OPPENHEIMER INTERNATIONAL BOND FUND
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. ILLIQUID OR RESTRICTED SECURITIES
As of September 30, 1999, 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 also 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 limitation. The aggregate value of illiquid or restricted
securities subject to this limitation as of September 30, 1999, was $23,128,925,
which represents 9.24% of the Fund's net assets, of which $77,987 is considered
restricted. Information concerning restricted securities is as follows:
<TABLE>
<CAPTION>
VALUATION
PER UNIT AS OF
SEPTEMBER 30,
SECURITY ACQUISITION DATE COST PER UNIT 1999
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS
Tag Heuer International SA, 12% Sr. Sub. Nts.,
12/15/05 5/14/96 105.25% 111.41%
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
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 Oppenheimer funds 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,
1999.
<PAGE>
Appendix A
RATINGS DEFINITIONS
Below are summaries of the rating definitions used by the nationally-recognized
rating agencies listed below. Those ratings represent the opinion of the agency
as to the credit quality of issues that they rate. The summaries below are based
upon publicly-available information provided by the rating organizations.
Moody's Investors Service, Inc.
Long-Term (Taxable) Bond Ratings
Aaa: Bonds rated Aaa are judged to be the best quality. They 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 are the lowest class of rated bonds and can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier "1" indicates that the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range ranking and the modifier "3" indicates a ranking in the lower end of
the category.
Short-Term Ratings - Taxable Debt
These ratings apply to the ability of issuers to repay punctually senior debt
obligations having an original maturity not exceeding one year:
Prime-1: Issuer has a superior ability for repayment of senior short-term debt
obligations.
Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage, while sound, may be subject to
variation. Capitalization characteristics, while appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions may
be more pronounced. Variability in earnings and profitability may result in
changes in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuer does not fall within any Prime rating category.
Standard & Poor's Rating Services
Long-Term Credit Ratings
AAA: Bonds rated "AAA" have the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: Bonds rated "AA" differ from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.
A: Bonds rated "A" are somewhat more susceptible to adverse effects of changes
in circumstances and economic conditions than obligations in higher-rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB: Bonds rated BBB exhibit adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity of the obligor to meet its financial commitment on the
obligation.
Bonds rated BB, B, CCC, CC and C are regarded as having significant speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: Bonds rated BB are less vulnerable to nonpayment than other speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B: A bond rated B is more vulnerable to nonpayment than an obligation rated BB,
but the obligor currently has the capacity to meet its financial commitment on
the obligation.
CCC: A bond rated CCC is currently vulnerable to nonpayment, and is dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may used where a bankruptcy petition has been filed or similar
action has been taken, but payments on this obligation are being continued.
D: Bonds rated D are in default. Payments on the obligation are not being
made on the date due.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant noncredit
risks.
Short-Term Issue Credit Ratings
A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, a plus (+) sign
designation indicates the issuer's capacity to meet its financial obligation is
very strong.
A-2: Obligation is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than obligations in higher rating
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
A-3: Exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity of the obligor to meet its financial commitment on the obligation.
B: Regarded as having significant speculative characteristics. The obligor
currently has the capacity to meet its financial commitment on the obligation.
However, it faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: Currently vulnerable to nonpayment and is dependent upon favorable
business, financial, and economic conditions for the obligor to meet its
financial commitment on the obligation.
D: In payment default. Payments on the obligation have not been made on the
due date. The rating may also be used if a bankruptcy petition has been
filed or similar actions jeopardize payments on the obligation.
Fitch IBCA, Inc.
International Long-Term Credit Ratings
Investment Grade:
AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A: High Credit Quality. "A" ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable to
changes in circumstances or in economic conditions than is the case for
higher ratings.
BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
Speculative Grade:
BB: Speculative. "BB" ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse economic
change over time. However, business or financial alternatives may be
available to allow financial commitments to be met.
B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC, CC C: High Default Risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.
DDD, DD, and D: Default. Securities are not meeting current obligations and
are extremely speculative. "DDD" designates the highest potential for
recovery of amounts outstanding on any securities involved.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the rating category. Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."
International Short-Term Credit Ratings
F1: Highest credit quality. Strongest capacity for timely payment. May have an
added "+" to denote exceptionally strong credit feature.
F2: Good credit quality. A satisfactory capacity for timely payment, but the
margin of safety is not as great as in higher ratings.
F3: Fair credit quality. Capacity for timely payment is adequate. However,
near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment, plus vulnerability to
near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility, Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D: Default. Denotes actual or imminent payment default.
Duff & Phelps Credit Rating Co. Ratings
Long-Term Debt and Preferred Stock
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.
A+, A & A-: Protection factors are average but adequate. However, risk factors
are more variable in periods of greater economic stress.
BBB+, BBB & BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective financial protection factors fluctuate according to
industry conditions. Overall quality may move up or down frequently within the
category.
B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a higher of
lower rating grade.
CCC: Well below investment-grade securities. Considerable uncertainty exists as
to timely payment of principal, interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD: Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP: Preferred stock with dividend arrearages.
Short-Term Debt:
High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free
U.S. Treasury short-term debt.
D-1: Very high certainty of timely payment. Risk factors are minor.
D-1-: High certainty of timely payment. Risk factors are very small.
Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.
Satisfactory Grade:
D-3: Satisfactory liquidity and other protection factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.
Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.
Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.
<PAGE>
B-1
Appendix B
Industry Classifications
Aerospace/Defense Food and Drug Retailers
Air Transportation Gas Utilities
Asset-Backed Health Care/Drugs
Auto Parts and Equipment Health Care/Supplies & Services
Automotive Homebuilders/Real Estate
Bank Holding Companies Hotel/Gaming
Banks Industrial Services
Beverages Information Technology
Broadcasting Insurance
Broker-Dealers Leasing & Factoring
Building Materials Leisure
Cable Television Manufacturing
Chemicals Metals/Mining
Commercial Finance Nondurable Household Goods
Communication Equipment Office Equipment
Computer Hardware Oil - Domestic
Computer Software Oil - International
Conglomerates Paper
Consumer Finance Photography
Consumer Services Publishing
Containers Railroads & Truckers
Convenience Stores Restaurants
Department Stores Savings & Loans
Diversified Financial Shipping
Diversified Media Special Purpose Financial
Drug Wholesalers Specialty Printing
Durable Household Goods Specialty Retailing
Education Steel
Electric Utilities Telecommunications - Long Distance
Electrical Equipment Telephone - Utility
Electronics Textile, Apparel & Home Furnishings
Energy Services Tobacco
Entertainment/Film Trucks and Parts
Environmental Wireless Services
Food
<PAGE>
C-7
Appendix C
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A
shares1 of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.2 That is because
of the economies of sales efforts realized by OppenheimerFunds Distributor,
Inc., (referred to in this document as the "Distributor"), or by dealers or
other financial institutions that offer those shares to certain classes of
investors.
Not all waivers apply to all funds. For example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.
For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans: (1) plans
qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, (2)
non-qualified deferred compensation plans, (3) employee benefit plans3 (4) Group
Retirement Plans4 (5) 403(b)(7) custodial plan accounts (6) Individual
Retirement Accounts ("IRAs"), including traditional IRAs, Roth IRAs, SEP-IRAs,
SARSEPs or SIMPLE plans
The interpretation of these provisions as to the applicability of a special
arrangement or waiver in a particular case is in the sole discretion of the
Distributor or the transfer agent (referred to in this document as the
"Transfer Agent") of the particular Oppenheimer fund. These waivers and
special arrangements may be amended or terminated at any time by a
particular fund, the Distributor, and/or OppenheimerFunds, Inc. (referred
to in this document as the "Manager"). Waivers that apply at the time
shares are redeemed must be requested by the shareholder and/or dealer in
the redemption request.
- --------------
1. Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
2. In the case of Oppenheimer Senior Floating Rate Fund, a
continuously-offered closed-end fund, references to contingent deferred
sales charges mean the Fund's Early Withdrawal Charges and references to
"redemptions" mean "repurchases" of shares.
3. An "employee benefit plan" means any plan or arrangement, whether or not
it is "qualified" under the Internal Revenue Code, under which Class A
shares of an Oppenheimer fund or funds are purchased by a fiduciary or
other administrator for the account of participants who are employees of a
single employer or of affiliated employers. These may include, for example,
medical savings accounts, payroll deduction plans or similar plans. The
fund accounts must be registered in the name of the fiduciary or
administrator purchasing the shares for the benefit of participants in the
plan.
4. The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase Class A shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution designated by the
group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group
Retirement Plan" also includes qualified retirement plans and non-qualified
deferred compensation plans and IRAs that purchase Class A shares of an
Oppenheimer fund or funds through a single investment dealer, broker or
other financial institution that has made special arrangements with the
Distributor enabling those plans to purchase Class A shares at net asset
value but subject to the Class A contingent deferred sales charge.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain
Cases
Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial
Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge
(unless a waiver applies).
There is no initial sales charge on purchases of Class A shares of any
of the Oppenheimer funds in the cases listed below. However, these purchases may
be subject to the Class A contingent deferred sales charge if redeemed within 18
months of the end of the calendar month of their purchase, as described in the
Prospectus (unless a waiver described elsewhere in this Appendix applies to the
redemption). Additionally, on shares purchased under these waivers that are
subject to the Class A contingent deferred sales charge, the Distributor will
pay the applicable commission described in the Prospectus under "Class A
Contingent Deferred Sales Charge."3 This waiver provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases by a Retirement Plan (other than an IRA or 403(b)(7)
custodial plan) that: (1) buys shares costing $500,000 or more, or (2) has,
at the time of purchase, 100 or more eligible employees or total plan
assets of $500,000 or more, or (3) certifies to the Distributor that it
projects to have annual plan purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored 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 those 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.
|_| Purchases of Class A shares by Retirement Plans that have any of the
following record-keeping arrangements: (1) The record keeping is performed
by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") on a daily
valuation basis for the Retirement Plan. On the date the plan sponsor signs
the record-keeping service agreement with Merrill Lynch, the Plan must have
$3 million or more of its assets invested in (a) mutual funds, other than
those advised or managed by Merrill Lynch Asset Management, L.P. ("MLAM"),
that are made available under a Service Agreement between Merrill Lynch and
the mutual fund's principal underwriter or distributor, and (b) funds
advised or managed by MLAM (the funds described in (a) and (b) are referred
to as "Applicable Investments"). (2) The record keeping for the Retirement
Plan is performed on a daily valuation basis by a 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
record keeping service agreement with Merrill Lynch, the Plan must have $3
million or more of its assets (excluding assets invested in money market
funds) invested in Applicable Investments. (3) The record keeping for a
Retirement Plan is handled under a service agreement with Merrill Lynch and
on the date the plan sponsor signs that agreement, the Plan has 500 or more
eligible employees (as determined by the Merrill Lynch plan conversion
manager). Purchases by a Retirement Plan whose record keeper had a
cost-allocation agreement with the Transfer Agent on or before May 1, 1999.
II. Waivers of Class A Sales Charges of Oppenheimer Funds
A. 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 (and no commissions are paid by the Distributor on such
purchases):
|_| The Manager or its affiliates.
|_| Present or former officers, directors, trustees and employees (and
their "immediate families") of the Fund, the Manager and its
affiliates, and retirement plans established by them for their
employees. The term "immediate family" refers to one's spouse,
children, grandchildren, grandparents, parents, parents-in-law,
brothers and sisters, sons- and daughters-in-law, a sibling's
spouse, a spouse's siblings, aunts, uncles, nieces and nephews;
relatives by virtue of a remarriage (step-children, step-parents,
etc.) are included.
|_| Registered management investment companies, or separate accounts
of insurance companies having an agreement with the Manager or the
Distributor for that purpose.
|_| Dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees.
|_| Employees and registered representatives (and their spouses) of
dealers or brokers described above or financial institutions that
have entered into sales arrangements with such dealers or brokers
(and which are identified as such to the Distributor) or with the
Distributor. The purchaser must certify to the Distributor at the
time of purchase that the purchase is for the purchaser's own
account (or for the benefit of such employee's spouse or minor
children).
|_| Dealers, brokers, banks 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, bank or
advisor for the purchase or sale of Fund shares.
|_| Investment advisors and financial planners who have entered into
an agreement for this purpose with the Distributor and who charge
an advisory, consulting or other fee for their services and buy
shares for their own accounts or the accounts of their clients.
|_| "Rabbi trusts" that buy shares for their own accounts, if the
purchases are made through a broker or agent or other financial
intermediary that has made special arrangements with the
Distributor for those purchases.
|_| 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 on
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.
|_| 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.
|_| Accounts for which Oppenheimer Capital (or its successor) 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.
|_| A unit investment trust that has entered into an appropriate agreement
with the Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have
entered into an agreement with the Distributor to sell shares to defined
contribution employee retirement plans for which the dealer, broker or
investment adviser provides administration services.
|_| Retirement Plans and deferred compensation plans and trusts used
to fund those plans (including, for example, plans qualified or
created under sections 401(a), 401(k), 403(b) or 457 of the
Internal Revenue Code), in each case if those purchases are made
through a broker, agent or other financial intermediary that has
made special arrangements with the Distributor for those
purchases.
|_| 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.
|_| A qualified Retirement Plan 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, if that arrangement was consummated and share
purchases commenced by December 31, 1996.
B. 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 sales charges (and no commissions are paid by the Distributor on such
purchases):
|_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_| Shares purchased by the reinvestment of 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.
|_| Shares purchased through a broker-dealer that has entered into a
special agreement with the Distributor to allow the broker's customers to
purchase and pay for shares of Oppenheimer funds using 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 deferred 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 shares of
the Fund, and the Distributor may require evidence of qualification for
this waiver.
|_| Shares purchased with the proceeds of maturing principal units of any
Qualified Unit Investment Liquid Trust Series.
|_| Shares purchased by the reinvestment of loan repayments by a
participant in a Retirement Plan for which the Manager or an affiliate acts
as sponsor.
C. 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:
|_| To make Automatic Withdrawal Plan payments that are limited annually to
no more than 12% of the account value adjusted annually.
|_| Involuntary redemptions of shares by operation of law or
involuntary redemptions of small accounts (please refer to
"Shareholder Account Rules and Policies," in the applicable fund
Prospectus).
|_| 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.4
(5) Under a Qualified Domestic Relations Order, as defined in
the Internal Revenue Code, or, in the case of an IRA, a
divorce or separation agreement described in Section 71(b)
of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue Code.
(7) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.
(9) Separation from service.5
(10) Participant-directed redemptions to purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the Manager)
if the plan has made special arrangements with the Distributor.
(11) Plan termination or "in-service distributions, if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.
|_| For distributions from Retirement Plans having 500 or more
eligible employees, except distributions due to termination of all
of the Oppenheimer funds as an investment option under the Plan.
|_| For distributions from 401(k) plans sponsored by broker-dealers
that have entered into a special agreement with the Distributor
allowing this waiver.
III. Waivers of Class B and Class C Sales Charges of Oppenheimer Funds
The Class B and Class C contingent deferred sales charges will not be applied to
shares purchased in certain types of transactions or redeemed in certain
circumstances described below.
A. 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:
|_| Shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," in the applicable Prospectus.
|_| 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.
|_| Distributions from accounts for which the broker-dealer of record
has entered into a special agreement with the Distributor allowing
this waiver.
|_| Redemptions of Class B shares 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.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust
from accounts of clients of financial institutions that have
entered into a special arrangement with the Distributor for this
purpose.
|_| Redemptions requested in writing by a Retirement Plan sponsor of Class C
shares of an
|_| Oppenheimer fund in amounts of $1 million or more held by the
Retirement Plan for more than one year, if the redemption proceeds are
invested in Class A shares of one or more Oppenheimer funds.
|_| Distributions from Retirement 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 in an Oppenheimer fund.
(2) To return excess contributions made to a participant's account.
(3) To return contributions made due to a mistake of fact.
(4) To make hardship withdrawals, as defined in the plan.6
(5) To make distributions required under a Qualified Domestic Relations
Order or, in the case of an IRA, a divorce or separation agreement
described in Section 71(b) of the Internal Revenue Code.
(6) To meet the minimum distribution requirements of the Internal Revenue Code.
(7) To make "substantially equal periodic payments" as described in Section
72(t) of the Internal Revenue Code.
(8) For loans to participants or beneficiaries.7
(9) On account of the participant's separation from service.8
(10) Participant-directed redemptions to purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the Manager)
offered as an investment option in a Retirement Plan if the plan has made
special arrangements with the Distributor.
(11) Distributions made on account of a plan termination or "in-service"
distributions, if the redemption proceeds are rolled over directly to an
OppenheimerFunds-sponsored IRA.
(12) Distributions from Retirement Plans having 500 or more eligible
employees, but excluding distributions made because of the Plan's
elimination as investment options under the Plan of all of the Oppenheimer
funds that had been offered.
(13) For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2, as long as the
aggregate value of the distributions does not exceed 10% of the account's
value, adjusted annually.
(14) Redemptions of Class B shares under an Automatic Withdrawal Plan for
an account other than a Retirement Plan, if the aggregate value of the
redeemed shares does not exceed 10% of the account's value, adjusted
annually.
|_| Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the account's
value annually.
B. Waivers for Shares Sold or Issued in Certain Transactions.
The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
|_| Shares sold to the Manager or its affiliates.
|_| Shares sold to registered management investment companies or
separate accounts of insurance companies having an agreement with
the Manager or the Distributor for that purpose.
|_| Shares issued in plans of reorganization to which the Fund is a party.
|_| Shares sold to present or former officers, directors, trustees or
employees (and their "immediate families" as defined above in
Section I.A.) of the Fund, the Manager and its affiliates and
retirement plans established by them for their employees.
IV. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Former Quest for Value Funds
The initial and contingent deferred sales charge rates and waivers for Class A,
Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described below
for certain persons who were shareholders of the former Quest for Value Funds.
To be eligible, those persons must have been shareholders on November 24, 1995,
when OppenheimerFunds, Inc. became the investment advisor to those former Quest
for Value Funds. Those funds include:
<PAGE>
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Quest Small Cap Value Fund
Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Global Value Fund
Oppenheimer Quest Opportunity Value Fund
These arrangements also apply to shareholders of the following funds
when they merged (were reorganized) into various Oppenheimer funds on November
24, 1995:
Quest for Value U.S. Government Income Fund
Quest for Value New York Tax-Exempt Fund
Quest for Value Investment Quality Income Fund
Quest for Value National Tax-Exempt Fund
Quest for Value Global Income Fund
Quest for Value California Tax-Exempt Fund
All of the funds listed above are referred to in this Appendix as the
"Former Quest for Value Funds." The waivers of initial and contingent deferred
sales charges described in this Appendix apply to shares of an Oppenheimer fund
that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an
Oppenheimer fund that was one of the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another
Oppenheimer fund that were acquired pursuant to the merger of any
of the Former Quest for Value Funds into that other Oppenheimer
fund on November 24, 1995.
A. Reductions or Waivers of Class A Sales Charges.
|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for
Value Funds Shareholders.
Purchases by Groups and Associations. The following table sets forth the initial
sales charge rates for Class A shares purchased by members of "Associations"
formed for any purpose other than the purchase of securities. The rates in the
table apply if 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.
<TABLE>
<CAPTION>
Number of Eligible Employees Initial Sales Charge as a Initial Sales Charge as a Commission as % of
or Members % of Offering Price % of Net Amount Invested Offering Price
<S> <C> <C> <C>
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
9 or Fewer 2.50% 2.56% 2.00%
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
At least 10 but not more 2.00% 2.04% 1.60%
than 49
- ------------------------------ ---------------------------- ---------------------------- ----------------------------
</TABLE>
For purchases by 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 in the applicable fund's Prospectus.
Purchases made under this arrangement qualify for the lower of either
the sales charge rate in the table based on the number of members of an
Association, or the sales charge rate that applies under the Right of
Accumulation described in the applicable fund's Prospectus and Statement of
Additional Information. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations also may purchase shares
for their individual or custodial accounts at these reduced sales charge rates,
upon request to the Distributor.
|X| Waiver of Class A Sales Charges for Certain Shareholders. Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
|_| Shareholders 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.
|_| Shareholders who acquired shares of any Former Quest for Value Fund by
merger of any of the portfolios of the Unified Funds.
|X| 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 purchased by the following investors who were
shareholders of any Former Quest for Value Fund:
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.
B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers.
|X| 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, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the 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. Those shares must have been
purchased prior to March 6, 1995 in connection with:
|_| withdrawals under an automatic withdrawal plan holding only either
Class B or Class C shares if the annual withdrawal does not exceed 10% of
the initial value of the account value, adjusted annually, and
|_| 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.
|X| 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, Class B or
Class C shares of an Oppenheimer fund. The shares must have been acquired by the
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
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
|_| redemptions following the death or disability of the shareholder(s) (as
evidenced by a determination of total disability by the U.S. Social
Security Administration);
|_| withdrawals under an automatic withdrawal plan (but only for
Class B or Class C shares) where the annual withdrawals do not
exceed 10% of the initial value of the account value; adjusted
annually, and
|_| 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, Class B
or Class C shares of the Oppenheimer fund described in this section if the
proceeds are invested in the same Class of shares in that fund or another
Oppenheimer fund within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Connecticut Mutual Investment
Accounts, Inc.
The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix) of
the following Oppenheimer funds (each is referred to as a "Fund" in this
section): o Oppenheimer U. S. Government Trust, o Oppenheimer Bond Fund, o
Oppenheimer Disciplined Value Fund and o Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
Connecticut Mutual Liquid Account
Connecticut Mutual Total Return Account
Connecticut Mutual Government Securities Account
CMIA LifeSpan Capital Appreciation Account
Connecticut Mutual Income Account
CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account
CMIA Diversified Income Account
A. Prior Class A CDSC and Class A Sales Charge Waivers.
|_| Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue to
make additional purchases of Class A shares at net asset value without a Class A
initial sales charge, but subject to the Class A contingent deferred sales
charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC").
Under the prior Class A CDSC, if any of those shares are redeemed within one
year of purchase, they will be assessed a 1% contingent deferred sales charge on
an amount equal to the current market value or the original purchase price of
the shares sold, whichever is smaller (in such redemptions, any shares not
subject to the prior Class A CDSC will be redeemed first).
Those shareholders who are eligible for the prior Class A CDSC are:
(1) persons whose purchases of Class A shares of a Fund and other
Former Connecticut Mutual Funds were $500,000 prior to March 18,
1996, as a result of direct purchases or purchases pursuant to
the Fund's policies on Combined Purchases or Rights of
Accumulation, who still hold those shares in that Fund or other
Former Connecticut Mutual Funds, and
(2) persons whose intended purchases under a Statement of Intention
entered into prior to March 18, 1996, with the former general
distributor of the Former Connecticut Mutual Funds to purchase
shares valued at $500,000 or more over a 13-month period
entitled those persons to purchase shares at net asset value
without being subject to the Class A initial sales charge.
Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this arrangement
they will be subject to the prior Class A CDSC.
|_| Class A Sales Charge Waivers. Additional Class A shares of a Fund
may be purchased without a sales charge, by a person who was in one (or more) of
the categories below and acquired Class A shares prior to March 18, 1996, and
still holds Class A shares:
(1) any purchaser, provided the total initial amount invested in the Fund
or any one or more of the Former Connecticut Mutual Funds totaled $500,000
or more, including investments made pursuant to the Combined Purchases,
Statement of Intention and Rights of Accumulation features available at the
time of the initial purchase and such investment is still held in one or
more of the Former Connecticut Mutual Funds or a Fund into which such Fund
merged;
(2) any participant in a qualified plan, provided that the total initial
amount invested by the plan in the Fund or any one or more of the Former
Connecticut Mutual Funds totaled $500,000 or more;
(3) Directors of the Fund or any one or more of the Former Connecticut
Mutual Funds and members of their immediate families;
(4) employee benefit plans sponsored by Connecticut Mutual Financial
Services, L.L.C. ("CMFS"), the prior distributor of the Former Connecticut
Mutual Funds, and its affiliated companies;
(5) one or more members of a group of at least 1,000 persons (and persons
who are retirees from such group) engaged in a common business, profession,
civic or charitable endeavor or other activity, and the spouses and minor
dependent children of such persons, pursuant to a marketing program between
CMFS and such group; and
(6) an institution acting as a fiduciary on behalf of an individual or
individuals, if such institution was directly compensated by the
individual(s) for recommending the purchase of the shares of the Fund or
any one or more of the Former Connecticut Mutual Funds, provided the
institution had an agreement with CMFS.
Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.
Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State by
Connecticut Mutual Life Insurance Company through the Panorama Separate Account
which is beyond the applicable surrender charge period and which was used to
fund a qualified plan, if that holder exchanges the variable annuity contract
proceeds to buy Class A shares of the Fund.
B. Class A and Class B Contingent Deferred Sales Charge Waivers.
In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
(1) by the estate of a deceased shareholder;
(2) upon the disability of a shareholder, as defined in Section 72(m)(7) of the
Internal Revenue Code;
(3) for retirement distributions (or loans) to participants or
beneficiaries from retirement plans qualified under Sections 401(a) or
403(b)(7)of the Code, or from IRAs, deferred compensation plans created
under Section 457 of the Code, or other employee benefit plans;
(4) as tax-free returns of excess contributions to such retirement or employee
benefit plans;
(5) in whole or in part, in connection with shares sold to any state,
county, or city, or any instrumentality, department, authority, or agency
thereof, that is prohibited by applicable investment laws from paying a
sales charge or commission in connection with the purchase of shares of any
registered investment management company;
(6) in connection with the redemption of shares of the Fund due to a
combination with another investment company by virtue of a
merger, acquisition or similar reorganization transaction;
(7) in connection with the Fund's right to involuntarily redeem or
liquidate the Fund;
(8) in connection with automatic redemptions of Class A shares and
Class B shares in certain retirement plan accounts pursuant to
an Automatic Withdrawal Plan but limited to no more than 12% of
the original value annually; or
(9) as involuntary redemptions of shares by operation of law, or
under procedures set forth in the Fund's Articles of
Incorporation, or as adopted by the Board of Directors of the
Fund.
VI. Special Reduced Sales Charge for Former Shareholders of Advance America
Funds, Inc.
Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Equity Income Fund who
acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those Oppenheimer
funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on
March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a
maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
Convertible Securities Fund
Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this
section) may sell Class M shares at net asset value without any initial sales
charge to the classes of investors listed below who, prior to March 11, 1996,
owned shares of the Fund's then-existing Class A and were permitted to purchase
those shares at net asset value without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and
their "immediate families" as defined in the Fund's Statement of Additional
Information) of the Fund, the Manager and its affiliates, and retirement
plans established by them or the prior investment advisor of the Fund for
their employees,
|_| registered management investment companies or separate accounts of
insurance companies that had an agreement with the Fund's prior
investment advisor or distributor for that purpose,
|_| dealers or brokers that have a sales agreement with the
Distributor, if they purchase shares for their own accounts or for
retirement plans for their employees,
|_| employees and registered representatives (and their spouses) of
dealers or brokers described in the preceding section or financial
institutions that have entered into sales arrangements with those
dealers or brokers (and whose identity is made known to the
Distributor) or with the Distributor, but only if the purchaser
certifies to the Distributor at the time of purchase that the
purchaser meets these qualifications,
|_| dealers, brokers, or registered investment advisors that had
entered into an agreement with the Distributor or the prior
distributor of the Fund specifically providing for the use of
Class M shares of the Fund in specific investment products made
available to their clients, and
|_| dealers, brokers or registered investment advisors that had
entered into an agreement with the Distributor or prior
distributor of the Fund's shares to sell shares to defined
contribution employee retirement plans for which the dealer,
broker, or investment advisor provides administrative services.
<PAGE>
Oppenheimer International Bond Fund
Internet Web Site:
www.oppenheimerfunds.com
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 Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.525.7048
Custodian Bank
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
67890
PX880.02000
<PAGE>
OPPENHEIMER INTERNATIONAL BOND FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
- -------- ---------------------------------
(a) 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.
(b) By-Laws dated 2/28/95: Previously filed with Registrant's Pre-Effective
Amendment No. 1, 5/16/95, and incorporated herein by reference.
(c) (i) Specimen Class A Share Certificate: Filed herewith.
(ii) Specimen Class B Share Certificate: Filed herewith.
(iii) Specimen Class C Share Certificate: Filed herewith.
(d) Investment Advisory Agreement: Previously filed with Registrant's
Pre-Effective Amendment No. 1, 5/16/95, and incorporated herein by
reference.
(e) (i) 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 Dealer Agreement of Oppenheimer Funds Distributor, Inc.:
Previously filed with Pre-Effective Amendment No. 2 of Oppenheimer Trinity
Value Fund (Reg. No. 333-79707), 8/25/99, and incorporated herein by
reference.
(iii) Form of Broker Agreement of Oppenheimer Funds Distributor, Inc.:
Previously filed with Pre-Effective Amendment No. 2 of Oppenheimer Trinity
Value Fund (Reg. No. 333-79707), 8/25/99, and incorporated herein by
reference.
(iv) Form of Agency Agreement of Oppenheimer Funds Distributor, Inc.:
Previously filed with Pre-Effective Amendment No. 2 of Oppenheimer Trinity
Value Fund (Reg. No. 333-79707), 8/25/99, and incorporated herein by
reference.
(f) Form of Deferred Compensation Plan for Disinterested
Trustees/Directors: Filed with Post-Effective Amendment No. 40 to the
Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076),
10/27/98, and incorporated herein by reference.
(g) (i) 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. (ii) Foreign Custody Manager
Agreement between Registrant and The Bank of New York: Previously filed
with Pre-Effective Amendment No. 2 to the Registration Statement of
Oppenheimer World Bond Fund (Reg. 333-48973), 4/23/98, and incorporated
herein by reference.
(h) Not applicable.
(i) Opinion and Consent of Counsel dated 5/25/95: Previously filed with
Registrant's Pre-Effective Amendment No. 2, 5/30/95, and incorporated
herein by reference.
(j) Independent Auditors' Consent: Filed herewith.
(k) Not applicable.
(l) Investment Letter dated 5/30/95 from OppenheimerFunds, Inc. (then named
Oppenheimer Management Corporation) to Registrant: Previously filed with
Registrant's Pre-Effective Amendment No. 2, 5/30/95, and incorporated
herein by reference.
(m) (i) Service Plan and Agreement dated 6/5/95 for Class A shares
under Rule 12b-1: Filed herewith.
(ii) Amended and Restated Distribution and Service Plan and
Agreement for Class B shares, dated 2/24/98, under Rule 12b-1: Previously filed
with Post-Effective Amendment No. 4 to Registration Statement, 11/25/98, and
incorporated herein by reference.
(iii) Amended and Restated Distribution and Service Plan and
Agreement for Class C shares, dated 2/24/98, under Rule 12b-1: Previously filed
with Post-Effective Amendment No. 4 to Registration Statement, 11/25/98, and
incorporated herein by reference.
(n) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 updated through
8/24/99: Previously filed with Pre-Effective Amendment No. 1 to the
Registration Statement of Oppenheimer Senior Floating Rate Fund (Reg. No.
333-82579), 8/27/99, and incorporated herein by reference.
--- Power of Attorney for all Trustees/Directors other than Edward L.
Cameron: Previously filed with Post-Effective Amendment No.41 to the
Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62078),
08/26/99, and incorporated herein by reference.
-- Power of Attorney for Edward L. Cameron: Previously filed with
Post-Effective Amendment No. 5 to the Registration Statement of Oppenheimer
Real Asset Fund (Reg. No. 333-14887), 12/28/99, and incorporated herein by
reference.
Item 24. Persons Controlled by or Under Common Control with the Fund
None.
Item 25. Indemnification
Reference is made to the provisions of Article Seven of Registrant's
Amended and Restated Declaration of Trust filed as Exhibit 23(a) to this
Registration Statement, and incorporated herein by reference.
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 26. Business and Other Connections of the 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 investment
companies, including without limitation those described in Parts A and B hereof
and listed in Item 26(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 Other Business and Connections
with OppenheimerFunds, Inc. During the Past Two Years
Charles E. Albers,
Senior Vice President An officer
and/or portfolio manager of
certain Oppenheimer funds
(since April 1998); a
Chartered Financial
Analyst; formerly, a Vice
President and portfolio
manager for Guardian
Investor Services, the
investment management
subsidiary of The Guardian
Life Insurance Company
(since
1972).
Edward Amberger,
Assistant Vice President Formerly
Assistant Vice President,
Securities Analyst for
Morgan Stanley Dean Witter
(May 1997 - April 1998);
and Research Analyst (July
1996 - May 1997), Portfolio
Manager (February 1992 -
July 1996) and Department
Manager (June 1988 to
February 1992) for The Bank
of New York.
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; 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; he was also
responsible for managing the common stock department and common stock
investments of Connecticut Mutual Life Insurance Co.
Victor Babin,
Senior Vice President None.
Bruce Bartlett,
Senior Vice President An officer
and/or portfolio manager of
certain Oppenheimer funds.
Formerly, a Vice President
and Senior Portfolio
Manager at First of America
Investment Corp.
George Batejan,
Executive Vice President,
Chief Information Officer
Formerly Senior Vice President, Group Executive, and Senior Systems Officer
for American International Group (October 1994 - May 1998).
Richard Bayha,
Senior Vice President None.
John R. Blomfield,
Vice President Formerly Senior
Product Manager (November
1995 - August 1997) of
International Home Foods
and American Home Products
(March 1994 - October
1996).
Connie Bechtolt,
Assistant Vice President None.
Kathleen Beichert,
Vice President None.
Rajeev Bhaman,
Vice President Formerly, Vice
President (January 1992 -
February, 1996) of Asian
Equities for Barclays de
Zoete Wedd, Inc.
Robert J. Bishop,
Vice President Vice President of
Mutual Fund Accounting
(since May 1996); an
officer of other
Oppenheimer funds;
formerly, an Assistant Vice
President of
OppenheimerFunds,
Inc./Mutual Fund Accounting
(April 1994 - May 1996),
and a Fund Controller for
OppenheimerFunds, Inc.
Mark Binning None.
Chad Boll,
Assistant Vice President None
Scott Brooks,
Vice President None.
Kevin Brosmith,
Vice President None.
Jeffrey Burns
Stradley, Ronen Stevens and Young, LLP (February 1998-September 1999)
Morgan Lewis and Bockius, LLP (April 1995- February 1998)
Adele Campbell,
Assistant Vice President & Assistant
Treasurer: Rochester Division
Formerly, Assistant Vice President of Rochester Fund Services, Inc.
Christopher Capot,
Assistant Vice President Assistant
Vice President of Public
Relations at Webster
Financial Corporation
(December 1995 - December
1998).
Michael Carbuto,
Vice President
An officer and/or portfolio manager of certain Oppenheimer funds; Vice
President of Centennial Asset Management Corporation.
John Cardillo,
Assistant Vice President None.
Mark Curry,
Assistant Vice President None.
H.C. Digby Clements,
Vice President:
Rochester Division None.
O. Leonard Darling,
Executive Vice President
and Chief Investment
Officer Chief Investment Officer
(since 6/99); Chief
Executive Officer and
Senior Manager of
HarbourView Asset
Management Corporation;
Trustee (1993 - present) of
Awhtolia College - Greece;
formerly Chief Executive
Officer (1993-June 1999).
William DeJianne, None.
Assistant Vice President
Robert A. Densen,
Senior Vice President None.
Sheri Devereux,
Vice President None.
Craig P. Dinsell
Executive Vice President Formerly,
Senior Vice President of
Human Resources for
Fidelity Investments-Retail
Division (January 1995 -
January 1996), Fidelity
Investments FMR Co.
(January 1996 - June 1997)
and Fidelity Investments
FTPG (June 1997 - January
1998).
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 Asset Management Corporation Shareholder
Services, Inc., Shareholder Financial Services, Inc. and Oppenheimer
Partnership Holdings, Inc. since (September 1995); President and a director
of Centennial Asset Management Corporation (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 Oppenheimer Acquisition Corp.; Vice President and Director of
OppenheimerFunds International, Ltd. and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.
Bruce Dunbar, None.
Vice President
Daniel Engstrom,
Assistant Vice President None.
George Evans,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds.
Edward Everett,
Assistant Vice President None.
George Fahey,
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
OppenheimerFunds,
Inc./Mutual Fund Accounting
(April 1994 - May 1996),
and a Fund Controller for
OppenheimerFunds, Inc.
Leslie A. Falconio,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds
(since 6/99).
Katherine P. Feld,
Vice President and Secretary
Vice President and
Secretary of the
Distributor; Secretary of
HarbourView Asset
Management Corporation, and
Centennial Asset Management
Corporation; Secretary,
Vice President and Director
of Centennial Capital
Corporation; Vice President
and Secretary of
Oppenheimer Real Asset
Management, Inc.
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. 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.
David Foxhoven,
Assistant Vice President
Formerly Manager, Banking Operations Department (July 1996 - November
1998).
Jennifer Foxson,
Vice President None.
Dan Gangemi,
Vice President None.
Erin Gardiner,
Assistant Vice President None.
Daniel Garrity,
Vice President None.
Charles Gilbert,
Assistant Vice President None.
Alan Gilston,
Vice President
Formerly, Vice President (1987 - 1997) for Schroder Capital Management
International.
Jill Glazerman,
Vice President None.
Robyn Goldstein-Liebler
Assistant Vice President None.
Mikhail Goldverg
Assistant Vice President None.
Jeremy Griffiths,
Executive Vice President,
Chief Financial Officer and
Director
Chief Financial Officer and Treasurer (since March Director 1998) of
Oppenheimer Acquisition Corp.; a Member and Fellow of the Institute of
Chartered Accountants; formerly, an accountant for Arthur Young (London,
U.K.).
Robert Grill,
Senior Vice President Formerly,
Marketing Vice President
for Bankers Trust Company
(1993 - 1996); Steering
Committee Member,
Subcommittee Chairman for
American Savings Education
Council (1995 - 1996).
Robert Haley
Assistant Vice President Formerly,
Vice President of
Information Services for
Bankers Trust Company
(January 1991 - November
1997).
Thomas B. Hayes,
Vice President None.
Barbara Hennigar,
Chairman of OppenheimerFunds Formerly Executive Vice President and
Services, a Division of OFI Chief Executive Officer of
OppenheimerFunds Services,
a division of the Manager
.
Dorothy Hirshman, None.
Assistant Vice President
Merryl Hoffman,
Vice President and None.
Senior Counsel
Merrell Hora,
Assistant Vice President
Research Fellow for the University of Minnesota (July 1997- July 1998).
Scott T. Huebl,
Vice President None.
James Hyland,
Assistant Vice President Formerly
Manager of Customer
Research for Prudential
Investments (February 1998
- July 1999).
Kathleen T. Ives,
Vice President None.
William Jaume,
Vice President None.
Frank Jennings,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds.
Andrew Jordan,
Assistant Vice President None.
Deborah Kaback
Vice President Senior Vice
President and Deputy
General Counsel of
Oppenheimer Capital (April
1989-November 1999).
Lewis Kamman
Vice President
Senior Consultant for Bell Atlantic Network Integration, Inc. (June
1997-December 1998) and Vice President for JP Morgan, Inc. (August
1994-June 1997).
Thomas W. Keffer,
Senior Vice President None.
Erica Klein,
Assistant Vice President None.
Walter Konops,
Assistant Vice President None.
Avram Kornberg,
Vice President None.
Jimmy Kourkoulakos,
Assistant Vice President. None.
John Kowalik,
Senior Vice President An officer
and/or portfolio manager
for certain
OppenheimerFunds; formerly,
Managing Director and
Senior Portfolio Manager at
Prudential Global Advisors
(1989 -
1998).
Joseph Krist,
Assistant Vice President None.
Michael Levine,
Vice President None.
Shanquan Li,
Vice President None.
Stephen F. Libera,
Vice President
An officer and/or portfolio manager for certain Oppenheimer funds; a
Chartered Financial Analyst; a Vice President of HarbourView Asset
Management Corporation; 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,
Vice President None.
Steve Macchia,
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 Asset Management Corporation; and a
director of Shareholder Services, Inc. (since August 1994), and Shareholder
Financial Services, Inc. (September 1995); President (since September 1995)
and a director (since October 1990) of Oppenheimer Acquisition Corp.;
President (since September 1995) and a director (since November 1989) of
Oppenheimer Partnership Holdings, Inc., a holding company subsidiary of
OppenheimerFunds, Inc.; 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
OppenheimerFunds, Inc. and Oppenheimer Millennium Funds plc (since October
1997); President and a director of other Oppenheimer funds; a director of
Hillsdown Holdings plc (a U.K. food company); formerly, an Executive Vice
President of OFI.
Philip T. Masterson,
Vice President Formerly an
Associate at Davis, Graham,
& Stubbs (January 1998 -
July 1998); Associate;
Myer, Swanson, Adams &
Wolf, P.C. (May 1996 - June
1998).
Loretta McCarthy,
Executive Vice President None.
Beth Michnowski,
Assistant Vice President
Formerly Senior Marketing Manager (May 1996 - June 1997) and Director of
Product Marketing (August 1992 - May 1996) with Fidelity Investments.
Lisa Migan,
Assistant Vice President None.
Andrew J. Mika
Senior Vice President Formerly a
Second Vice President for
Guardian Investments (June
1990 - October 1999).
Denis R. Molleur,
Vice President and
Senior Counsel None.
Nikolaos Monoyios,
Vice President A Vice President
and/or portfolio manager of
certain Oppenheimer funds
(since April 1998); a
Certified Financial
Analyst; formerly, a Vice
President and portfolio
manager for Guardian
Investor Services, the
management subsidiary of
The Guardian Life Insurance
Company (since 1979).
Linda Moore,
Vice President
Formerly, Marketing Manager (July 1995 -November 1996) for
Chase Investment Services Corp.
Kenneth Nadler,
Vice President None.
David Negri,
Senior Vice President An officer
and/or portfolio manager of
certain Oppenheimer funds.
Barbara Niederbrach,
Assistant Vice President None.
Robert A. Nowaczyk,
Vice President None.
Ray Olson,
Assistant Vice President None.
Richard M. O'Shaugnessy,
Assistant Vice President:
Rochester Division None.
Gina M. Palmieri,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds
(since 6/99).
Robert E. Patterson,
Senior Vice President An officer
and/or portfolio manager of
certain Oppenheimer funds.
Frank Pavlak,
Vice President
Branch Chief of Investment Company Examinations at U.S. Securities and
Exchange Commission (January 1981 - December 1998).
James Phillips
Assistant Vice President None.
David Pellegrino Vice President.
Stephen Puckett,
Vice President None.
Jane Putnam,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds.
Michael Quinn,
Assistant Vice President
Formerly, Assistant Vice President (April 1995 - January 1998) of Van
Kampen American Capital.
Julie Radtke,
Vice President
Formerly Assistant Vice President and Business Analyst for Pershing, Jersey
City (August 1997 -November 1997); Senior Business Consultant, American
International Group (January 1996 - July 1997).
Russell Read,
Senior Vice President
Vice President of Oppenheimer Real Asset Management, Inc. (since March
1995).
Thomas Reedy,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds;
formerly, a Securities
Analyst for the Manager.
John Reinhardt,
Vice President: Rochester Division None
Jeffrey Rosen,
Vice President None.
Michael S. Rosen,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds.
Marci Rossell,
Vice President and
Corporate Economist Economist with Federal Reserve
Bank of Dallas (April 1996 - March 1999).
Richard H. Rubinstein,
Senior Vice President An officer
and/or portfolio manager of
certain Oppenheimer funds.
Lawrence Rudnick,
Assistant Vice President None.
James Ruff,
Executive Vice President & Director None.
Andrew Ruotolo
Executive Vice President of
Oppenheimer Funds Services, a
division of OFI
Formerly Chief Operations Officer for American International Group
(1997-August 1999).
Rohit Sah,
Assistant Vice President None.
Valerie Sanders,
Vice President None.
Jeff Schneider,
Vice President Director, Personal Decisions International.
Ellen Schoenfeld,
Assistant Vice President None.
David Schultz,
Senior Vice President
and Chief Executive Officer
Senior Managing Director,
President (since April
1999) and Chief Executive
Officer of HarbourView
Asset Management
Corporation (since June
1999).
Stephanie Seminara,
Vice President None.
Martha Shapiro,
Assistant Vice President None.
Christian D. Smith
Senior Vice President Formerly
Co-head of the Municipal
Portfolio Management Team,
Portfolio Manager for
Prudential Global Asset
Management (January 1990 -
September 1999).
Connie Song,
Assistant Vice President None.
Richard Soper,
Vice President None.
Keith Spencer Equity trader.
Vice President
Cathleen Stahl,
Vice President
Assistant Vice President & Manager of Women & Investing Program 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.
Jayne Stevlingson,
Vice President None.
Marlo Stil,
Vice President
Investment Specialist and Career Agent/Registered Representative for MML
Investor services, Inc.
John Stoma,
Senior Vice President None.
Michael C. Strathearn,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds;
a Chartered Financial
Analyst; a Vice President
of HarbourView Asset
Management Corporation.
Kevin Surrett,
Assistant Vice President
Assistant Vice President of Product Development At Evergreen Investor
Services, Inc. (June 1995 - May 1999).
Wayne Strauss,
Assistant Vice President: Rochester
Division
Formerly Senior Editor, West Publishing Company (January 1997 - March
1997).
James C. Swain,
Vice Chairman of the Board
Chairman, CEO and Trustee,
Director or Managing
Partner of the Denver-based
Oppenheimer Funds;
formerly, President and
Director of Centennial
Asset Management
Corporation and Chairman of
the Board of Shareholder
Services, Inc.
Susan Switzer,
Assistant Vice President None.
Anthony A. Tanner,
Vice President: Rochester Division None.
Jay Tracey,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds.
James Turner,
Assistant Vice President None.
Angela Uttaro,
Assistant Vice President None.
Mark Vandehey,
Vice President None.
Maureen VanNorstrand,
Assistant Vice President None.
Annette Von Brandis,
Assistant Vice President None.
Phillip Vottiero,
Vice President
Chief Financial officer for the Sovlink Group (April 1996 - June 1999).
Teresa Ward, Vice President None.
Jerry Webman,
Senior Vice President
Director of New York-based tax-exempt fixed income Oppenheimer 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 Asset
Management Corporation.
William L. Wilby,
Senior Vice President An officer
and/or portfolio manager of
certain Oppenheimer funds;
Vice President of
HarbourView Asset
Management Corporation.
Donna Winn, Senior Vice President/Distribution Marketing.
Senior Vice President
Brian W. Wixted, Formerly Principal and Chief Operating Officer,
Senior Vice President and Bankers Trust Company - Mutual Fund Services
Treasurer Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS
First Boston Investment
Management Corp. (September 1991 - March 1995);
and Vice President and Accounting Manager,
Merrill Lynch Asset
Management (November 1987 - September 1991).
Carol Wolf,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds;
Vice President of
Centennial Asset Management
Corporation; Vice
President, Finance and
Accounting; Point of
Contact: Finance Supporters
of Children; Member of the
Oncology Advisory Board of
the Childrens Hospital.
Caleb Wong,
Vice President An officer and/or
portfolio manager of
certain Oppenheimer funds
(since 6/99) .
Robert G. Zack,
Senior Vice President and
Assistant Secretary, Associate
General Counsel
Assistant Secretary of Shareholder Services, Inc. (since May 1985),
Shareholder Financial Services, Inc. (since November 1989),
OppenheimerFunds International Ltd. (since 1998), Oppenheimer Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds.
Jill Zachman,
Assistant Vice President:
Rochester Division None.
Mark Zavanelli,
Assistant Vice President None.
Arthur J. Zimmer,
Senior Vice President
An officer and/or portfolio manager of certain Oppenheimer funds; Vice
President of Centennial Asset Management Corporation.
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 Capital Preservation Fund Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund Oppenheimer Enterprise Fund Oppenheimer Europe 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 Large Cap Growth
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 Trinity Core Fund Oppenheimer Trinity Growth Fund
Oppenheimer Trinity Value Fund Oppenheimer U.S. Government Trust Oppenheimer
World Bond Fund
Quest/Rochester Funds
Limited Term New York Municipal Fund
Oppenheimer Convertible Securities Fund
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 Capital Income Fund Oppenheimer High Yield Fund
Oppenheimer Integrity Funds Oppenheimer International Bond Fund Oppenheimer
Limited-Term Government Fund Oppenheimer Main Street Small Cap Fund Oppenheimer
Main Street Funds, Inc. Oppenheimer Municipal Fund Oppenheimer Real Asset Fund
Oppenheimer Senior Floating Rate Fund Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc. Oppenheimer Variable Account Funds Panorama
Series Fund, Inc.
The address of OppenheimerFunds, Inc., the New York-based Oppenheimer Funds, the
Quest Funds, OppenheimerFunds Distributor, Inc., HarbourView Asset Management
Corp., Oppenheimer Partnership Holdings, Inc., and Oppenheimer Acquisition Corp.
is Two World Trade Center, New York, New York 10048-0203.
The address of the Denver-based Oppenheimer Funds, Shareholder Financial
Services, Inc., Shareholder Services, Inc., OppenheimerFunds Services,
Centennial Asset Management Corporation, Centennial Capital Corp., and
Oppenheimer Real Asset Management, Inc. is 6803 South Tucson Way, Englewood,
Colorado 80112.
The address of the Rochester-based funds is 350 Linden Oaks, Rochester, New York
14625-2807.
Item 27. 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
26(b) above (except Oppenheimer Multi-Sector Income Trust and Panorama Series
Fund, Inc.) and for MassMutual Institutional Funds.
(b) The directors and officers of the Registrant's principal
underwriter are:
<TABLE>
<CAPTION>
Name & Principal Positions & Offices Positions & Offices
Business Address with Underwriter with Registrant
<S> <C> <C>
Jason Bach Vice President None
31 Racquel Drive
Marietta, GA 30064
Peter Beebe Vice President None
876 Foxdale Avenue
Winnetka, IL 60093
Douglas S. Blankenship Vice President None
17011 Woodbank
Spring, TX 77379
Peter W. Brennan Vice President None
8826 Amberton Lane
Charlotte, NC 28226
Susan Burton(2) Vice President None
Erin Cawley(2) Assistant Vice President None
Robert Coli Vice President None
12 White Tail Lane
Bedminster, NJ 07921
William Coughlin Vice President None
1730 N. Clark Street
#3203
Chicago, IL 60614
Mary Crooks(1) Senior Vice President None
Daniel Deckman Vice President None
12252 Rockledge Circle
Boca Raton, FL 33428
Christopher DeSimone Vice President None
5105 Aldrich Avenue South
Minneapolis, MN 55419
Joseph DiMauro Vice President None
244 McKinley Avenue
Grosse Pointe Farms, MI 48236
Rhonda Dixon-Gunner(1) Assistant Vice President None
Andrew John Donohue(2) Executive Vice Secretary of the
President, Director Oppenheimer funds.
and General Counsel
John Donovan Vice President None
868 Washington Road
Woodbury, CT 06798
Kenneth Dorris Vice President None
4104 Harlanwood Drive
Fort Worth, TX 76109
Wendy H. Ehrlich Vice President None
4 Craig Street
Jericho, NY 11753
Kent Elwell Vice President None
35 Crown Terrace
Yardley, PA 19067
George Fahey Vice President None
141 Breon Lane
Elkton, MD 21921
Eric Fallon Vice President None
10 Worth Circle
Newton, MA 02158
Katherine P. Feld(2) Vice President None
& Secretary & Senior Counsel
Mark Ferro Vice President None
43 Market Street
Breezy Point, NY 11697
Ronald H. Fielding(3) Vice President None
John ("J") Fortuna(2) Vice President None
Ronald R. Foster Senior Vice President None
11339 Avant Lane
Cincinnati, OH 45249
Patricia Gadecki-Wells Vice President None
4734 Highland Place Center
Lakeland, FL 33813
Luiggino Galleto Vice President None
10302 Reisling Court
Charlotte, NC 28277
Michelle Gans Vice President None
8327 Kimball Drive
Eden Prairie, MN 55347
L. Daniel Garrity Vice President None
27 Covington Road
Avondale, GA 30002
Lucio Giliberti Vice President None
78 Metro Vista Drive
Hawthorne, NJ 07506
Ralph Grant(2) Vice President/National None
Sales Manager
Michael Guman Vice President None
3913 Pleasent Avenue
Allentown, PA 18103
Linda Harding Vice President/FID None
6229 Love Drive
#413
Irving, TX 75039
Webb Heidinger Vice President None
138 Gates Street
Portsmouth, NH 03801
Phillip Hemery Vice President None
184 Park Avenue
Rochester, NY 14607
Tammy Hospodar Vice President None
30864 Paloma Court
Westlake Village, CA 91362
Edward Hrybenko (2) Vice President None
Richard L. Hymes (2) Vice President None
Byron Ingram(1) Assistant Vice President None
Kathleen T. Ives(1) Vice President None
Lynn Jensen Vice President None
5120 Patterson Street
Long Beach, CA 90815
Eric K. Johnson Vice President None
3665 Clay Street
San Francisco, CA 94118
Mark D. Johnson Vice President None
409 Sundowner Ridge Court
Wildwood, MO 63011
Elyse Jurman Vice President None
1194 Hillsboro Mile, #51
Hillsboro Beach, FL 33062
Michael Keogh(2) Vice President None
Brian Kelly Vice President None
60 Larkspur Road
Fairfield, CT 06430
Richard Klein Vice President None
4820 Fremont Avenue So.
Minneapolis, MN 55409
Brent Krantz Vice President None
2609 SW 149th Place
Seattle, WA 98166
Oren Lane Vice President None
5286 Timber Bend Drive
Brighton, MI 48116
Todd Lawson Vice President None
10687 East Ida Avenue
Englewood, CO 80111
Dawn Lind Vice President None
7 Maize Court
Melville, NY 11747
James Loehle Vice President None
30 Wesley Hill Lane
Warwick, NY 10990
Steve Manns Vice President None
1941 W. Wolfram Street
Chicago, IL 60657
Todd Marion Vice President None
3 St. Marks Place
Cold Spring Harbor, NY 11724
LuAnn Mascia(2) Assistant Vice President None
Marie Masters Vice President None
8384 Glen Eagle Drive
Manlius, NY 13104
Theresa-Marie Maynier Vice President None
2421 Charlotte Drive
Charlotte, NC 28203
Anthony Mazzariello Vice President None
704 Beaver Road
Leetsdale, PA 15056
John McDonough Vice President None
3812 Leland Street
Chevy Chase, MD 20815
Kent McGowan Vice President None
18424 12th Avenue West
Lynnwood, WA 98037
Tanya Mrva(2) Assistant Vice President None
Laura Mulhall(2) Senior Vice President None
Charles Murray Vice President None
18 Spring Lake Drive
Far Hills, NJ 07931
Wendy Murray Vice President None
32 Carolin Road
Upper Montclair, NJ 07043
Denise-Marie Nakamura Vice President None
4111 Colony Plaza
Newport, CA 92660
John Nesnay Vice President None
3410 East County Line
#17
Highlands Ranch, CO 80126
Chad V. Noel Vice President None
2408 Eagleridge Drive
Henderson, NV 89014
Joseph Norton Vice President None
2518 Fillmore Street
San Francisco, CA 94115
Kevin Parchinski Vice President None
8409 West 116th Terrace
Overland Park, KS 66210
Gayle Pereira Vice President None
2707 Via Arboleda
San Clemente, CA 92672
Charles K. Pettit Vice President None
22 Fall Meadow Drive
Pittsford, NY 14534
Bill Presutti Vice President None
130 E. 63rd Street, #10E
New York, NY 10021
Steve Puckett Vice President None
5297 Soledad Mountain Road
San Diego, CA 92109
Elaine Puleo(2) Senior Vice President None
Christopher L. Quinson (2) Vice President/ None
Variable Annuities
Minnie Ra Vice President None
100 Delores Street, #203
Carmel, CA 93923
Dustin Raring Vice President None
378 Elm Street
Denver, CO 80220
Michael Raso Vice President None
16 N. Chatsworth Ave.
Apt. 301
Larchmont, NY 10538
Douglas Rentschler Vice President None
677 Middlesex Road
Grosse Pointe Park, MI 48230
Ruxandra Risko(2) Vice President None
Michael S. Rosen(2) Vice President None
Kenneth Rosenson Vice President None
3505 Malibu Country Drive
Malibu, CA 90265
James Ruff(2) President & Director None
Alfredo Scalzo Vice President None
19401 Via Del Mar, #303
Tampa, FL 33647
Timothy Schoeffler Vice President None
1717 Fox Hall Road
Washington, DC 77479
Michael Sciortino Vice President None
785 Beau Chene Drive
Mandeville, LA 70471
Eric Sharp Vice President None
862 McNeill Circle
Woodland, CA 95695
Michelle Simone(2) Assistant Vice President None
Stuart Speckman(2) Vice President None
Timothy J. Stegner Vice President None
794 Jackson Street
Denver, CO 80206
Marlo Stil Vice President None
8579 Prestwick Drive
La Jolla, CA 92037
Peter Sullivan Vice President None
21445 S. E 35th Street
Issaquah, WA 98029
David Sturgis Vice President None
81 Surrey Lane
Boxford, MA 01921
Scott Such(1) Senior Vice President None
Brian Summe Vice President None
239 N. Colony Drive
Edgewood, KY 41017
George Sweeney Vice President None
5 Smokehouse Lane
Hummelstown, PA 17036
Andrew Sweeny Vice President None
5967 Bayberry Drive
Cincinnati, OH 45242
Scott McGregor Tatum Vice President None
704 Inwood
Southlake, TX 76092
David G. Thomas Vice President None
2200 North Wilson Blvd.
Suite 102-176
Arlington, VA 22201
Sarah Turpin Vice President None
3517 Milton Avenue
Dallas, TX 75205
Mark Vandehey(1) Vice President None
Brian Villec (2) Vice President None
Andrea Walsh(1) Vice President None
Suzanne Walters(1) Assistant Vice President None
James Wiaduck Vice President None
935 Wood Run Court
South Lyon, MI 48178
Michael Weigner Vice President None
5722 Harborside Drive
Tampa, FL 33615
Donn Weise Vice President None
3249 Earlmar Drive
Los Angeles, CA 90064
Marjorie Williams Vice President None
6930 East Ranch Road
Cave Creek, AZ 85331
Brian W. Wixted (1) Vice President Vice President and
and Treasurer Treasurer of the Oppenheimer
funds.
</TABLE>
(1) 6803 South Tucson Way, Englewood, CO 80112
(2) Two World Trade Center, New York, NY 10048
(3) 350 Linden Oaks, Rochester, NY 14623
(c) Not applicable.
Item 28. 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 29. Management Services
Not applicable
Item 30. Undertakings
Not applicable.
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 14th day of January, 2000.
OPPENHEIMER INTERNATIONAL BOND FUND
By: /s/ James C. Swain*
James C. Swain, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities on
the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ James C. Swain* Chairman of the January 14, 2000
- ------------------------------------- Board of Trustees
James C. Swain and Principal Executive
Officer
/s/ Bridget A. Macaskill* President January 14, 2000
- ------------------------------------- and Trustee
Bridget A. Macaskill
/s/ Brian W. Wixted* Treasurer and Principal Financial January 14, 2000
and Accounting Officer
- -------------------------------------
Brian W. Wixted
/s/ William L. Armstrong* Trustee January 14, 2000
- -----------------------------------
William L. Armstrong
/s/ Robert G. Avis* Trustee January 14, 2000
- -------------------------------------
Robert G. Avis
/s/ William A. Baker* Trustee January 14, 2000
- -------------------------------------
William A. Baker
/s/ Edward L. Cameron* Trustee January 14, 2000
- -------------------------------------
Edward L. Cameron
/s/ Jon S. Fossel* Trustee January 14, 2000
- -------------------------------------
Jon S. Fossel
/s/ Sam Freedman* Trustee January 14, 2000
- -------------------------------------
Sam Freedman
/s/ Raymond J. Kalinowski* Trustee January 14, 2000
- -------------------------------------
Raymond J. Kalinowski
/s/ C. Howard Kast* Trustee January 14, 2000
- -------------------------------------
C. Howard Kast
/s/ Robert M. Kirchner* Trustee January 14, 2000
- -------------------------------------
Robert M. Kirchner
/s/ Ned M. Steel* Trustee January 14, 2000
- -------------------------------------
Ned M. Steel
*By: /s/ Robert G. Zack January 14, 2000
- ---------------------------------------------
Robert G. Zack, Attorney-in-Fact
</TABLE>
OPPENHEIMER INTERNATIONAL BOND FUND
EXHIBIT INDEX
Form N-1A
Exhibit No. Description
23(j) Independent Auditors' Consent
23(c)(i) Specimen Class A Share Certificate
23(c)(ii) Specimen Class B Share Certificate
23(c)(iii) Specimen Class C Share Certificate
23(m)(i) Service Plan and Agreement for Class A Shares
EXHIBIT 23(j)
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees
Oppenheimer International Bond Fund:
We consent to the use in this Post-Effective Amendment No. 6 to
Registration Statement No. 33-58383 of Oppenheimer International Bond
Fund on Form N-1A of our report dated October 21, 1999, appearing in
the Statement of Additional Information, which is a part of such
Registration Statement, and to the reference to us under the headings
"Independent Auditors" in the Statement of Additional Information and
"Financial Highlights" in the Prospectus, which is also a part of such
Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
Deloitte & Touche LLP
Denver, Colorado
January 26, 2000
Exhibit 23(c)(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 68380T103
(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.
(signature at Dated: (signature at
left of seal) right of seal)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
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
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 23(c)(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 68380T202
(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.
(signature at Dated: (signature at
left of seal) right of seal)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
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
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 23(c)(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 68380T103
(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.
(signature at Dated: (signature at
left of seal) right of seal)
/s/ Brian W. Wixted /s/ Bridget A. Macaskill
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
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
SERVICE PLAN AND AGREEMENT
BETWEEN
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
AND
OPPENHEIMER INTERNATIONAL BOND FUND
FOR CLASS A SHARES
SERVICE PLAN AND AGREEMENT (the "Plan") dated the 5th day of June, 1995, by and
between OPPENHEIMER INTERNATIONAL BOND FUND (the "Fund") and OPPENHEIMER FUNDS
DISTRIBUTOR, INC. (the "Distributor").
1. The Plan. This Plan is the Fund's written service plan for its Class A Shares
described in the Fund's registration statement as of the date this Plan takes
effect, contemplated by and to comply with Article III, Section 26 of the Rules
of Fair Practice of the National Association of Securities Dealers, pursuant to
which the Fund will reimburse the Distributor for a portion of its costs
incurred in connection with the personal service and the maintenance of
shareholder accounts (AAccounts@) that hold Class A Shares (the "Shares") of
such series and class of the Fund. The Fund may be deemed to be acting as
distributor of securities of which it is the issuer, pursuant to Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act"), according to the
terms of this Plan. The Distributor is authorized under the Plan to pay
"Recipients," as hereinafter defined, for rendering services and for the
maintenance of Accounts. Such Recipients are intended to have certain rights as
third-party beneficiaries under this Plan.
2. Definitions. As used in this Plan, the following terms shall have the
following meanings:
<PAGE>
(a) "Recipient" shall mean any broker, dealer, bank or other
institution which: (i) has rendered services in connection with the
personal service and maintenance of Accounts; (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 such service; and (iii) has been selected by the
Distributor to receive payments under the Plan. Notwithstanding the
foregoing, a majority of the Fund's Board of Trustees (the "Board") who
are not "interested persons" (as defined in the 1940 Act) and who have
no direct or indirect financial interest in the operation of this Plan
or in any agreements relating to this Plan (the "Independent Trustees")
may remove any broker, dealer, bank or other institution as a
Recipient, whereupon such entity's rights as a third-party beneficiary
hereof shall terminate.
(b) "Qualified Holdings" shall mean, as to any Recipient, all Shares
owned beneficially or of record by: (i) such Recipient, or (ii) such
brokerage or other customers, or investment advisory or other clients
of such Recipient and/or accounts as to which such Recipient is a
fiduciary or custodian or co-fiduciary or co-custodian (collectively,
the "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
two entities would otherwise qualify as Recipients as to the same
Shares, the Recipient which is the dealer of record on the Fund's books
shall be deemed the Recipient as to such Shares for purposes of this
Plan.
3. Payments.
(a) Under the Plan, the Fund will make payments to the Distributor,
within forty-five (45) days of the end of each calendar quarter, in the
amount of the lesser of: (i) .0625% (.25% on an annual basis) of the
average during the calendar quarter of the aggregate net asset value of
the Shares, computed as of the close of each business day, or (ii) the
Distributor's actual expenses under the Plan for that quarter of the
type approved by the Board. The Distributor will use such fee received
from the Fund in its entirety to reimburse itself for payments to
Recipients and for its other expenditures and costs of the type
approved by the Board incurred in connection with the personal service
and maintenance of Accounts including, but not limited to, the services
described in the following paragraph. 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.
<PAGE>
The services to be rendered by the Distributor and Recipients
in connection with the personal service and the maintenance of Accounts
may include, but shall not be limited to, the following: answering
routine inquiries from the Recipient's customers concerning the Fund,
providing such customers with information on their investment in
shares, assisting in the establishment and maintenance of accounts or
sub-accounts in the Fund, making the Fund's investment plans and
dividend payment options available, and providing such other
information and customer liaison services and the maintenance of
Accounts as the Distributor or the Fund may reasonably request. It may
be presumed that a Recipient has provided services qualifying for
compensation under the Plan if it has Qualified Holdings of Shares to
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 services, 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 services in this regard. If the Distributor still is not
satisfied, it may take appropriate steps to terminate the Recipient's
status as such under the Plan, whereupon such entity's rights as a
third-party beneficiary hereunder shall terminate.
Payments received by the Distributor from the Fund under the
Plan will not be used to pay any interest expense, carrying charges or
other financial costs, or allocation of overhead by the Distributor, or
for any other purpose other than for the payments described in this
Section 3. The amount payable to the Distributor each quarter will be
reduced to the extent that reimbursement payments otherwise permissible
under the Plan have not been authorized by the Board of Trustees for
that quarter. Any unreimbursed expenses incurred for any quarter by the
Distributor may not be recovered in later periods.
(b) The Distributor shall make payments to any Recipient quarterly,
within forty-five (45) days of the end of each calendar quarter, at a
rate not to exceed .0625% (.25% on an annual basis) of the average
during the calendar quarter of the aggregate net asset value of the
Shares computed as of the close of each business day, of Qualified
Holdings owned beneficially or of record by the Recipient or by its
Customers. 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, to be set from time to time by a majority
of the Independent Trustees. A majority of the Independent Trustees may
at any time or from time to time increase or decrease and thereafter
adjust the rate of fees to be paid to the Distributor or to any
Recipient, but not to exceed the rate set forth above, and/or increase
or decrease the number of shares constituting Minimum Qualified
Holdings. The Distributor shall notify all Recipients of the Minimum
Qualified Holdings 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.
<PAGE>
(c) Under the Plan, payments may be made to Recipients: (i) by
Oppenheimer Management Corporation ("OMC") 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 OMC), from
its own resources.
4. Selection and Nomination of Trustees. While this Plan is in effect, the
selection or replacement of Independent Trustees and the nomination of those
persons to be Trustees of the Fund who are not "interested persons" of the Fund
shall be committed to the discretion of the Independent Trustees. Nothing herein
shall prevent the Independent Trustees from soliciting the views or the
involvement of others in such selection or nomination if the final decision on
any such selection and nomination is approved by a majority of the incumbent
Independent Trustees.
5. Reports. While this Plan is in effect, the Treasurer of the Fund shall
provide at least quarterly a written report to the Fund's Board for its review,
detailing the amount of all payments made pursuant to this Plan, the identity of
the Recipient of each such payment, and the purposes for which the payments were
made. The report shall state whether all provisions of Section 3 of this Plan
have been complied with. The Distributor shall annually certify to the Board the
amount of its total expenses incurred that year with respect to the personal
service and maintenance of Accounts in conjunction with the Board's annual
review of the continuation of the Plan.
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 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 securities of the Class, on not more than
sixty days written notice to any other party to the agreement; (ii) such
agreement shall automatically terminate in the event of its "assignment" (as
defined in the 1940 Act); (iii) it 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 (iv) it 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 the Board and its
Independent Trustees cast in person at a meeting called for the purpose of
voting on such continuance.
<PAGE>
7. Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved by a vote of the Independent Trustees cast in person at a meeting
called on February 28, 1995 for the purpose of voting on this Plan, and shall
take effect on the date that the Fund's Registration Statement is declared
effective by the Securities and Exchange Commission. Unless terminated as
hereinafter provided, it shall continue in effect until October 31, 1995 and
from year to year thereafter or as the Board may otherwise determine only so
long as such continuance is specifically approved at least annually by the Board
and its Independent Trustees cast in person at a meeting called for the purpose
of voting on such continuance. 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 voting
securities of the Class. This Plan may not be amended to increase materially the
amount of payments to be made without approval of the Class A Shareholders, in
the manner described above, and all material amendments must be approved by a
vote of the Board and of the Independent Trustees.
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/ Robert G. Zack
Robert G. Zack, Assistant Secretary
OPPENHEIMER FUNDS DISTRIBUTOR, INC.
By: /s/ Katherine P. Feld
Katherine P. Feld
Vice President & Secretary
