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Xxxxxxxxxxx International Growth Fund
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0000 Xxxxx Xxxxxx Xxx, Xxxxxxxxx, Xxxxxxxx 00000
0.000.000.0000
Statement of Additional Information dated March 28, 2002
This Statement of Additional Information is not a Prospectus. This document contains additional information
about the Fund and supplements information in the Prospectus dated March 28, 2002. It should be read together with the
Prospectus. You can obtain the Prospectus by writing to the Fund's Transfer Agent, OppenheimerFunds Services, at X.X. Xxx
0000, Xxxxxx, Xxxxxxxx 00000, or by calling the Transfer Agent at the toll-free number shown above, or by downloading it
from the OppenheimerFunds Internet website at xxx.xxxxxxxxxxxxxxxx.xxx.
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......................................................... 5
Investment Restrictions............................................................................ 19
How the Fund is Managed ................................................................................ 21
Organization and History ....................................................................... 21
Trustees and Officers........................................................................... 22
The Manager..................................................................................... 29
Brokerage Policies of the Fund ........................................................................ 32
Distribution and Service Plans ......................................................................... 34
Performance of the Fund ................................................................................ 38
About Your Account
How to Buy Shares....................................................................................... 42
How to Sell Shares...................................................................................... 52
How to Exchange Shares.................................................................................. 57
Dividends, Capital Gains and Taxes...................................................................... 60
Additional Information About the Fund................................................................... 64
Financial Information About the Fund
Independent Auditors' Report............................................................................ 65
Financial Statements.................................................................................... 66
Appendix A: Industry Classifications.................................................................... A-1
Appendix B: Special Sales Charge Arrangements and Waivers............................................... B-1
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A B O U T T H E F U N D
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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.
|X| Investments in Stocks and Other Equity Securities. The Fund focuses its investments in common stocks of
foreign growth companies, but it can invest in other equity securities. Equity securities include common stocks,
preferred stocks, rights and warrants, and securities convertible into common stock. The Fund can purchase securities of
issuers having a small, medium or large market capitalization.
Current income is not a criterion used to select portfolio securities. However, certain debt securities can be
selected for the Fund's portfolio for defensive purposes. The Fund can also buy debt securities that the Manager
believes might offer some opportunities for capital appreciation when stocks are disfavored, including convertible
securities as discussed below.
Securities of newer growth companies might offer greater opportunities for capital appreciation than securities
of large, more established companies. However, these securities also involve greater risks than securities of more
established companies. Securities of small capitalization issuers may be subject to greater price volatility in general
than securities of large-cap and mid-cap companies. Therefore, to the degree that the Fund has investments in smaller
capitalization companies at times of market volatility, the Fund's share price may fluctuate more.
|_| Growth Companies. Growth companies are those companies that the Manager believes are entering into
a growth cycle in their business, with the expectation that their stock will increase in value. They may be established
companies as well as newer companies in the development stage.
Growth companies might have a variety of characteristics that in the Manager's view define them as "growth"
issuers. They might be generating or applying new technologies, new or improved distribution techniques or new services.
They might own or develop natural resources. They might be companies that can benefit from changing consumer demands or
lifestyles, or companies that have projected earnings in excess of the average for their sector or industry. In each
case, they have
prospects that the Manager believes are favorable for the long term. The portfolio manager of the
Fund looks for growth companies with strong, capable management, sound financial and accounting
policies, successful product development and marketing and other factors.
|_| 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: 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.
Convertible securities are debt securities that are convertible into an issuer's common stock. Convertible
securities rank senior to common stock in a corporation's capital structure and therefore are subject to less risk than
common stock in case of the issuer's bankruptcy or liquidation.
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 can invest up to 5% of its total assets in warrants or rights. That
5% 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. 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.
|_| Preferred Stock. Preferred stock, unlike common stock, has a stated dividend rate payable from the
corporation's earnings. Preferred stock dividends may be cumulative or non-cumulative. "Cumulative" dividend provisions
require all or a portion of prior unpaid dividends to
be paid before dividends can be paid on the issuer's common stock. Preferred stock may be "participating" stock, which
means that it may be entitled to a dividend exceeding the stated dividend in certain cases.
If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of the
preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as provisions allowing
calls or redemptions prior to maturity, which can also have a negative impact on prices when interest rates decline.
Preferred stock generally has a preference over common stock on the distribution of a corporation's assets in the event
of liquidation of the corporation. The rights of preferred stock on distribution of a corporation's assets in the event
of a liquidation are generally subordinate to the rights associated with a corporation's debt securities.
|X| Foreign Securities. "Foreign securities" include equity and debt securities of companies organized under
the laws of countries other than the United States and of governments other than the U.S. government. "Foreign
securities" 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. Those securities 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, and foreign currencies, are considered "foreign
securities" for the purpose of the Fund's investment allocations. They are subject to some of the special considerations
and risks, discussed below, that apply to foreign securities traded and held abroad.
The amount of the Fund's assets invested in securities of issuers in a particular country will vary over time,
based upon the Manager's evaluation of the investment merits of particular issuers as well as the market and economic
conditions in a particular country or region. Factors that might be considered could include, for example, a country's
balance of payments, inflation rate, economic self-sufficiency, and social and political factors.
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.
|_| 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,
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.
|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. The Fund does
not expect to have a portfolio turnover rate of more than 100% annually.
Increased portfolio turnover creates higher brokerage and transaction costs for the Fund, which could 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 from time to time can 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 might not use them.
|X| Investing in Small, Unseasoned Companies. The Fund can invest in securities of small, unseasoned
companies. These are companies that have been in operation for less than three years, including the operations of any
predecessors. Securities of these companies may be subject to volatility in their prices. They might have a limited
trading market, which could adversely affect the Fund's ability to dispose of them and can reduce the price the Fund
might be able to obtain for them. Other investors that own a security issued by a small, unseasoned issuer for which
there is limited liquidity might trade the security when the Fund is attempting to dispose of its holdings of that
security. In that case the Fund might receive a lower price for its holdings than might otherwise be obtained. The Fund
has no limit on the amount of its net assets that may be invested in those securities.
|X| Investing in Debt Securities. While the Fund does not invest for the purpose of seeking current income, at
times the Fund can invest in debt securities, including the convertible debt securities described above under the
description of equity investments. Debt securities also can be selected for investment by the Fund for defensive
purposes, as described below. For example, when the stock market is volatile, or when the portfolio manager believes that
growth opportunities in stocks are not attractive, certain debt securities might provide not only offer defensive
opportunities but also some opportunities for capital appreciation.
The Fund's debt investments can include corporate bonds and notes of foreign or U.S. companies, as well as U.S.
and foreign government securities. It is not expected that this will be a significant portfolio strategy of the Fund
under normal market circumstances, and the Fund normally does not intend to invest more than 5% of its total assets in
debt securities.
|_| Credit Risk. Debt securities are subject to credit risk. Credit risk relates to the ability of
the issuer of a debt security to make interest or principal payments on the security as they become due. If the issuer
fails to pay interest, the Fund's income may be reduced and if the issuer fails to repay principal, the value of that
bond and of the Fund's shares may be reduced. The Manager may rely to some extent on credit ratings by nationally
recognized rating agencies in evaluating the credit risk of securities selected for the Fund's portfolio. It may also use
its own research and analysis. Many factors affect an issuer's ability to make timely payments, and the credit risks of
a particular security may change over time.
While the Fund can invest in higher-yielding lower-grade debt securities (that is, securities below investment
grade), its debt investments will generally be investment grade. Those are securities rated in the four highest rating
categories of Standard & Poor's Rating Service or Xxxxx'x Investors Service, Inc. ("Moody's"), or having equivalent
ratings from other nationally recognized rating agencies or, in the case of unrated securities, comparable ratings
assigned to a security by the Manager.
The Fund can invest in securities rated as low as "C" or "D" or which are in default when the Fund buys them.
Securities rated "Baa" by Moody's or "BBB" by Standard & Poor's are considered investment grade but may be subject to
greater market fluctuations and risks of loss of income and principal than higher grade securities. They may be
considered to have speculative elements. The Fund can also buy unrated securities to which the Manager assigns a rating
based upon its evaluation of the yield and risks of comparable rated securities. The Fund is not obligated to dispose of
a security if the rating is reduced after the Fund buys the security, but the Manager will monitor those securities to
determine whether they should be retained in the Fund's portfolio.
|_| Interest Rate Risks. In addition to credit risks, debt securities are subject to changes in value
when prevailing interest rates change. When interest rates fall, the values of outstanding debt securities generally
rise, and the bonds may sell for more than their face amount. When interest rates rise, the values of outstanding debt
securities generally fall, and the bonds may sell at a discount from their face amount. The magnitude of these price
changes is generally greater for bonds with longer maturities. Therefore, when the average maturity of the Fund's debt
securities is longer, its share price may fluctuate more when interest rates change.
|X| Repurchase Agreements. The Fund can acquire securities subject to repurchase agreements. It might do so for:
o liquidity purposes to meet anticipated redemptions of Fund shares, or pending the investment of the proceeds
from sales of Fund shares, or
o pending the settlement of portfolio securities transactions, or
o 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 Manager 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.
|X| 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 can 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| Loans of Portfolio Securities. To raise cash for liquidity purposes, 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 total assets. The Fund currently does not intend to
engage in loans of securities, 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 finders', 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 10% 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, but if it does so, it will not likely do so to a
substantial degree.
|X| Derivatives. The Fund can invest in a variety of derivative investments to seek income for liquidity needs
or for hedging purposes. Some derivative investments the Fund can use are the
hedging instruments described below in this Statement of Additional Information. However, the Fund does not use, and does
not currently contemplate using, derivatives or hedging instruments to a significant degree.
Some of the 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
them. It is not required to do so in seeking its goal. 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 can also be used to seek 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 would 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 stock
indices (these are referred to as "stock index futures"), and (2) foreign currencies (these are referred to as "forward
contracts").
A broadly-based stock index is used as the basis for trading stock index futures. In some cases these futures
may be based on stocks of issuers in a particular industry or group of industries. A stock index assigns relative values
to the common stocks included in the index and its value fluctuates in response to the changes in value of the underlying
stocks. A stock index cannot be purchased or sold directly. 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.
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 mvalue 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 (except forward contracts) 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, and options on the other types of futures described above.
|_| Writing Covered Call Options. The Fund can 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 25% 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 premium.
The Fund's custodian bank, 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 xxxx-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 can 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 on
its books 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. 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 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 whether or not it holds the underlying investment in its portfolio. 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.
Buying a put on an investment the Fund does not own (such as an index or future) permits the Fund either to
resell the put or to buy the underlying investment and sell it at the exercise price. The resale price will vary
inversely to the price of the underlying investment. If the market price of the underlying investment is above the
exercise price and, as a result, the put is not exercised, the put will become worthless on its expiration date.
When the Fund purchases a 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 can 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 try 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 can also use "cross-hedging" where the Fund xxxxxx 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 can 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 could 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 could 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 might 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 vary 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.
|_| 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 Advisor as the Fund (or an Advisor that is an affiliate of
the Fund's Advisor). 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 liquid assets, 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) 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 reinvest cash received from the sale of other portfolio securities. The Fund can
buy:
o high-quality (rated in the top two rating categories of nationally-recognized rating organizations or deemed by
the Manager to be of comparable quality), short-term money market instruments, including those issued by
the U. S. Treasury or other government agencies,
o commercial paper (short-term, unsecured, promissory notes of domestic or foreign companies) rated in the top two
rating categories of a nationally-recognized rating organization,
o debt obligations of corporate issuers, rated investment grade (rated at least Baa by Xxxxx'x or at least BBB by
Standard & Poor's, or a comparable rating by another rating organization), or unrated securities judged by
the Manager to be of a quality comparable to rated securities in those categories,
o certificates of deposit and bankers' acceptances of domestic and foreign banks and savings and loan
associations, 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| What Are the Fund's 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 all or a portion of an issue of bonds, debentures,
commercial paper or other similar corporate obligations, whether or not they are publicly distributed
(however, the purchase of obligations that are not publicly distributed is limited by the Fund's policy on
holding restricted and illiquid securities). The Fund may also lend its portfolio securities subject to any
restrictions adopted by the Board of Trustees, and may enter into repurchase agreements.
o The Fund cannot concentrate investments. That means it cannot invest 25% or more of its total assets in
companies in any one industry. Obligations of the U.S. government, its
o agencies and instrumentalities are not considered to be part of an "industry" for the purposes of this
restriction.
o The Fund cannot invest in real estate or interests in real estate. However, the Fund can purchase
readily-marketable securities of companies holding real estate or interests in real estate.
o The Fund cannot issue senior securities. This restriction does not prevent the Fund from borrowing money for
investment or emergency purposes, or from entering into margin, collateral or escrow arrangements permitted
by its other investment policies.
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 commodities or commodity contracts, other than the hedging instruments permitted by
any of its other investment policies. It does not matter whether the hedging instrument is considered to be
a commodity or commodity contract.
o The Fund cannot invest in companies for the purpose of acquiring control or management of them.
o The Fund cannot purchase securities on margin. However, the Fund may make margin deposits in connection with any
of the hedging instruments permitted by any of its other investment policies.
o The Fund cannot invest in or hold securities of any issuer if officers and Trustees or Directors 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 or pledge any of its assets. However, this does not prohibit the escrow arrangements
contemplated by the writing of covered call options or other collateral or margin arrangements in
connection with any of the hedging instruments permitted by any of its other investment policies.
o The Fund cannot invest in other open-end investment companies. It cannot invest more than 5% of its net assets
in closed-end investment companies, including small business development companies. Any brokerage
commissions it pays in investing in closed-end investment companies must not exceed normal commission
rates.
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.
For purposes of the Fund's policy not to concentrate its investments as described above, the Fund has adopted
the industry classifications set forth in Appendix A to this Statement of Additional Information. That is not a
fundamental policy.
As a non-fundamental policy, the Fund cannot sell securities short except in collateralized transactions. In
those cases the Fund must own an equivalent amount of the securities sold short. Not more than 15% of the Fund's net
assets may be held as collateral for short sales at any time. The Fund does not expect to engage in this type of
transaction as part of its normal portfolio management techniques.
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 December 1995.
|X| Classes of Shares. The Trustees are authorized, without shareholder approval, 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.
The Fund currently has four classes of shares: Class A, Class B, Class C and Class N. All classes invest in the
same investment portfolio. Only retirement plans may purchase Class N shares. 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.
|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.
Board of Trustees
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 take other action described in the Fund's Declaration of Trust.
The Board of Trustees has an Audit Committee, a Study Committee and a Proxy Committee. The members of the Audit
Committee are Xxxxxxx Xxxxxxx (Chairman), Xxxxxxxx Xxxxxxxx and Xxxxxx Xxxxx. The Audit Committee held four meetings
during the Fund's fiscal year ended November 30, 2001. The Audit Committee provides the Board with recommendations
regarding the selection of the Fund's independent auditor. The Audit Committee also reviews the scope and results of
audits and the audit fees charged, reviews reports form the Fund's independent auditor concerning the Fund's internal
accounting procedures, and controls and reviews reports of the Manager's internal auditor, among other duties as set
forth in the Committee's charter.
The members of the Study Committee are Xxxxxxxx Xxxxxxxx (Chairman), Xxxxxx Xxxxx and Xxxxxxxxx Xxxxxxxx. The
Study Committee held six meetings during the Fund's fiscal year ended November 30, 2001. The Study Committee evaluates
and reports to the Board on the Fund's contractual arrangements, including the Investment Advisory and Distribution
Agreements, transfer and shareholder service agreements and custodian agreements as well as the policies and procedures
adopted by the Fund to comply with the Investment Company Act of 1940 and other applicable law, among other duties as set
forth in the Committee's charter.
The members of the Proxy Committee are Xxxxxx Xxxxx (Chairman), Xxxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxx. The Proxy
Committee held one meeting during the fiscal year ended November 30, 2001. The Proxy Committee provides the Board with
recommendations for proxy voting and monitors proxy voting by the Fund.
Xx. Xxxxxxxx has reported he has a controlling interest in The Directorship Search Group, Inc., a director
recruiting firm that provided consulting services to Massachusetts Mutual Life Insurance Company (which controls the
Manager) for fees aggregating $100,000 for the calendar year ended December 31, 2001, an amount representing less than 5%
of the annual revenues of The Directorship Search Group, Inc. The Independent Trustees have unanimously (except for Xx.
Xxxxxxxx, who abstained) determined that the consulting arrangements between The Directorship Search Group, Inc. and
Massachusetts Mutual Life Insurance Company were not material business or professional relationships that would
compromise Xx. Xxxxxxxx' status as an Independent Trustee. Nonetheless, to assure certainty as to determinations of the
Board and the Independent Trustees as to matters upon which the Investment Company Act or the rules thereunder require
approval by a majority of Independent Trustees, Xx. Xxxxxxxx will not be counted for purposes of determining whether a
quorum of Independent Trustees was present or whether a majority of Independent Trustees approved the matter.
Trustees and Officers of the Fund. The Fund's Trustees and officers and their positions held with the Fund and length of
service in such position(s) and their principal occupations and business affiliations during the past five years are
listed below. Each of the Trustees except Xx. Xxxxxx are independent trustees, as defined in the Investment Company
Act. Xx. Xxxxxx is an "interested trustee," because he is affiliated with the Manager by virtue of his positions as an
officer and director of the Manager, and as a shareholder of its parent company. Xx. Xxxxxx was elected as a Trustee of
the Fund with the understanding that in the event his affiliation with the Manager is terminated, he will resign as a
trustee of the Fund and the other Board I Funds for which he is a trustee or director. All information is as of December
31, 2001. All of the Trustees are Trustees or Directors of the following Xxxxxxxxxxx funds1 (referred to as "Board I
Funds"):
Xxxxxxxxxxx California Municipal Fund Xxxxxxxxxxx International Growth Fund
Xxxxxxxxxxx Capital Appreciation Fund Xxxxxxxxxxx International Small Company Fund
Xxxxxxxxxxx Capital Preservation Fund Xxxxxxxxxxx Money Market Fund, Inc.
Xxxxxxxxxxx Concentrated Growth Fund Xxxxxxxxxxx Multiple Strategies Fund
Xxxxxxxxxxx Developing Markets Fund Xxxxxxxxxxx Multi-Sector Income Trust
Xxxxxxxxxxx Discovery Fund Xxxxxxxxxxx Multi-State Municipal Trust
Xxxxxxxxxxx Emerging Growth Fund Xxxxxxxxxxx Municipal Bond Fund
Xxxxxxxxxxx Emerging Technologies Fund Xxxxxxxxxxx New York Municipal Fund
Xxxxxxxxxxx Enterprise Fund Xxxxxxxxxxx Series Fund, Inc.
Xxxxxxxxxxx Europe Fund Xxxxxxxxxxx Special Value Fund
Xxxxxxxxxxx Global Fund Xxxxxxxxxxx Trinity Core Fund
Xxxxxxxxxxx Global Growth & Income Fund Xxxxxxxxxxx Trinity Large Cap Growth Fund
Xxxxxxxxxxx Gold & Special Minerals Fund Xxxxxxxxxxx Trinity Value Fund
Xxxxxxxxxxx Growth Fund Xxxxxxxxxxx U.S. Government Trust
In addition to being a trustee or director of the Board I Funds, Xx. Xxxxx is also a director or trustee of 10
other portfolios in the OppenheimerFunds complex.
Messrs. Spiro, Murphy, Bishop, Farrar, Molleur, Wixted, and Mses. Xxxx and Xxxx respectively hold the same
offices with the other Board I Funds as with the Fund. As of March 1, 2002, the Trustees and officers of the Fund as a
group owned of record or beneficially less than 1% of each class of shares of the Fund. The foregoing statement does not
reflect ownership of shares of the Fund held of record by an employee benefit plan for employees of the Manager, other
than the shares beneficially owned under the plan by the officers of the Fund listed above. In addition, each Independent
Trustee, and his or her family members, do not own securities of either the Manager or Distributor of the Board I Funds
or any person directly or indirectly controlling, controlled by or under common control with the Manager or Distributor.
Independent Trustees
-------------------------- ------------------------------------------------------ ----------------- ------------------
Name, Address,2 Age, Aggregate Dollar
Position(s) Held with Principal Occupation(s) During Past 5 Years / Other Dollar Range of Range of Shares
Fund and Length of Time Trusteeships Held by Trustee / Number of Portfolios Shares Owned in Owned in any of
Served3 in Fund Complex Overseen by Trustee the Fund the Board I Funds
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxx Xxxx, Chairman of General Partner of Odyssey Partners, L.P. $0 $0
the Board of Trustees (investment partnership) (since 1982) and Chairman
Trustee since 1996 of the Board of Avatar Holdings, Inc. (real estate
Age: 76 development) (since 1981). Director/trustee of 31
investment companies in the OppenheimerFunds complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxxxx X. Xxxxx, A Trustee or Director of other Xxxxxxxxxxx funds. Over $100,000 Over $100,0004
Trustee since 1996 Formerly Vice Chairman of the Manager (October 1995
Age: 68 - December 1997). Director/trustee of 41 investment
companies in the OppenheimerFunds complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxxxxx X. Xxxxxxxxx, The Director of the Institute for Advanced Study, $0 $0
Trustee since 1999 Princeton, N.J. (since 1991), director of GSI
Age: 63 Lumonics (since 2001) and a member of the National
Academy of Sciences (since 1979); formerly (in
descending chronological order) a director of
Bankers Trust Corporation, Xxxxxxx and Professor of
Mathematics at Duke University, a director of
Research Triangle Institute, Raleigh, N.C., and a
Professor of Mathematics at Harvard University.
Director/trustee of 30 investment companies in the
OppenheimerFunds complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxxxxxx Xxxxxxxx, Professor Emeritus of Marketing, Xxxxx Graduate $0 Over $100,000
Trustee since 1996 School of Business Administration, New York
Age: 78 University. Director/trustee of 31 investment
companies in the OppenheimerFunds complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxxxxxxx X. Xxxxxxxx, Author and architectural historian; a trustee of the $10,001 - $50,001 -
Trustee since 1996 Xxxxx Gallery of Art and Xxxxxx X. Xxxxxxx Gallery
Age: 72 (Smithsonian Institute), Trustees Council of the
National Building Museum; a member of the Trustees
Council, Preservation League of New York State. $50,000 $100,000
Director/trustee of 31 investment companies in the
OppenheimerFunds complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxxxxx X. Xxxxxxx, A director of Dominion Resources, Inc. (electric $0 Over $100,000
Trustee since 1996 utility holding company) and Prime Retail, Inc.
Age: 74 (real estate investment trust); formerly a director
of Dominion Energy, Inc. (electric power and oil &
gas producer), President and Chief Executive Officer
of The Conference Board, Inc. (international
economic and business research) and a director of
Lumbermens Mutual Casualty Company, American
Motorists Insurance Company and American
Manufacturers Mutual Insurance Company.
Director/trustee of 31 investment companies in the
OppenheimerFunds complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxxxx X. Xxxxx, President, Baruch College, CUNY; a director of
Trustee since 1996 RBAsset (real estate manager); a director of
Age: 71 OffitBank; formerly Trustee, Financial Accounting
Foundation (FASB and GASB), Senior Fellow of Xxxxxx
Xxxx Economics Institute, Bard College, Chairman of $50,001 -
Municipal Assistance Corporation for the City of New $1-10,000 $100,000
York, New York State Comptroller and Trustee of New
York State and Local Retirement Fund.
Director/trustee of 31 investment companies in the
OppenheimerFunds complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxxxxx X. Xxxxxxxx, Xx., Chairman of The Directorship Search Group, Inc.
Trustee since 1996 (corporate governance consulting and executive
Age: 70 recruiting) (since 1993); a life trustee of
International House (non-profit educational
organization), and a trustee of the Greenwich $0 $10,001 - $50,000
Historical Society (since 1996). Director/trustee of
31 investment companies in the OppenheimerFunds
complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxxxx X. Xxxxx, Vice Formerly he held the following positions: Chairman
Chairman of the Board of Emeritus (until August 1999), Chairman (November
Trustees, 1987 - January 1991) and a director (January 1969 -
Trustee since 1996 August 1999) of the Manager; President and Director $10,001 -
Age: 76 of OppenheimerFunds Distributor, Inc., a subsidiary $50,000 Over $100,000
of the Manager and the Fund's Distributor (July 1978
- January 1992). Director/trustee of 31 investment
companies in the OppenheimerFunds complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxxxxx X. Xxxxxxx, Of Counsel, Xxxxx & Xxxxxxx (a law firm) (since $0 $0
Trustee since 1996 1993). Other directorships: Caterpillar, Inc. (since
Age: 71 1993) and Weyerhaeuser Co. (since 1999).
Director/trustee of 31 investment companies in the
OppenheimerFunds complex. Director/trustee of 31
investment companies in the OppenheimerFunds complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
Interested Trustee and Officer
-------------------------- ------------------------------------------------------ ----------------- ------------------
Name, Address,5 Age, Principal Occupation(s) During Past 5 Years / Other Dollar Range of Aggregate Dollar
Range of Shares
Position(s) Held with Owned in any of
Fund and Length of Time Trusteeships Held by Trustee / Number of Portfolios Shares Owned in the Xxxxxxxxxxx
Served6 in Fund Complex Overseen by Trustee the Fund Funds7
-------------------------- ------------------------------------------------------ ----------------- ------------------
-------------------------- ------------------------------------------------------ ----------------- ------------------
Xxxx X. Xxxxxx, Chairman, Chief Executive Officer and director $0 Over $100,000
President and Trustee (since June 2001) and President (since September
Trustee since October 2000) of the Manager; President and a trustee of
2001 other Xxxxxxxxxxx funds; President and a director
Age: 52 (since July 2001) of Xxxxxxxxxxx Acquisition Corp.,
the Manager's parent holding company and of
Xxxxxxxxxxx Partnership Holdings, Inc., a holding
company subsidiary of the Manager; Director (since
November 2001) of OppenheimerFunds Distributor,
Inc., a subsidiary of the Manager; Chairman and a
director (since July 2001) of Shareholder Services,
Inc. and of Shareholder Financial Services, Inc.,
transfer agent subsidiaries of the Manager;
President and a director (since July 2001) of
OppenheimerFunds Legacy Program, a charitable trust
program established by the Manager; a director of
the following investment advisory subsidiaries of
the Manager: OAM Institutional, Inc. and Centennial
Asset Management Corporation (since November 2001),
HarbourView Asset Management Corporation and OFI
Private Investments, Inc. (since July 2001);
President (since November 1, 2001) and a director
(since July 2001) of Xxxxxxxxxxx Real Asset
Management, Inc., an investment advisor subsidiary
of the Manager; a director (since November 2001) of
Trinity Investment Management Corp. and Tremont
Advisers, Inc., investment advisory affiliates of
the Manager; Executive Vice President (since
February 1997) of Massachusetts Mutual Life
Insurance Company, the Manager's parent company; a
director (since June 1995) of DBL Acquisition
Corporation; formerly Chief Operating Officer (from
September 2000 to June 2001) of the Manager;
President and trustee (from November 1999 to
November 2001) of MML Series Investment Fund and
MassMutual Institutional Funds, open-end investment
companies; a director (from September 1999 to August
2000) of C.M. Life Insurance Company; President,
Chief Executive Officer and director (from September
1999 to August 2000) of MML Bay State Life Insurance
Company; a director (from June 1989 to June 1998) of
Emerald Isle Bancorp and Hibernia Savings Bank,
wholly-owned subsidiary of Emerald Isle Bancorp;
Executive Vice President Director and Chief
Operating Officer (from June 1995 to January 1997)
of Xxxxx X. Xxxxxx & Co., Inc., an investment
advisor; Chief Operating Officer (from March 1993 to
December 1996) of Concert Capital Management, Inc.,
an investment advisor. Director/trustee of 64
investment companies in the OppenheimerFunds complex.
-------------------------- ------------------------------------------------------ ----------------- ------------------
Officers of the Fund
----------------------------------------------- ----------------------------------------------------------------------
Name, Address,8 Age, Position(s) Held with Principal Occupation(s) During Past 5 Years
Fund and Length of Time Served9
----------------------------------------------- ----------------------------------------------------------------------
----------------------------------------------- ----------------------------------------------------------------------
Xxxxxx Xxxxx, Vice President and Portfolio Vice President of the Manager (since October 1993) and of
Manager (since October 1996) HarbourView Asset Management Corporation (since July 1994); an
Age: 42 officer and portfolio manager of other Xxxxxxxxxxx Funds.
----------------------------------------------- ----------------------------------------------------------------------
----------------------------------------------- ----------------------------------------------------------------------
Xxxxx X. Xxxxxx, Treasurer, Principal Senior Vice President and Treasurer (since March 1999) of the
Financial and Accounting Officer (since March Manager; Treasurer (since March 1999) of HarbourView Asset
1999) Management Corporation, Shareholder Services, Inc., Oppenheimer Real
Age: 42 Asset Management Corporation, Shareholder Financial Services, Inc.
and Oppenheimer Partnership Holdings, Inc., of OFI Private
Investments, Inc. (since March 2000) and of OppenheimerFunds
International Ltd. and Xxxxxxxxxxx Millennium Funds plc (since May
2000); Treasurer and Chief Financial Officer (since May 2000) of
Xxxxxxxxxxx Trust Company; Assistant Treasurer (since March 1999) of
Xxxxxxxxxxx Acquisition Corp.; an officer of other Xxxxxxxxxxx
funds; 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).
----------------------------------------------- ----------------------------------------------------------------------
----------------------------------------------- ----------------------------------------------------------------------
Xxxxx X. Xxxxxx, Assistant Treasurer Vice President of the Manager/Mutual Fund Accounting (since May
(since May 1996) 1996); Assistant Treasurer of Xxxxxxxxxxx Millennium Funds plc
Age: 36 (since October 1997); an officer of other Xxxxxxxxxxx Funds;
formerly an Assistant Vice President of the Manager/Mutual Fund
Accounting (April 1994 - May 1996), and a Fund Controller of the
Manager.
----------------------------------------------- ----------------------------------------------------------------------
----------------------------------------------- ----------------------------------------------------------------------
Xxxxxx X. Xxxx, Secretary Senior Vice President (since May 1985) and Acting General Counsel
(since October 2001) (since November 2001) of the Manager; Assistant Secretary of
Age: 53 Shareholder Services, Inc. (since May 1985), Shareholder Financial
Services, Inc. (since November 1989); OppenheimerFunds International
Ltd. and Oppenheimer Millennium Funds plc (since October 1997); an
officer of other Xxxxxxxxxxx funds.
----------------------------------------------- ----------------------------------------------------------------------
----------------------------------------------- ----------------------------------------------------------------------
Xxxxx X. Xxxxxxx, Assistant Secretary Vice President and Senior Counsel of the Manager (since July 1999);
(since October 2001) an officer of other Xxxxxxxxxxx funds; formerly a Vice President and
Age: 44 Associate Counsel of the Manager (September 1995 - July 1999).
----------------------------------------------- ----------------------------------------------------------------------
----------------------------------------------- ----------------------------------------------------------------------
Xxxxxxxxx X. Xxxx, Assistant Secretary Vice President and Senior Counsel of the Manager (since July 1999);
(since October 2001) an officer of other Xxxxxxxxxxx funds; formerly a Vice President and
Age: 43 Associate Counsel of the Manager (June 1990 - July 1999).
----------------------------------------------- ----------------------------------------------------------------------
----------------------------------------------- ----------------------------------------------------------------------
Xxxxxxxx X. Xxxx, Assistant Secretary Vice President and Assistant Counsel of the Manager (since June
(since October 2001) 1998); an officer of other Xxxxxxxxxxx funds; formerly an Assistant
Age: 36 Vice President and Assistant Counsel of the Manager (August 1997 -
June 1998); and Assistant Counsel of the Manager (August 1994-August
1997).
----------------------------------------------- ----------------------------------------------------------------------
|X| Remuneration of Trustees. The officers of the Funds and a Trustee of the Fund (Xx. Xxxxxx) 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 from the Fund with respect to the Fund's fiscal year ended November 30, 2001. The compensation from all of
the Board I Funds (including the Fund) represents compensation received as a director, trustee or member of a committee
of the boards of those funds during the calendar year 2001.
------------------------------------ -------------------------- ------------------------- ----------------------------
Retirement Total
Benefits Compensation
Aggregate Compensation Accrued as Part From all
Trustee's Name from Fund1 of Fund Board I
and Other Positions Expenses Funds (33 Funds)2
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Xxxx Xxxx
Chairman $18,764 $13,007 $173,700
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Xxxxxx X. Galli3
Study Committee Member $ 5,119 $ 1,614 $202,886
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Xxxxxx X. Griffths4
$ 2,246 $ 427 $ 54,889
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Xxxxxxxx Xxxxxxxx
Study Committee Chairman,
Audit Committee Member $11,593 $ 6,617 $150,152
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Xxxxxxxxx X. Xxxxxxxx
Study Committee Member $ 9,639 $ 6,134 $105,760
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Xxxxxxx X. Xxxxxxx
Audit Committee Member $10,671 $ 7,456 $ 97,012
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Xxxxxx X. Xxxxx
Proxy Committee Chairman, Audit
Committee Member $ 9,455 $ 6,275 $ 95,960
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Xxxxxxx X. Xxxxxxxx, Xx.
Proxy Committee Member
$ 6,055 $ 3,675 $ 71,792
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Xxxxxx X. Xxxxx
Vice Chairman
$ 2,637 $ 513 $ 64,080
------------------------------------ -------------------------- ------------------------- ----------------------------
------------------------------------ -------------------------- ------------------------- ----------------------------
Xxxxxxx X. Yeutter5
Proxy Committee Member $ 6,940 $ 4,560 $ 71,792
------------------------------------ -------------------------- ------------------------- ----------------------------
1 Aggregate compensation includes fees, deferred compensation, if any, and retirement plan benefits accrued for a
Trustee if, any for the fiscal year ended November 30, 2001.
3 Total compensation for the 2001 calendar year includes $97,126 received for serving as Trustee or Director of 10 other
Xxxxxxxxxxx funds.
4 Includes $1,819 deferred under Deferred Compensation Plan described below.
5 Includes $595 deferred under Deferred Compensation Plan described below.
|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan that provides for payments to retired
Trustees. Payments are up to 80% of the average compensation paid during a Trustee's five years of service in which the
highest compensation was received. A Trustee must serve as trustee for any of the Board I Funds for at least 15 years to
be eligible for the maximum payment. Each Trustee's retirement benefits will depend on the amount of the Trustee's
future compensation and length of service. Therefore the amount of those benefits cannot be determined at this time, nor
can we estimate the number of years of credited service that will be used to determine those benefits.
|X| Deferred Compensation Plan for Trustees. 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 Xxxxxxxxxxx funds selected by the Trustee. The
amount paid to the Trustee under the plan will be determined based upon the performance of the selected funds.
Deferral of Trustees' fees under the plan will not materially affect the Fund's assets, liabilities or net
income per share. The plan will not obligate the Fund to retain the services of any Trustee or to pay any particular
level of compensation to any Trustee. Pursuant to an Order issued by the Securities and Exchange Commission, the Fund
may invest in the funds selected by the Trustee under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.
Major Shareholders. As of March 1, 2002 , the only persons who owned of record or was known by the Fund to
own beneficially 5% or more of the Fund's outstanding securities of any class were:
Xxxxxxx Xxxxx, Xxxxxx Xxxxxx & Xxxxx, 0000 Xxxx Xxxx Xxxxx, Xxxx, Xxxxxxxxxxxx, Xxxxxxx 00000, which owned 9,986,415.908
Class A shares (representing approximately 26.95% of the Class A shares then outstanding), 1,438,654.160 Class B shares
(representing approximately 9.08% of the Class B shares then outstanding) and 1,215,164.229 Class C shares (representing
approximately 14.90% of the Class C shares then outstanding), which it advised the Fund that it held for the benefit of
its customers,
Sterling Trust Co. TR Zomba Recording 401(k), 0000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000, which owned 57,153.397 Class N
shares (representing approximately 12.50% of the Class N shares then outstanding) and Sterling Trust CO XX Xxxxxx
Reliable Tool & Manufact., 0000 Xxxxxxxx Xxxxxx, Xxxxxx, XX 00000-0000, which owned 35,657.141 Class N shares
(representing approximately 7.80% of the Class N shares then outstanding),
Xxxxxxx Di Xxxxx TR, TJH Medical Services PC 401(k), 0000 000xx Xxxxxx, Xxxxxxx, XX 00000-0000, which owned 29,315.095
Class N shares (representing approximately 6.41% of the Class N shares then outstanding),
RPSS TR, KAZ, Inc. 401(k) Plan, 0000 Xxxxxxxx, Xxx Xxxx, XX 00000, which owned 27,472.798 Class N shares (representing
approximately 6.01% of the Class N shares then outstanding).
The Manager. The Manager is wholly-owned by Xxxxxxxxxxx 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 Manger.
The Code of Ethics is an exhibit to the Fund's registration statement filed with the Securities and Exchange
Commission and can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. You can obtain
information about the hours of operation of the Public Reference Room by calling the SEC at 1.800.202.942.8090. The Code
of Ethics can also be viewed as part of the Fund's registration statement on the SEC's XXXXX database at the SEC's
Internet website at xxx.xxx.xxx. Copies may be obtained, after paying a duplicating fee, by electronic request at the
following E-mail address: xxxxxxxxxx@xxx.xxx, or by writing to the SEC's Public Reference Section, Washington, D.C.
20549-0102.
|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 Equity Portfolio Team, in particular Xx. Xxxxxxx Xxxxx and Xx. Xxxxx Xxxxxxxx, 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 11/30: Management Fees Paid to OppenheimerFunds, Inc.
---------------------------------------- ----------------------------------------------------------------------------
---------------------------------------- ----------------------------------------------------------------------------
1999 $2,888,430
---------------------------------------- ----------------------------------------------------------------------------
---------------------------------------- ----------------------------------------------------------------------------
2000 $6,114,717
---------------------------------------- ----------------------------------------------------------------------------
---------------------------------------- ----------------------------------------------------------------------------
2001 $7,087,397
---------------------------------------- ----------------------------------------------------------------------------
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 advisor for any other person, firm or corporation and to use
the name "Xxxxxxxxxxx" in connection with other investment companies for
which it may act as investment advisor or general distributor. If the Manager shall no longer act as investment advisor
to the Fund, the Manager may withdraw the right of the Fund to use the name "Xxxxxxxxxxx" as part of its name.
|X| Annual Approval of Investment Advisory Agreement. Each year, the Board of Trustees, including a majority of the
Independent Trustees, is required to approve the renewal of the investment advisory agreement. The Investment Company Act
requires that the Board request and evaluate and the Manager provide such information as may be reasonably necessary to
evaluate the terms of the investment advisory agreement. The board employs an independent consultant to prepare a report
that provides such information as the Board requests for this purpose.
The Board also receives information about the 12b-1 distribution fees the Fund pays. These distribution fees
are reviewed and approved at a different time of the year.
The Board reviewed the foregoing information in arriving at its decision to renew the investment advisory
agreement. Among other factors, the Board considered:
o The nature, cost, and quality of the services provided to the Fund and its shareholders;
o The profitability of the Fund to the Manager;
o The investment performance of the Fund in comparison to regular market indices
o Economies of scale that may be available to the Fund from the Manager;
o Fees paid by other mutual funds for similar services;
o The value and quality of any other benefits or services received by the Fund from its relationship with the
Manager, and
o The direct and indirect benefits the Manager received from its relationship with the Fund. These included
services provided by the General Distributor and the Transfer Agent, and brokerage and soft dollar
arrangements permissible under Section 28(e) of the Securities Exchange Act.
The Board considered that the Manager must be able to pay and retain high quality personnel at competitive rates
to provide services to the Fund. The Board also considered that maintaining the financial viability of the Manager is
important so that the Manager will be able to continue to provide quality services to the Fund and its shareholders in
adverse times. The Board also considered the investment performance of other mutual funds advised by the Manager. The
Board is aware that there are alternatives to the use of the Manager.
These matters were also considered by the Independent Trustees meeting separately from the full Board with
experienced Counsel to the Fund who assisted the Board in its deliberations. The Fund's Counsel is independent of the
Manager within the meaning and intent of the SEC Rules regarding the independence of counsel.
In arriving at a decision, the Board did not single out any one factor or group of factors as being more important
than other factors, but considered all factors together. The Board judged the terms and conditions of the Agreement,
including the investment advisory fee, in light of all of the surrounding circumstances.
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 the
Fund's 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 advisor.
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 11/30: Total Brokerage Commissions Paid by the Fund1
---------------------------------------- -----------------------------------------------------------------------------
---------------------------------------- -----------------------------------------------------------------------------
1999 $1,115,579
---------------------------------------- -----------------------------------------------------------------------------
---------------------------------------- -----------------------------------------------------------------------------
2001 $$1,652,249
---------------------------------------- -----------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions on a net trade basis.
2. In the fiscal year ended 11/30/01, the amount of transactions directed to brokers for research services was
$74,941 and the amount of the commissions paid to broker-dealers for those services was $34,453,383.
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 classes of shares. The Distributor bears the expenses
normally attributable to sales including advertising and the cost of printing and mailing prospectuses, other than those
furnished to existing shareholders. The Distributor is not obligated to sell a specific number of shares.
The sales charges and concessions paid to, or retained by, the Distributor from the sale of shares during the
Fund's three most recent fiscal years, and the contingent deferred sales charges retained by the Distributor on the
redemption of shares for the most recent fiscal year are shown in the tables below.
--------------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
Aggregate Class A Concessions on Concessions on Concessions on Concessions on
Fiscal Year Front-End Sales Front-End Sales Class A Shares Class B Shares Class C Shares Class N Shares
Ended 11/30: Charges on Charges Advanced by Advanced by Advanced by Advanced by
Class A Shares Retained by Distributor1 Distributor1 Distributor1 Distributor1
Distributor
--------------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
--------------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
1999 $ 732,494 $208,769 $ 174,092 $ 883,662 $120,524 0
--------------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
--------------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
2000 $2,515,558 $488,326 $1,156,083 $3,622,526 $824,261 0
--------------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
--------------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
2001 $2,268,871 $330,999 $ 958,310 $2,010,709 $548,577 $28,4172
--------------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for sales of
Class B, Class C and Class N shares from its own resources at the time of sale.
2. The inception date of Class N shares was March 1, 2001.
-------------------------- ----------------------- ------------------------ ----------------------- ------------------------
Class A Contingent Class B Contingent Class C Contingent Class N Contingent
Fiscal Year Ended 11/30: Deferred Sales Deferred Sales Charges Deferred Sales Deferred Sales Charges
Charges Retained by Retained by Distributor Charges Retained by Retained by Distributor
Distributor Distributor
-------------------------- ----------------------- ------------------------ ----------------------- ------------------------
2001 $46,218 $551,444 $68,806 $5
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B, Class C and Class N shares under Rule 12b-1 of the
InvestmentCompany 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 Trustees, 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. 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 November 30, 2001 payments under the Class A Plan totaled $1,321,113, all of which was paid
by the Distributor to recipients. That included $62,532 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, Class C and Class N Service and Distribution Plan. 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, Class C and
Class N 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 plans 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, Class C and the Class
N 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, Class C or Class N
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 and Class N 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 concession 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, Class C and/or Class N service fee and the asset-based sales charge to the dealer
quarterly in lieu of paying the sales concessions and service fee in advance at the time of
purchase.
The asset-based sales charges on Class B, Class C and Class N 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,
Class C and Class N shares. The payments are made to the Distributor in recognition that the
Distributor:
o pays sales concessions to authorized brokers and dealers at the time of sale and pays service
fees as described above,
o may finance payment of sales concessions 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, Class C and Class N 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.
o may not be able to adequately compensate dealers that sell Class B, Class C and Class N shares
without receiving payment under the plans and therefore may not be able to offer such Classes for
sale absent the plans,
o receives payments under the plans consistent with the service fees and asset-based sales charges
paid by other non-proprietary funds that charge 12b-1 fees,
o may use the payments under the plan to include the Fund in various third-party distribution programs
that may increase sales of Fund shares,
o may experience increased difficulty selling the Fund's shares if payments under the plan are discontinued
because most competitor funds have plans that pay dealers for rendering distribution services as much or
more than the amounts currently being paid by the Fund, and
o may not be able to continue providing, at the sameor at alesser cost, the same quality distribution
sales efforts and services, or to obtain such services from brokers and dealers, if the plan payments
were to be discontinued. When Class B, Class C or Class N shares are sold without the designation of a
broker-dealer, the Distributor is automatically designated as the broker-dealer of record. In those cases,
the Distributor retains the service fee and asset-based sales charge paid on Class B, Class C and
Class N shares.
Distribution Fees Paid
to the Distributor in
the Fiscal Year Ended
11/30/01*
----------------------------------------------------------------------------------------------------------------------------
------------------ --------------------- ---------------------- ---------------------------- -------------------------
Distributor's Aggregate Distributor's
Unreimbursed Expenses Unreimbursed Expenses
Total Payments Amount Retained by Under Plan as % of
Under Plan Distributor Net Assets of Class
Class
------------------ --------------------- ---------------------- ---------------------------- -------------------------
------------------ --------------------- ---------------------- ---------------------------- -------------------------
Class B Plan
$2,627,971 $2,141,6331 $5,793,397 2.52%
------------------ --------------------- ---------------------- ---------------------------- -------------------------
------------------ --------------------- ---------------------- ---------------------------- -------------------------
Class C Plan
$1,227,443 $ 561,0282 $1,665,274 1.46%
------------------ --------------------- ---------------------- ---------------------------- -------------------------
------------------ --------------------- ---------------------- ---------------------------- -------------------------
Class N Plan
$ 4,298 $ 3,651 $ 26,325 $0.85%
------------------ --------------------- ---------------------- ---------------------------- -------------------------
1. Includes $31,796 paid to an affiliate of the Distributor's parent company.
2. Includes $8,328 paid to an affiliate of the Distributor's parent company.
3. The inception date of Class N shares was 3/1/01.
The Distributor's actual expenses in selling when Class B, Class C or Class N shares are sold without the
designation of a broker-dealer, the Distributor is automatically designated as the broker-dealer of record. In those
cases, the Distributor retains the service fee paid on Class B and Class C shares and retains the asset-based sales
charge paid on Class B, Class C and Class N shares.
The Distributor's actual expenses in selling Class, B, Class C and Class N 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 to compensate it for its expenses incurred for distributing shares before the plan was terminated.
All payments under the Class B, Class C and the Class N 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 investment performance.
Those terms include "cumulative total return," "average annual total return," "average annual total return at net asset
value" and "total return at net asset value." An explanation as of how total returns are calculated is set forth below.
The charts below show the Fund's performance of the Fund's most recent fiscal year end. You can obtain current
performance as information by calling the Fund's Transfer Agent at 0.000.000.0000 or by visiting the OppenheimerFunds
Internet website at xxxx://xxx.xxxxxxxxxxxxxxxx.xxx.
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).
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 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 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 Total returns for any given past period represent historical performance information and are not, and
should not be considered, a prediction of future 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 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 debt investments, the types of investments the Fund holds, and its operating expenses that are allocated to the
particular class.
|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 the SEC. The methodology is
discussed below.
In calculating total returns for Class A shares, the current maximum sales charge of 5.75% (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. For Class N shares the 1% contingent deferred sales charge is deducted for returns for the
life-of-class periods as applicable.
|_| 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, Class C or Class
N 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 11/30/01
----------------------------------------------------------------------------------------------------------------------
-------------- -------------------------- ----------------------------------------------------------------------------
Cumulative Total Returns Average Annual Total Returns
Class of (10 years or Life of
Shares Class if less)
-------------- -------------------------- ----------------------------------------------------------------------------
-------------- -------------------------- ------------------------ ------------------------- -------------------------
10-Years
1-Year 5-Years (or life-of-class if
less)
-------------- -------------------------- ------------------------ ------------------------- -------------------------
-------------- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------
After Sales Without After Without After Without After Without
Charge Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
-------------- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------
-------------- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------
Class A 61.51%(1) 71.36%(1) -25.15% -20.58% 6.59% 7.86% 8.81%(1) 9.95%(1)
-------------- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------
-------------- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------
Class B 62.62%(2) 63.62%(2) -24.98% -21.23% 6.72% 7.03% 8.94%(2) 9.05%(2)
-------------- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------
-------------- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------
Class C 63.95%(3) 63.95%(3) -21.16% -21.16% 7.05% 7.05% 9.09%(3) 9.09%(3)
-------------- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------
-------------- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------
Class N -21.13%(4) -20.33%(4) X/X X/X X/X X/X X/X X/X
-------------- ------------- ------------ ----------- ------------ ------------ ------------ ------------ ------------
1. Inception of Class A: 3/25/96
2. Inception of Class B: 3/25/96
3. Inception of Class C: 3/25/96
4. Inception of Class N: 3/01/01
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, Inc. ("Lipper") 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 styles. 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 Ratings and 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. ("Morningstar"), 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 international stock funds category.
Morningstar proprietary star rankings reflect historical risk-adjusted total investment return. For each fund
with at least a three-year history, Morningstar calculates a Morningstar RatingTM metric each month by subtracting the
return on a 90-day U.S. Treasury Xxxx from the fund's load-adjusted return for the same period, and then adjusting this
excess return for risk. The top 10% of funds in each broad asset class receive 5 stars, the next 22.5% receive 4 stars,
the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The Overall Morningstar
Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five- and
ten-year (if applicable) Morningstar Ratings metrics.
The Fund may also compare its total return rating to that of other funds in its Morningstar category, in
addition to its star ratings. Those total return ratings 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, Xxxxxx'x, 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 Xxxxxxxxxxx funds, other than performance rankings of the
Xxxxxxxxxxx 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.
From time to time, the Fund may include in its advertisements and sales literature the total return performance
of a hypothetical investment account that includes shares of the fund and other Xxxxxxxxxxx funds. The combined account
may be part of an illustration of an asset allocation model or similar presentation. The account performance may combine
total return performance of the fund and the total return performance of other Xxxxxxxxxxx funds included in the
account. Additionally, from time to time, the Fund's advertisements and sales literature may include, for illustrative
or comparative purposes, statistical data or other information about general or specific market and economic conditions.
That may include, for example,
o information about the performance of certain securities or commodities markets or segments of those markets,
o information about the performance of the economics of particular countries or regions,
o the earnings of companies included in segments of particular industries, sectors, securities markets, countries
or regions,
o the availability of different types of securities or offerings of securities,
o information relating to the gross national or gross domestic product of the United States or other countries or
regions,
o comparisons of various market sectors or indices to demonstrate performance, risk or other characteristics of
the Fund.
---------------------------------------------------------------------------------------------------------------------------
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
B 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 the Distributor is instructed 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 Fund receives Federal Funds for the purchase through the ACH system before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the Exchange, the shares will be purchased and dividends will begin to
accrue on the next regular business day. The proceeds of ACH transfers are normally received by the Fund 3 days after
the transfers are initiated. 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 B 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 (including IRAs and 403(b) plans), 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, Class B and Class N shares of the Fund and other Xxxxxxxxxxx funds to reduce the
sales charge rate that applies to current purchases of Class A shares, and
o Class A, Class B and Class N shares of Xxxxxxxxxxx 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 Xxxxxxxxxxx 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 Xxxxxxxxxxx Funds. The Xxxxxxxxxxx funds are those mutual funds for which the Distributor acts as the
distributor or the sub-distributor and currently include the following:
Xxxxxxxxxxx Bond Fund Xxxxxxxxxxx Main Street Growth & Income Fund
Xxxxxxxxxxx California Municipal Fund Xxxxxxxxxxx Main Street Opportunity Fund
Xxxxxxxxxxx Capital Appreciation Fund Xxxxxxxxxxx Main Street Small Cap Fund
Xxxxxxxxxxx Capital Preservation Fund Xxxxxxxxxxx XxxXxx Fund
Xxxxxxxxxxx Capital Income Fund Xxxxxxxxxxx Multiple Strategies Fund
Xxxxxxxxxxx Champion Income Fund Xxxxxxxxxxx Municipal Bond Fund
Xxxxxxxxxxx Convertible Securities Fund OSM1 - Mercury Advisors S&P 500 Index
Xxxxxxxxxxx Developing Markets Fund OSM1 - Mercury Advisors Focus Growth Fund
Xxxxxxxxxxx Disciplined Allocation Fund Xxxxxxxxxxx New York Municipal Fund
Xxxxxxxxxxx Value Fund Xxxxxxxxxxx New Jersey Municipal Fund
Xxxxxxxxxxx Discovery Fund Xxxxxxxxxxx Pennsylvania Municipal Fund
Xxxxxxxxxxx Emerging Growth Fund OSM1 - QM Active Balanced Fund
Xxxxxxxxxxx Emerging Technologies Fund Xxxxxxxxxxx Quest Balanced Value Fund
Xxxxxxxxxxx Enterprise Fund Xxxxxxxxxxx Quest Capital Value Fund, Inc.
Xxxxxxxxxxx Europe Fund Xxxxxxxxxxx Quest Global Value Fund, Inc.
Xxxxxxxxxxx Florida Municipal Fund Xxxxxxxxxxx Quest Opportunity Value Fund
OSM1- Gartmore Millennium Growth Fund Xxxxxxxxxxx Quest Value Fund, Inc.
Xxxxxxxxxxx Global Fund Xxxxxxxxxxx Real Asset Fund
Xxxxxxxxxxx Global Growth & Income Fund OSM1 - Salomon Brothers Capital Fund
Xxxxxxxxxxx Gold & Special Minerals Fund Xxxxxxxxxxx Senior Floating Rate Fund
Xxxxxxxxxxx Growth Fund Xxxxxxxxxxx Small Cap Value Fund
Xxxxxxxxxxx High Yield Fund Xxxxxxxxxxx Strategic Income Fund
Xxxxxxxxxxx Intermediate Municipal Fund Xxxxxxxxxxx Total Return Fund, Inc.
Xxxxxxxxxxx International Bond Fund Xxxxxxxxxxx Trinity Core Fund
Xxxxxxxxxxx International Growth Fund Xxxxxxxxxxx Trinity Growth Fund
Xxxxxxxxxxx International Small Company Fund Xxxxxxxxxxx Trinity Value Fund
OSM1 -Xxxxxxxx Growth Fund Xxxxxxxxxxx U.S. Government Trust
Xxxxxxxxxxx Large Cap Growth Fund Limited-Term New York Municipal Fund
Xxxxxxxxxxx Limited-Term Government Fund Rochester Fund Municipals
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 Xxxxxxxxxxx Cash Reserves
Centennial Money Market Trust Xxxxxxxxxxx Money Market Fund, Inc.
1 - "OSM" stands for Xxxxxxxxxxx Select Managers
There is an initial sales charge on the purchase of Class A shares of each of the Xxxxxxxxxxx funds described
above 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.
|X| 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 Xxxxxxxxxxx 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 Xxxxxxxxxxx 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 Xxxxxxxxxxx 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 concessions 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 concessions allowed or paid to the dealer over the amount of concessions that apply to the actual amount of
purchases. The excess concessions 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 Xxxxxxxxxxx
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 concessions 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.
|_| 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 Xxxxxxxxxxx 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 Xxxxxxxxxxx
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 Xxxxxxxxxxx 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 a (ACH) member. Asset Builder Plans may not be used to buy shares
for OppenheimerFunds employee-sponsored qualified retirement accounts. Asset Builder Plans also enable shareholders of
Xxxxxxxxxxx Cash Reserves to use their fund account to make monthly automatic purchases of shares of up to four other
Xxxxxxxxxxx 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 you 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 B 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 Xxxxxxx Xxxxx Xxxxxx Xxxxxx & Xxxxx, Inc. ("Xxxxxxx Xxxxx") or an independent record keeper that has a
contract or special arrangement with Xxxxxxx Xxxxx. If on the date the plan sponsor signed the Xxxxxxx Xxxxx 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 Xxxxxxxxxxx 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,
Class C or Class N 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, Class C and Class N
shares 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, Class C and Class N shares have no initial sales charge, the purpose of the deferred sales charge
and asset-based sales charge on Class B, Class C and Class N 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 A Shares Subject to a Contingent Deferred Sales Charge. For purchases of Class A shares subject to a
contingent deferred sales charge as described in the Prospectus, no sales concessions will be paid to the broker-dealer
of record, as described in the Prospectus, on sales of Class A shares purchased with the redemption proceeds of shares of
another mutual fund offered as an investment option in a retirement plan in which Xxxxxxxxxxx funds are also offered as
investment options under a special arrangement with the Distributor, if the purchase occurs more than 30 days after the
Xxxxxxxxxxx funds are added as an investment option under that plan. Additionally, that concession will not be paid on
purchases of shares by a retirement plan made with the redemption proceeds of Class N shares of one or more Xxxxxxxxxxx
funds held by the plan for more than 18 months.
|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 that 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| Availability of Class N Shares. In addition to the description of the types of retirement plans which may
purchase Class N shares contained in the prospectus, Class N shares also are offered to the following:
o to all rollover IRAs,
o to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and Ascender retirement plans,
o to all trustee-to-trustee XXX transfers,
o to all 90-24 type 403(b) transfers,
o to Group Retirement Plans (as defined in Appendix _ to this Statement of Additional Information) which have
entered into a special agreement with the Distributor for that purpose,
o to Retirement Plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, the recordkeeper or
the plan sponsor for which has entered into a special agreement with the Distributor,
o to Retirement Plans of a plan sponsor where the aggregate assets of all such plans invested in the Xxxxxxxxxxx
funds is $500,000 or more,
o to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the purchase with the redemption proceeds of
Class A shares of one or more Xxxxxxxxxxx funds.
o to certain customers of broker-dealers and financial advisors that are identified in a special agreement between
the broker-dealer or financial advisor and the Distributor for that purpose.
The sales concession and the advance of the service fee, as described in the Prospectus, will not be paid
to dealers of record on sales of Class N shares on:
o purchases of Class N shares in amounts of $500,000 or more by a retirement plan that pays for the purchase with
the redemption proceeds of Class A shares of one or more Xxxxxxxxxxx funds (other than rollovers
from an OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to any XXX invested in the
Xxxxxxxxxxx funds),
o purchase of Class N shares in amounts of $500,000 or more by a retirement plan that pays for the purchase with
the redemption proceeds of Class C shares of one or more Xxxxxxxxxxx funds held by the plan for
more than one year (other than rollovers from an OppenheimerFunds-sponsored Pinnacle or Ascender
401(k) plan made with the redemption proceeds of Class A shares of one or more Xxxxxxxxxxx funds),
o purchases of Class N shares in amounts of $500,000 or more by a retirement plan that pays for the purchase with
the redemption proceeds of Class C shares of one or more Xxxxxxxxxxx funds held by the plan for
more than one year (other than rollovers from an OppenheimerFunds-sponsored Pinnacle or Ascender
401(k) plan to any XXX invested in the Xxxxxxxxxxx funds), and
o on purchases of Class N shares by an OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan made with the
redemption proceeds of Class A shares of one or more Xxxxxxxxxxx funds.
|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 U.S. 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,
Xxxxxx Xxxxxx Xxxx, Xx. 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. Because the Fund's net asset
values will not be calculated on those days, the Fund's net asset values per share may be significantly affected on such
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. If such determination is made the Manager acting through
an internal valuation committee, will establish a valuation for such security subject to the approval, ratification and
confirmation by the Board at its next ensuing meeting.
|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
The information below supplements the terms and conditions for redeeming shares set forth in the Prospectus.
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
Xxxxxxxxxxx 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 or Class N 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 Xxxxxxxxxxx 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, under certain circumstances 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 $500 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, Class C or Class N 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, Class C and Class N shareholders should not establish automatic withdrawal plans,
because of the potential imposition of the contingent deferred sales charge on such withdrawals (except where the Class
B, Class C or Class N contingent deferred sales charge is waived as described in Appendix B 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 Xxxxxxxxxxx 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 Xxxxxxxxxxx funds having more than one class of
shares may be exchanged only for shares of the same class of other Xxxxxxxxxxx funds. Shares of Xxxxxxxxxxx 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 0.000.000.0000.
o All of the Xxxxxxxxxxx funds currently offer Class A, B and C shares except Xxxxxxxxxxx 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 Class B, Class C and Class N shares of Xxxxxxxxxxx Cash Reserves are generally available only by exchange from
the same class of shares of other Xxxxxxxxxxx funds or through OppenheimerFunds-sponsored 401(k) plans.
o Only certain Xxxxxxxxxxx funds currently offer Class Y shares. Class Y shares of Xxxxxxxxxxx Real Asset Fund may
not be exchanged for shares of any other fund.
o Only certain Xxxxxxxxxxx funds currently offer Class N shares, which are only offered to retirement plans as
described in the Prospectus. Class N shares can be exchanged only for Class N shares of other Xxxxxxxxxxx funds.
o Class M shares of Xxxxxxxxxxx Convertible Securities Fund may be exchanged only for Class A shares of other
Xxxxxxxxxxx funds. They may not be acquired by exchange of shares of any class of any other Xxxxxxxxxxx funds except
Class A shares of Xxxxxxxxxxx Money Market Fund or Xxxxxxxxxxx Cash Reserves acquired by exchange of Class M shares.
o Class X shares of Limited Term New York Municipal Fund can be exchanged only for Class B shares of other
Xxxxxxxxxxx funds and no exchanges may be made to Class X shares.
o Shares of Xxxxxxxxxxx Capital Preservation Fund may not be exchanged for shares of Xxxxxxxxxxx Money Market
Fund, Inc., Xxxxxxxxxxx Cash Reserves or Xxxxxxxxxxx Limited-Term Government Fund. Only participants in certain
retirement plans may purchase shares of Xxxxxxxxxxx Capital Preservation Fund, and only those participants may
exchange shares of other Xxxxxxxxxxx funds for shares of Xxxxxxxxxxx Capital Preservation Fund.
o Class A shares of Xxxxxxxxxxx Senior Floating Rate Fund are not available by exchange of shares of Xxxxxxxxxxx
Money Market Fund or Class A shares of Xxxxxxxxxxx Cash Reserves. If any Class A shares of another Xxxxxxxxxxx fund
that are exchanged for Class A shares of Xxxxxxxxxxx Senior Floating Rate Fund are subject to the Class A contingent
deferred sales charge of the other Xxxxxxxxxxx fund at the time of exchange, the holding period for that Class A
contingent deferred sales charge will carry over to the Class A shares of Xxxxxxxxxxx Senior Floating Rate Fund
acquired in the exchange. The Class A shares of Xxxxxxxxxxx Senior Floating Rate Fund acquired in that exchange will
be subject to the Class A Early Withdrawal Charge of Xxxxxxxxxxx Senior Floating Rate Fund if they are repurchased
before the expiration of the holding period.
o Class A, Class B, Class C and Class Y Shares of Xxxxxxxxxxx Select Managers Mercury Advisors S&P Index Fund and
Xxxxxxxxxxx Select Managers QM Active Balanced Fund are only available to retirement plans and are available only by
exchange from the same class of shares of other Xxxxxxxxxxx funds held by retirement plans.
Class A shares of Xxxxxxxxxxx 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 Xxxxxxxxxxx funds offered with a sales charge upon payment of the sales charge. They may also be
used to purchase shares of Xxxxxxxxxxx funds subject to an early withdrawal charge or contingent deferred sales charge.
Shares of Xxxxxxxxxxx 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 Xxxxxxxxxxx funds without being subject to an initial sales charge 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 Xxxxxxxxxxx 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 Xxxxxxxxxxx
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 Xxxxxxxxxxx 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
of the Fund, acquired by exchange of Class A shares of other Xxxxxxxxxxx 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. With respect to Class N shares, a 1% contingent deferred sales charge will be imposed if the retirement plan (not
including IRAs and 403(b) plans) is terminated or Class N shares of all Xxxxxxxxxxx funds are terminated as an investment
option of the plan and Class N shares are redeemed within 18 months after the plan's first purchase of Class N shares of
any Xxxxxxxxxxx fund or with respect to an individual retirement plan or 403(b) plan, Class N shares are redeemed within
18 months of the plan's first purchase of Class N shares of any Xxxxxxxxxxx fund.
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
Xxxxxxxxxxx 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 Xxxxxxxxxxx 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. The Fund has no fixed dividend rate and 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, Class C and Class N 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, Class C and Class
N 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 Xxxxxxxxxxx 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, Distributions and Redemptions of Shares. The federal tax treatment of the Fund's
dividends and capital gains distributions is briefly highlighted in the Prospectus. The following is only a summary of
certain additional tax considerations generally affecting the Fund and its shareholders.
The tax discussion in the Prospectus and this Statement of Additional Information is based on tax law in effect
on the date of the Prospectus and this Statement of Additional Information. Those laws and regulations may be changed by
legislative, judicial, or administrative action, sometimes with retroactive effect. State and local tax treatment of
ordinary income dividends and capital gain dividends from regulated investment companies may differ from the treatment
under the Internal Revenue Code described below. Potential purchasers of shares of the Fund are urged to consult their
tax advisers with specific reference to their own tax circumstances as well as the consequences of federal, state and
local tax rules affecting an investment in the Fund.
|X| Qualification as a Regulated Investment Company. The Fund has elected to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. As a regulated investment
company, the Fund is not subject to federal income tax on the portion of its net investment income (that is, taxable
interest, dividends, and other taxable ordinary income, net of expenses) and capital gain net income (that is, the excess
of net long-term capital gains over net short-term capital losses) that it distributes to shareholders. 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 their Fund shares are held in a retirement account
or the shareholder is otherwise exempt from tax). The Internal Revenue Code contains a number of complex tests relating
to qualification that the Fund might not meet in a particular year. If it did not qualify as a regulated investment
company, the Fund would be treated for tax purposes as an ordinary corporation and would receive no tax deduction for
payments made to shareholders.
To qualify as a regulated investment company, the Fund must distribute at least 90% of its investment company
taxable income (in brief, net investment income and the excess of net short-term capital gain over net long-term capital
loss) for the taxable year. The Fund must also satisfy certain other requirements of the Internal Revenue Code, some of
which are described below. Distributions by the Fund made during the taxable year or, under specified circumstances,
within twelve months after the close of the taxable year, will be considered distributions of income and gains for the
taxable year and will therefore count toward satisfaction of the above-mentioned requirement.
To qualify as a regulated investment company, the Fund must derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies (to the extent such currency gains are directly related to the regulated investment
company's principal business of investing in stock or securities) and certain other income.
In addition to satisfying the requirements described above, the Fund must satisfy an asset diversification test
in order to qualify as a regulated investment company. Under that test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of cash and cash items, U.S. government
securities, securities of other regulated investment companies, and securities of other issuers. As to each of those
issuers, the Fund must not have invested more than 5% of the value of the Fund's total assets in securities of each such
issuer and the Fund must not hold more than 10% of the outstanding voting securities of each such issuer. No more than
25% of the value of its total assets may be invested in the securities of any one issuer (other than U.S. government
securities and securities of other regulated investment companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses. For purposes of this test, obligations issued or
guaranteed by certain agencies or instrumentalities of the U.S. government are treated as U.S. government securities.
|X| Excise Tax on Regulated Investment Companies. 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. To meet this requirement, in certain circumstances the Fund might be required
to liquidate portfolio investments to make sufficient distributions to avoid excise tax liability. 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.
|X| Taxation of Fund Distributions. The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Those distributions will be taxable to shareholders as ordinary income and
treated as dividends for federal income tax purposes.
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. Since it is anticipated that most of the Fund's income will be derived from interest
it receives on its investments, the Fund does not anticipate that its distributions will qualify for this deduction.
The Fund may either retain or distribute to shareholders its net capital gain for each taxable year. The Fund
currently intends to distribute any such amounts. If net long term capital gains are distributed and designated as a
capital gain distribution, it will be taxable to shareholders as long-term capital gain. It does not matter how long the
shareholder has held his or her shares or whether that gain was recognized by the Fund before the shareholder acquired
his or her shares.
If the Fund elects to retain its net capital gain, the Fund will be subject to tax on it at the 35% corporate
tax rate. If the Fund elects to retain its net capital gain, it is expected that the Fund also will elect to have
shareholders of record on the last day of its taxable year treated as if each received a distribution of their pro rata
share of such gain. As a result, each shareholder will be
required to report his or her pro rata share of such gain on their tax return as long-term capital gain, will receive a
refundable tax credit for his/her pro rata share of tax paid by the Fund on the gain, and will increase the tax basis for
his/her shares by an amount equal to the deemed distribution less the tax credit.
Investment income that may be received by the Fund from sources within foreign countries may be subject to
foreign taxes withheld at the source. The United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
Distributions by the Fund that do not constitute ordinary income dividends or capital gain distributions will be
treated as a return of capital to the extent of the shareholder's tax basis in their shares. Any excess will be treated
as gain from the sale of those shares, as discussed below. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year. 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.
Distributions by the Fund will be treated in the manner described above regardless of whether the distributions
are paid in cash or reinvested in additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a distribution in an amount equal to the fair
market value of the shares received, determined as of the reinvestment date.
The Fund will be required in certain cases to withhold and remit to the U.S. Treasury 31% of ordinary income
dividends and capital gains distributions and the proceeds of the redemption of shares, paid to any shareholder (1) who
has failed to provide a correct, certified taxpayer identification number, (2) who is subject to backup withholding for
failure to report the receipt of interest or dividend income properly, or (3) who has failed to certify to the Fund that
the shareholder is not subject to backup withholding or is an "exempt recipient" (such as a corporation).
|X| Tax Effects of Redemptions of Shares. If a shareholder redeems all or a portion of his/her shares, the
-
shareholder will recognize a gain or loss on the redeemed shares in an amount equal to the difference between the
proceeds of the redeemed shares and the shareholder's adjusted tax basis in the shares. All or a portion of any loss
recognized in that manner may be disallowed if the shareholder purchases other shares of the Fund within 30 days before
or after the redemption.
In general, any gain or loss arising from the redemption of shares of the Fund will be considered capital gain
or loss, if the shares were held as a capital asset. It will be long-term capital gain or loss if the shares were held
for more than one year. However, any capital loss arising from the redemption of shares held for six months or less will
be treated as a long-term capital loss to the extent of the amount of capital gain dividends received on those shares.
Special holding period rules under the Internal Revenue Code apply in this case to determine the holding period of shares
and there are limits on the deductibility of capital losses in any year.
|X| Foreign Shareholders. Taxation of a shareholder who under United States law is a nonresident alien
individual, foreign trust or estate, foreign corporation, or foreign partnership depends on whether the shareholder's
income from the Fund is effectively connected with a U.S. trade or business carried on by such shareholder.
If the income from the Fund is not effectively connected with a U.S. trade or business carried on by a foreign
shareholder, ordinary income dividends paid to such foreign shareholder will be subject to U.S. withholding tax. The rate
of the tax depends on a number of factors. If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends, capital gain dividends, and any gains
realized upon the sale of shares of the Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of a foreign non-corporate shareholder, the Fund may be required to withhold U.S. federal income tax
at a rate of 31% on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless the shareholder furnishes the Fund with proper notification of their foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be
different from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to
the particular tax consequences to them of an investment in the Fund, including the applicability of foreign taxes.
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 Xxxxxxxxxxx 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 Xxxxxxxxxxx funds (other than Xxxxxxxxxxx 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 Xxxxxxxxxxx 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 as the
Transfer Agent for an annual per account fee. It also acts as shareholder servicing agent for the other Xxxxxxxxxxx
funds. The Fund's transfer agent has voluntarily agreed to limit transfer and shareholder servicing agent fees to 0.25%
per annum of Class Y shares, effective January 1, 2001, and for all other classes, 0.35% per annum, effective October 1,
2001. That undertaking may be amended or withdrawn at any time. 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. KPMG 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 certain other funds advised by the Manager and its
affiliates.
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
Xxxxxxxxxxx International Growth Fund:
We have audited the accompanying statement of assets and liabilities of
Xxxxxxxxxxx International Growth Fund, including the statement of investments,
as of November 30, 2001, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. 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 November 30, 2001, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Xxxxxxxxxxx International Growth Fund as of November 30, 2001, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
KPMG LLP
Denver, Colorado
December 14, 2001
STATEMENT OF INVESTMENTS November 30, 2001
Market Value
Shares See Note 1
------------------------------------------------------------------------------------------------
Common Stocks--91.1%
Capital Goods--20.3%
Aerospace/Defense--2.6%
Empresa Brasileira de Aeronautica SA (Embraer), Preference 5,359,000 $ 23,401,284
Electrical Equipment--3.3%
Halma plc 6,891,000 16,706,334
Toshiba Corp. 2,957,424 12,634,869
------------
29,341,203
Industrial Services--9.3%
3i Group plc 470,631 5,859,287
BTG plc/1/ 854,000 9,377,748
Xxxx plc 1,701,100 4,924,656
Hyundai Heavy Industries Co. Ltd. 429,663 8,320,196
ICTS International NV 211,200 1,424,438
Koninklijke Boskalis Westminster NV 1,292,891 38,202,602
Technip-Coflexip SA, Sponsored ADR/1/ 462,875 13,955,681
------------
82,064,608
Manufacturing--5.1%
FKI plc 1,871,070 5,109,858
GSI Lumonics, Inc./1/ 1,125,000 8,583,750
Jenoptik AG 1,337,765 27,250,741
Xxxxx-Danfoss, Inc. 150,000 1,125,000
Shire Pharmaceuticals Group plc/1/ 259,800 3,093,682
------------
45,163,031
Communication Services--2.0%
Telecommunications-Long Distance--1.3%
Videsh Xxxxxxx Xxxxx Ltd. 2,081,700 10,110,990
Videsh Xxxxxxx Xxxxx Ltd., Sponsored ADR 175,504 1,598,841
------------
11,709,831
Telephone Utilities--0.7%
Tele Norte Leste Participacoes SA (Telemar) 540,369,189 6,160,700
Consumer Cyclicals--13.3%
Autos & Housing--1.6%
Aucnet, Inc. 205,230 2,415,353
Ducati Motor Holding SpA/1/ 2,500,000 3,883,798
Porsche AG, Preferred 11,601 4,142,965
Solidere, GDR1/2/ 855,700 3,829,257
------------
14,271,373
14 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
Market Value
Shares See Note 1
---------------------------------------------------------------------------------------------------------------
Consumer Services--1.6%
Prosegur Compania de Seguridad SA 638,176 $ 8,828,482
Randstad Holding NV 424,200 5,070,713
-----------
13,899,195
Media--4.5%
Xxxx International plc 2,377,339 20,002,907
Wolters Kluwer NV 922,099 19,980,668
-----------
39,983,575
Retail: General--0.2%
Compagnie Financiere Richemont AG, A Units 95,000 1,799,854
Retail: Specialty--4.9%
Boots Co. plc 1,965,600 16,538,539
UBI Soft Entertainment SA/1/ 774,221 26,966,938
-----------
43,505,477
Textile/Apparel & Home Furnishings--0.5%
Bulgari SpA 493,000 4,180,363
Consumer Staples--17.0%
Beverages--0.5%
Aalberts Industries NV 303,500 4,810,044
Broadcasting--3.2%
Grupo Televisa SA, Sponsored GDR/1/ 246,000 8,536,200
LG Home Shopping, Inc./3/ 352,472 15,506,054
Sogecable SA/1/ 168,300 4,159,205
-----------
28,201,459
Entertainment--11.4%
Imagineer Co. Ltd./1/ 105,000 635,356
Infogrames Entertainment SA/1/ 1,837,288 25,910,446
Nintendo Co. Ltd. 230,600 39,800,601
Sega Corp./1/ 1,057,200 21,939,133
Village Roadshow Ltd., Cl. A, Preference 7,339,185 6,397,477
Zee Telefilms Ltd. 2,355,000 6,330,936
-----------
101,013,949
Household Goods--1.9%
Wella AG 52,000 2,265,183
Wella AG, Preference, Non-Vtg. 299,500 14,105,863
-----------
16,371,046
15 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
STATEMENT OF INVESTMENTS Continued
Market Value
Shares See Note 1
---------------------------------------------------------------------------------------------------------------
Energy--3.2%
Energy Services--2.0%
Electrofuel, Inc./1/ 750,000 $ 415,156
Expro International Group plc 1,077,900 6,121,103
Innogy Holdings plc 3,914,500 11,123,069
-----------
17,659,328
Oil: International--1.2%
Canadian Hunter Exploration Ltd./1/ 309,700 10,435,651
-----------
Financial--8./1/%
Banks--2.2%
Banco Espirito Santo SA 215,975 2,688,038
Xxxxxx Xxxx Holding AG, Cl. B 31,550 10,422,152
Uniao de Bancos Brasileiros SA (Unibanco), Sponsored ADR 307,300 6,084,540
-----------
19,194,730
Diversified Financial--5./1/%
Xxxxxxx Xxxxxxx Ltd. 1,748,400 8,926,348
Espirito Santo Financial Group, ADR 234,700 3,879,591
Housing Development Finance Corp. Ltd. 132,750 1,913,284
ICICI Ltd., Sponsored ADR 1,080,000 6,490,800
Van der Moolen Holding NV 848,100 23,920,745
-----------
45,130,768
Insurance--0.8%
Axa SA 273,200 5,968,808
Ockham Holdings plc 1,604,011 983,616
-----------
6,952,424
Healthcare--9.5%
Healthcare/Drugs--5.5%
Biocompatibles International plc/1/ 3,374,298 5,293,295
Cambridge Antibody Technology Group plc/1/ 194,300 4,666,216
Elan Corp. plc, ADR/1/ 220,940 9,769,967
NeuroSearch AS/1/ 272,600 4,721,766
Nicox SA/1/ 269,561 12,176,860
Oxford GlycoSciences plc/1/ 445,948 3,561,412
Pliva d.d., GDR/2/ 848,350 8,313,830
-----------
48,503,346
Healthcare/Supplies & Services--4.0%
Novogen Ltd./1/ 4,406,800 3,552,564
Ortivus AB, B Shares/1/ 551,400 1,083,767
PowderJect Pharmaceuticals plc/1/ 2,522,000 19,511,687
SkyePharma plc/1/ 14,194,700 11,386,722
-----------
35,534,740
16 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
Market Value
Shares See Note 1
Technology--15.6%
Computer Hardware--0.7%
Oberthur Card Systems SA/1/ 784,005 $ 6,191,623
Computer Services--2.4%
Xxxxx XX/1/ 234,930 3,540,297
Computer Services Solutions Holding NV 686,208 3,963,078
Magnus Holding NV 918,480 937,544
Redbus Interhouse plc/1/ 1,354,700 231,833
Ushio, Inc. 994,000 12,433,073
-----------
21,105,825
Computer Software--7.0%
Capcom Co. Ltd. 438,100 12,418,527
Eidos plc/1/ 2,244,900 7,563,430
Infosys Technologies Ltd. 151,100 12,282,037
Koei Co. Ltd. 231,500 7,427,104
Konami Co. Ltd. 184,900 6,262,451
NIIT Ltd. 1,478,700 6,680,836
Xxxx 0 Xxxxxxx XX/0/ 000,000 8,773,008
-----------
61,407,393
Communications Equipment--0.1%
Pace Micro Technology plc 130,300 758,149
Electronics--5.4%
Art Advanced Research Technologies, Inc./1,4/ 1,901,125 5,559,070
ASM International NV/1/ 484,100 7,169,521
Electrocomponents plc 626,200 4,500,840
Hamamatsu Photonics K.K. 608,000 15,160,494
Hoya Corp. 93,300 6,138,158
Keyence Corp. 31,100 5,491,504
Sony Corp. 78,767 3,716,994
-----------
47,736,581
Transportation--1.1%
Shipping--1.1%
Smit Internationale NV, CVA 365,104 7,617,099
Tsakos Energy Navigation Ltd./1,4/ 204,400 1,773,352
-----------
9,390,451
Utilities--1.0%
Electric Utilities--1.0%
Nordex AG/1/ 1,367,900 8,573,724
-----------
Total Common Stocks (Cost $965,768,784) 804,451,725
17 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
STATEMENT OF INVESTMENTS Continued
Market Value
Shares See Note 1
---------------------------------------------------------------------------------------------------------------
Preferred Stocks--1.9%
Ceres, Inc., $4.00 Cv., Series C-1/1,4/ 44,515 $ 267,090
---------------------------------------------------------------------------------------------------------------
Ceres, Inc.:
Cv., Series C /1,4/ 600,000 3,600,000
Cv., Series D /1,4/ 418,000 2,508,000
---------------------------------------------------------------------------------------------------------------
Oxagen Ltd. /1,3,4/ 1,250,000 2,139,150
---------------------------------------------------------------------------------------------------------------
Fresenius Medical Care AG, Preferred 176,000 8,037,110
------------
Total Preferred Stocks (Cost $15,177,189) 16,551,350
Units
---------------------------------------------------------------------------------------------------------------
Rights, Warrants and Certificates--0.0%
Ceres Group, Inc., Series C Wts., Exp. 12/30/01/1/ 20,032 --
---------------------------------------------------------------------------------------------------------------
Ceres Group, Inc., Series D Wts., Exp. 12/31/30/1/ 41,800 --
------------
Total Rights, Warrants and Certificates (Cost $0) --
Principal
Amount
---------------------------------------------------------------------------------------------------------------
Repurchase Agreements--8.2%
Repurchase agreement with Banque Nationale De Paris,
2.05%, dated 11/30/01, to be repurchased at $16,002,733
on 12/3/01, collateralized by U.S. Treasury Nts., 6.25%, 6/30/02,
with a value of $16,362,045 $16,000,000 16,000,000
---------------------------------------------------------------------------------------------------------------
Repurchase agreement with PaineWebber, Inc.,
2.12%, dated 11/30/01, to be repurchased at $56,389,960
on 12/3/01, collateralized by Federal National Mortgage Assn.,
6%--6.50%, 5/1/16--11/1/31, with a value of $42,706,654 and
Federal Home Loan Mortgage Corp., 6%--7%, 10/1/16-11/1/31,
with a value of $14,890,413 56,380,000 56,380,000
------------
Total Repurchase Agreements (Cost $72,380,000) 72,380,000
---------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $1,053,325,973) 101.2% 893,383,075
---------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets (1.2) (10,496,394)
------------------------------
Net Assets 100.0% $882,886,681
==============================
18 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
Footnotes to Statement of Investments
1. Non-income-producing security.
2. 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 $12,143,087 or 1.38% of the Fund's net
assets as of November 30, 2001.
3. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended November 30,
2001. The aggregate fair value of securities of affiliated companies held by the
Fund as of November 30, 2001, amounts to $17,645,204. Transactions during the
period in which the issuer was an affiliate are as follows:
Unrealized
Shares Gross Gross Shares Appreciation Dividend
Nov. 30, 2000 Additions Reductions Nov. 30, 2001 (Depreciation) Income
-----------------------------------------------------------------------------------------------------------------------
Stocks and/or Warrants
LG Home Shopping, Inc. 94,761 257,711 -- 352,472 (232,694) $64,467
Oxagen Ltd. -- 1,250,000 -- 1,250,000 (71,550) --
-------
$64,467
=======
4. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.
Distribution of investments representing geographic diversification, as a
percentage of total investments at value, is as follows:
Geographical Diversification Market Value Percent
------------------------------------------------------------------------------------------
Great Britain $168,379,880 18.9%
Japan 146,473,616 16.4
The Netherlands 121,869,461 13.6
France 94,710,654 10.6
United States 79,880,090 8.9
Germany 64,375,586 7.2
India 45,407,725 5.1
Brazil 35,646,524 4.0
Canada 24,993,626 2.8
Korea, Republic of (South) 23,826,250 2.7
Spain 12,987,687 1.5
Switzerland 12,222,006 1.4
Australia 9,950,040 1.1
Ireland 9,769,967 1.1
Mexico 8,536,200 1.0
Croatia 8,313,830 0.9
Italy 8,064,161 0.9
Portugal 6,567,629 0.7
Denmark 4,721,766 0.5
Lebanon 3,829,258 0.4
Norway 1,773,352 0.2
Sweden 1,083,767 0.1
---------------------------
Total $893,383,075 100.0%
===========================
See accompanying Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES November 30, 2001
-------------------------------------------------------------------------------------------
Assets
Investments, at value--see accompanying statement:
Unaffiliated companies (cost $1,035,376,525) $ 875,737,871
Affiliated companies (cost $17,949,448) 17,645,204
---------------
893,383,075
-------------------------------------------------------------------------------------------
Cash 1,578,292
-------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts 27,509
-------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold 9,061,269
Interest and dividends 1,203,273
Investments sold 163,125
Other 3,275
---------------
Total assets 905,419,818
-------------------------------------------------------------------------------------------
Liabilities
Unrealized depreciation on foreign currency contracts 527
-------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased 16,841,256
Shares of beneficial interest redeemed 4,958,669
Distribution and service plan fees 322,468
Trustees' compensation 131,672
Shareholder reports 23,836
Transfer and shareholder servicing agent fees 20,453
Other 234,256
---------------
Total liabilities 22,533,137
-------------------------------------------------------------------------------------------
Net Assets $ 882,886,681
===============
-------------------------------------------------------------------------------------------
Composition of Net Assets
Paid-in capital $ 1,131,177,318
-------------------------------------------------------------------------------------------
Accumulated net investment income 1,431,640
-------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments and
foreign currency transactions (89,762,757)
-------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments and
translation of assets and liabilities denominated in foreign currencies (159,959,520)
---------------
Net Assets $ 882,886,681
===============
--------------------------------------------------------------------------------
Net Asset Value Per Share
Class A Shares:
Net asset value and redemption price per share (based on net
assets of $535,615,139 and 35,804,517 shares of beneficial interest
outstanding) $14.96
Maximum offering price per share (net asset value plus sales
charge of 5.75% of offering price) $15.87
--------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $230,085,237 and 16,042,123 shares of beneficial interest
outstanding) $14.34
--------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $114,084,071 and 7,941,779 shares of beneficial interest
outstanding) $14.37
--------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $3,102,234 and 207,809 shares of beneficial interest
outstanding) $14.93
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS For the Year Ended November 30, 2001
-------------------------------------------------------------------------------------------
Investment Income
Dividends:
Unaffiliated companies (net of foreign withholding taxes of $1,431,047) $ 15,701,401
Affiliated companies (net of foreign withholding taxes of $16,781) 64,467
-------------------------------------------------------------------------------------------
Interest 2,871,679
-----------------
Total income 18,637,547
-------------------------------------------------------------------------------------------
Expenses
Management fees 7,087,397
-------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 1,321,113
Class B 2,627,971
Class C 1,227,443
Class N 4,298
-------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 1,688,529
Class B 819,868
Class C 386,605
Class N 3,301
-------------------------------------------------------------------------------------------
Custodian fees and expenses 511,645
-------------------------------------------------------------------------------------------
Trustees' compensation 83,119
-------------------------------------------------------------------------------------------
Other 220,009
-----------------
Total expenses 15,981,298
Less reduction to custodian expenses (6,025)
Less voluntary waiver of transfer and shareholder
servicing agent fees--Classes A, B, C and N (72,470)
-----------------
Net expenses 15,902,803
-------------------------------------------------------------------------------------------
Net Investment Income 2,734,744
-------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments (55,838,996)
Foreign currency transactions (19,340,429)
-----------------
Net realized gain (loss) (75,179,425)
-------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments (132,852,581)
Translation of assets and liabilities denominated in foreign currencies (2,212,404)
-------------------------------------------------------------------------------------------
Net change (135,064,985)
-----------------
Net realized and unrealized gain (loss) (210,244,410)
-------------------------------------------------------------------------------------------
Net Decrease in Net Assets Resulting from Operations $ (207,509,666)
=================
See accompanying Notes to Financial Statements.
22 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended November 30, 2001 2000
--------------------------------------------------------------------------------------------------------------------
Operations
Net investment income (loss) $ 2,734,744 $ (1,167,125)
--------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) (75,179,425) 88,209,618
--------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) (135,064,985) (138,432,170)
-----------------------------------
Net increase (decrease) in net assets resulting from operations (207,509,666) (51,389,677)
--------------------------------------------------------------------------------------------------------------------
Dividends and/or Distributions to Shareholders
Distributions from net realized gain:
Class A (22,911,383) (2,338,269)
Class B (13,439,801) (1,929,730)
Class C (5,572,381) (575,074)
Class N -- --
--------------------------------------------------------------------------------------------------------------------
Beneficial Interest Transactions
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A 195,231,062 299,436,909
Class B 33,151,063 114,422,426
Class C 35,618,668 73,282,592
Class N 3,165,705 --
--------------------------------------------------------------------------------------------------------------------
Net Assets
Total increase 17,733,267 430,909,177
--------------------------------------------------------------------------------------------------------------------
Beginning of period 865,153,414 434,244,237
-----------------------------------
End of period [including accumulated net investment
income (loss) of $1,431,640 and $(227,882), respectively] $ 882,886,681 $ 865,153,414
===================================
See accompanying Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
Class A Year Ended November 30, 2001 2000 1999 1998 1997
----------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $ 19.77 $ 19.22 $ 15.11 $ 14.37 $ 11.74
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .06 (.01) (.02) .05 (.05)/1/
Net realized and unrealized gain (loss) (3.93) .77 5.02 .91 2.68/1/
--------------------------------------------------------------------------
Total income (loss) from
investment operations (3.87) .76 5.00 .96 2.63
----------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- (.13) -- --
Distributions from net realized gain (.94) (.21) (.76) (.22) --
--------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders (.94) (.21) (.89) (.22) --
----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 14.96 $ 19.77 $ 19.22 $ 15.11 $ 14.37
==========================================================================
----------------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value/2/ (20.58)% 3.92% 35.31% 6.78% 22.40%
----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $535,615 $478,680 $208,981 $186,859 $122,720
----------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $536,366 $418,537 $180,719 $175,022 $66,156
----------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/3/
Net investment income (loss) 0.62% 0.22% (0.15)% 0.44% (0.36)%
Expenses 1.42% 1.38% 1.55% 1.40%/4/ 1.78%/4/
----------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 33% 61% 75% 82% 64%
1. Based on average shares outstanding for the period.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and 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 has been calculated without adjustment for the reduction to
custodian expenses.
See accompanying Notes to Financial Statements.
Class B Year Ended November 30, 2001 2000 1999 1998 1997
--------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $19.14 $18.75 $14.76 $14.15 $11.65
--------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.01) (.08) (.14) (.03) (.12)/1/
Net realized and unrealized gain (loss) (3.85) .68 4.92 .86 2.62/1/
-------------------------------------------------------------------------
Total income (loss) from
investment operations (3.86) .60 4.78 .83 2.50
--------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- (.03) -- --
Distributions from net realized gain (.94) (.21) (.76) (.22) --
-------------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.94) (.21) (.79) (.22) --
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.34 $19.14 $18.75 $14.76 $14.15
==========================================================================
--------------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value/2/ (21.23)% 3.16% 34.32% 5.95% 21.46%
--------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $230,085 $273,243 $176,021 $142,127 $90,565
--------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $262,745 $276,393 $145,203 $125,772 $45,553
--------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/3/
Net investment loss (0.15)% (0.56)% (0.91)% (0.34)% (1.14)%
Expenses 2.17% 2.14% 2.31% 2.18%/4/ 2.56%/4/
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 33% 61% 75% 82% 64%
1. Based on average shares outstanding for the period.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total xxxxxxx.Xxxxx 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 has been calculated without adjustment for the reduction to
custodian expenses.
See accompanying Notes to Financial Statements.
FINANCIAL HIGHLIGHTS Continued
Class C Class N
Year Period
Ended Ended
Nov. 30, Nov. 30,
2001 2000 1999 1998 1997 2001/1/
-------------------------------------------------------------------------------------------------------------------------------
Per Share Operating Data
Net asset value, beginning of period $19.16 $18.77 $14.78 $14.17 $11.66 $18.74
-------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) --/2/ (.04) (.13) (.03) (.13)/3/ .01
Net realized and unrealized gain (loss) (3.85) .64 4.91 .86 2.64/3/ (3.82)
-----------------------------------------------------------------------------
Total income (loss) from
investment operations (3.85) .60 4.78 .83 2.51 (3.81)
-------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- (.03) -- -- --
Distributions from net realized gain (.94) (.21) (.76) (.22) -- --
-----------------------------------------------------------------------------
Total dividends and/or
distributions to shareholders (.94) (.21) (.79) (.22) -- --
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.37 $19.16 $18.77 $14.78 $14.17 $14.93
=============================================================================
-------------------------------------------------------------------------------------------------------------------------------
Total Return, at Net Asset Value/4/ (21.16)% 3.16% 34.28% 5.94% 21.53% (20.33)%
-------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Net assets, end of period (in thousands) $114,084 $113,230 $49,242 $36,776 $21,908 $3,102
-------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $122,775 $98,110 $39,641 $32,460 $10,864 $1,152
-------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/5/
Net investment income (loss) (0.14)% (0.53)% (0.92)% (0.34)% (1.18)% 0.18%
Expenses 2.17% 2.14% 2.32% 2.17%/6/ 2.55%/6/ 1.74%
-------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 33% 61% 75% 82% 64% 33%
1. For the period from March 1, 2001 (inception of offering) to November 30,
2001.
2. Less than $0.005 per share.
3. Based on average shares outstanding for the period.
4. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and 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.
5. Annualized for periods of less than one full year.
6. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.
See accompanying Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. Significant Accounting Policies
Xxxxxxxxxxx International Growth Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund's investment objective is to seek long-term capital
appreciation. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager).
The Fund offers Class A, Class B, Class C and Class N shares. Class A
shares are sold at their offering price, which is normally net asset value plus
a front-end sales charge. Class B, Class C and Class N shares are sold without a
front-end sales charge but may be subject to a contingent deferred sales charge
(CDSC). Class N shares are sold only through retirement plans. Retirement plans
that offer Class N shares may impose charges on those accounts. 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, C and N have separate distribution and/or service plans. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
Beginning September 1, 2001, the Fund assesses a 2% fee on the proceeds of Fund
shares that are redeemed (either by selling or exchanging to another Xxxxxxxxxxx
fund) within 30 days of their purchase. The following is a summary of
significant accounting policies consistently followed by the Fund.
--------------------------------------------------------------------------------
Securities Valuation. Securities listed or traded on National Stock Exchanges or
other domestic or foreign exchanges are valued based on the last sale price of
the security traded on that exchange prior to the time when the Fund's assets
are valued. In the absence of a sale, the security is valued at the last sale
price on the prior trading day, if it is within the spread of the closing bid
and asked prices, and if not, at the closing bid price. Securities (including
restricted securities) for which quotations are not readily available are valued
primarily using dealer-supplied valuations, a portfolio pricing service
authorized by the Board of Trustees, or at their fair value. Fair value is
determined in good faith under consistently applied procedures under the
supervision of the Board of Trustees. Short-term "money market type" debt
securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).
--------------------------------------------------------------------------------
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.
NOTES TO FINANCIAL STATEMENTS Continued
--------------------------------------------------------------------------------
1. Significant Accounting Policies Continued
Repurchase Agreements. The Fund requires its custodian bank 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, including any net realized gain on
investments not offset by loss carryovers, to shareholders. Therefore, no
federal income or excise tax provision is required.
As of November 30, 2001, the Fund had available for federal income tax purposes
unused capital loss carryovers as follows:
Expiring
------------------------------------------
2009 $80,843,212
As of November 30, 2001, the Fund had approximately $8,809,000 of post-October
losses available to offset future capital gains, if any. Such losses, if
unutilized, will expire in 2010. Additionally, the Fund had approximately
$23,000 of post-October foreign currency losses which were deferred. If
unutilized by the Fund in the following fiscal year, such losses will expire.
--------------------------------------------------------------------------------
Trustees' Compensation. The Fund has adopted an unfunded retirement plan for the
Fund's independent Board of Trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
November 30, 2001, the Fund's projected benefit obligations were increased by
$50,278 and payments of $1,809 were made to retired trustees, resulting in an
accumulated liability of $126,820 as of November 30, 2001.
The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of annual compensation they are entitled to receive from the Fund. Under
the plan, the compensation deferred is periodically adjusted as though an equivalent amount had been
invested for the Board of Trustees in shares of one or more Xxxxxxxxxxx funds
selected by the trustee. The amount paid to the Board of Trustees under the plan
will be determined based upon the performance of the selected funds. Deferral of
trustees' fees under the plan will not affect the net assets of the Fund, and
will not materially affect the Fund's assets, liabilities or net investment
income per share.
--------------------------------------------------------------------------------
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 Dividends and Distributions to Shareholders. Net investment
income (loss) and net realized gain (loss) may differ for financial statement
and tax purposes primarily because of the recognition of certain foreign
currency gains (losses) as ordinary income (loss) for tax purposes. The
character of dividends and distributions made during the fiscal year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to timing of
dividends and 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 November 30, 2001, amounts have been reclassified to reflect an
increase in paid-in capital of $41,561, a decrease in accumulated net investment
income of $1,075,222, and a decrease in accumulated net realized loss on
investments of $1,033,661. Net assets of the Fund were unaffected by the
reclassifications.
--------------------------------------------------------------------------------
Investment Income. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at the fair market value of the securities
received. Interest income, which includes accretion of discount and amortization
of premium, is accrued as earned.
--------------------------------------------------------------------------------
Security Transactions. Security transactions are accounted for as of trade date.
Gains and losses on securities sold are determined on the basis of identified
cost.
--------------------------------------------------------------------------------
Other. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.
29 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
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:
Year Ended November 30, 2001/1/ Year Ended November 30, 2000
Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------------------
Class A
Sold 108,489,049 $ 1,945,995,797 76,011,738 $ 1,793,646,337
Dividends and/or
distributions reinvested 929,206 17,682,799 107,442 2,137,021
Redeemed (97,825,030) (1,768,447,534) (62,783,039) (1,496,346,449)
---------------------------------------------------------------------------
Net increase (decrease) 11,593,225 $ 195,231,062 13,336,141 $ 299,436,909
===========================================================================
-----------------------------------------------------------------------------------------------------------------
Class B
Sold 8,047,368 $ 137,864,302 10,533,589 $ 244,951,984
Dividends and/or
distributions reinvested 644,557 11,853,418 95,979 1,861,912
Redeemed (6,928,344) (116,566,657) (5,739,196) (132,391,470)
---------------------------------------------------------------------------
Net increase (decrease) 1,763,581 $ 33,151,063 4,890,372 $ 114,422,426
===========================================================================
-----------------------------------------------------------------------------------------------------------------
Class C
Sold 15,378,417 $ 267,377,719 16,858,318 $ 390,185,202
Dividends and/or
distributions reinvested 240,466 4,429,384 27,786 539,702
Redeemed (13,585,578) (236,188,435) (13,601,068) (317,442,312)
---------------------------------------------------------------------------
Net increase (decrease) 2,033,305 $ 35,618,668 3,285,036 $ 73,282,592
===========================================================================
-----------------------------------------------------------------------------------------------------------------
Class N
Sold 220,109 $ 3,343,158 -- $ --
Dividends and/or
distributions reinvested -- -- -- --
Redeemed (12,300) (177,453) -- --
---------------------------------------------------------------------------
Net increase (decrease) 207,809 $ 3,165,705 -- $ --
===========================================================================
1. For the year ended November 30, 2001, for Class A, B and C shares and for the
period from March 1, 2001 (inception of offering) to November 30, 2001, for
Class N shares.
30 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
--------------------------------------------------------------------------------
3. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended November 30, 2001, were
$534,115,122 and $288,295,543, respectively.
As of November 30, 2001, unrealized appreciation (depreciation) based on cost of
securities for federal income tax purposes of $1,053,413,958 was:
Gross unrealized appreciation $ 53,635,388
Gross unrealized depreciation (213,666,271)
-------------
Net unrealized appreciation (depreciation) $(160,030,883)
=============
--------------------------------------------------------------------------------
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 a fee of 0.80% of
the first $250 million of average annual net assets of the Fund, 0.77% of the
next $250 million, 0.75% of the next $500 million, 0.69% of the next $1 billion,
and 0.67% of average annual net assets in excess of $2 billion. The Fund's
management fee for the year ended November 30, 2001, was an annualized rate of
0.77%.
--------------------------------------------------------------------------------
Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS an agreed-upon per account fee. The Fund's transfer agent has voluntarily
agreed to limit transfer and shareholder servicing agent fees to 0.35% per
annum, effective October 1, 2001. This undertaking may be amended or withdrawn
at any time.
--------------------------------------------------------------------------------
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.
Class A
Aggregate Front-End
Front-End Sales Commissions on Commissions on Commissions on Commissions on
Sales Charges Charges Class A Shares Class B Shares Class C Shares Class N Shares
on Class A Retained by Advanced by Advanced by Advanced by Advanced by
Year Ended Shares Distributor Distributor/1/ Distributor/1/ Distributor/1/ Distributor/1/
---------------------------------------------------------------------------------------------------------------------------
Nov. 30, 2001 $2,268,871 $330,999 $958,310 $2,010,709 $548,577 $28,417
1. The Distributor advances commission payments to dealers for certain sales of
Class A shares and for sales of Class B, Class C and Class N shares from its own
resources at the time of sale.
31 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Continued
4. Management Fees and Other Transactions with Affiliates Continued
--------------------------------------------------------------------------------
Class A Contingent Class B Contingent Class C Contingent Class N Contingent
Deferred Sales Charges Deferred Sales Charges Deferred Sales Charges Deferred Sales Charges
Year Ended Retained by Distributor Retained by Distributor Retained by Distributor Retained by Distributor
-------------------------------------------------------------------------------------------------------------------------
Nov. 30, 2001 $46,218 $551,444 $68,806 $5
The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B, Class C and Class N 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.
--------------------------------------------------------------------------------
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 a specified percent of average annual net
assets of Class A shares purchased. The Distributor makes payments to plan
recipients quarterly at an annual rate not to exceed a specified percent of the
average annual net assets consisting of Class A shares of the Fund. For the year
ended November 30, 2001, payments under the Class A plan totaled $1,321,113, all
of which were paid by the Distributor to recipients, and included $62,532 paid
to an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs
with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years.
--------------------------------------------------------------------------------
Class B, Class C and Class N 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, Class C and Class N
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 Distributor retains the asset-based
sales charge on Class N shares. The asset-based sales charges on Class B, Class
C and Class N 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, Class C and Class N
shares may be more than the payments it receives from the contingent deferred
sales charges collected on redeemed shares and asset-based sales charges from
the Fund under the plans. If any
32 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
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
carryforward 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 November 30, 2001,
were as follows:
Distributor's
Distributor's Aggregate
Aggregate Expenses as %
Total Payments Amount Retained Unreimbursed Expenses of Net Assets
Under Plan by Distributor Under Plan of Class
------------------------------------------------------------------------------------------------------------------
Class B Plan $ 2,627,971 $ 2,141,633 $ 5,793,397 2.52%
Class C Plan 1,227,443 561,028 1,665,274 1.46
Class N Plan 4,298 3,651 26,325 0.85
-------------------------------------------------------------------------------------------------------------------
5. Foreign Currency Contracts
A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts for operational purposes and to seek to protect against
adverse exchange rate fluctuations. Risks to the Fund include the potential
inability of the counterparty to meet the terms of the contract.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange rates as provided by
a reliable bank, dealer or pricing service. Unrealized appreciation and
depreciation on foreign currency contracts are reported in the Statement of
Assets and Liabilities as a receivable or payable and in the Statement of
Operations with the change in unrealized appreciation or depreciation.
The Fund may realize a gain or loss upon the closing or settlement of the
foreign currency transactions. Such realized gains and losses are reported with
all other foreign currency gains and losses in the Statement of Operations.
As of November 30, 2001, the Fund had outstanding foreign currency contracts as
follows:
Contract Amount Valuation as of Unrealized Unrealized
Contract Description Expiration Dates (000s) Nov. 30, 2001 Appreciation Depreciation
----------------------------------------------------------------------------------------------------------------------------------
Contracts to Purchase
Euro (EUR) 12/3/01-12/4/01 EUR4,224 $ 3,781,346 $ 27,509 $--
Contracts to Sell
Euro (EUR) 12/3/01 EUR129 115,240 -- 527
-----------------------------
Total Unrealized
Appreciation
and Depreciation $ 27,509 $ 527
=============================
33 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS Continued
6. Illiquid or Restricted Securities
--------------------------------------------------------------------------------
As of November 30, 2001, 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 November 30, 2001,
was $15,846,662, which represents 1.79% of the Fund's net assets, of which
$14,073,310 is considered restricted. Information concerning restricted
securities is as follows:
Unrealized
Valuation as of Appreciation
Security Acquisition Dates Cost Nov. 30, 2001 (Depreciation)
--------------------------------------------------------------------------------------------------------------------------------
Stocks and Warrants
Art Advanced Research Technologies, Inc. 6/19/01 $7,500,000 $5,559,070 $(1,940,930)
Ceres, Inc., $4.00 Cv., Series C-1 2/6/01 178,060 267,090 89,030
Ceres, Inc., Cv., Series C 1/6/99 2,400,000 3,600,000 1,200,000
Ceres, Inc., Cv., Series D 3/15/01 2,508,000 2,508,000 --
Oxagen Ltd. 12/20/00 2,210,700 2,139,150 (71,550)
--------------------------------------------------------------------------------------------------------------------------------
7. 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 Xxxxxxxxxxx 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 0.45%. 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 0.08%
per annum.
The Fund had no borrowings outstanding during the year ended or at November 30,
2001.
34 | XXXXXXXXXXX INTERNATIONAL GROWTH FUND
APPENDIX A
---------------------------------------------------------------------------------------------------------------------------
Corporate Industry Classifications
---------------------------------------------------------------------------------------------------------------------------
Aerospace & Defense Household Durables
Air Freight & Couriers Household Products
Airlines Industrial Conglomerates
Auto Components Insurance
Automobiles Internet & Catalog Retail
Banks Internet Software & Services
Beverages Information Technology Consulting & Services
Biotechnology Leisure Equipment & Products
Building Products Machinery
Chemicals Marine
Commercial Services & Supplies Media
Communications Equipment Metals & Mining
Computers & Peripherals Multiline Retail
Construction & Engineering Multi-Utilities
Construction Materials Office Electronics
Containers & Packaging Oil & Gas
Distributors Paper & Forest Products
Diversified Financials Personal Products
Diversified Telecommunication Services Pharmaceuticals
Electric Utilities Real Estate
Electrical Equipment Road & Rail
Electronic Equipment & Instruments Semiconductor Equipment & Products
Energy Equipment & Services Software
Food & Drug Retailing Specialty Retail
Food Products Textiles & Apparel
Gas Utilities Tobacco
Health Care Equipment & Supplies Trading Companies & Distributors
Health Care Providers & Services Transportation Infrastructure
Hotels Restaurants & Leisure Water Utilities
Wireless Telecommunication Services
Appendix B
OppenheimerFunds Special Sales Charge Arrangements and Waivers
In certain cases, the initial sales charge that applies to purchases of Class A shares11 of the Xxxxxxxxxxx funds or the
contingent deferred sales charge that may apply to Class A, Class B or Class C shares may be waived.12 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 Xxxxxxxxxxx
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 Xxxxxxxxxxx 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 plans13
4) Group Retirement Plans14
5) 403(b)(7) custodial plan accounts
6) Individual Retirement Accounts ("IRAs"), including traditional IRAs, Xxxx 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 Xxxxxxxxxxx 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.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
---------------------------------------------------------------------------------------------------------------------------
Purchases of Class A Shares of Xxxxxxxxxxx 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 Xxxxxxxxxxx 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 (24 months in the case of Xxxxxxxxxxx Rochester National Municipals and Rochester Fund Municipals) of the
beginning 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 concession described in the Prospectus
under "Class A Contingent Deferred Sales Charge."15 This waiver provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more.
|_| Purchases of Class A shares by a Retirement Plan that was permitted to purchase such shares at net asset value
but subject to a contingent deferred sales charge prior to March 1, 2001. That included plans (other than XXX or
403(b)(7) Custodial Plans) that: 1) bought shares costing $500,000 or more, 2) had at the time of purchase 100
or more eligible employees or total plan assets of $500,000 or more, or 3) certified to the Distributor that it
projects to have annual plan purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover XXX, if the purchases are made:
1) through a broker, dealer, bank or registered investment advisor 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 Xxxxxxx Xxxxx Xxxxxx Xxxxxx & Xxxxx, Inc. ("Xxxxxxx Xxxxx") on a daily
valuation basis for the Retirement Plan. On the date the plan sponsor signs the record-keeping service
agreement with Xxxxxxx Xxxxx, the Plan must have $3 million or more of its assets invested in (a) mutual
funds, other than those advised or managed by Xxxxxxx Xxxxx Investment Management, L.P. ("MLIM"), that are
made available under a Service Agreement between Xxxxxxx Xxxxx and the mutual fund's principal underwriter
or distributor, and (b) funds advised or managed by MLIM (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 Xxxxxxx Xxxxx. On the
date the plan sponsor signs the record keeping service agreement with Xxxxxxx Xxxxx, 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 Xxxxxxx Xxxxx and on the
date the plan sponsor signs that agreement, the Plan has 500 or more eligible employees (as determined by
the Xxxxxxx Xxxxx plan conversion manager).
|_| Purchases by a Retirement Plan whose record keeper had a cost-allocation agreement with the Transfer Agent on or
before March 1, 2001.
II. Waivers of Class A Sales Charges of Xxxxxxxxxxx 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 concessions 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 Xxxxxxxxxxx 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 advisors 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 advisor 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 concessions 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
Xxxxxxxxxxx funds (other than Xxxxxxxxxxx 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 Xxxxxxxxxxx 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 Xxxxxxxxxxx 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.16
5) Under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code, or, in the case of an
XXX, 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.17
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 XXX.
|_| For distributions from 401(k) plans sponsored by broker-dealers that have entered into a special agreement with
the Distributor allowing this waiver.
|_| For distributions from retirement plans that have $10 million or more in plan assets and that have entered into
a special agreement with the Distributor.
|_| For distributions from retirement plans which are part of a retirement plan product or platform offered by
certain banks, broker-dealers, financial advisors, insurance companies or record keepers which have entered into
a special agreement with the Distributor.
III. Waivers of Class B, Class C and Class N Sales Charges of Xxxxxxxxxxx Funds
-----------------------------------------------------------------------------------------------------------------------------
The Class B, Class C and Class N 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, Class C and Class N 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 Xxxxxxx Xxxxx or an independent record keeper under a contract with Xxxxxxx Xxxxx.
|_| Redemptions of Class C shares of Xxxxxxxxxxx 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 Xxxxxxxxxxx fund in
amounts of $500,000 or more and made more than 12 months after the Retirement Plan's first purchase of Class C
shares, if the redemption proceeds are invested in Class N shares of one or more Xxxxxxxxxxx funds.
|_| Distributions18 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
Xxxxxxxxxxx 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.19
5) To make distributions required under a Qualified Domestic Relations Order or, in the case of an XXX, 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.20
9) On account of the participant's separation from service.21
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 XXX.
12) 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.
13) 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.
14) For distributions from 401(k) plans sponsored by broker-dealers that have entered into a special
arrangement with the Distributor allowing this waiver.
|_| 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 Xxxxxxxxxxx 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 Xxxxxxxxxxx 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:
Xxxxxxxxxxx Quest Value Fund, Inc. Xxxxxxxxxxx Small Cap Value Fund
Xxxxxxxxxxx Quest Balanced Value Fund Xxxxxxxxxxx Quest Global Value Fund, Inc.
Xxxxxxxxxxx Quest Opportunity Value Fund
These arrangements also apply to shareholders of the following funds when they merged (were reorganized) into
various Xxxxxxxxxxx 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 Xxxxxxxxxxx
fund that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an Xxxxxxxxxxx fund that was one of the Former
Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another Xxxxxxxxxxx fund that were acquired pursuant to
the merger of any of the Former Quest for Value Funds into that other Xxxxxxxxxxx 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.
-------------------------------- ---------------------------- --------------------------------- ---------------------
Number of Eligible Employees Initial Sales Charge as a Initial Sales Charge as a % of Concession as % of
or Members % of Offering Price Net Amount Invested Offering Price
-------------------------------- ---------------------------- --------------------------------- ---------------------
-------------------------------- ---------------------------- --------------------------------- ---------------------
9 or Fewer 2.50% 2.56% 2.00%
-------------------------------- ---------------------------- --------------------------------- ---------------------
-------------------------------- ---------------------------- --------------------------------- ---------------------
At least 10 but not more than 2.00% 2.04% 1.60%
49
-------------------------------- ---------------------------- --------------------------------- ---------------------
---------------------------------------------------------------------------------------------------------------------------
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:
o 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.
o 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 Xxxxxxxxxxx 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
Xxxxxxxxxxx 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:
o 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
o 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 Xxxxxxxxxxx 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 Xxxxxxxxxxx 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:
o 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);
o 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
o 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 Xxxxxxxxxxx fund described in this section if the proceeds
are invested in the same Class of shares in that fund or another Xxxxxxxxxxx fund within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Xxxxxxxxxxx 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 Xxxxxxxxxxx funds (each is referred to as a "Fund" in this
section):
Xxxxxxxxxxx U. S. Government Trust,
Xxxxxxxxxxx Bond Fund,
Xxxxxxxxxxx Value Fund and
Xxxxxxxxxxx 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 advisor 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.
|X| 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.
|X|
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
Xxxxxxxxxxx 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 concession 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 Xxxxxxxxxxx Municipal Bond Fund, Xxxxxxxxxxx U.S. Government Trust, Xxxxxxxxxxx Strategic Income Fund and
Xxxxxxxxxxx Capital 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 Xxxxxxxxxxx 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 Xxxxxxxxxxx funds at a maximum sales
charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of Xxxxxxxxxxx Convertible Securities Fund
---------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxxx 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.
---------------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxxx International Growth Fund
---------------------------------------------------------------------------------------------------------------------------
Internet Website:
XXX.XXXXXXXXXXXXXXXX.XXX
------------------------
Investment Advisor
OppenheimerFunds, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Distributor
OppenheimerFunds Distributor, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Transfer Agent
OppenheimerFunds Services
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
0.000.000.0000
Custodian Bank
The Bank of New York
Xxx Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Independent Auditors
KPMG LLP
000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Legal Counsel
Mayer, Brown, Xxxx and Maw
0000 Xxxxxxxx
Xxx Xxxx, XX 00000-0000
(OppenheimerFunds logo)
PX825.sai_March_2002
