Oppenheimer Principal Protected Main Street Fund III

497 1 pp34971206.htm 497 FOR SAI Oppenheimer Principal Protected Main Street Fund III

Oppenheimer Principal Protected Main Street Fund III(R)

6803 South Tucson Way, Centennial, Colorado 80112-3924
1.800.CALL OPP (225.5677)

Statement of Additional Information dated October 7, 2004, revised December 6, 2005

This Statement of Additional Information is not a prospectus. This document contains
additional information about the Fund and supplements information in the Prospectus dated
October 7, 2004. It should be read together with the Prospectus, which may be obtained by
writing to the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver,
Colorado 80217, or by calling the Transfer Agent at the toll-free number shown above, or by
downloading it from the OppenheimerFunds Internet website at www.oppenheimerfunds.com.

Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks......2
The Fund's Investment Policies.........................................2
The Asset Allocation Process...........................................3
Other Investment Restrictions.........................................10
How the Fund is Managed...................................................12
Organization and History..............................................12
Board of Trustees and Oversight Committees............................14
Trustees and Officers of the Fund.....................................15
The Manager...........................................................23
Brokerage Policies of the Fund............................................26
Distribution and Service Plans............................................28
Payments to Fund Intermediaries...........................................33
Performance of the Fund...................................................36

About Your Account
How to Sell Shares........................................................44
How to Exchange Shares....................................................46
Dividends, Capital Gains and Taxes........................................50
Additional Information About the Fund.....................................54

Financial Information About the Fund
Report of Independent Registered Public Accounting Firm...................55
Financial Statements......................................................55

Appendix A: Industry Classifications.....................................A-1
Appendix B: Special Sales Charge Arrangements and Waivers................B-1
Appendix C: Information About the Underlying Fund........................C-1

About the Fund

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 as well as information about any
non-principal investment policies and the attendant risks not described in the prospectus
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 can 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 can use in selecting portfolio securities will vary
over time. The "Warranty Period" began December 16, 2004 and will end December 16, 2011 or
the next following business day (the "Maturity Date"). The investment objective of the Fund
during the Warranty Period is to seek capital preservation in order to attempt to make sure
that the value of each shareholder's account on the Maturity Date will be no less than the
value of that shareholder's account on the last day of the Offering Period, less sales
charges, extraordinary expenses and other amounts not covered by the "Warranty Agreement"
(the "Warranty Amount"). The Fund seeks high total return as a secondary objective. There
can be no assurance that the Fund will achieve its objective. The Fund's investment
objective during the "Post-Warranty Period," the period immediately following the Maturity
Date, is high total return. This section supplements the disclosure in the Fund's
Prospectus and provides additional information on the Fund's investment policies or
restrictions to the extent permitted under the Financial Warranty Agreement, dated
September 24, 2004 (the "Warranty Agreement"), among the Fund, the Manager and Merrill
Lynch Bank USA. Restrictions or policies stated as a maximum percentage of the Fund's
assets are only applied immediately after a portfolio investment to which the policy or
restriction is applicable (other than the limitations on borrowing and illiquid
securities). Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered in determining whether the
investment complies with the Fund's restrictions and policies.

Under normal market conditions, during the Warranty Period the Fund's assets are
allocated between an equity component, consisting of Class Y shares of the Oppenheimer Main
Street Fund (the "Underlying Fund") and futures contracts on the Standard and Poor's 500
Composite Stock Price Index ("S&P 500 Index"), and a fixed income component, normally
consisting primarily of zero-coupon U.S. government securities. However, as explained more
fully in the prospectus, under certain circumstances, the Fund's assets may be invested
primarily or even exclusively in U.S. government securities.

Merrill Lynch Bank USA ("MLBUSA" or the "Warranty Provider") is a wholly-owned
subsidiary of Merrill Lynch & Co., Inc. MLBUSA is licensed as an industrial bank pursuant
to the laws of the State of Utah. MLBUSA is regulated by certain Federal and state agencies
and is examined by those agencies. MLBUSA may hedge its risks under the Warranty Agreement
with one or more counterparties, including with an affiliate of MLBUSA (which may include
the calculation agent under the Warranty Agreement). MLBUSA is not required to hedge its
risk under the Warranty Agreement and may choose not to do so. Whether MLBUSA attempts to
hedge its risk under the Warranty Agreement or not, it is the sole entity responsible for
making payments to the Fund, if any, under the Warranty Agreement.

The Asset Allocation Process. In pursuing the Fund's investment objective during the
Warranty Period, the Manager allocates the Fund's assets between the equity and fixed
income components of the portfolio. The Fund did not employ an asset allocation model
during the Offering Period and will not do so during the Post-Warranty Period.

The prevailing level of interest rates and the volatility of the equity markets will
significantly influence the initial allocation of Fund assets between equity and fixed
income securities. At the date of this Statement of Additional Information, interest rates
remain at historically low levels and the equity markets continue to experience above
normal volatility, both of which are factors that may result in the mathematical formula
allocating a high portion of the Fund's assets to fixed income securities. The Manager will
monitor the allocation of the Fund's assets on a daily basis.

The asset allocation process will also be affected by the values of the Underlying
Fund and the futures contracts on the S&P 500 Index. For example, if the market value of
the Underlying Fund increases, a smaller portion of the Fund's assets would be allocated to
the debt portfolio. On the other hand, if the market value of the Underlying Fund and the
futures contracts decreases, a higher portion of the Fund's assets would have to be
allocated to the debt portfolio, and the ability of the Fund to participate in any
subsequent upward movement in the equity market would be reduced.

The Warranty Agreement contains a mathematical formula which provides the maximum
amount of the Fund's assets that may be invested in the equity portfolio on any given day
during the Warranty Period. That percentage allocation to the equity portfolio can be as
high as 100% and as low as zero. Accordingly, the Warranty Agreement could limit the way
that the Manager manages the Fund during the Warranty Period in response to changing market
conditions.

In allocating the Fund's assets between equity and fixed income securities, the
Manager will base its decision on the formula set forth in the Warranty Agreement. The
formula will help establish both the initial allocation of the Fund's assets and on a daily
basis will reevaluate the Fund's then maximum permitted allocation in the equity component.
The objective of the formula is to preserve the principal of the Fund, primarily through
allocations to the fixed income securities. The formula takes into account a number of
factors, including, but not limited to:
o The market value of the Fund's assets as compared to the Warranty Amount;
o The prevailing level of interest rates;
o Equity market volatility; and
o The length of time remaining until the Maturity Date.

The model may allocate between 0% to 100% of the Fund's assets to equity securities.
However, initially a significant portion of the Fund's assets will be allocated to fixed
income securities. It is also possible that 100% of the Fund's assets will be allocated to
the debt portfolio during the Warranty Period.

The basic terms of the asset allocation model were determined prior to the Fund
entering into the Warranty Agreement with MLBUSA. MLBUSA reviewed the asset allocation
model in determining whether it was prepared to offer the Financial Warranty to the Fund
and negotiated some modifications to manage its financial risk. MLBUSA has no right to
require any modification to the structure of the asset allocation formula during the
Warranty Period, but has discretion in certain limited circumstances to adjust certain
variables in the formula. Because the model impacts MLBUSA's financial exposure, MLBUSA has
a right to approve any changes that the Fund wishes to make to the model during the
Warranty Period. MLBUSA has informational rights regarding the model's allocation and the
Fund's portfolio during the Warranty Period, but these rights are intended to enable MLBUSA
to monitor its financial exposure. Under the terms of the Warranty Agreement, the Fund is
subject to certain investment parameters during the Warranty Period. The Fund has also
agreed to be bound by various covenants. If the Fund's assets are not managed in accordance
with the parameters set forth in the Warranty Agreement or if the Fund breaches these
covenants, the Fund's assets could be allocated entirely to the fixed income portfolio for
the remainder of the Warranty Period, or MLBUSA may terminate the Warranty Agreement.

The Financial Warranty. The prospectus contains a detailed description of the Warranty
Agreement. The "Financial Warranty" that the Warranty Provider issued is a contractual
obligation to make a payment to the Fund in the event there is a shortfall between the
Warranty Amount and the then-current net asset value of the Fund on the Maturity Date
("Shortfall"). The Financial Warranty is not a guarantee and therefore the availability of
the Financial Warranty on the Maturity Date will be conditioned upon the Manager and the
Fund satisfying their respective obligations under the Warranty Agreement. Should the Fund
and/or the Manager fail to satisfy their respective obligations under the Warranty
Agreement, the Warranty Provider is permitted to terminate the Financial Warranty and thus
terminate its obligation, if any, to make any payment to the Fund on the Maturity Date.
Shareholders also bear the risk that the Warranty Provider will become insolvent or
otherwise fail to or become unable to satisfy its payment obligation to the Fund, if any,
under the Financial Warranty. If either event were to occur, shareholders' investment in
the Fund would no longer be protected by the Financial Warranty, which means their shares
may be worth less than their anticipated Warranty Amount. The Fund's Board of Trustees will
periodically review the financial statements of the Warranty Provider. In the event that
the financial condition of the Warranty Provider has deteriorated beyond certain
thresholds, the Board of Trustees will determine whether there is a substantial likelihood
that the Warranty Provider will be unable to satisfy its obligations under the Warranty
Agreement, and, in response, the Board may, but is not obligated to, replace the Warranty
Provider.

In the event the Manager acts with negligence, recklessness, bad faith, willful
misconduct or fraud and the Fund's net asset value is below a set limit, the Manager will
be required to make a payment under the Warranty Agreement in an amount equal to the amount
of any reduction in the Fund's net asset value below a set limit that is directly or
indirectly attributable to the Manager's conduct. Additionally, in the event the Manager is
required to allocate the Fund's assets to the debt portfolio and fails to do so and such
failure results in the Fund's net asset value falling below a set limit, the Manager will
be required to pay to the Warranty Provider an amount equal to the shortfall due to the
Fund's assets not being so invested. The Warranty Provider may also terminate the Financial
Warranty for other reasons, as discussed in the Prospectus and this Statement of Additional
Information.

The Warranty Agreement imposes certain conditions and requirements on the Fund and
the Manager. Failure to satisfy those conditions and requirements, which are described in
detail in the Prospectus, gives the Warranty Provider the ability to (i) reduce the amount
of the Fund's assets invested in shares of the equity portfolio, (ii) require 100% of the
Fund's assets to be invested in U.S. government securities, or (iii) terminate the Warranty
Agreement, depending on the condition or requirement. The Manager will monitor the
conditions and requirements of the Warranty Agreement on a daily basis to ensure that the
Fund and the Manager satisfy those conditions and requirements. In certain circumstances,
the Warranty Agreement provides that in the case of certain deficiencies, the Fund may have
a specified period of time to cure the deficiency. In the case of other deficiencies, the
Warranty Provider has the right, in its sole discretion, to either direct the Manager to
allocate all of the Fund's assets to the debt portfolio, deliver to the Fund's Custodian
pre-signed instructions from the Manager instructing the Custodian to immediately allocate
all of the Fund's assets to the debt portfolio or change one of the variables in the
formula which would have the effect of increasing the portion of the Fund's assets
allocated to the debt portfolio or in certain circumstances terminate the Warranty
Agreement. The Warranty Provider will rely on the Manager as well as on the Fund's
Custodian bank for the information necessary to monitor the Fund's and/or the Manager's
compliance with the terms of the Warranty Agreement. The attendant risks to the Fund and
shareholders are if the Manager or the Custodian bank fail to provide the information
required by the Warranty Agreement, in which case the Warranty Provider may require the
Fund to invest exclusively in U.S. government securities.

On the Maturity Date, if there is a shortfall between the Warranty Amount and the
Fund's then-current net asset value, the Warranty Provider will be required to make a
payment to the Fund in the amount of the shortfall. The Shortfall amount will be determined
per class of shares and then the specific shortfall amount per class of shares will be
allocated to the respective class. Once the dollar amount of Shortfall is allocated per
class, that amount will then be divided evenly among the outstanding shares of the class to
apply on a shareholder basis. The Fund will then provide those shareholders who redeem
their Fund shares on the Maturity Date with their respective Warranty Amount.

During the Warranty Period, the Fund may purchase securities or engage in investment
techniques set forth in the following sections.

|X| Investments in Equity Securities. The Fund's investments in equity securities
will consist of Class Y shares of the Oppenheimer Main Street Fund (the "Underlying Fund").
The Underlying Fund does not limit its investments in equity securities to issuers having a
market capitalization of a specified size or range, and therefore can invest in securities
of small-, mid- and large-capitalization issuers. At times, the Underlying Fund can focus
its equity investments in securities of one or more capitalization ranges, based upon the
Manager's judgment of where the best market opportunities are to seek the Underlying Fund's
objective. At times, the market may favor or disfavor securities of issuers of a particular
capitalization range. Securities of small capitalization issuers may be subject to greater
price volatility in general than securities of larger companies. Therefore, if the
Underlying Fund is focusing on or has substantial investments in smaller capitalization
companies at times of market volatility, the Underlying Fund's share prices may fluctuate
more than that of funds focusing on larger capitalization issuers. Further information
about the Underlying Fund is included under "Information About the Underlying Fund" in
Appendix C to this Statement of Additional Information. The Underlying Fund's Prospectus
and Statement of Additional Information describe in detail the Underlying Fund's investment
policies, risks, management, investment restrictions, strategies and types of securities in
which it may invest, and contains other information about the Underlying Fund. The
Prospectus, Statement of Additional Information and annual and semi-annual reports of the
Underlying Fund are available without charge upon request by calling 1.800.525.7048.

Investment in Futures Contracts. The Fund can buy and sell S&P 500 Index futures contracts.
The Standard and Poor's 500 Composite Stock Index is the basis for trading S&P 500 futures
contracts. The S&P 500 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. The S&P 500 Index cannot be purchased or sold directly. S&P 500 Index futures
contracts are based on the future value of the basket of securities that comprise the S&P
500 Index. These contracts obligate the seller to deliver, and the purchaser to take, cash
to settle the futures transaction. There is no delivery made of the underlying securities
to settle the futures obligation. Either party may also settle the transaction by entering
into an offsetting contract.

No money is paid or received by the Fund on the purchase or sale of a futures
contract. 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 futures contract is marked to market (that is, its
value on the Fund's books is changed) to reflect changes in its market value, subsequent
margin payments, called variation margin, will be paid to or by the futures broker daily.

At any time prior to expiration of the futures contract, the Fund can 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 futures contract is then realized by the Fund for tax purposes. All
stock index futures contracts are effected through a clearinghouse associated with the
exchange on which the contracts are traded. There can be no assurance that the Fund will be
able to enter into an offsetting transaction with respect to a particular contract at a
particular time. If the Fund is not able to enter into an offsetting transaction, it will
continue to be required to maintain the margin deposits on the contract.

The prices of futures contracts are volatile and are influenced by, among other
things, actual and anticipated changes in interest rates and equity prices, which in turn
are affected by fiscal and monetary policies and national and international political and
economic events.

When the Fund buys or sells a futures contract, unless it already owns an offsetting
position, it will designate cash having an aggregate value at least equal to the full
"notional" value of the futures contract, thereby ensuring that the leveraging effect of
such futures contract is minimized, in accordance with regulatory requirements.

|X| Investments in Bonds and Other Debt Securities. The Fund will invest in U.S.
government securities to seek its investment objective. In general, debt securities are
subject to two types of risk: credit risk and interest rate risk.

o Credit Risk. Credit risk relates to the ability of the issuer to meet interest or
principal payments or both as they become due. The fixed income component of the Fund's
portfolio consists of U.S. government securities. U.S. government securities, although
unrated, are generally considered to be equivalent to securities in the highest rating
categories. Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors
Service, Inc., or at least "BBB" by Standard & Poor's Rating Service or Fitch, Inc., or
that have comparable ratings by another nationally-recognized rating organization.

o Interest Rate Risk. Interest rate risk refers to the fluctuations in value of debt
securities resulting from the inverse relationship between price and yield. For example, an
increase in general interest rates will tend to reduce the market value of already-issued
debt securities, and a decline in general interest rates will tend to increase their value.
In addition, debt securities having longer maturities tend to offer higher yields, but are
subject to potentially greater fluctuations in value from changes in interest rates than
obligations having shorter maturities.

Fluctuations in the market value of debt securities after the Fund buys them will not
affect the interest income payable on those securities (unless the security pays interest
at a variable rate pegged to interest rate changes). However, those price fluctuations will
be reflected in the valuations of the securities, and therefore the Fund's net asset values
will be affected by those fluctuations.

|X| U.S. Government Securities. U.S. government securities the Fund buys will include
non-callable general obligations of the U.S. Treasury backed by the full faith and credit
of the U.S. government or of any of the following U.S. government agencies,
instrumentalities or government sponsored enterprises: Federal National Mortgage
Association, Federal Home Loan Mortgage Corporation, Federal Home Loan Bank, Resolution
Funding Corporation, Financing Corporation and Tennessee Valley Authority, provided such
securities are rated no less than "AAA" by Standard & Poor's Rating Services or "Aaa" by
Moody's Investors Service, Inc.

o U.S. Treasury Obligations. These include Treasury bills (which have maturities of one
year or less when issued), Treasury notes (which have maturities of more than one year and
up to ten years when issued), and Treasury bonds (which have maturities of more than ten
years when issued). Treasury securities are backed by the full faith and credit of the
United States as to timely payments of interest and repayments of principal. Other U.S.
Treasury obligations the Fund can buy include U. S. Treasury securities that have been
"stripped" by a Federal Reserve Bank, zero-coupon U.S. Treasury securities described below.

o Obligations Issued or Guaranteed by U.S. Government Agencies or Instrumentalities. These
include direct obligations and mortgage-related securities that have different levels of
credit support from the government. The Fund may invest in, Government National Mortgage
Association pass-through mortgage certificates (called "Ginnie Maes"), which are supported
by the full faith and credit of the U.S. government .

|X| Zero-Coupon Securities. The Fund can buy zero-coupon and delayed-interest securities.
The Fund can buy U.S. Treasury notes or bonds that have been stripped of their interest
coupons, U.S. Treasury bills issued without interest coupons, and certificates representing
interests in stripped securities.

Zero-coupon securities do not make periodic interest payments and are sold at a deep
discount from their face value. The buyer recognizes a rate of return determined by the
gradual appreciation of the security, which is redeemed at face value on a specified
maturity date. This discount depends on the time remaining until maturity, as well as
prevailing interest rates, the liquidity of the security and the credit quality of the
issuer. The discount typically decreases as the maturity date approaches. Some zero-coupon
securities are convertible, in that they are zero-coupon securities until a predetermined
date, at which time they convert to a security with a specified coupon rate.

Because zero-coupon securities pay no interest and typically compound semi-annually
at the rate fixed at the time of their issuance, their value is generally more volatile
than the value of other debt securities. Their value may fall more dramatically than the
value of interest-bearing securities when interest rates rise. When prevailing interest
rates fall, zero-coupon securities tend to rise more rapidly in value because they have a
fixed rate of return.

The Fund's investment in zero-coupon securities may cause the Fund to recognize
income and make distributions to shareholders before it receives any cash payments on the
zero-coupon investment. To generate cash to satisfy those distribution requirements, the
Fund may have to sell portfolio securities that it otherwise might have continued to hold
or to use cash flows from other sources such as the sale of Fund shares.

|X| Money Market Instruments. The following is a brief description of the types of the U.S.
dollar-denominated money market securities the Fund can invest in. Money market securities
are high-quality, short-term debt instruments that may be issued by the U.S. government,
corporations, banks or other entities. They may have fixed, variable or floating interest
rates. During the Offering Period the Fund invested its assets in:

o U.S. Government Securities. These include obligations issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, described above.

o Bank Obligations. The Fund can buy time deposits, certificates of deposit and bankers'
acceptances. They must be:
o obligations issued or guaranteed by a domestic bank (including a foreign
branch of a domestic bank) having total assets of at least U.S. $1 billion, or
o obligations of a foreign bank with total assets of at least U.S. $1 billion.

"Banks" include commercial banks, savings banks and savings and loan associations, which
may or may not be members of the Federal Deposit Insurance Corporation.

o Commercial Paper. The Fund can invest in commercial paper if it is rated within the top
three rating categories of Standard & Poor's and Moody's or other rating organizations.

If the paper is not rated, it may be purchased if the Manager determines that it is
comparable to rated commercial paper in the top three rating categories of national rating
organizations.

The Fund can buy commercial paper, including U.S. dollar-denominated securities of
foreign branches of U.S. banks, issued by other entities if the commercial paper is
guaranteed as to principal and interest by a bank, government or corporation whose
certificates of deposit or commercial paper may otherwise be purchased by the Fund.

During the Warranty Period, the Fund may invest in bank deposits, commercial paper
and U.S. government securities (excluding U.S. government zero coupon securities), having a
remaining maturity of 90 days or less. The bank deposits will include demand and time
deposits in, certificates of deposit of, and bankers' acceptances issued by, any U.S.
depository institution or trust company. The bank deposits and commercial paper must have a
credit rating of at least "P-1" by Moody's Investors Service, Inc. and at least "A-1" by
Standard & Poor's Rating Services, and the issuer thereof must have at the time of such
investment a long-term credit rating of at least "Aa3" by Moody's or at least "AA" by S&P.

|X| Borrowing. The Fund may borrow for temporary or emergency purposes only to the
extent necessary to meet redemption requests after using all cash held by the Fund to meet
such redemption requests, other than cash necessary to pay Fund fees and expenses.
Currently, under the Investment Company Act of 1940 (the "Investment Company Act"), a
mutual fund may borrow only from banks and the maximum amount it may borrow is up to
one-third of its total assets (including the amount borrowed less its liabilities, other
than borrowings), except that a fund may borrow up to 5% of its total assets for temporary
purposes from any person. Under the Investment Company Act, there is a rebuttable
presumption that a loan is temporary if it is repaid within 60 days and not extended or
renewed. As a matter of fundamental policy, the Fund is authorized to borrow up to the
limits set forth in the Investment Company Act. During periods of substantial borrowings,
the value of the Fund's assets would be reduced due to the added expense of interest on
borrowed monies. The Fund is authorized to borrow, and to pledge assets to secure such
borrowings, up to the maximum extent permissible under the Investment Company Act. Any such
borrowing will be made only pursuant to the requirements of the Investment Company Act and
will be made only to the extent that the value of each 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, so computed, should fail to meet the 300%
asset coverage requirement, the Fund is required, within three days to reduce its bank debt
to the extent necessary to meet such requirement and may have to sell a portion of its
investments at a time when independent investment judgment would not dictate such sale.
Interest on money borrowed is an expense the Fund would not otherwise incur, so that it may
have little or no net investment income during periods of substantial borrowings. Since
substantially all of the Fund's assets fluctuate in value, but borrowing obligations are
fixed when the Fund has outstanding borrowings, the net asset value per share of the Fund
correspondingly will tend to increase and decrease more when the Fund's assets increase or
decrease in value than would otherwise be the case.

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| Portfolio Turnover. "Portfolio turnover" describes the rate at which the Fund
traded its portfolio securities during its previous fiscal year. For example, if a fund
sold all of its securities during the year, its portfolio turnover rate would have been
100%. The Fund's portfolio turnover rate will fluctuate from year to year, and the Fund can
have a portfolio turnover rate of 100% or more. Increased portfolio turnover creates higher
brokerage and transaction costs for the Fund, which may reduce its overall performance.
Additionally, the realization of capital gains from selling portfolio securities may result
in distributions of taxable long-term capital gains to shareholders, since the Fund will
normally distribute all of its capital gains realized each year, to avoid excise taxes
under the Internal Revenue Code. As a result of the Fund's dynamic asset allocation model,
the Fund may have a higher portfolio turnover rate than other mutual funds.

Investment in Other Investment Companies. As stated above, the Fund can invest in the Class
Y shares of Oppenheimer Main Street Fund, subject to the limits set forth in the Investment
Company Act or any exemption therefrom that apply to those types of investments and any
percentage limit established, from time to time, by the asset allocation formula described
in the Warranty Agreement. Investing in another investment company may involve the payment
of substantial premiums above the value of such investment company's portfolio securities
and is subject to limitations under the Investment Company Act. As a shareholder of an
investment company, the Fund will be subject to its ratable share of that investment
company's expenses, including its advisory and administration expenses.

Other 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.

The Underlying Fund's investment objective is a fundamental policy. Other policies
described in the Underlying Fund's Prospectus or its Statement of Additional Information
and in Appendix C to this Statement of Additional Information are "fundamental" only if
they are identified as such. The Underlying Fund's Board of Directors can change
non-fundamental policies without shareholder approval. However, significant changes to
investment policies will be described in supplements or updates to the Underlying Fund's
Prospectus or Statement of Additional Information, as appropriate. The Underlying Fund's
most significant investment policies are described in its Prospectus as well as in the
Oppenheimer Principal Protected Main Street Fund III Prospectus.

|X| Does the Fund Have Additional Fundamental Policies? The following investment
restrictions are fundamental policies of the Fund.

o The Fund cannot concentrate investments. That means it cannot invest 25% or more
of its total assets in any industry. However, there is no limitation on investments in
affiliated funds and obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities.

o The Fund cannot invest in commodities. However, the Fund can buy and sell any of the
derivative instruments or hedging instruments permitted by any of its other policies. It
does not matter if the derivative instrument or hedging instrument is considered to be a
commodity or commodity contract.

o The Fund cannot invest in real estate or in interests in real estate. However, the
Fund can purchase securities of issuers holding real estate or interests in real estate
(including securities of real estate investment trusts).

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 issue "senior securities," but this does not prohibit certain
investment activities for which assets of the Fund are designated as segregated, or margin,
collateral or escrow arrangements are established, to cover the related obligations.
Examples of those activities include borrowing money, reverse repurchase agreements,
delayed-delivery and when-issued arrangements for portfolio securities transactions, and
contracts to buy or sell derivatives, hedging instruments, options or futures.

o The Fund cannot borrow money, except to the extent permitted under the Investment
Company Act, the rules or regulations thereunder or any exemption therefrom that is
applicable to the Fund, as such statutes, rules or regulations may be amended or
interpreted from time to time.

o The Fund cannot make loans except (a) through lending of securities, (b) through the
purchase of debt instruments or similar evidences of indebtedness, (c) through an interfund
lending program with other affiliated funds, and (d) through repurchase agreements.

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 it would then own
more than 10% of that issuer's voting securities. This limit 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, or securities of other affiliated investment
companies.

|X| Does the Underlying Fund Have Additional Fundamental Policies? The following investment
restrictions are Fundamental policies of the Underlying Fund.

o The Underlying Fund cannot concentrate investments. That means it cannot invest 25%
or more of its total assets in any industry. However, there is no limitation on investments
in U.S. government securities.

o The Underlying Fund cannot invest in commodities. However, the Underlying Fund can
buy and sell any of the hedging instruments permitted by any of its other policies. It does
not matter if the hedging instrument is considered to be a commodity or commodity contract.

o The Underlying Fund cannot invest in real estate or in interests in real estate.
However, the Underlying Fund can purchase securities of issuers holding real estate or
interests in real estate (including securities of real estate investment trusts).

o The Underlying 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 Underlying Fund cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Fund are designated as segregated, or
margin, collateral or escrow arrangements are established, to cover the related
obligations. Examples of those activities include borrowing money, reverse repurchase
agreements, delayed-delivery and when-issued arrangements for portfolio securities
transactions, and contracts to buy or sell derivatives, hedging instruments, options or
futures.

o The Underlying Fund cannot borrow money in excess of 33 1/3% of the value of its
total assets (including the amount borrowed). The Underlying Fund may borrow only from
banks and/or affiliated investment companies. With respect to this fundamental policy, the
Underlying Fund can borrow only if it maintains a 300% ratio of assets to borrowings at all
times in the manner set forth in the Investment Company Act.

o The Underlying Fund cannot make loans except (a) through lending of securities, (b)
through the purchase of debt instruments or similar evidences of indebtedness, and (c)
through repurchase agreements

o The Underlying 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 it would
then own more than 10% of that issuer's voting securities. This limit applies to 75% of the
Underlying Fund's total assets. The limit does not apply to securities issued by the U.S.
Government or any of its agencies or instrumentalities, or securities of other investment
companies.

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 an
investment (except in the case of borrowing and investments in illiquid securities) is
made. The Fund and the Underlying 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 or
Underlying Fund.

For purposes of the policy not to concentrate investments as described above, the
Fund and the Underlying Fund have each adopted as a non-fundamental policy the industry
classifications set forth in Appendix A to its Statement of Additional Information. The
Fund and the Underlying Fund do not intend to concentrate its investments in a group of
industries.

How the Fund is Managed

Organization and History. The Fund, a series of Oppenheimer Principal Protected Trust III,
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 March 2004.

|X| Classes of Shares. The Trustees are authorized, without shareholder approval, to
create new series and classes of shares, to reclassify unissued shares into additional
series or classes and to 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, preemptive rights 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 will generally have a different net asset value,
o will generally 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
a 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, but may hold
shareholder meetings from time to time on important matters or when required to do so by
the Investment Company Act or other applicable law. Shareholders have the right, upon a
vote or declaration in writing of two-thirds of the outstanding shares of the Fund, to
remove a Trustee or to take other action described in the Fund's Declaration of Trust.

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. 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 and that the Trustees shall have no personal liability to any
such person, to the extent permitted by law.

Board of Trustees and Oversight Committees. 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.

The Board of Trustees has an Audit Committee, a Review Committee and a Governance
Committee. Each committee is comprised solely of Trustees who are not "interested persons"
under the Investment Company Act (the "Independent Trustees"). The members of the Audit
Committee are Edward L. Cameron (Chairman), George C. Bowen, Robert J. Malone and F. William
Marshall, Jr. The Audit Committee furnishes the Board with recommendations regarding the
selection of the Fund's independent registered public accounting firm (also referred to as
the "independent Auditors"). Other main functions of the Audit Committee, outlined in the
Audit Committee Charter, include, but are not limited to: (i) reviewing the scope and
results of financial statement audits and the audit fees charged; (ii) reviewing reports
from the Fund's independent Auditors regarding the Fund's internal accounting procedures and
controls; (iii) reviewing reports from the Manager's Internal Audit Department; (iv)
reviewing certain reports from and meet periodically with the Funds' Chief Compliance
Officer; (v) maintaining a separate line of communication between the Fund's independent
Auditors and the Independent Trustees; (vi) reviewing the independence of the Fund's
independent Auditors; and (vii) pre-approving the provision of any audit or non-audit
services by the Fund's independent Auditors, including tax services, that are not prohibited
by the Sarbanes-Oxley Act, to the Fund, the Manager and certain affiliates of the Manager.

The Review Committee is comprised solely of Independent Trustees. The members of the
Review Committee are Jon S. Fossel (Chairman), Robert G. Avis, Sam Freedman and Beverly L.
Hamilton. Among other duties, as set forth in the Review Committee's Charter, the Review
Committee reports and makes recommendations to the Board concerning the fees paid to the
Fund's transfer agent and the Manager and the services provided to the Fund by the transfer
agent and the Manager. The Review Committee also reviews the Fund's investment performance
as well as the policies and procedures adopted by the Fund to comply with the Investment
Company Act and other applicable law.

The Governance Committee is comprised solely of Independent Trustees. The members of
the Governance Committee are, Robert J. Malone (Chairman), William Armstrong, Beverly L.
Hamilton and F. William Marshall, Jr. The Governance Committee was established in August
2004. The Governance Committee has adopted a charter setting forth its duties and
responsibilities. Among other duties, the Governance Committee reviews and oversees the
Fund's governance guidelines, the adequacy of the Fund's Codes of Ethics and the nomination
of Trustees, including Independent Trustees. The Governance Committee has adopted a process
for shareholder submission of nominees for board positions. Shareholders may submit names
of individuals, accompanied by complete and properly supported resumes, for the Governance
Committee's consideration by mailing such information to the Governance Committee in care
of the Fund. The Governance Committee may consider such persons at such time as it meets to
consider possible nominees. The Governance Committee, however, reserves sole discretion to
determine which candidates for Trustees and Independent Trustees it will recommend to the
Board and/or shareholders and it may identify candidates other than those submitted by
Shareholders. The Governance Committee may, but need not, consider the advice and
recommendation of the Manager and/or its affiliates in selecting nominees. The full Board
elects new Trustees except for those instances when a shareholder vote is required.

Shareholders who desire to communicate with the Board should address correspondence
to the Board or an individual Board member and may submit their correspondence
electronically at www.oppenheimerfunds.com under the caption "contact us" or by mail to the
Fund at the address below. The Governance Committee will consider if a different process
should be recommended to the Board.

Trustees and Officers of the Fund. Except for Mr. Murphy, each of the Trustees is an
Independent Trustee. All of the Trustees are also trustees or directors of the following
Oppenheimer/Centennial funds (referred to as "Board II Funds"):

Oppenheimer Principal Protected
Oppenheimer Cash Reserves Trust II
Oppenheimer Principal Protected
Oppenheimer Capital Income Fund Trust III
Oppenheimer Champion Income Fund Oppenheimer Real Asset Fund
Oppenheimer Senior Floating Rate
Oppenheimer Equity Fund, Inc. Fund
Oppenheimer High Yield Fund Oppenheimer Strategic Income Fund
Oppenheimer Integrity Funds Oppenheimer Variable Account Funds
Oppenheimer International Bond Fund Panorama Series Fund, Inc.
Oppenheimer Limited-Term Government Fund
Centennial California Tax Exempt
Oppenheimer Main Street Funds, Inc. Trust
Oppenheimer Main Street Opportunity Fund Centennial Government Trust
Oppenheimer Main Street Small Cap Fund Centennial Money Market Trust
Centennial New York Tax Exempt
Oppenheimer Municipal Fund Trust
Oppenheimer Principal Protected Trust Centennial Tax Exempt Trust

Present or former officers, directors, trustees and employees (and their immediate
family members) of the Fund, the Manager and its affiliates, and retirement plans
established by them for their employees are permitted to purchase Class A shares of the
Fund and the other Oppenheimer funds at net asset value without sales charge. The sales
charge on Class A shares is waived for that group because of the reduced sales efforts
realized by the Distributor.

Messrs. Gillespie, Manioudakis, Murphy, Petersen, Schadt, Vandehey, Vottiero, Wixted
and Zack and Mss. Bloomberg and Ives, who are officers of the Fund, hold the same offices
with one or more of the other Board II Funds. As of November 30, 2005 the Trustees and
officers of the Fund, as a group, owned of record or beneficially less than 1% of any class
of shares of the Fund. The foregoing statement does not reflect ownership of shares held of
record by an employee benefit plan for employees of the Manager, other than the shares
beneficially owned under that plan by the officers of the Board II Funds. In addition, none
of the Independent Trustees (nor any of their immediate family members) owns securities of
either the Manager or the Distributor or of any entity directly or indirectly controlling,
controlled by or under common control with the Manager or the Distributor of the Board II
Funds.

Biographical Information. The Trustees and officers, their positions with the Fund,
length of service in such position(s), and principal occupations and business affiliations
during at least the past five years are listed in the charts below. The charts also include
information about each Trustee's beneficial share ownership in the Fund and in all of the
registered investment companies that the Trustee oversees in the Oppenheimer family of
funds ("Supervised Funds"). The address of each Trustee in the chart below is 6803 S.
Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or
until his or her resignation, retirement, death or removal.

---------------------------------------------------------------------------------------
Independent Trustees
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During the Past Dollar Aggregate
Dollar
Range of
Shares
Range of Beneficially
5 Years; Other Shares Owned in
with the Fund, Trusteeships/Directorships Held; Number Beneficially All
Length of Service, of Portfolios in the Fund Complex Owned in Supervised
Age Currently Overseen the Fund Funds
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
As of December 31, 2004
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
William L. Chairman of the following private None Over
Armstrong, mortgage banking companies: Cherry Creek $100,000
Chairman of the Mortgage Company (since 1991),
Board of Trustees Centennial State Mortgage Company (since
since 2003, 1994), and The El Paso Mortgage Company
Trustee since 2004 (since 1993); Chairman of the following
Age: 68 private companies: Ambassador Media
Corporation (since 1984) and Broadway
Ventures (since 1984); Director of the
following: Helmerich & Payne, Inc. (oil
and gas drilling/production company)
(since 1992), Campus Crusade for Christ
(since 1991) and The Lynde and Harry
Bradley Foundation, Inc. (non-profit
organization) (since 2002); former
Chairman of the following: Transland
Financial Services, Inc. (private
mortgage banking company) (1997-2003),
Great Frontier Insurance (insurance
agency) (1995-2000), Frontier Real
Estate, Inc. (residential real estate
brokerage) (1994-2000) and Frontier
Title (title insurance agency)
(1995-2000); former Director of the
following: UNUMProvident (insurance
company) (1991-2004), Storage Technology
Corporation (computer equipment company)
(1991-2003) and International Family
Entertainment (television channel)
(1992-1997); U.S. Senator (January
1979-January 1991). Oversees 38
portfolios in the OppenheimerFunds
complex.
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Robert G. Avis, Director and President of A.G. Edwards None Over
Trustee since 2004 Capital, Inc. (General Partner of $100,000
Age: 74 private equity funds) (until February
2001); Chairman, President and Chief
Executive Officer of A.G. Edwards
Capital, Inc. (until March 2000);
Director of A.G. Edwards & Sons, Inc.
(brokerage company) (until 2000) and
A.G. Edwards Trust Company (investment
adviser) (until 2000); Vice Chairman and
Director of A.G. Edwards, Inc. (until
March 1999); Vice Chairman of A.G.
Edwards & Sons, Inc. (until March 1999);
Chairman of A.G. Edwards Trust Company
(until March 1999) and A.G.E. Asset
Management (investment adviser) (until
March 1999). Oversees 38 portfolios in
the OppenheimerFunds complex.
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
George C. Bowen, Assistant Secretary and Director of None Over
Trustee since 2004 Centennial Asset Management Corporation $100,000
Age: 69 (December 1991-April 1999); President,
Treasurer and Director of Centennial
Capital Corporation (June 1989-April
1999); Chief Executive Officer and
Director of MultiSource Services, Inc.
(March 1996-April 1999); Mr. Bowen held
several positions with the Manager and
with subsidiary or affiliated companies
of the Manager (September 1987-April
1999). Oversees 38 portfolios in the
OppenheimerFunds complex.
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Edward L. Cameron, Member of The Life Guard of Mount Vernon None Over
Trustee since 2004 (George Washington historical site) $100,000
Age: 67 (since June 2000); Director of Genetic
ID, Inc. (biotech company) (March
2001-May 2002); Partner at
PricewaterhouseCoopers LLP (accounting
firm) (July 1974-June 1999); Chairman of
Price Waterhouse LLP Global Investment
Management Industry Services Group (July
1994-June 1998). Oversees 38 portfolios
in the OppenheimerFunds complex.
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Jon S. Fossel, Director of UNUMProvident (insurance None Over
Trustee since 2004 company) (since June 2002); Director of $100,000
Age: 63 Northwestern Energy Corp. (public
utility corporation) (since November
2004); Director of P.R. Pharmaceuticals
(October 1999-October 2003); Director of
Rocky Mountain Elk Foundation
(non-profit organization) (February
1998-February 2003); Chairman and
Director (until October 1996) and
President and Chief Executive Officer
(until October 1995) of the Manager;
President, Chief Executive Officer and
Director of the following: Oppenheimer
Acquisition Corp. ("OAC") (parent
holding company of the Manager),
Shareholders Services, Inc. and
Shareholder Financial Services, Inc.
(until October 1995). Oversees 38
portfolios in the OppenheimerFunds
complex.
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Sam Freedman, Director of Colorado Uplift (charitable None Over
Trustee since 2004 organization) (since September 1984). $100,000
Age: 65 Mr. Freedman held several positions with
the Manager and with subsidiary or
affiliated companies of the Manager
(until October 1994). Oversees 38
portfolios in the OppenheimerFunds
complex.
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Beverly L. Trustee of Monterey Institute for None Over
Hamilton, International Studies (educational $100,000
Trustee since 2004 organization) (since February 2000);
Age: 59 Director of The California Endowment
(philanthropic organization) (since
April 2002); Director of Community
Hospital of Monterey Peninsula (since
February 2002); Director of American
Funds' Emerging Markets Growth Fund,
Inc. (mutual fund) (since October 1991);
President of ARCO Investment Management
Company (February 1991-April 2000);
Member of the investment committees of
The Rockefeller Foundation and The
University of Michigan; Advisor at
Credit Suisse First Boston's Sprout
venture capital unit (venture capital
fund) (1994-January 2005); Trustee of
MassMutual Institutional Funds
(investment company) (1996-June 2004);
Trustee of MML Series Investment Fund
(investment company) (April 1989-June
2004); Member of the investment
committee of Hartford Hospital
(2000-2003); and Advisor to Unilever
(Holland) pension fund (2000-2003).
Oversees 38 portfolios in the
OppenheimerFunds complex.
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
Robert J. Malone, Director of Jones International None Over
Trustee since 2004 University (educational organization) $100,000
Age: 61 (since August 2005); Chairman, Chief
Executive Officer and Director of Steele
Street State Bank (commercial banking)
(since August 2003); Director of
Colorado UpLIFT (charitable
organization) (since 1986); Trustee of
the Gallagher Family Foundation
(non-profit organization) (since 2000);
Former Chairman of U.S. Bank-Colorado
(subsidiary of U.S. Bancorp and formerly
Colorado National Bank) (July 1996-April
1999); Director of Commercial Assets,
Inc. (real estate investment trust)
(1993-2000); Director of Jones
Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil
and gas exploration) (1997-February
2004). Oversees 38 portfolios in the
OppenheimerFunds complex.
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
F. William Trustee of MassMutual Select Funds None Over
Marshall, Jr., (formerly MassMutual Institutional $100,000
Trustee since 2004 Funds) (investment company) (since 1996)
Age: 63 and MML Series Investment Fund
(investment company) (since 1996), the
Springfield Library and Museum
Association (museums) (since 1995) and
the Community Music School of
Springfield (music school) (since 1996);
Chairman and Trustee (since 2003) and
Chairman of the Investment Committee
(since 1994) of the Worcester Polytech
Institute (private university);
President and Treasurer of the SIS Funds
(private charitable fund) (since January
1999); Chairman of SIS & Family Bank,
F.S.B. (formerly SIS Bank) (commercial
bank) (January 1999-July 1999); Member
of the Investment Committee of the
Community Foundation of Western
Massachusetts (1998-2003); and Executive
Vice President of Peoples Heritage
Financial Group, Inc. (commercial bank)
(January 1999-July 1999). Oversees 40
portfolios in the OppenheimerFunds
complex.*
---------------------------------------------------------------------------------------
* Includes two open-end investment companies: MassMutual Select Funds and MML Series
Investment Fund. In accordance with the instructions for Form N-1A, for purposes of this
section only, MassMutual Select Funds and MML Series Investment Fund are included in the
"Fund Complex." The Manager does not consider MassMutual Select Funds and MML Series
Investment Fund to be part of the OppenheimerFunds' "Fund Complex" as that term may be
otherwise interpreted.

The address of Mr. Murphy is Two World Financial Center, 225 Liberty Street, 11th Floor,
New York, New York 10281-1008. Mr. Murphy serves as a Trustee and as an officer for an
indefinite term, or until his resignation, retirement, death or removal. Mr. Murphy 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. Mr.
Murphy was elected as a Trustee of the Fund with the understanding that in the event he
ceases to be the chief executive officer of the Manager, he will resign as a Trustee of the
Fund and the other Board II Funds (defined below) for which he is a director or trustee.

----------------------------------------------------------------------------------------
Interested Trustee and Officer
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Name, Principal Occupation(s) During the Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Range of Beneficially
Position(s) Shares Owned in
Held with the Years; Other Trusteeships/Directorships Held; Beneficially All
Fund, Length of Number of Portfolios in the Fund Complex Owned in Supervised
Service, Age Currently Overseen the Fund Funds
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
As of December 31, 2004
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and None Over
President and Director (since June 2001) and President $100,000
Trustee since (since September 2000) of the Manager;
2004 President and director or trustee of other
Age: 56 Oppenheimer funds; President and Director of
OAC and of Oppenheimer Partnership Holdings,
Inc. (holding company subsidiary of the
Manager) (since July 2001); Director of
OppenheimerFunds Distributor, Inc.
(subsidiary of the Manager) (since November
2001); Chairman and Director of Shareholder
Services, Inc. and of Shareholder Financial
Services, Inc. (transfer agent subsidiaries
of the Manager) (since July 2001); President
and Director of OppenheimerFunds Legacy
Program (charitable trust program established
by the Manager) (since July 2001); Director
of the following investment advisory
subsidiaries of the Manager: OFI
Institutional Asset Management, Inc.,
Centennial Asset Management Corporation,
Trinity Investment Management Corporation and
Tremont Capital Management, Inc. (since
November 2001), HarbourView Asset Management
Corporation and OFI Private Investments, Inc.
(since July 2001); President (since November
2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.;
Executive Vice President of Massachusetts
Mutual Life Insurance Company (OAC's parent
company) (since February 1997); Director of
DLB Acquisition Corporation (holding company
parent of Babson Capital Management LLC)
(since June 1995); Member of the Investment
Company Institute's Board of Governors (since
October 3, 2003); Chief Operating Officer of
the Manager (September 2000-June 2001);
President and Trustee of MML Series
Investment Fund and MassMutual Select Funds
(open-end investment companies) (November
1999-November 2001); Director of C.M. Life
Insurance Company (September 1999-August
2000); President, Chief Executive Officer and
Director of MML Bay State Life Insurance
Company (September 1999-August 2000);
Director of Emerald Isle Bancorp and Hibernia
Savings Bank (wholly-owned subsidiary of
Emerald Isle Bancorp) (June 1989-June 1998).
Oversees 77 portfolios as an officer and
director or trustee and 10 additional
portfolios as an officer in the
OppenheimerFunds complex.
----------------------------------------------------------------------------------------

The addresses of the officers in the chart below are as follows: for Messrs. Gillespie,
Manioudakis, Schadt and Zack and Ms. Bloomberg, Two World Financial Center, 225 Liberty
Street, New York, New York 10281-1008, for Messrs. Petersen, Vandehey, Vottiero, and Wixted
and Ms. Ives, 6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each officer serves for
an indefinite term or until his or her resignation, retirement death or removal.

---------------------------------------------------------------------------------
Other Officers of the Fund
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During Past 5 Years
Held with the
Fund, Length of
Service, Age
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Angelo Manioudakis, Senior Vice President of the Manager (since April 2002), of
Vice President and HarbourView Asset Management Corporation (since April, 2002
Portfolio Manager and of OFI Institutional Asset Management, Inc. (since June
since 2004 2002); Executive Director and portfolio manager for Miller,
Age: 39 Anderson & Sherrerd, a division of Morgan Stanley
Investment Management (August 1993-April 2002). An officer
of 14 portfolios in the OppenheimerFunds complex.
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Rudi W. Schadt, Vice President, Director of Research in Product Design and
Vice President and Risk Management of the Manager since August 2004. Prior to
Portfolio Manager joining the Manager in February 2002 he was a Director and
since 2004 Senior Quantitative Analyst (2000-2001) at UBS Asset
Age: 48 Management prior to which he was an Associate Director of
Research (since June 1999) and Senior Researcher and
Portfolio Manager (from June 1997) at State Street Global
Advisors. An officer of 7 portfolios in the
OppenheimerFunds complex.
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Mark S. Vandehey, Senior Vice President and Chief Compliance Officer of the
Vice President and Manager (since March 2004); Vice President of
Chief Compliance OppenheimerFunds Distributor, Inc., Centennial Asset
Officer since 2004 Management Corporation and Shareholder Services, Inc.
Age: 55 (since June 1983); Vice President and Director of Internal
Audit of the Manager (1997-February 2004). An officer of 87
portfolios in the OppenheimerFunds complex.
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer of the Manager (since
Treasurer since March 1999); Treasurer of the following: HarbourView Asset
2004 Management Corporation, Shareholder Financial Services,
Age: 46 Inc., Shareholder Services, Inc., Oppenheimer Real Asset
Management Corporation, and Oppenheimer Partnership
Holdings, Inc. (since March 1999), OFI Private Investments,
Inc. (since March 2000), OppenheimerFunds International
Ltd. and OppenheimerFunds plc (since May 2000), OFI
Institutional Asset Management, Inc. (since November 2000),
and OppenheimerFunds Legacy Program (since June 2003);
Treasurer and Chief Financial Officer of OFI Trust Company
(trust company subsidiary of the Manager) (since May 2000);
Assistant Treasurer of the following: OAC (since March
1999), Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program
(April 2000-June 2003); Principal and Chief Operating
Officer of Bankers Trust Company-Mutual Fund Services
Division (March 1995-March 1999). An officer of 87
portfolios in the OppenheimerFunds complex.
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Brian Petersen, Assistant Vice President of the Manager (since August
Assistant 2002); Manager/Financial Product Accounting of the Manager
Treasurer since (November 1998-July 2002). An officer of 87 portfolios in
2004 the OppenheimerFunds complex.
Age: 35
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Philip F. Vottiero, Vice President/Fund Accounting of the Manager (since March
Assistant 2002); Vice President/Corporate Accounting of the Manager
Treasurer since (July 1999-March 2002); Chief Financial Officer of Sovlink
2004 Corporation (April 1996-June 1999). An officer of 87
Age: 42 portfolios in the OppenheimerFunds complex.
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Robert G. Zack, Executive Vice President (since January 2004) and General
Secretary since Counsel (since March 2002) of the Manager; General Counsel
2004 and Director of the Distributor (since December 2001);
Age: 57 General Counsel of Centennial Asset Management Corporation
(since December 2001); Senior Vice President and General
Counsel of HarbourView Asset Management Corporation (since
December 2001); Secretary and General Counsel of OAC (since
November 2001); Assistant Secretary (since September 1997)
and Director (since November 2001) of OppenheimerFunds
International Ltd. and OppenheimerFunds plc; Vice President
and Director of Oppenheimer Partnership Holdings, Inc.
(since December 2002); Director of Oppenheimer Real Asset
Management, Inc. (since November 2001); Senior Vice
President, General Counsel and Director of Shareholder
Financial Services, Inc. and Shareholder Services, Inc.
(since December 2001); Senior Vice President, General
Counsel and Director of OFI Private Investments, Inc. and
OFI Trust Company (since November 2001); Vice President of
OppenheimerFunds Legacy Program (since June 2003); Senior
Vice President and General Counsel of OFI Institutional
Asset Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003);
Senior Vice President (May 1985-December 2003), Acting
General Counsel (November 2001-February 2002) and Associate
General Counsel (May 1981-October 2001) of the Manager;
Assistant Secretary of the following: Shareholder Services,
Inc. (May 1985-November 2001), Shareholder Financial
Services, Inc. (November 1989-November 2001), and
OppenheimerFunds International Ltd. (September
1997-November 2001). An officer of 87 portfolios in the
OppenheimerFunds complex.
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Lisa I. Bloomberg, Vice President and Associate Counsel of the Manager (since
Assistant May 2004); First Vice President (April 2001-April 2004),
Secretary since Associate General Counsel (December 2000-April 2004),
2004 Corporate Vice President (May 1999-April 2001) and
Age: 37 Assistant General Counsel (May 1999-December 2000) of UBS
Financial Services Inc. (formerly, PaineWebber
Incorporated). An officer of 87 portfolios in the
OppenheimerFunds complex.
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel and
Assistant Assistant Secretary (since October 2003) of the Manager;
Secretary since Vice President (since 1999) and Assistant Secretary (since
2004 October 2003) of the Distributor; Assistant Secretary of
Age: 40 Centennial Asset Management Corporation (since October
2003); Vice President and Assistant Secretary of
Shareholder Services, Inc. (since 1999); Assistant
Secretary of OppenheimerFunds Legacy Program and
Shareholder Financial Services, Inc. (since December 2001);
Assistant Counsel of the Manager (August 1994-October
2003). An officer of 87 portfolios in the OppenheimerFunds
complex.
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Phillip S. Senior Vice President and Deputy General Counsel of the
Gillespie, Manager (since September 2004); First Vice President
Assistant (2000-September 2004), Director (2000-September 2004) and
Secretary since Vice President (1998-2000) of Merrill Lynch Investment
2004 Management. An officer of 87 portfolios in the
Age: 41 OppenheimerFunds complex.
---------------------------------------------------------------------------------

Remuneration of the Officers and Trustees. The officers and the interested Trustee of
the Fund who are affiliated with the Manager receive no salary or fee from the Fund. The
Independent Trustees received the compensation shown below from the Fund for serving as a
Trustee and member of a committee (if applicable), with respect to the Fund's fiscal year
ended August 31, 2005. The total compensation, including accrued retirement benefits, from
the Fund and fund complex represents compensation received for serving as a Trustee and
member of a committee (if applicable) of the Boards of the Fund and other funds in the
OppenheimerFunds complex during the calendar year ended December 31, 2004.

---------------------------------------------------------------------------------
Name of Trustee and Other Fund Aggregate Compensation Total Compensation
From the Fund and
Position(s) (as applicable) From the Fund(1) Fund Complex(2)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
William L. Armstrong $585 $178,000
Chairman of the Board and
Governance Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Robert G. Avis $389 $118,500
Review Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
George C. Bowen $389 $118,500
Audit Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Edward L. Cameron $447 $136,000
Audit Committee Chairman
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Jon S. Fossel $447 $136,000
Review Committee Chairman
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Sam Freedman $389 $118,500
Review Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Beverly Hamilton $392(3) $152,355(5)
Review Committee Member and
Governance Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Robert J. Malone $450(4) $121,726
Governance Committee Chairman
and
Audit Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
F. William Marshall, Jr.
Audit Committee Member and $389 $167,500(6)
Governance Committee Member
---------------------------------------------------------------------------------
1. "Aggregate Compensation From the Fund" includes fees and deferred compensation, if
any.
2. In accordance with SEC regulations, for purposes of this section only, "Fund Complex"
includes the Oppenheimer funds, the MassMutual Institutional Funds, the MassMutual
Select Funds and the MML Series Investment Fund, the investment adviser for which is the
indirect parent company of the Fund's Manager. The Manager also serves as the
Sub-Advisor to the following: MassMutual Premier International Equity Fund, MassMutual
Premier Main Street Fund, MassMutual Premier Strategic Income Fund, MassMutual Premier
Capital Appreciation Fund, and MassMutual Premier Global Fund. The Manager does not
consider MassMutual Institutional Funds, MassMutual Select Funds and MML Series
Investment Fund to be part of the OppenheimerFunds' "Fund Complex" as that term may be
otherwise interpreted.
3. Includes $392 deferred by Ms. Hamilton under the "Deferred Compensation Plan"
described below.
4. Includes $450 deferred by Mr. Malone under the "Deferred Compensation Plan" described
below.
5. Includes $36,654 deferred by Ms. Hamilton under a deferred compensation plan for
serving as a Trustee for MassMutual Institutional Funds and MML Series Investment Fund
(until June 30, 2004).
6. Includes $49,000 compensation paid to Mr. Marshall for serving as a Trustee for
MassMutual Select Funds and MML Series Investment Fund.

|X| Deferred Compensation Plan For Trustees. The Board of Trustees has adopted a Deferred
Compensation Plan for Independent Trustees that enables them to elect to defer receipt of
all or a portion of the annual fees they are entitled to receive from the Fund. Under the
plan, the compensation deferred by a Trustee is periodically adjusted as though an
equivalent amount had been invested in shares of one or more Oppenheimer funds selected by
the Trustee. The amount paid to the Trustee under the plan will be determined based upon
the amount of compensation deferred and 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 ("SEC"), , the Fund may invest in the
funds selected by the Trustees under the plan without shareholder approval for the limited
purpose of determining the value of the Trustees' deferred compensation account.

|X| Major Shareholders. As of October 7, 2004, OppenheimerFunds, Inc. was the only
shareholder of record of any class of shares of the Fund.

The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding
company controlled by Massachusetts Mutual Life Insurance Company, a global, diversified
insurance and financial services organization.

|X| Code of Ethics. The Fund, the Manager and the Distributor have a Code of Ethics.
It is designed to detect and prevent improper personal trading by certain employees,
including portfolio managers, that would compete with or take advantage of the Fund's
portfolio transactions. Covered persons include persons with knowledge of the investments
and investment intentions of the Fund and other funds advised by the Manager. The Code of
Ethics does permit personnel subject to the Code to invest in securities, including
securities that may be purchased or held by the Fund, subject to a number of restrictions
and controls. Compliance with the Code of Ethics is carefully monitored and enforced by the
Manager.

The Code of Ethics is an exhibit to the Fund's registration statement filed with the
SEC 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 1.202.942.8090. The Code of Ethics can also be viewed as part of the
Fund's registration statement on the SEC's EDGAR database at the SEC's Internet website at
www.sec.gov. Copies may be obtained, after paying a duplicating fee, by electronic request
at the following E-mail address: publicinfo@sec.gov, or by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102.

|X| Portfolio Proxy Voting. The Fund has adopted Portfolio Proxy Voting Policies and
Procedures under which the Fund votes proxies relating to securities ("portfolio proxies")
held by the Fund. The Fund's primary consideration in voting portfolio proxies is the
financial interests of the Fund and its shareholders. The Fund has retained an unaffiliated
third-party as its agent to vote portfolio proxies in accordance with the Fund's Portfolio
Proxy Voting Guidelines and to maintain records of such portfolio proxy voting. The Proxy
Voting Guidelines include provisions to address conflicts of interest that may arise
between the Fund and the Manager where a directly-controlled affiliate of the Manager
manages or administers the assets of a pension plan of a company soliciting the proxy. The
Fund's Portfolio Proxy Voting Guidelines on routine and non-routine proxy proposals are
summarized below.

o The Fund votes with the recommendation of the issuer's management on routine matters,
including election of directors nominated by management and ratification of the
independent registered public accounting firm, unless circumstances indicate
otherwise.
o In general, the Fund opposes "anti-takeover" proposals and supports the elimination
of anti-takeover proposals, absent unusual circumstances.
o The Fund supports shareholder proposals to reduce a super-majority vote requirement,
and opposes management proposals to add a super-majority vote requirement.
o The Fund opposes proposals to classify the board of directors.
o The Fund supports proposals to eliminate cumulative voting.
o The Fund opposes re-pricing of stock options.
o The Fund generally considers executive compensation questions such as stock option
plans and bonus plans to be ordinary business activity. The Fund analyzes stock
option plans, paying particular attention to their dilutive effect. While the Fund
generally supports management proposals, the Fund opposes plans it considers to be
excessive.

The Fund is required to file Form N-PX, with its complete proxy voting record for the
12 months ended June 30th, no later than August 31st of each year. The Fund's Form N-PX
filing is available (i) without charge, upon request, by calling the Fund toll-free at
1.800.525.7048 and (ii) on the SEC's website at www.sec.gov.

|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 managers of the Fund are employed by the Manager and are
the persons who are principally responsible for the day-to-day management of 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. The management fees paid by the Fund to the Manager
during the Fund's last fiscal year was:

-----------------------------------------------------------------
Fiscal Year Ended August 31: Management Fee Paid to
OppenheimerFunds, Inc.
-----------------------------------------------------------------
-----------------------------------------------------------------
2005(1) $336,746
-----------------------------------------------------------------
1. For the fiscal period from October 7, 2004 (commencement of operations) to
August 31, 2005.

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 the Fund sustains for any investment, adoption of any investment policy, or
the purchase, sale or retention of any security.

The agreement permits the Manager to act as investment advisor for any other person,
firm or corporation and to use the names "Oppenheimer" and "Main Street" 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's parent corporation to use the names
"Oppenheimer" and "Main Street" as part of its name and the name of the Fund.

Portfolio Manager. The Fund's portfolio is managed by Angelo Manioudakis and Rudi W.
Schadt (the "Portfolio Managers") who are responsible for the day-to-day management of the
Fund's investments.

Other Accounts Managed. In addition to managing the Fund's investments, each
Portfolio Manager also manages other investment portfolios and accounts. The following
table provides information regarding the other portfolios and accounts managed by the
Portfolio Managers as of August 31, 2005. No account has a performance-based advisory fee:

Portfolio RegistereTotal Other Total Other Total
Assets in
Assets in Other
Registered Pooled Pooled Assets
InvestmenInvestment Investment Investment in Other
CompaniesCompanies Vehicles Vehicles Accounts Accounts
Manager Managed Managed* Managed Managed* Managed Managed*
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Angelo 17 $12,777.8 6 $205.4 1 $39.5
Manioudakis
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Rudi W. Schadt 7 $690.8 None None None None
--------------------------------------------------------------------------------
* In millions.

As indicated above, each of the Portfolio Managers also manage other funds and
accounts. Potentially, at times, those responsibilities could conflict with the interests
of the Fund. That may occur whether the investment strategies of the other funds or
accounts are the same as, or different from, the Fund's investment objectives and
strategies. For example the Portfolio Managers may need to allocate investment
opportunities between the Fund and another fund or account having similar objectives or
strategies, or they may need to execute transactions for another fund or account that could
have a negative impact on the value of securities held by the Fund. Not all funds and
accounts advised by the Manager have the same management fee. If the management fee
structure of another fund or account is more advantageous to the Manager than the fee
structure of the Fund, the Manager could have an incentive to favor the other fund or
account. However, the Manager's compliance procedures and Code of Ethics recognize the
Manager's fiduciary obligations to treat all of its clients, including the Fund, fairly and
equitably, and are designed to preclude the Portfolio Managers from favoring one client
over another. It is possible, of course, that those compliance procedures and the Code of
Ethics may not always be adequate to do so. At various times, the Fund's Portfolio Managers
may manage other funds or accounts with investment objectives and strategies that are
similar to those of the Fund, or may manage funds or accounts with investment objectives
and strategies that are different from those of the Fund.

Compensation of the Portfolio Managers. The Fund's Portfolio Managers are employed
and compensated by the Manager, not the Fund. Under the Manager's compensation program for
its portfolio managers and portfolio analysts, their compensation is based primarily on the
investment performance results of the funds and accounts they manage, rather than on the
financial success of the Manager. This is intended to align the portfolio managers and
analysts' interests with the success of the funds and accounts and their shareholders. The
Manager's compensation structure is designed to attract and retain highly qualified
investment management professionals and to reward individual and team contributions toward
creating shareholder value. As of August 31, 2005, each Portfolio Managers' compensation
consisted of three elements: a base salary, an annual discretionary bonus and eligibility
to participate in long-term awards of options and appreciation rights in regard to the
common stock of the Manager's holding company parent. Senior portfolio managers may also be
eligible to participate in the Manager's deferred compensation plan.

To help the Manager attract and retain talent, the base pay component of each portfolio
manager is reviewed regularly to ensure that it reflects the performance of the individual,
is commensurate with the requirements of the particular portfolio, reflects any specific
competence or specialty of the individual manager, and is competitive with other comparable
positions. The annual discretionary bonus is determined by senior management of the Manager
and is based on a number of factors, including a fund's pre-tax performance for periods of
up to five years, measured against an appropriate Lipper benchmark selected by management.
The Lipper benchmark with respect to the Fund is Lipper - Balanced Target Maturity Funds.
Other factors considered include management quality (such as style consistency, risk
management, sector coverage, team leadership and coaching) and organizational development.
The Portfolio Managers' compensation is not based on the total value of the Fund's
portfolio assets, although the Fund's investment performance may increase those assets. The
compensation structure is also intended to be internally equitable and serve to reduce
potential conflicts of interest between the Fund and other funds and accounts managed by
the Portfolio Managers. The compensation structure of the other funds and accounts managed
by the Portfolio Managers is the same as the compensation structure of the Fund, described
above.

Ownership of Fund Shares. As of August 31, 2005, the Portfolio Managers did not
beneficially own any shares of the Funds.

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 will 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, in choosing brokers to execute portfolio
transactions for the Fund, the Manager may select brokers (other than affiliates) that
provide brokerage and/or research services to the Fund and/or the other accounts over which
the Manager or its affiliates have investment discretion. The commissions paid to those
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.

Rule 12b-1 under the Investment Company Act prohibits any fund from compensating a
broker or dealer for promoting or selling the fund's shares by (1) directing to that broker
or dealer any of the fund's portfolio transactions, or (2) directing any other remuneration
to that broker or dealer, such as commissions, mark-ups, mark downs or other fees from the
fund's portfolio transactions, that were effected by another broker or dealer (these latter
arrangements are considered to be a type of "step-out" transaction). In other words, a fund
and its investment adviser cannot use the fund's brokerage for the purpose of rewarding
broker-dealers for selling the fund's shares.

However, the Rule permits funds to effect brokerage transactions through firms that
also sell fund shares, provided that certain procedures are adopted to prevent a quid pro
quo with respect to portfolio brokerage allocations. As permitted by the Rule, the Manager
has adopted procedures (and the Fund's Board of Trustees has approved those procedures)
that permit the Fund to direct portfolio securities transactions to brokers or dealers that
also promote or sell shares of the Fund, subject to the "best execution" considerations
discussed above. Those procedures are designed to prevent: (1) the Manager's personnel who
effect the Fund's portfolio transactions from taking into account a broker's or dealer's
promotion or sales of the Fund shares when allocating the Fund's portfolio transactions,
and (2) the Fund, the Manager and the Distributor from entering into agreements or
understandings under which the Manager directs or is expected to direct the Fund's
brokerage directly, or through a "step-out" arrangement, to any broker or dealer in
consideration of that broker's or dealer's promotion or sale of the Fund's shares or the
shares of any of the other Oppenheimer funds.

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. 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. 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
commissions 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 Total Brokerage Commissions Paid by the
August 31: Fund(1)
---------------------------------------------------------------------
---------------------------------------------------------------------
2005 None (2)
---------------------------------------------------------------------
1. Amounts do not include spreads or commissions on principal transactions on a net
trade basis.
2. For the fiscal period from October 7, 2004 (commencement of operations) to August 31,
2005, the amount of transactions directed to brokers for research services
was $0 and amount of the commissions paid to broker-dealers for those
services was $0.

Distribution and Service Plans

The Distributor. Under its General Distributor's Agreement with the Fund, the Distributor
acted as the Fund's principal underwriter in the public offering of the Fund's classes of
shares. The Distributor bore 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 was 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 and the contingent deferred sales charges retained by the Distributor on the
redemption of shares during the Fund's most recent fiscal year ended August 31, 2005 are
shown in the tables below.

---------------------------------------------
Fiscal Aggregate Class A
Front-End Sales
Year Front-End Sales Charges
Ended Charges on Class Retained by
8/31: A Shares Distributor(1)
---------------------------------------------
---------------------------------------------
2005(2) $1,062,753 $228,623
---------------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent of the
Distributor.
2. For the fiscal period from October 7, 2004 (commencement of operations) to August 31,
2005.

--------------------------------------------------------------------------------
Fiscal Concessions on Concessions on Concessions on Concessions on
Year Class A Shares Class B Shares Class C Shares Class N Shares
Ended Advanced by Advanced by Advanced by Advanced by
8/31: Distributor(1) Distributor(1) Distributor(1) Distributor(1)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2005(2) None None None None
--------------------------------------------------------------------------------
1. The Distributor advanced concession payments to financial intermediaries for certain
sales of Class A shares and for sales of Class B and Class C shares from its own
resources at the time of sale.
2. For the fiscal period from October 7, 2004 (commencement of operations) to August 31,
2005.

--------------------------------------------------------------------------------
Fiscal Class A Class B Class C Class N
Contingent Contingent Contingent Contingent
Period Deferred Sales Deferred Sales Deferred Sales Deferred Sales
Ended Charges Charges Charges Charges
8/31: Retained by Retained by Retained by Retained by
Distributor Distributor Distributor Distributor
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2005(1) None $41,608 $6,863 $91
--------------------------------------------------------------------------------
1. For the fiscal period from October 7, 2004 (commencement of operations) to August 31,
2005.

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 Investment Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or servicing of the
shares of the particular class. Each plan has been approved by a vote of the Board of
Trustees, including a majority of the Independent Trustees(1), cast in person at a meeting
called for the purpose of voting on that plan.

Under the Plans, the Manager and the Distributor may make payments to affiliates. In
their sole discretion, they may also from time to time make substantial payments from their
own resources, which include the profits the Manager derives from the advisory fees it
receives from the Fund, to compensate brokers, dealers, financial institutions and other
intermediaries for providing distribution assistance and/or administrative services or that
otherwise promote sales of the Fund's shares. These payments, some of which may be
referred to as "revenue sharing," may relate to the Fund's inclusion on a financial
intermediary's preferred list of funds offered to its clients.

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 90 months
after purchase, 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 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 plans for a class, no payment will be made to any recipient in any period
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.

|X| Class A Service Plan Fees. Under the Class A service plan, the Distributor currently
uses the fees it receives from the Fund to pay brokers, dealers and other financial
institutions (they are referred to as "recipients") for personal services and account
maintenance services they provide for their customers who hold Class A shares. The services
include, among others, answering customer inquiries about the Fund, assisting in
establishing and maintaining accounts in the Fund, making the Fund's investment plans
available and providing other services at the request of the Fund or the Distributor. The
Class A service plan permits reimbursements to the Distributor at a rate of up to 0.25% of
average annual net assets of Class A shares. The Board has set the rate at that level. The
Distributor does not receive or retain the service fee on Class A shares in accounts for
which the Distributor has been listed as the broker-dealer of record. 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, except in the case of the special
arrangement described below, regarding grandfathered retirement accounts. The Distributor
makes payments to recipients periodically 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.

With respect to purchases of Class A shares subject to a contingent deferred sales
charge by certain retirement plans that purchased such shares prior to March 1, 2001
("grandfathered retirement accounts"), the Distributor currently intends to pay the service
fee to recipients in advance for the first year after the shares are purchased. During the
first year the shares are sold, the Distributor retains the service fee to reimburse itself
for the costs of distributing the shares. After the first year shares are outstanding, the
Distributor makes service fee payments to recipients periodically 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 A shares purchased by
grandfathered retirement accounts 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.

For the fiscal year ended August 31, 2005 payments under the Class A plan totaled
$9,051, of which $700 was retained by the Distributor under the arrangement described
above, and included $1,825 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 Distribution and Service Plan Fees. Under each plan,
distribution and service 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. Each plan provides for the Distributor to be compensated at a flat rate, whether
the Distributor's distribution expenses are more or less than the amounts paid by the Fund
under the plan during the period for which the fee is paid. The types of services that
recipients provide are similar to the services provided under the Class A service plan,
described above.

Each plan permits the Distributor to retain both the asset-based sales charges and
the service fees or to pay recipients the service fee on a periodic basis, without payment
in advance. However, the Distributor currently intends to pay the service fee to recipients
in advance for the first year after Class B, Class C and Class N shares are purchased.
After the first year Class B, Class C or Class N shares are outstanding, after their
purchase, the Distributor makes service fee payments periodically 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. Class B, Class C or Class N
shares may not be purchased by an investor directly from the Distributor without the
investor designating another registered broker-dealer. If the investor no longer has
another broker-dealer of record for an existing account, the Distributor is automatically
designated as the broker-dealer of record, but solely for the purpose of acting as the
investor's agent to purchase the shares. In those cases, the Distributor retains the
asset-based sales charge paid on Class B, Class C and Class N shares, but does not retain
any service fees as to the assets represented by that account.

The asset-based sales charge and service fees increase Class B and Class C expenses
by 1.00% and the asset-based sales charge and service fees increase Class N expenses by
0.50% of the net assets per year of the respective classes.

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
or Class N service fee and the asset-based sales charge to the dealer periodically in lieu
of paying the sales concession and service fee in advance at the time of purchase.

The asset-based sales charge 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 charge 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,
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 same or at a lesser 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.

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, Class C or
Class N 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.

-------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Period Ended August
31, 2005
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Total Amount Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Payments Retained by Expenses of Net Assets
Under Plan Distributor Under Plan of Class
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class B Plan $9,633 $157,692(1) $661,241 3.17%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C Plan $4,821 $158,338(2) $445 0.00%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class N Plan $244 $4,450(3) $11,380 0.79%
-------------------------------------------------------------------------------
1. Includes $0 paid to an affiliate of the Distributor's parent company.
2. Includes $188 paid to an affiliate of the Distributor's parent company.
3. Includes $13,887 paid to an affiliate of the Distributor's parent company.

All payments under the Class B, Class C and 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.

Payments to Fund Intermediaries

Financial intermediaries may receive various forms of compensation or reimbursement
from the Fund in the form of 12b-1 plan payments as described in the preceding section of
this Statement of Additional Information. They may also receive reallowance of commissions
from the Distributor, derived from sales charges paid by the clients of the financial
intermediary, also as described in this Statement of Additional Information. Additionally,
the Manager and/or the Distributor (including their affiliates) may make payments to
financial intermediaries in connection with their offering and selling shares of the Fund
and other Oppenheimer funds, providing marketing or promotional support, transaction
processing and/or administrative services. Among the financial intermediaries that may
receive these payments are brokers and dealers who sell and/or hold shares of the Fund,
banks (including bank trust departments), registered investment advisers, insurance
companies, retirement plan and qualified tuition program administrators, third party
administrators, and other institutions that have selling, servicing or similar arrangements
with the Manager or Distributor. The payments to intermediaries vary by the types of
product sold, the features of the Fund share class and the role played by the intermediary.

Possible types of payments to financial intermediaries include, without limitation,
those discussed below.

o Payments made by the Fund, or by an investor buying or selling shares of the Fund may
include:

o depending on the share class that the investor selects, contingent deferred sales
charges or initial front-end sales charges, all or a portion of which
front-end sales charges are payable by the Distributor to financial
intermediaries as sales commissions (see "About Your Account" in the
Prospectus);
o ongoing asset-based payments attributable to the share class selected, including fees
payable under the Fund's distribution and/or service plans adopted under Rule
12b-1 under the Investment Company Act, which are paid from the Fund's assets
and allocated to the class of shares to which the plan relates (see "About
the Fund -- Distribution and Service Plans" above);
o shareholder servicing payments for providing omnibus accounting, recordkeeping,
networking, sub-transfer agency or other administrative or shareholder
services, including retirement plan and 529 plan administrative services
fees, which are paid from the assets of a Fund as reimbursement to the
Manager or Distributor for expenses they incur on behalf of the Fund.

o Payments made by the Manager or Distributor out of their respective resources and
assets, which may include profits the Manager derives from investment advisory
fees paid by the Fund. These payments are made at the discretion of the Manager
and/or the Distributor. These payments, often referred to as "revenue sharing"
payments, may be in addition to the payments by the Fund listed above.

o These types of payments may reflect compensation for marketing support, support
provided in offering the Fund or other Oppenheimer funds through certain
trading platforms and programs, transaction processing or other services;
o The Manager and Distributor each may also pay other compensation to the extent the
payment is not prohibited by law or by any self-regulatory agency, such as
the NASD. Payments are made based on the guidelines established by the
Manager and Distributor, subject to applicable law.

These payments may provide an incentive to financial intermediaries to actively
market or promote the sale of shares of the Fund or other Oppenheimer funds, or to support
the marketing or promotional efforts of the Distributor in offering shares of the Fund or
other Oppenheimer funds. In addition, some types of payments may provide a financial
intermediary with an incentive to recommend the Fund or a particular share class. Financial
intermediaries may earn profits on these payments, since the amount of the payment may
exceed the cost of providing the service. Certain of these payments are subject to
limitations under applicable law. Financial intermediaries may categorize and disclose
these arrangements to their clients and to members of the public in a manner different from
the disclosures in the Fund's prospectus and this Statement of Additional Information. You
should ask your financial intermediary for information about any payments it receives from
the Fund, the Manager or the Distributor and any services it provides, as well as the fees
and commissions it charges.

Although brokers or dealers that sell Fund shares may also act as a broker or dealer
in connection with the execution of the purchase or sale of portfolio securities by the
Fund or other Oppenheimer funds, a financial intermediary's sales of shares of the Fund or
such other Oppenheimer funds is not a consideration for the Manager when choosing brokers
or dealers to effect portfolio transactions for the Fund or such other Oppenheimer funds.

Revenue sharing payments can pay for distribution-related or asset retention items
including, without limitation,

o transactional support, one-time charges for setting up access for the Fund or other
Oppenheimer funds on particular trading systems, and paying the intermediary's
networking fees;
o program support, such as expenses related to including the Oppenheimer funds in
retirement plans, college savings plans, fee-based advisory or wrap fee programs,
fund "supermarkets", bank or trust company products or insurance companies'
variable annuity or variable life insurance products;
o placement on the dealer's list of offered funds and providing representatives of the
Distributor with access to a financial intermediary's sales meetings, sales
representatives and management representatives.

Additionally, the Manager or Distributor may make payments for firm support, such as
business planning assistance, advertising, and educating a financial intermediary's sales
personnel about the Oppenheimer funds and shareholder financial planning needs.

For the year ended December 31, 2004, the following financial intermediaries that are
broker-dealers offering shares of the Oppenheimer funds, and/or their respective
affiliates, received revenue sharing or similar distribution-related payments from the
Manager or Distributor for marketing or program support:

ADVEST INC. AEGON
A.G. Edwards & Sons, Inc AIG Network
Allianz Life Insurance Company Allstate Life Insurance Company
Ameritas Life Insurance Corporation American Centurian Life Insurance
American Enterprise Life Insurance American Express Financial Advisors
Inc.
American Portfolios Annuity Investors Life
AXA Advisors Banc One Securities Corporation
Bank of New York Cadaret Grant & Co. Inc.
Charter One Securities Inc. Chase Investment Services
Citigroup Financial Network CitiStreet
Citizens Bank of Rhode Island CJM Planning Corp.
Columbus Life Insurance Company Commonwealth Financial Network
CUNA Brokerage Services Inc. CUSO Financial Services, L.P.
Federal Kemper First Allied Securities Inc
First Global Capital GE Financial Assurance
GlenBrook Life and Annuity Co. Great West Life & Annuity Co., Inc.
HD Vest Hewitt Associates
HSBC Brokerage (USA) Inc. ING Network
Jefferson Pilot Securities Corporation John Hancock Variable Life Insurance
Company
Kemper Life Assurance Company Legend Equities Corporation
Legg Mason Wood Walker, Incorporated Lincoln National Life Insurance
Company
Lincoln Financial Advisors Corporation Lincoln Investment Planning
Linsco/Private Ledger Corp. MassMutual Financial Group and
affiliates
McDonald Investments, Inc. Merrill Lynch & Co., Inc. and
affiliates
Metlife and affiliates Minnesota Life Insurance Company
Morgan Stanley DW Inc. NPH Network
Nationwide and affiliates New York Life Securities, LLC
PacLife Network Park Avenue Securities LLC
Planmember Securities Corporation Prime Capital Services, Inc.
Princor Financial Services Corporation Protective Life Insurance Co.
Provident Mutual Insurance Company Prudential Investment Management
Services LLC
Raymond James Financial Services, Inc. Raymond James & Associates, Inc.
RBC Dain Rauscher Inc. Securities America, Inc.
Security Benefit Life Insurance Company Signator Investments
Sun Life Insurance Company Suntrust Investment Services, Inc.
Tower Square Securities, Inc Travelers Life & Annuity Co., Inc.
UBS Financial Services Inc. Union Central Life Insurance Company
Wachovia Securities LLC Wells Fargo Investments, LLC

For the year ended December 31, 2004, the following firms, which in some cases are
broker-dealers, received payments from the Manager or Distributor for administrative or
other services provided (other than revenue sharing arrangements), as described above:

ABN AMRO ADP
Alliance Benefit Group AMVESCAP Retirement Plans
American Stock & Transfer Baden Retirement
BCG Benefit Administration Co., LLC
Benefit Administration, Inc. Benefit Plans Administrative Services
Benetech, Inc. BISYS Retirement Services
Boston Financial Data Services Ceridian
Circle Trust Company Citigroup
CitiStreet CPI
Daily Access.Com, Inc. Digital Retirement Solutions
Dyatech ERISA Administrative Services, Inc.
ExpertPlan.com FAScore
FBD Consulting Federated Investors
Fidelity Institutional First National Bank of Omaha
First Trust Corp. Franklin Templeton
Geller Group Gold K
Great West Financial Services Hartford Life Insurance Co.
Equities, Inc.
ICMA - RC Services In West Pension Mgmt
Independent Plan Coordinators Ingham Group
Interactive Retirement Systems, Ltd. Invesmart, Inc.
Kaufman & Goble Leggette & Co., Inc.
Manulife MassMutual Financial Group and
affiliates
Matrix Settlement & Clearance Services Mellon HR Solutions
Merrill Lynch & Co., Inc. Metavante
Metlife Securities Inc. MFS Investment Management
Mid Atlantic Capital Corp. Milliman USA
Morgan Stanley DW Inc. National City Bank
National Financial Services Corp. National Investors Services Corp.
Nationwide Investment Service Corp. New York Life Investment Management,
Inc.
Northwest Plan Services Pension Administration and Consulting
PFPC, Inc. PSMI Group
Putnam Fiduciary Trust Company Quads Trust Company
RSM McGladrey SAFECO
Charles Schwab & Co., Inc. Security Trust Company
Sentinel / National Life Standard Insurance Co
Stanley, Hunt, Dupree & Rhine State Street Bank & Trust Company
Suntrust Investment Services, Inc. Swerdlin & Co.
T. Rowe Price Brokerage Services, L.P. Taylor, Perky & Parker, LLC
The 401k Company The Investment Center, Inc.
Trusource Union Bank and Trust Co.
USI Consulting Group Vanguard Group
Web401K.com Wilmington Trust Company

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 of how total returns are calculated is set forth below. The
charts below show the Fund's performance as of the Fund's most recent fiscal year end. You
can obtain current performance information by calling the Fund's Transfer Agent at
1.800.225.5677 or by visiting the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

The Fund's illustrations of its performance data in advertisements must comply with
rules of the SEC. 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.

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 by 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"
in the formula below) (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 1.0% contingent deferred
sales charge is deducted for returns for the one-year period. For Class N shares, the 1.0%
contingent deferred sales charge is deducted for returns for the one-year and life-of-class
periods, as applicable.

o 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:

ERV - 1 = Average Annual Total
l/n Return
P

o Average Annual Total Return (After Taxes on Distributions). The "average annual total
return (after taxes on distributions)" of Class A shares is an average annual compounded
rate of return for each year in a specified number of years, adjusted to show the effect of
federal taxes (calculated using the highest individual marginal federal income tax rates in
effect on any reinvestment date) on any distributions made by the Fund during the specified
period. 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 value ("ATVD" in the formula) of that investment, after
taking into account the effect of taxes on Fund distributions, but not on the redemption of
Fund shares, according to the following formula:

- 1 = Average Annual Total Return (After Taxes on
ATVD l/n Distributions)
P

o Average Annual Total Return (After Taxes on Distributions and Redemptions). The
"average annual total return (after taxes on distributions and redemptions)" of Class A
shares is an average annual compounded rate of return for each year in a specified number
of years, adjusted to show the effect of federal taxes (calculated using the highest
individual marginal federal income tax rates in effect on any reinvestment date) on any
distributions made by the Fund during the specified period and the effect of capital gains
taxes or capital loss tax benefits (each calculated using the highest federal individual
capital gains tax rate in effect on the redemption date) resulting from the redemption of
the shares at the end of the period. 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 value ("ATVDR" in the formula) of that
investment, after taking into account the effect of taxes on Fund distributions and on the
redemption of Fund shares, according to the following formula:

ATVDR - 1 = Average Annual Total Return (After Taxes on Distributions
l/n and Redemptions)
P

o 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

o 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 August 31, 2005
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Returns
(10 Years or
life-of-class, if
Shares less)(1)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
1-Year 5-Year
(or life of class if
less)(1)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
After Without After Without After Without
Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A(1) -4.09 1.76 N/A N/A N/A N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B(1) -3.97 1.03 N/A N/A N/A N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C(1) 0.11 1.11 N/A N/A N/A N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N(1) 0.57 1.57 N/A N/A N/A N/A
---------------------------------------------------------------------------------
1. Inception of Class A, Class B, Class C and Class N: October 7, 2004.

----------------------------------------------------------------
Average Annual Total Returns for Class A Shares (After Sales
Charge)
For the Periods Ended August 31, 2005
----------------------------------------------------------------
----------------------------------------------------------------
1-Year(1) 5-Year
(or life of class
if less)(1)
----------------------------------------------------------------
----------------------------------------------------------------
After Taxes on Distributions -4.14 N/A
----------------------------------------------------------------
----------------------------------------------------------------
After Taxes on -2.66 N/A
Distributions and
Redemption of Fund Shares
----------------------------------------------------------------
1. Inception of Class A shares: October 7, 2004.

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. From time to time the Fund may publish the star rating of the
performance of its classes of shares by Morningstar, Inc., an independent mutual fund
monitoring service. Morningstar rates mutual funds in their specialized market sector. The
Fund is rated among domestic hybrid funds.

Morningstar proprietary star ratings reflect historical risk-adjusted total
investment return. For each fund with at least a three-year history, Morningstar calculates
a Morningstar Rating(TM)based on a Morningstar Risk-Adjusted Return measure that accounts for
variation in a fund's monthly performance (including the effects of sales charges, loads,
and redemption fees), placing more emphasis on downward variations and rewarding consistent
performance. The top 10% of funds in each category 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. (Each share class is counted as a fraction of one fund within this scale
and rated separately, which may cause slight variations in the distribution percentages.)
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 Rating metrics.

|X| Performance Rankings and Comparisons by Other Entities and Publications. From
time to time the Fund may include in its advertisements and sales literature performance
information about the Fund cited in newspapers and other periodicals such as The New York
Times, The Wall Street Journal, Barron's, or similar publications. That information may
include performance quotations from other sources, including Lipper and Morningstar. The
performance of the Fund's classes of shares may be compared in publications to the
performance
of various market indices or other investments, and averages, performance rankings or other
benchmarks prepared by recognized mutual fund statistical services.

Investors may also wish to compare the returns on the Fund's share classes to the
return on fixed-income investments available from banks and thrift institutions. Those
include certificates of deposit, ordinary interest-paying checking and savings accounts,
and other forms of fixed or variable time deposits, and various other instruments such as
Treasury bills. However, the Fund's returns and share price are not guaranteed or insured
by the FDIC or any other agency and will fluctuate daily, while bank depository obligations
may be insured by the FDIC and may provide fixed rates of return. Repayment of principal
and payment of interest on Treasury securities is backed by the full faith and credit of
the U.S. government.

From time to time, the Fund may publish rankings or ratings of the Manager or
Transfer Agent, and of the investor services provided by them to shareholders of the
Oppenheimer funds, other than performance rankings of the Oppenheimer funds themselves.
Those ratings or rankings of shareholder and investor services by third parties may include
comparisons of their services to those provided by other mutual fund families selected by
the rating or ranking services. They may be based upon the opinions of the rating or
ranking service itself, using its research or judgment, or based upon surveys of investors,
brokers, shareholders or others.

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 Oppenheimer 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 Oppenheimer 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 economies 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.

About Your Account

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.

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, Class C or Class N 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 permitted an investor to choose the
method of purchasing shares that was more appropriate for the investor. That may have
depended on the amount of the purchase, the length of time the investor expected 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
sold 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.

|X| Class A Shares Subject to a Contingent Deferred Sales Charge. For purchases of
Class A shares at net asset value whether or not 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 Oppenheimer funds are also offered as
investment options under a special arrangement with the Distributor, if the purchase occurs
more than 30 days after the Oppenheimer funds are added as an investment option under that
plan. Additionally, that concession will not be paid on purchases of Class A shares by a
retirement plan made with the redemption proceeds of Class N shares of one or more
Oppenheimer 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
90 months from the date of purchase 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 90 months.

|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 values 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).

Fund Account Fees. As stated in the Prospectus, a $12 annual "Minimum Balance Fee" is
assessed on each Fund account with a share balance valued under $500. The Minimum Balance
Fee is automatically deducted from each such Fund account in September.

Listed below are certain cases in which the Fund has elected, in its discretion, not
to assess the Fund Account Fees. These exceptions are subject to change:
o A fund account whose shares were acquired after September 30th of the prior year;
o A fund account that has a balance below $500 due to the automatic conversion of
shares from Class B to Class A shares. However, once all Class B shares held in
the account have been converted to Class A shares the new account balance may
become subject to the Minimum Balance Fee;
o Accounts of shareholders who elect to access their account documents electronically
via eDoc Direct;
o A fund account that has only certificated shares and, has a balance below $500 and is
being escheated;
o Accounts of shareholders that are held by broker-dealers under the NSCC Fund/SERV
system;
o Accounts held under the Oppenheimer Legacy Program and/or holding certain Oppenheimer
Variable Account Funds;
o Omnibus accounts holding shares pursuant to the Pinnacle, Ascender, Custom Plus,
Recordkeeper Pro and Pension Alliance Retirement Plan programs; and
o A fund account that falls below the $500 minimum solely due to market fluctuations
within the 12-month period preceding the date the fee is deducted.

To access account documents electronically via eDocs Direct, please visit the Service
Center on our website at www.oppenheimerfunds.com or call 1.888.470.0862 for instructions.

The Fund reserves the authority to modify Fund Account Fees in its discretion.

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 (the "NYSE") on each day that the NYSE 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 NYSE normally closes at 4:00 p.m., Eastern 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). All references to time in this Statement of Additional
Information mean "Eastern time." The NYSE's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. It may also close on other days.

Dealers other than NYSE members may conduct trading in certain securities on days on
which the NYSE is closed (including weekends and 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, with respect to certain
securities held by the Underlying Fund, trading on European and Asian stock exchanges and
over-the-counter markets normally is completed before the close of the NYSE.

Changes in the values of securities held by the Underlying Fund and 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 NYSE, will not be reflected in the Underlying
Fund's calculation of its net asset values that day unless the Manager determines that the
event is likely to effect a material change in the value of the security. The Manager, or
an internal valuation committee established by the Manager, as applicable, may establish a
valuation, under procedures established by the Board and 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 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).

How to Sell Shares

The information below supplements the terms and conditions for redeeming shares set forth
in the Prospectus.

Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of redemption
proceeds may be delayed if the Fund's custodian bank is not open for business on a day when
the Fund would normally authorize the wire to be made, which is usually the Fund's next
regular business day following the redemption. In those circumstances, the wire will not be
transmitted until the next bank business day on which the Fund is open for business. No
dividends will be paid on the proceeds of redeemed shares awaiting transfer by Federal
Funds wire.

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
if the reinvestment occurs during the Post-Warranty Period or, if the reinvestment occurs
during the Warranty Period, in any of the other Oppenheimer funds into which shares of the
Fund are exchangeable as described in "How to Exchange Shares" below. Reinvestment will be
at the net asset value next computed after the Transfer Agent receives the reinvestment
order. The shareholder must ask the Transfer Agent for that privilege at the time of
reinvestment. This privilege does not apply to Class C and 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 Oppenheimer funds within 90 days of payment of the
sales charge, the shareholder's basis in the shares of the Fund that were redeemed may not
include the amount of the sales charge paid. That would reduce the loss or increase the
gain recognized from the redemption. However, in that case the sales charge would be added
to the basis of the shares acquired by the reinvestment of the redemption proceeds.

Payments "In Kind." The Prospectus states that payment for shares tendered for redemption
is ordinarily made in cash. However, 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 and 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, SEP-IRAs, SIMPLE 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 plan sponsors) 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 NYSE
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 NYSE closes.
Normally, the NYSE 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.

How to Exchange Shares

As stated in the Prospectus, shares of a particular class of Oppenheimer funds having more
than one class of shares may be exchanged only for shares of the same class of other
Oppenheimer funds. Shares of Oppenheimer funds that have a single class without a class
designation are deemed "Class A" shares for this purpose. You can obtain a current list
showing which funds offer which classes of shares by calling the Distributor.

o All of the Oppenheimer funds currently offer Class A, B, C, N and Y shares with the
following exceptions:

The following funds only offer Class A shares:
Centennial California Tax Exempt Trust Centennial New York Tax Exempt
Trust
Centennial Government Trust Centennial Tax Exempt Trust
Centennial Money Market Trust

The following funds do not offer Class N shares:
Limited Term New York Municipal Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer AMT-Free Municipals Oppenheimer Principal Protected Main
Street Fund II
Oppenheimer AMT-Free New York Oppenheimer Pennsylvania Municipal
Municipals Fund
Oppenheimer California Municipal Fund Oppenheimer Rochester National
Municipals
Oppenheimer International Value Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Limited Term California Rochester Fund Municipals
Municipal Fund
Oppenheimer Limited Term Municipal
Fund
Oppenheimer Money Market Fund, Inc.

The following funds do not offer Class Y shares:
Limited Term New York Municipal Fund Oppenheimer Limited Term California
Municipal Fund
Oppenheimer AMT-Free Municipals Oppenheimer Limited Term Municipal Fund
Oppenheimer AMT-Free New York Municipals Oppenheimer New Jersey Municipal Fund
Oppenheimer Balanced Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer California Municipal Fund Oppenheimer Principal Protected Main
Street Fund
Oppenheimer Capital Income Fund Oppenheimer Principal Protected Main
Street Fund II
Oppenheimer Cash Reserves Oppenheimer Principal Protected Main
Street Fund III
Oppenheimer Champion Income Fund Oppenheimer Quest Capital Value Fund,
Inc.
Oppenheimer Convertible Securities Fund Oppenheimer Quest International Value
Fund, Inc.
Oppenheimer Disciplined Allocation Fund Oppenheimer Rochester National Municipals
Oppenheimer Dividend Growth Fund Oppenheimer Total Return Bond Fund
Oppenheimer Gold & Special Minerals Fund

o Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y shares.
o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for shares of any
other fund.
o Class B and Class C shares of Oppenheimer Cash Reserves are generally available only
by exchange from the same class of shares of other Oppenheimer funds or through
OppenheimerFunds-sponsored 401(k) plans.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged only for
Class A shares of other Oppenheimer funds. They may not be acquired by exchange of
shares of any class of any other Oppenheimer funds except Class A shares of
Oppenheimer Money Market Fund, Inc. or Oppenheimer Cash Reserves acquired by exchange
of Class M shares.
o Class A shares of Oppenheimer funds may be exchanged at net asset value for shares of
any money market fund offered by the Distributor. Shares of any money market fund
purchased without a sales charge may be exchanged for shares of Oppenheimer funds
offered with a sales charge upon payment of the sales charge. They may also be used
to purchase shares of Oppenheimer funds subject to an early withdrawal charge or
contingent deferred sales charge.
o Shares of the Fund acquired by reinvestment of dividends or distributions from any of
the other Oppenheimer funds or from any unit investment trust for which reinvestment
arrangements have been made with the Distributor may be exchanged at net asset value
for shares of any of the Oppenheimer funds.
o Shares of Oppenheimer Principal Protected Main Street Fund may be exchanged at net
asset value for shares of any of the Oppenheimer funds. However, shareholders are not
permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
Principal Protected Main Street Fund until after the expiration of the warranty
period (8/5/2010).
o Shares of Oppenheimer Principal Protected Main Street Fund II may be exchanged at net
asset value for shares of any of the Oppenheimer funds. However, shareholders are not
permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
Principal Protected Main Street Fund II until after the expiration of the warranty
period (3/3/2011).
o Shares of Oppenheimer Principal Protected Main Street Fund III may be exchanged at
net asset value for shares of any of the Oppenheimer funds. However, shareholders are
not permitted to exchange shares of other Oppenheimer funds for shares of Oppenheimer
Principal Protected Main Street Fund III until after the expiration of the warranty
period (12/16/2011).

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, with the following exceptions:

o When Class A shares of any Oppenheimer fund (other than Rochester National Municipals
and Rochester Fund Municipals) acquired by exchange of Class A shares of any Oppenheimer
fund purchased subject to a Class A contingent deferred sales charge are redeemed within 18
months measured from the beginning 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.

o When Class A shares of Rochester National Municipals and Rochester Fund Municipals
acquired by exchange of Class A shares of any Oppenheimer fund purchased subject to a Class
A contingent deferred sales charge are redeemed within 24 months of the beginning 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.

o If any Class A shares of another Oppenheimer fund that are exchanged for Class A
shares of Oppenheimer Senior Floating Rate Fund are subject to the Class A contingent
deferred sales charge of the other Oppenheimer 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 Oppenheimer Senior Floating Rate Fund acquired in the exchange. The Class A
shares of Oppenheimer Senior Floating Rate Fund acquired in that exchange will be subject
to the Class A Early Withdrawal Charge of Oppenheimer Senior Floating Rate Fund if they are
repurchased before the expiration of the holding period.

o When Class A shares of Oppenheimer Cash Reserves and Oppenheimer Money Market Fund,
Inc. acquired by exchange of Class A shares of any Oppenheimer fund purchased subject to a
Class A contingent deferred sales charge are redeemed within the Class A holding period of
the fund from which the shares were exchanged, the Class A contingent deferred sales charge
of the fund from which the shares were exchanged is imposed on the redeemed shares.

o Except with respect to the Class B shares described in the next two paragraphs, the
contingent deferred sales charge is imposed on Class B shares acquired by exchange if they
are redeemed within six years of the initial purchase of the exchanged Class B shares.

o With respect to Class B shares of Oppenheimer Limited Term California Municipal Fund,
Oppenheimer Limited-Term Government Fund, Oppenheimer Limited Term Municipal Fund, Limited
Term New York Municipal Fund and Oppenheimer Senior Floating Rate Fund, the Class B
contingent deferred sales charge is imposed on the acquired shares if they are redeemed
within five years of the initial purchase of the exchanged Class B shares.

o With respect to Class B shares of Oppenheimer Cash Reserves that were acquired
through the exchange of Class B shares initially purchased in the Oppenheimer Capital
Preservation Fund, the Class B contingent deferred sales charge is imposed on the acquired
shares if they are redeemed within five years of that initial purchase.

o With respect to Class C 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.

o 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 Oppenheimer 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 Oppenheimer 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 Oppenheimer fund.

o When Class B, Class C or Class N 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, Class C or Class N 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.

|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.

Processing Exchange Requests. Shares to be exchanged are redeemed on the regular
business day the Transfer Agent receives an exchange request in proper form (the
"Redemption Date"). Normally, shares of the fund to be acquired are purchased on the
Redemption Date, but such purchases may be delayed by either fund up to five business days
if it determines that it would be disadvantaged by an immediate transfer of the redemption
proceeds. The Fund reserves the right, in its discretion, to refuse any exchange request
that may disadvantage it. For example, if the receipt of multiple exchange requests from a
dealer might require the disposition of portfolio securities at a time or at a price that
might be disadvantageous to the Fund, the Fund may refuse the request.

When you exchange some or all of your shares from one fund to another, any special
account feature such as an Asset Builder Plan or Automatic Withdrawal Plan, will be
switched to the new fund account unless you tell the Transfer Agent not to do so. However,
special redemption and exchange features such as Automatic Exchange Plans and Automatic
Withdrawal Plans cannot be switched to an account in Oppenheimer Senior Floating Rate Fund.

In connection with any exchange request, the number of shares exchanged may be less
than the number requested if the exchange or the number requested would include shares
subject to a restriction cited in the Prospectus or this Statement of Additional
Information, or would include shares covered by a share certificate that is not tendered
with the request. In those cases, only the shares available for exchange without
restriction will be exchanged.

The different Oppenheimer funds available for exchange have different investment
objectives, policies and risks. A shareholder should assure that the fund selected is
appropriate for his or her investment and should be aware of the tax consequences of an
exchange. For federal income tax purposes, an exchange transaction is treated as a
redemption of shares of one fund and a purchase of shares of another. "Reinvestment
Privilege," above, discusses some of the tax consequences of reinvestment of redemption
proceeds in such cases. The Fund, the Distributor, and the Transfer Agent are unable to
provide investment, tax or legal advice to a shareholder in connection with an exchange
request or any other investment transaction.

Dividends, Capital Gains and Taxes

Dividends and Distributions. 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 Oppenheimer Money Market Fund, Inc. Reinvestment will be made as
promptly as possible after the return of such checks to the Transfer Agent, to enable the
investor to earn a return on otherwise idle funds. Unclaimed accounts may be subject to
state escheatment laws, and the Fund and the Transfer Agent will not be liable to
shareholders or their representatives for compliance with those laws in good faith.

Tax Status of the Fund's Dividends, 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.

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 12 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 (including receivables),
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.

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.

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.

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 a long-term capital gain and will be properly identified in
reports sent to shareholders in January of each year. Such treatment will apply no 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, the
Fund will provide to shareholders of record on the last day of its taxable year information
regarding their pro rata share of the gain and tax paid. 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 28% of ordinary income
dividends, capital gains distributions and the proceeds of the redemption of shares, paid
to any shareholder (1) who has failed to provide a correct taxpayer identification number
or to properly certify that number when required, (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). Any tax withheld by the Fund is remitted
by the Fund to the U.S. Treasury and all income and any tax withheld is identified in
reports mailed to shareholders in January of each year with a copy sent to the IRS.

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.

Foreign Shareholders. Under U.S. tax law, taxation of a shareholder who is a foreign person
(to include, but not limited to, a nonresident alien individual, a foreign trust, a foreign
estate, a foreign corporation, or a foreign partnership) primarily depends on whether the
foreign person's income from the Fund is effectively connected with the conduct of a U.S.
trade or business. Typically, ordinary income dividends paid from a mutual fund are not
considered "effectively connected" income.

Ordinary income dividends that are paid by the Fund (and are deemed not "effectively
connected income") to foreign persons will be subject to a U.S. tax withheld by the Fund at
a rate of 30%, provided the Fund obtains a properly completed and signed Certificate of
Foreign Status. The tax rate may be reduced if the foreign person's country of residence
has a tax treaty with the U.S. allowing for a reduced tax rate on ordinary income dividends
paid by the Fund. Any tax withheld by the Fund is remitted by the Fund to the U.S. Treasury
and all income and any tax withheld is identified in reports mailed to shareholders in
March of each year with a copy sent to the IRS.

If the ordinary income dividends from the Fund are effectively connected with the
conduct of a U.S. trade or business, then the foreign person may claim an exemption from
the U.S. tax described above provided the Fund obtains a properly completed and signed
Certificate of Foreign Status. If the foreign person fails to provide a certification of
his/her foreign status, the Fund will be required to withhold U.S. tax at a rate of 28% on
ordinary income dividends, capital gains distributions and the proceeds of the redemption
of shares, paid to any foreign person. Any tax withheld by the Fund is remitted by the Fund
to the U.S. Treasury and all income and any tax withheld is identified in reports mailed to
shareholders in January of each year with a copy sent to the IRS.

The tax consequences to foreign persons 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 advisors or the U.S. Internal Revenue Service with
respect to the particular tax consequences to them of an investment in the Fund, including
the applicability of the U.S. withholding taxes described above.

Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to reinvest all
dividends and/or capital gains distributions in shares of the same class of any of the
other Oppenheimer funds listed above. Reinvestment will be made without sales charge at the
net asset value per share in effect at the close of business on the payable date of the
dividend or distribution. However, such reinvestment will not be protected by the Financial
Warranty and will result in a reduction of the shareholder's Warranty Amount. To elect this
option, the shareholder must notify the Transfer Agent in writing and must have an existing
account in the fund selected for reinvestment. Otherwise the shareholder first must obtain
a prospectus for that fund and an application from the Distributor to establish an account.
Dividends and/or distributions from shares of certain other Oppenheimer funds may be
invested in shares of this Fund on the same basis.

Additional Information About the Fund

The Distributor. The Fund's shares were sold through dealers, brokers and other financial
institutions that have a sales agreement with OppenheimerFunds Distributor, Inc., a
subsidiary of the Manager that acts as the Fund's Distributor. The Distributor also
distributes shares of the other Oppenheimer funds and is sub-distributor for funds managed
by a subsidiary of the Manager.

The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is a division of
the Manager. It is responsible for maintaining the Fund's shareholder registry and
shareholder accounting records, and for paying dividends and distributions to shareholders.
It also handles shareholder servicing and administrative functions. It serves as the
Transfer Agent for an annual per account fee. It also acts as shareholder servicing agent
for the other Oppenheimer funds. Shareholders should direct inquiries about their accounts
to the Transfer Agent at the address and toll-free numbers shown on the back cover.

The Warranty Provider. Merrill Lynch Bank USA, located at 15 West South Temple Square,
Suite 300 Salt Lake City, Utah 84101, has entered into the Warranty Agreement with the
Fund. Merrill Lynch Bank USA is a wholly-owned subsidiary of Merrill Lynch & Co., Inc. and
its principal business is to engage in banking activities. The 2003 audited financial
statements of Merrill Lynch Bank USA and its March 26, 2004 and June 26, 2004, and
quarterly unaudited financial statements are incorporated herein by reference. You may
request a copy of the Merrill Lynch Bank USA financial statements, free of charge, by
calling the Transfer Agent at the toll-free number listed on the back cover of this
Statement of Additional Information.

The Custodian. JPMorgan Chase Bank 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 is 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 Registered Public Accounting Firm. Deloitte & Touche LLP serves as the
independent registered public accounting firm for the Fund. Deloitte & Touche LLP audits
the Fund's financial statements and performs other related audit services. Deloitte &
Touche LLP also acts as the independent registered public accounting firm for certain other
funds advised by the Manager and its affiliates. Audit and non-audit services provided by
Deloitte & Touche LLP to the Fund must be pre-approved by the Audit Committee. Deloitte &
Touche LLP are the independent auditors of MLBUSA

Financial Statements. The initial Statement of Assets and Liabilities for the Fund and the
Opinion of Independent Registered Public Accounting Firm follows. The audited financial
statements for the Oppenheimer Main Street Fund (the "Underlying Fund") are incorporated in
this Statement of Additional Information by reference to the August 31, 2003 annual report
to shareholders of the Underlying Fund and the unaudited financial statements for the
Underlying Fund are incorporated in this Statement of Additional Information by reference
to the February 29, 2004 semi-annual report to shareholders of the Underlying Fund. You may
request a copy of that annual report at no charge by calling the toll-free number listed on
the back cover of this Statement of Additional Information during normal business hours on
any business day.

A-1
Appendix A

Industry Classifications

Aerospace & Defense Household Products
Air Freight & Couriers Industrial Conglomerates
Airlines Insurance
Auto Components Internet & Catalog Retail
Automobiles Internet Software & Services
Beverages IT Services
Biotechnology Leisure Equipment & Products
Building Products Machinery
Chemicals Marine
Consumer Finance Media
Commercial Banks Metals & Mining
Commercial Services & Supplies Multiline Retail
Communications Equipment Multi-Utilities
Computers & Peripherals Office Electronics
Construction & Engineering Oil & Gas
Construction Materials Paper & Forest Products
Containers & Packaging Personal Products
Distributors Pharmaceuticals
Diversified Financial Services Real Estate
Diversified Telecommunication Road & Rail
Services
Electric Utilities Semiconductors and Semiconductor
Equipment
Electrical Equipment Software
Electronic Equipment & Instruments Specialty Retail
Energy Equipment & Services Textiles, Apparel & Luxury Goods
Food & Staples Retailing Thrifts & Mortgage Finance
Food Products Tobacco
Gas Utilities Trading Companies & Distributors
Health Care Equipment & Supplies Transportation Infrastructure
Health Care Providers & Services Water Utilities
Hotels Restaurants & Leisure Wireless Telecommunication Services
Household Durables

B-11
Appendix B

OppenheimerFunds Special Sales Charge Arrangements and Waivers

Shares of the Fund were sold during the Offering Period and cannot be purchased during the
Warranty Period.

In certain cases, the initial sales charge that applies to purchases of Class A shares(1)
of the Oppenheimer funds or the contingent deferred sales charge that may apply to Class A,
Class B or Class C shares may be waived.(2) That is because of the economies of sales
efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this document as
the "Distributor"), or by dealers or other financial institutions that offer those shares
to certain classes of investors. Not all waivers apply to all funds.

For the purposes of some of the waivers described below and in the Prospectus and Statement
of Additional Information of the applicable Oppenheimer funds, the term "Retirement Plan"
refers to the following types of plans:
1) plans created or qualified under Sections 401(a) or 401(k) of the Internal
Revenue Code,
2) non-qualified deferred compensation plans,
3) employee benefit plans(3)
4) Group Retirement Plans(4)
5) 403(b)(7) custodial plan accounts
6) Individual Retirement Accounts ("IRAs"), including traditional IRAs, Roth IRAs,
SEP-IRAs, SARSEPs or SIMPLE plans

The interpretation of these provisions as to the applicability of a special arrangement or
waiver in a particular case is in the sole discretion of the Distributor or the transfer
agent (referred to in this document as the "Transfer Agent") of the particular Oppenheimer
fund. These waivers and special arrangements may be amended or terminated at any time by a
particular fund, the Distributor, and/or OppenheimerFunds, Inc. (referred to in this
document as the "Manager").

Waivers that apply at the time shares are redeemed must be requested by the shareholder
and/or dealer in the redemption request.
I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
--------------------------------------------------------------------------------------------

Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial Sales
Charge but May Be Subject to the Class A Contingent Deferred Sales Charge (unless a waiver
applies).

There is no initial sales charge on purchases of Class A shares of any of the
Oppenheimer funds in the cases listed below. However, these purchases may be subject to the
Class A contingent deferred sales charge if redeemed within 18 months (24 months in the
case of Oppenheimer 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."(5) 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 IRA 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 IRA, if the purchases are made:
1) through a broker, dealer, bank or registered investment adviser that has made
special arrangements with the Distributor for those purchases, or
2) by a direct rollover of a distribution from a qualified Retirement Plan if the
administrator of that Plan has made special arrangements with the Distributor
for those purchases.
|_| Purchases of Class A shares by Retirement Plans that have any of the following
record-keeping arrangements:
1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc.
("Merrill Lynch") on a daily valuation basis for the Retirement Plan. On the
date the plan sponsor signs the record-keeping service agreement with Merrill
Lynch, the Plan must have $3 million or more of its assets invested in (a)
mutual funds, other than those advised or managed by Merrill Lynch Investment
Management, L.P. ("MLIM"), that are made available under a Service Agreement
between Merrill Lynch and the mutual fund's principal underwriter or
distributor, and (b) funds advised or managed by 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 Merrill Lynch. On the date the plan
sponsor signs the record keeping service agreement with Merrill Lynch, the Plan
must have $3 million or more of its assets (excluding assets invested in money
market funds) invested in Applicable Investments.
3) The record keeping for a Retirement Plan is handled under a service agreement
with Merrill Lynch and on the date the plan sponsor signs that agreement, the
Plan has 500 or more eligible employees (as determined by the Merrill Lynch
plan conversion manager).
II. Waivers of Class A Sales Charges of Oppenheimer Funds
--------------------------------------------------------------------------------------------

A. Waivers of Initial and Contingent Deferred Sales Charges for Certain Purchasers.

Class A shares purchased by the following investors are not subject to any Class A sales
charges (and no 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 Oppenheimer Capital (or its successor) is the investment advisor
(the Distributor must be advised of this arrangement) and persons who are
directors or trustees of the company or trust which is the beneficial owner of
such accounts.
|_| A unit investment trust that has entered into an appropriate agreement with the
Distributor.
|_| Dealers, brokers, banks, or registered investment advisers that have entered into an
agreement with the Distributor to sell shares to defined contribution employee
retirement plans for which the dealer, broker or investment adviser provides
administration services.
|_| Retirement Plans and deferred compensation plans and trusts used to fund those plans
(including, for example, plans qualified or created under sections 401(a), 401(k),
403(b) or 457 of the Internal Revenue Code), in each case if those purchases are
made through a broker, agent or other financial intermediary that has made special
arrangements with the Distributor for those purchases.
|_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors) whose
Class B or Class C shares of a Former Quest for Value Fund were exchanged for
Class A shares of that Fund due to the termination of the Class B and Class C
TRAC-2000 program on November 24, 1995.
|_| A qualified Retirement Plan that had agreed with the former Quest for Value Advisors
to purchase shares of any of the Former Quest for Value Funds at net asset value,
with such shares to be held through DCXchange, a sub-transfer agency mutual fund
clearinghouse, if that arrangement was consummated and share purchases commenced
by December 31, 1996.
|_| Effective October 1, 2005, taxable accounts established with the proceeds of Required
Minimum Distributions from Retirement Plans.

B. Waivers of the Class A Initial and Contingent Deferred Sales Charges in Certain
Transactions.

1. 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 Oppenheimer funds or unit investment trusts for which
reinvestment arrangements have been made with the Distributor.
|_| Shares purchased by certain Retirement Plans that are part of a retirement plan or
platform offered by banks, broker-dealers, financial advisors or insurance
companies, or serviced by recordkeepers.
|_| 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.
|_| Shares purchased in amounts of less than $5.

2. Class A shares issued and purchased in the following transactions are not subject to
sales charges (a dealer concession at the annual rate of 0.25% is paid by the
Distributor on purchases made within the first 6 months of plan establishment):
|_| Retirement Plans that have $5 million or more in plan assets.
|_| Retirement Plans with a single plan sponsor that have $5 million or more in aggregate
assets invested in Oppenheimer funds.

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.(6)
5) Under a Qualified Domestic Relations Order, as defined in the Internal Revenue
Code, or, in the case of an IRA, a divorce or separation agreement described in
Section 71(b) of the Internal Revenue Code.
6) To meet the minimum distribution requirements of the Internal Revenue Code.
7) To make "substantially equal periodic payments" as described in Section 72(t)
of the Internal Revenue Code.
8) For loans to participants or beneficiaries.
9) Separation from service.(7)
10) Participant-directed redemptions to purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the Manager) if
the plan has made special arrangements with the Distributor.
11) Plan termination or "in-service distributions," if the redemption
proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.
|_| For distributions from 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 Oppenheimer 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. 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.
|_| The contingent deferred sales charges are generally not waived following the death or
disability of a grantor or trustee for a trust account. The contingent deferred
sales charges will only be waived in the limited case of the death of the 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 (as defined in the Internal Revenue Code).
|_| Distributions from accounts for which the broker-dealer of record has entered into a
special agreement with the Distributor allowing this waiver.
|_| Redemptions of Class B shares held by Retirement Plans whose records are maintained
on a daily valuation basis by Merrill Lynch or an independent record keeper under
a contract with Merrill Lynch.
|_| Redemptions of Class C shares of Oppenheimer U.S. Government Trust from accounts of
clients of financial institutions that have entered into a special arrangement
with the Distributor for this purpose.
|_| Redemptions of Class C shares of an Oppenheimer fund in amounts of $1 million or more
requested in writing by a Retirement Plan sponsor and submitted more than 12
months after the Retirement Plan's first purchase of Class C shares, if the
redemption proceeds are invested to purchase Class N shares of one or more
Oppenheimer funds.
|_| Distributions(8) from Retirement Plans or other employee benefit plans for any of the
following purposes:
1) Following the death or disability (as defined in the Internal Revenue Code) of
the participant or beneficiary. The death or disability must occur after the
participant's account was established in an Oppenheimer fund.
2) To return excess contributions made to a participant's account.
3) To return contributions made due to a mistake of fact.
4) To make hardship withdrawals, as defined in the plan.(9)
5) To make distributions required under a Qualified Domestic Relations Order or,
in the case of an IRA, a divorce or separation agreement described in Section
71(b) of the Internal Revenue Code.
6) To meet the minimum distribution requirements of the Internal Revenue Code.
7) To make "substantially equal periodic payments" as described in Section 72(t)
of the Internal Revenue Code.
8) For loans to participants or beneficiaries.(10)
9) On account of the participant's separation from service.(11)
10) Participant-directed redemptions to purchase shares of a mutual fund
(other than a fund managed by the Manager or a subsidiary of the Manager)
offered as an investment option in a Retirement Plan if the plan has made
special arrangements with the Distributor.
11) Distributions made on account of a plan termination or "in-service"
distributions, if the redemption proceeds are rolled over directly to an
OppenheimerFunds-sponsored IRA.
12) 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 Oppenheimer Funds Who
Were Shareholders of Former Quest for Value Funds
--------------------------------------------------------------------------------------------

The initial and contingent deferred sales charge rates and waivers for Class A, Class B and
Class C shares described in the Prospectus or Statement of Additional Information of the
Oppenheimer funds are modified as described below for certain persons who were shareholders
of the former Quest for Value Funds. To be eligible, those persons must have been
shareholders on November 24, 1995, when OppenheimerFunds, Inc. became the investment
advisor to those former Quest for Value Funds. Those funds include:
Oppenheimer Quest Value Fund, Inc. Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer Quest Balanced Fund Oppenheimer Quest International Value Fund,
Inc.
Oppenheimer Quest Opportunity Value Fund

These arrangements also apply to shareholders of the following funds when they merged
(were reorganized) into various Oppenheimer funds on November 24, 1995:

Quest for Value U.S. Government Income Fund Quest for Value New York Tax-Exempt Fund
Quest for Value Investment Quality Income Fund Quest for Value National Tax-Exempt
Fund
Quest for Value Global Income Fund Quest for Value California Tax-Exempt Fund

All of the funds listed above are referred to in this Appendix as the "Former Quest
for Value Funds." The waivers of initial and contingent deferred sales charges described
in this Appendix apply to shares of an Oppenheimer fund that are either:
|_| acquired by such shareholder pursuant to an exchange of shares of an Oppenheimer fund
that was one of the Former Quest for Value Funds, or
|_| purchased by such shareholder by exchange of shares of another Oppenheimer fund that
were acquired pursuant to the merger of any of the Former Quest for Value Funds
into that other Oppenheimer fund on November 24, 1995.

A. Reductions or Waivers of Class A Sales Charges.

|X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for Value Funds
Shareholders.

Purchases by Groups and Associations. The following table sets forth the initial sales
charge rates for Class A shares purchased by members of "Associations" formed for any
purpose other than the purchase of securities. The rates in the table apply if that
Association purchased shares of any of the Former Quest for Value Funds or received a
proposal to purchase such shares from OCC Distributors prior to November 24, 1995.

--------------------------------------------------------------------------------
Initial Sales Initial Sales Charge Concession as
Number of Eligible Charge as a % of as a % of Net Amount % of Offering
Employees or Members Offering Price Invested Price
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9 or Fewer 2.50% 2.56% 2.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
At least 10 but not 2.00% 2.04% 1.60%
more than 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 Oppenheimer fund. The shares must have been acquired by the
merger of a Former Quest for Value Fund into the fund or by exchange from an Oppenheimer
fund that was a Former Quest for Value Fund or into which such fund merged. Those shares
must have been purchased prior to March 6, 1995 in connection with:
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 Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund into the fund
or by exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into
which such Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
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
Oppenheimer fund described in this section if the proceeds are invested in the same Class
of shares in that fund or another Oppenheimer fund within 90 days after redemption.
V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds Who
Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
--------------------------------------------------------------------------------------------

The initial and contingent deferred sale charge rates and waivers for Class A and Class B
shares described in the respective Prospectus (or this Appendix) of the following
Oppenheimer funds (each is referred to as a "Fund" in this section):
Oppenheimer U. S. Government Trust,
Oppenheimer Core Bond Fund,
Oppenheimer Value Fund and
Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were shareholders of the
following funds (referred to as the "Former Connecticut Mutual Funds") on March 1, 1996,
when OppenheimerFunds, Inc. became the investment adviser to the Former Connecticut Mutual
Funds:
Connecticut Mutual Liquid Account Connecticut Mutual Total Return Account
Connecticut Mutual Government Securities Account CMIA LifeSpan Capital Appreciation
Account
Connecticut Mutual Income Account CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account CMIA Diversified Income Account

A. Prior Class A CDSC and Class A Sales Charge Waivers.

|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 Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been purchased
prior to March 18, 1996:
1) by the estate of a deceased shareholder;
2) upon the disability of a shareholder, as defined in Section 72(m)(7) of the Internal
Revenue Code;
3) for retirement distributions (or loans) to participants or beneficiaries from
retirement plans qualified under Sections 401(a) or 403(b)(7)of the Code, or from
IRAs, deferred compensation plans created under Section 457 of the Code, or other
employee benefit plans;
4) as tax-free returns of excess contributions to such retirement or employee benefit
plans;
5) in whole or in part, in connection with shares sold to any state, county, or city, or
any instrumentality, department, authority, or agency thereof, that is prohibited by
applicable investment laws from paying a sales charge or 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 Oppenheimer AMT-Free Municipals, Oppenheimer U.S. Government Trust,
Oppenheimer Strategic Income Fund and Oppenheimer 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 Oppenheimer funds on October 18, 1991, and who held shares
of Advance America Funds, Inc. on March 30, 1990, may purchase Class A shares of those four
Oppenheimer funds at a maximum sales charge rate of 4.50%.
VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer Convertible
Securities Fund
--------------------------------------------------------------------------------------------

Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this section) may
sell Class M shares at net asset value without any initial sales charge to the classes of
investors listed below who, prior to March 11, 1996, owned shares of the Fund's
then-existing Class A and were permitted to purchase those shares at net asset value
without sales charge:
|_| the Manager and its affiliates,
|_| present or former officers, directors, trustees and employees (and their "immediate
families" as defined in the Fund's Statement of Additional Information) of the
Fund, the Manager and its affiliates, and retirement plans established by them or
the prior investment advisor of the Fund for their employees,
|_| registered management investment companies or separate accounts of insurance
companies that had an agreement with the Fund's prior investment advisor or
distributor for that purpose,
|_| dealers or brokers that have a sales agreement with the Distributor, if they purchase
shares for their own accounts or for retirement plans for their employees,
|_| employees and registered representatives (and their spouses) of dealers or brokers
described in the preceding section or financial institutions that have entered
into sales arrangements with those dealers or brokers (and whose identity is made
known to the Distributor) or with the Distributor, but only if the purchaser
certifies to the Distributor at the time of purchase that the purchaser meets
these qualifications,
|_| dealers, brokers, or registered investment advisors that had entered into an
agreement with the Distributor or the prior distributor of the Fund specifically
providing for the use of Class M shares of the Fund in specific investment
products made available to their clients, and
|_| dealers, brokers or registered investment advisors that had entered into an agreement
with the Distributor or prior distributor of the Fund's shares to sell shares to
defined contribution employee retirement plans for which the dealer, broker, or
investment advisor provides administrative services.

C-22
Appendix C

Information About the Underlying Fund

Additional Information About the Underlying Fund's Investment Policies and Risks

The investment objective, the principal investment policies and the main risks of the
Oppenheimer Main Street Fund(R)(the "Underlying Fund") are described in the Underlying
Fund's Prospectus as well as the Prospectus for Oppenheimer Principal Protected Main Street
Fund III. This Appendix C contains supplemental information about those policies and risks
and the types of securities that the Underlying Fund's investment Manager,
OppenheimerFunds, Inc., can select for the Underlying Fund. Additional information is also
provided about the strategies that the Underlying Fund can use to try to achieve its
objective.

The Underlying Fund's Principal Investment Policies. The composition of the Underlying
Fund's portfolio and the techniques and strategies that the Underlying Fund's Manager can
use in selecting portfolio securities will vary over time. The Underlying Fund is not
required to use any of the investment techniques and strategies described below at all
times in seeking its goal. It can use some of the special investment techniques and
strategies at some times or not at all.

|X| Investments in Equity Securities. The Underlying Fund does not limit its
investments in equity securities to issuers having a market capitalization of a specified
size or range, and therefore can invest in securities of small-, mid- and
large-capitalization issuers. At times, the Underlying Fund can focus its equity
investments in securities of one or more capitalization ranges, based upon the Manager's
judgment of where the best market opportunities are to seek the Underlying Fund's
objective. At times, the market may favor or disfavor securities of issuers of a particular
capitalization range. Securities of small capitalization issuers may be subject to greater
price volatility in general than securities of larger companies. Therefore, if the
Underlying Fund is focusing on or has substantial investments in smaller capitalization
companies at times of market volatility, the Underlying Fund's share prices may fluctuate
more than that of funds focusing on larger capitalization issuers.

|_| Rights and Warrants. The Underlying Fund can invest up to 10% of its total
assets in warrants or rights, although the Underlying Fund does not currently intend to
invest more than 5% of its total assets in warrants or rights. Warrants basically are
options to purchase equity securities at specific prices valid for a specific period of
time. Their prices do not necessarily move parallel to the prices of the underlying
securities. Rights are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of the issuer.

|_| Convertible Securities. 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.

The value of a convertible security is a function of its "investment value" and its
"conversion value." If the investment value exceeds the conversion value, the security will
behave more like a debt security, and the security's price will likely increase when
interest rates fall and decrease when interest rates rise. If the conversion value exceeds
the investment value, the security will behave more like an equity security. In that case,
it will likely sell at a premium over its conversion value, and its price will tend to
fluctuate directly with the price of the underlying security.

While some convertible securities are a form of debt security, in many cases their
conversion feature (allowing conversion into equity securities) caused 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 fixed-income securities.

To determine whether convertible securities should be regarded as "equity
equivalents," the Manager examines the following factors:
o 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,
o 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
o 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.

|X| Investments in Bonds and Other Debt Securities. The Underlying Fund can invest in
bonds, debentures and other debt securities to seek its investment objective. Because the
Underlying Fund currently emphasizes investments in equity securities, such as stocks, it
is not anticipated that significant amounts of the Underlying Fund's assets will be
invested in debt securities. However, if market conditions suggest that debt securities may
offer better total return opportunities than stocks, or if the Manager determines to seek a
higher amount of current income to distribute to shareholders, the Manager can shift more
of the Underlying Fund's investments into debt securities.

The Underlying Fund's debt investments can include investment-grade and
non-investment-grade bonds (commonly referred to as "junk bonds"). Investment-grade bonds
are bonds rated at least "Baa" by Moody's Investors Service, Inc., or at least "BBB" by
Standard & Poor's Corporation or Fitch, Inc., or that have comparable ratings by another
nationally-recognized rating organization. In making investments in debt securities, the
Manager can rely to some extent on the ratings of ratings organizations or it can use its
own research to evaluate a security's credit-worthiness. If the securities that the
Underlying Fund buys are unrated, to be considered part of the Underlying Fund's holdings
of investment-grade securities, they must be judged by the Manager to be of comparable
quality to bonds rated as investment grade by a rating organization.

|_| U.S. Government Securities. The Underlying Fund can buy securities issued or
guaranteed by the U.S. government or its agencies and instrumentalities. Securities issued
by the U.S. Treasury are backed by the full faith and credit of the U.S. government and are
subject to very little credit risk. Obligations of U.S. government agencies or
instrumentalities (including mortgage-backed securities) may or may not be guaranteed or
supported by the "full faith and credit" of the United States. Some are backed by the right
of the issuer to borrow from the U.S. Treasury; others, by discretionary authority of the
U.S. government to purchase the agencies' obligations; while others are supported only by
the credit of the instrumentality. If a security is not backed by the full faith and credit
of the United States, the owner of the security must look principally to the agency issuing
the obligation for repayment and may not be able to assert a claim against the United
States in the event that the agency or instrumentality does not meet its commitment. The
Underlying Fund will invest in securities of U.S. government agencies and instrumentalities
only when the Manager is satisfied that the credit risk with respect to the agency or
instrumentality is minimal.

|_| Special Risks of Lower-Grade Securities. While it is not anticipated that the
Underlying Fund will invest a substantial portion of its assets in debt securities, the
Underlying Fund can do so to seek current income. Because lower-rated securities tend to
offer higher yields than investment grade securities, the Underlying Fund can invest in
lower grade securities if the Manager is trying to achieve greater income (and, in some
cases, the appreciation possibilities of lower-grade securities may be a reason they are
selected for the Underlying Fund's portfolio).

The Underlying Fund can invest up to 25% of its total assets in "lower grade" debt
securities. However, the Underlying Fund does not currently intend to invest more that 10%
of its total assets in lower grade debt securities. "Lower-grade" debt securities are those
rated below "investment grade" which means they have a rating lower than "Baa" by Moody's
or lower than "BBB" by Standard & Poor's or Fitch, Inc., or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be of comparable
quality to debt securities rated below investment grade, they are included in the
limitation on the percentage of the Underlying Fund's assets that can be invested in
lower-grade securities. The Underlying Fund can invest in securities rated as low as "C" or
"D" or which may be in default at the time the Underlying Fund buys them.

Some of the special credit risks of lower-grade securities are discussed in the
Prospectus. There is a greater risk that the issuer may default on its obligation to pay
interest or to repay principal than in the case of investment grade securities. The
issuer's low creditworthiness may increase the potential for its insolvency. An overall
decline in values in the high yield bond market is also more likely during a period of a
general economic downturn. An economic downturn or an increase in interest rates could
severely disrupt the market for high yield bonds, adversely affecting the values of
outstanding bonds as well as the ability of issuers to pay interest or repay principal. In
the case of foreign high yield bonds, these risks are in addition to the special risk of
foreign investing discussed in the Prospectus and in this Statement of Additional
Information.

However, the Underlying Fund's limitations on buying these investments can reduce the
effect of those risks to the Underlying Fund, as will the Underlying Fund's policy of
diversifying its investments. Additionally, to the extent they can be converted into stock,
convertible securities may be less subject to some of these risks than non-convertible high
yield bonds, since stock may be more liquid and less affected by some of these risk
factors. The Underlying Fund may not invest more than 10% of its total assets in
lower-grade debt securities that are not convertible.

While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's or Fitch, Inc.
are investment grade and are not regarded as junk bonds, those securities may be subject to
special risks, and have some speculative characteristics. Definitions of the debt security
ratings categories of Moody's, S&P, and Fitch, Inc. are included in Appendix A to the
Statement of Additional Information of the Underling Fund.

|X| Foreign Securities. The Underlying Fund can purchase equity and debt securities
issued or guaranteed by foreign companies or foreign governments or their agencies.
"Foreign securities" include equity and debt securities of companies organized under the
laws of countries other than the United States and debt securities of foreign governments.
They may be traded on foreign securities exchanges or in the foreign over-the-counter
markets.

Securities of foreign issuers that are represented by American Depository Receipts or
that are listed on a U.S. securities exchange or traded in the U.S. over-the-counter
markets are not considered "foreign securities" for the purpose of the Underlying Fund's
investment allocations. That is because they are not subject to many of the special
considerations and risks, discussed below, that apply to foreign securities traded and held
abroad.

Investing in foreign securities offers potential benefits not available from
investing solely in securities of domestic issuers. They include the opportunity to invest
in foreign issuers that appear to offer growth potential, or in foreign countries with
economic policies or business cycles different from those of the U.S., or to reduce
fluctuations in portfolio value by taking advantage of foreign stock markets that do not
move in a manner parallel to U.S. markets. The Underlying Fund will hold foreign currency
only in connection with the purchase or sale of foreign securities.

|_| 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.

|X| Passive Foreign Investment Companies. The Underlying Fund may purchase the
securities of certain foreign investment corporations called passive foreign investment
companies ("PFICs"). Such entities have been the only or primary way to invest in certain
countries because some foreign countries limit, or prohibit, all direct foreign investment
in the securities of companies domiciled therein. However, the governments of some
countries have authorized the organization of investment funds to permit indirect foreign
investment in such securities. For tax purposes, these funds also may be PFICs.

The Underlying Fund is subject to certain percentage limitations under the Investment
Company Act relating to the purchase of securities of investment companies, and,
consequently, the Underlying Fund may have to subject any of its investment in other
investment companies, including PFICs, to the limitation that no more than 10% of the value
of the Underlying Fund's total assets may be invested in such securities. In addition to
bearing their proportionate share of a fund's expenses (management fees and operating
expenses), shareholders will also indirectly bear similar expenses of such entities. Like
other foreign securities, interests in PFICs also involve the risk of foreign securities,
as described above.

|X| Portfolio Turnover. "Portfolio turnover" describes the rate at which the
Underlying Fund traded its portfolio securities during its previous fiscal year. For
example, if a fund sold all of its securities during the year, its portfolio turnover rate
would have been 100%. The Underlying Fund's portfolio turnover rate will fluctuate from
year to year, and the Underlying Fund can have a portfolio turnover rate of 100% or more.
Increased portfolio turnover creates higher brokerage and transaction costs for the
Underlying Fund, which may reduce its overall performance. Additionally, the realization of
capital gains from selling portfolio securities may result in distributions of taxable
long-term capital gains to shareholders, since the Underlying Fund will normally distribute
all of its capital gains realized each year, to avoid excise taxes under the Internal
Revenue Code. The Financial Highlights table at the end of the Prospectus shows the
Underlying Fund's portfolio turnover rates during prior fiscal years.

Other Investment Techniques and Strategies. In seeking its objective, the Underlying Fund
can from time to time use the types of investment strategies described below. It is not
required to use all of these strategies at all times and may, at times, not use any of them.

|X| Investing in Small, Unseasoned Companies. The Underlying 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 may have a limited
trading market, which may adversely affect the Underlying Fund's ability to dispose of them
and can reduce the price the Underlying 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 Underlying Fund is attempting to
dispose of its holdings of that security. In that case the Underlying Fund might receive a
lower price for its holdings than might otherwise be obtained. The Underlying Fund
currently intends to invest no more than 5% of its net assets in securities of small,
unseasoned issuers.

|X| When-Issued and Delayed-Delivery Transactions. The Underlying Fund can invest in
securities on a "when-issued" basis and can purchase or sell securities on a
"delayed-delivery" basis. When-issued and delayed-delivery are terms that refer to
securities whose terms and indenture are available and for which a market exists, but which
are not available for immediate delivery.

When such transactions are negotiated, the price (which is generally expressed in
yield terms) is fixed at the time the commitment is made. Delivery and payment for the
securities take place at a later date. The securities are subject to change in value from
market fluctuations during the period until settlement. The value at delivery may be less
than the purchase price. For example, changes in interest rates in a direction other than
that expected by the Manager before settlement will affect the value of such securities and
may cause a loss to the Underlying Fund. During the period between purchase and settlement,
no payment is made by the Underlying Fund to the issuer and no interest accrues to the
Underlying Fund from the investment.

The Underlying Fund will engage in when-issued transactions to secure what the
Manager considers to be an advantageous price and yield at the time of entering into the
obligation. When the Underlying Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its failure to do so
may cause the Underlying Fund to lose the opportunity to obtain the security at a price and
yield the Manager considers to be advantageous.

When the Underlying Fund engages in when-issued and delayed-delivery transactions, it
does so for the purpose of acquiring or selling securities consistent with its investment
objective and policies or for delivery pursuant to options contracts it has entered into,
and not for the purpose of investment leverage. Although the Underlying Fund will enter
into delayed-delivery or when-issued purchase transactions to acquire securities, it can
dispose of a commitment prior to settlement. If the Underlying Fund chooses to dispose of
the right to acquire a when-issued security prior to its acquisition or to dispose of its
right to delivery or receive against a forward commitment, it may incur a gain or loss.

At the time the Underlying Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its books and
reflects the value of the security purchased in determining the Underlying Fund's net asset
value. In a sale transaction, it records the proceeds to be received. The Underlying Fund
will identify on its books liquid securities of any type at least equal in value to the
value of the Underlying Fund's purchase commitments until the Underlying Fund pays for the
investment.

When issued and delayed-delivery transactions can be used by the Underlying Fund as a
defensive technique to hedge against anticipated changes in interest rates and prices. For
instance, in periods of rising interest rates and falling prices, the Underlying Fund might
sell securities in its portfolio on a forward commitment basis to attempt to limit its
exposure to anticipated falling prices. In periods of falling interest rates and rising
prices, the Underlying Fund might sell portfolio securities and purchase the same or
similar securities on a when-issued or delayed-delivery basis to obtain the benefit of
currently higher cash yields.

Investment in Other Investment Companies. The Underlying Fund can also invest in the
securities of other investment companies, which can include open-end funds, closed-end
funds and unit investment trusts, subject to the limits set forth in the Investment Company
Act that apply to those types of investments. For example, the Underlying Fund can invest
in Exchange-Traded Funds, which are typically open-end funds or unit investment trusts,
listed on a stock exchange. The Underlying Fund might do so as a way of gaining exposure to
the segments of the equity or fixed-income markets represented by the NYSE-Traded Funds'
portfolio, at times when the Underlying Fund may not be able to buy those portfolio
securities directly. As a non-fundamental policy, the Underlying Fund cannot invest in the
securities of other registered open-end investment companies or registered unit investment
trusts in reliance on sub-paragraph (F) or (G) of section 12(d)(1) of the Investment
Company Act.

Investing in another investment company may involve the payment of substantial
premiums above the value of such investment company's portfolio securities and is subject
to limitations under the Investment Company Act. The Underlying Fund does not intend to
invest in other investment companies unless the Manager believes that the potential
benefits of the investment justify the payment of any premiums or sales charges. As a
shareholder of an investment company, the Underlying Fund would be subject to its ratable
share of that investment company's expenses, including its advisory and administration
expenses. The Underlying Fund does not anticipate investing a substantial amount of its net
assets in shares of other investment companies.

|X| Repurchase Agreements. The Underlying Fund can acquire securities subject to
repurchase agreements. It may do so for liquidity purposes to meet anticipated redemptions
of Underlying Fund shares, or pending the investment of the proceeds from sales of
Underlying Fund shares, or pending the settlement of portfolio securities transactions.

In a repurchase transaction, the Underlying 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 Underlying Fund's limits on holding
illiquid investments. The Underlying Fund will not enter into a repurchase agreement having
a maturity beyond seven days that causes more than 10% of its net assets to exceed that
limit. There is no limit on the amount of the Underlying 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 Underlying 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
Underlying 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.

Pursuant to an Exemptive Order issued by the SEC, the Underlying Fund, along with
other affiliated mutual funds managed by the Manager, may transfer uninvested cash balances
into one or more joint repurchase accounts. These balances are invested in one or more
repurchase agreements, secured by U.S. government securities. Securities that are pledged
as collateral for repurchase agreements are held by a custodian bank until the agreements
mature. Each joint repurchase arrangement requires that the market value of the collateral
be sufficient to cover payments of interest and principal; however, in the event of default
by the other party to the agreement, retention or sale of the collateral may be subject to
legal proceedings.

|X| Illiquid and Restricted Securities. To enable the Underlying Fund to sell its
holdings of a restricted security not registered under the Securities Act of 1933, the
Underlying Fund may have to cause those securities to be registered. The expenses of
registering restricted securities may be negotiated by the Underlying Fund with the issuer
at the time the Underlying Fund buys the securities. When the Underlying Fund must arrange
registration because the Underlying 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 Underlying Fund could sell it. The Underlying Fund would
bear the risks of any downward price fluctuation during that period.

The Underlying Fund can also acquire restricted securities through private
placements. Those securities have contractual restrictions on their public resale. Those
restrictions might limit the Underlying Fund's ability to value or to dispose of the
securities and might lower the amount the Underlying Fund could realize upon the sale.

The Underlying 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 Underlying 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. The Underlying Fund can lend its portfolio
securities to certain types of eligible borrowers approved by the Board of Directors. It
may do so to try to provide income or to raise cash for liquidity purposes. These loans are
limited to not more than 25% of the value of the Underlying Fund's total assets. There are
some risks in connection with securities lending. The Underlying Fund might experience a
delay in receiving additional collateral to secure a loan, or a delay in recovery of the
loaned securities. The Underlying Fund presently does not intend to engage in loans of
securities in the coming year.

The Underlying 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 Underlying Fund is permitted to
invest. To be acceptable as collateral, letters of credit must obligate a bank to pay
amounts demanded by the Underlying 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
Underlying Fund.

When it lends securities, the Underlying 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 Underlying Fund can also pay reasonable finder's, custodian bank and
administrative fees in connection with these loans. The terms of the Underlying Fund's
loans must meet applicable tests under the Internal Revenue Code and must permit the
Underlying Fund to reacquire loaned securities on five days' notice or in time to vote on
any important matter.

|X| Derivatives. The Underlying Fund can invest in a variety of derivative
investments to seek income or for hedging purposes. Some derivative investments the
Underlying Fund can use are the hedging instruments described below.

Other derivative investments the Underlying Fund can invest in include "index-linked"
notes. Principal and/or interest payments on these notes depend on the performance of an
underlying index. Currency-indexed securities are another derivative the Underlying Fund
can use. Typically these are short-term or intermediate-term debt securities. Their value
at maturity or the rates at which they pay income are determined by the change in value of
the U.S. dollar against one or more foreign currencies or an index. In some cases, these
securities may pay an amount at maturity based on a multiple of the amount of the relative
currency movements. This type of index security offers the potential for increased income
or principal payments but at a greater risk of loss than a typical debt security of the
same maturity and credit quality.

Other derivative investments the Underlying 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. The Underlying Fund can use hedging to attempt to protect against
declines in the market value of the Underlying Fund's portfolio, to permit the Underlying
Fund to retain unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons. To do so, the
Underlying 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
increase the Underlying Fund's income, but the Manager does not expect to engage
extensively in that practice.

The Underlying Fund can use hedging to establish a position in the securities market
as a temporary substitute for purchasing particular securities. In that case, the
Underlying Fund would normally seek to purchase the securities and then terminate that
hedging position. The Underlying 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 Underlying Fund could:
o buy futures, or
o buy calls on such futures or on securities.

The Underlying Fund is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. The Underlying
Fund's strategy of hedging with futures and options on futures will be incidental to the
Underlying Fund's activities in the underlying cash market. The particular hedging
instruments the Underlying Fund can use are described below. The Underlying Fund can employ
new hedging instruments and strategies when they are developed, if those investment methods
are consistent with the Underlying Fund's investment objective and are permissible under
applicable regulations governing the Underlying Fund.

|_| Futures. The Underlying Fund can buy and sell futures contracts that relate to
(1) broadly-based stock indices ("stock index futures") (2) debt securities (these are
referred to as "interest rate futures"), (3) other broadly-based securities indices (these
are referred to as "financial futures"), (4) foreign currencies (these are referred to as
"forward contracts"), or (5) commodities (these are referred to as "commodity futures"), or
(6) an individual stock ("single stock futures").

A broadly-based stock index is used as the basis for trading stock index futures.
They may in some cases be based on stocks of issuers in a particular industry or group of
industries. A stock index assigns relative values to the 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. Financial futures are similar
contracts based on the future value of the basket of securities that comprise the index.
These contracts obligate the seller to deliver, and the purchaser to take, cash to settle
the futures transaction. There is no delivery made of the underlying securities to settle
the futures obligation. Either party may also settle the transaction by entering into an
offsetting contract.

An interest rate future obligates the seller to deliver (and the purchaser to take)
cash or a specified type of debt security to settle the futures transaction. Either party
could also enter into an offsetting contract to close out the position.

The Underlying Fund can invest a portion of its assets in commodity futures
contracts. Commodity futures may be based upon commodities within five main commodity
groups: (1) energy, which includes crude oil, natural gas, gasoline and heating oil; (2)
livestock, which includes cattle and hogs; (3) agriculture, which includes wheat, corn,
soybeans, cotton, coffee, sugar and cocoa; (4) industrial metals, which includes aluminum,
copper, lead, nickel, tin and zinc; and (5) precious metals, which includes gold, platinum
and silver. The Underlying Fund can purchase and sell commodity futures contracts, options
on futures contracts and options and futures on commodity indices with respect to these
five main commodity groups and the individual commodities within each group, as well as
other types of commodities.

A single stock future obligates the seller to deliver (and the purchaser to take)
cash or a specified equity security to settle the futures transaction. Either party could
also enter into an offsetting contract to close out the position. Single stock futures
trade on a very limited number of exchanges, with contracts typically not fungible among
the exchanges.

No money is paid or received by the Underlying Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Underlying 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 Underlying Fund's custodian
bank in an account registered in the futures broker's name. However, the futures broker can
gain access to that account only under specified conditions. As the future is marked to
market (that is, its value on the Underlying 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 Underlying Fund can 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
Underlying Fund. Any loss or gain on the future is then realized by the Underlying 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 Underlying Fund can buy and sell certain kinds of put
options ("puts") and call options ("calls"). The Underlying Fund can buy and sell
exchange-traded and over-the-counter put and call options, including index options,
securities options, currency options, commodities options, and options on the other types
of futures described above.

|_| Writing Covered Call Options. The Underlying Fund can write (that is, sell)
covered calls. If the Underlying Fund sells a call option, it must be covered. That means
the Underlying Fund must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call can be covered by identifying liquid
assets on the Underlying Fund's books to enable the Underlying Fund to satisfy its
obligations if the call is exercised. Up to 25% of the Underlying Fund's total assets can
be subject to calls the Underlying Fund writes.

When the Underlying Fund writes a call on a security, it receives cash (a premium).
The Underlying 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 Underlying 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 Underlying 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 Underlying Fund would keep the cash premium and the investment.

When the Underlying Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Underlying 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 Underlying
Fund would keep the cash premium.

The Underlying Fund's custodian bank, or a securities depository acting for the
custodian bank, will act as the Underlying Fund's escrow agent, through the facilities of
the Options Clearing Corporation ("OCC"), as to the investments on which the Underlying
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 Underlying Fund enters into a closing
transaction.

When the Underlying 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 Underlying 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 Underlying
Fund writes an OTC option, it will treat as illiquid (for purposes of its restriction on
holding illiquid securities) the mark-to-market value of any OTC option it holds, unless
the option is subject to a buy-back agreement by the executing broker. To terminate its
obligation on a call it has written, the Underlying Fund can purchase a corresponding call
in a "closing purchase transaction." The Underlying 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 Underlying Fund wrote is more or less than the price of
the call the Underlying Fund purchases to close out the transaction. The Underlying Fund
may realize a profit if the call expires unexercised, because the Underlying 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 Underlying Fund they are taxable as
ordinary income. If the Underlying 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 Underlying 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 Underlying Fund must cover the call by identifying an equivalent
dollar amount of liquid assets on the Underlying Fund's books. The Underlying Fund will
identify additional liquid assets on its books if the value of the segregated assets drops
below 100% of the current value of the future. Because of this segregation requirement, in
no circumstances would the Underlying Fund's receipt of an exercise notice as to that
future require the Underlying Fund to deliver a futures contract. It would simply put the
Underlying Fund in a short futures position, which is permitted by the Underlying Fund's
hedging policies.

o Writing Put Options. The Underlying 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 Underlying Fund
will not write puts if, as a result, more than 25% of the Underlying Fund's total assets
would be required to be segregated to cover such put options.

If the Underlying Fund writes a put, the put must be covered by liquid assets
identified on the Underlying Fund's books. The premium the Underlying 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 Underlying 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 Underlying Fund has written expires unexercised, the
Underlying Fund realizes a gain in the amount of the premium less the transaction costs
incurred. If the put is exercised, the Underlying 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 Underlying 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 Underlying Fund incurred.

When writing a put option on a security, to secure its obligation to pay for the
underlying security the Underlying Fund will deposit in escrow liquid assets with a value
equal to or greater than the exercise price of the underlying securities. The Underlying
Fund therefore forgoes the opportunity of investing the segregated assets or writing calls
against those assets.

As long as the Underlying 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 Underlying Fund to take delivery of the underlying security and pay
the exercise price. The Underlying 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 Underlying Fund effects a closing purchase transaction by purchasing a
put of the same series as it sold. Once the Underlying Fund has been assigned an exercise
notice, it cannot effect a closing purchase transaction.

The Underlying Fund can 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 Underlying
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 Underlying 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 Underlying Fund, are taxable as ordinary income.

o Purchasing Calls and Puts. The Underlying Fund can purchase calls to protect
against the possibility that the Underlying Fund's portfolio will not participate in an
anticipated rise in the securities market. When the Underlying Fund buys a call (other than
in a closing purchase transaction), it pays a premium. The Underlying 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 Underlying 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 Underlying Fund exercises the call. If the Underlying
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 Underlying Fund will have paid
the premium but lost the right to purchase the underlying investment.

The Underlying Fund can buy puts whether or not it holds the underlying investment in
its portfolio. When the Underlying 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 Underlying Fund owns enables the Underlying 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 Underlying
Fund will have paid the premium but lost the right to sell the underlying investment.
However, the Underlying Fund can sell the put prior to its expiration. That sale may or may
not be at a profit.

Buying a put on an investment the Underlying Fund does not own (such as an index or
future) permits the Underlying Fund 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 Underlying 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 Underlying 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 Underlying Fund can buy a call or put only if, after the purchase, the value of
all call and put options held by the Underlying Fund will not exceed 5% of the Underlying
Fund's total assets.

|_| Buying and Selling Options on Foreign Currencies. The Underlying 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 Underlying 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 Underlying 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 Underlying Fund's position. The Underlying
Fund will then have incurred option premium payments and transaction costs without a
corresponding benefit.

A call the Underlying Fund writes on a foreign currency is "covered" if the
Underlying 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 a segregated account by its
custodian bank) upon conversion or exchange of other foreign currency held in its
portfolio.

The Underlying 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 Underlying 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 Underlying
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 a
segregated account with the Underlying 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
Underlying Fund's return. The Underlying Fund could also experience losses if the prices of
its futures and options positions were not correlated with its other investments.

The Underlying Fund's option activities could affect its portfolio turnover rate and
brokerage commissions. The exercise of calls written by the Underlying Fund might cause the
Underlying Fund to sell related portfolio securities, thus increasing its turnover rate.
The exercise by the Underlying 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 Underlying Fund's control, holding a put might cause the Underlying
Fund to sell the related investments for reasons that would not exist in the absence of the
put.

The Underlying 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 Underlying Fund's net asset value being more
sensitive to changes in the value of the underlying investment.

If a covered call written by the Underlying Fund is exercised on an investment that
has increased in value, the Underlying 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 Underlying 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
Underlying 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
Underlying Fund's securities. For example, it is possible that while the Underlying Fund
has used hedging instruments in a short hedge, the market might advance and the value of
the securities held in the Underlying Fund's portfolio might decline. If that occurred, the
Underlying 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 Underlying
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
Underlying 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 Underlying 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 Underlying Fund does so the market might decline.
If the Underlying Fund then concludes not to invest in securities because of concerns that
the market might decline further or for other reasons, the Underlying 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
Underlying Fund uses them to "lock in" the U.S. dollar price of a security denominated in a
foreign currency that the Underlying 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 Underlying 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 Underlying Fund can also use "cross-hedging" where the
Underlying Fund hedges against changes in currencies other than the currency in which a
security it holds is denominated.

Under a forward contract, one party agrees to purchase, and another party agrees to
sell, a specific currency at a future date. That date may be any fixed number of days from
the date of the contract agreed upon by the parties. The transaction price is set at the
time the contract is entered into. These contracts are traded in the inter-bank market
conducted directly among currency traders (usually large commercial banks) and their
customers.

The Underlying 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 Underlying 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 Underlying 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 Underlying 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 Underlying Fund might enter into a forward contract for the purchase or sale of the
amount of foreign currency involved in the underlying transaction, in a fixed amount of
U.S. dollars per unit of the foreign currency. This is called a "transaction hedge." The
transaction hedge will protect the Underlying 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 Underlying 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 Underlying 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 Underlying Fund's portfolio securities
denominated in that foreign currency. When the Underlying Fund believes that the U.S.
dollar may 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
Underlying Fund could enter into a forward contract to sell a different foreign currency
for a fixed U.S. dollar amount if the Underlying 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 Underlying Fund are denominated. That is referred to as a "cross hedge."

The Underlying 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 Underlying
Fund's commitment under forward contracts. The Underlying Fund will not enter into forward
contracts or maintain a net exposure to such contracts if the consummation of the contracts
would obligate the Underlying Fund to deliver an amount of foreign currency in excess of
the value of the Underlying 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 Underlying Fund can maintain a net exposure to
forward contracts in excess of the value of the Underlying 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 Underlying Fund can purchase a call
option permitting the Underlying 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 Underlying Fund can purchase a put option permitting the
Underlying 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 Underlying Fund is obligated to deliver, the Underlying 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 Underlying Fund is obligated to deliver to settle the trade, the
Underlying 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 Underlying Fund to sustain losses on these contracts and to pay
additional transactions costs. The use of forward contracts in this manner might reduce the
Underlying Fund's performance if there are unanticipated changes in currency prices to a
greater degree than if the Underlying Fund had not entered into such contracts.

At or before the maturity of a forward contract requiring the Underlying Fund to sell
a currency, the Underlying Fund might sell a portfolio security and use the sale proceeds
to make delivery of the currency. In the alternative the Underlying Fund might retain the
security and offset its contractual obligation to deliver the currency by purchasing a
second contract. Under that contract the Underlying Fund will obtain, on the same maturity
date, the same amount of the currency that it is obligated to deliver. Similarly, the
Underlying 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 Underlying 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 Underlying Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the market
conditions then prevailing. Because forward contracts are usually entered into on a
principal basis, no brokerage fees or commissions are involved. Because these contracts are
not traded on an exchange, the Underlying Fund must evaluate the credit and performance
risk of the counterparty under each forward contract.

Although the Underlying 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 Underlying Fund can 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
Underlying Fund at one rate, while offering a lesser rate of exchange if the Underlying
Fund desires to resell that currency to the dealer.

|_| Interest Rate Swap Transactions. The Underlying Fund can enter into interest rate
swap agreements. In an interest rate swap, the Underlying Fund and another party exchange
their right to receive or their obligation to pay interest on a security. For example, they
might swap the right to receive floating rate payments for fixed rate payments. The
Underlying Fund can enter into swaps only on securities that it owns. The Underlying Fund
will not enter into swaps with respect to more than 25% of its total assets. Also, the
Underlying Fund will identify liquid assets on its books (such as cash or U.S. government
securities) to cover any amounts it could owe under swaps that exceed the amounts it is
entitled to receive, and it will adjust that amount daily, as needed.

Swap agreements entail both interest rate risk and credit risk. There is a risk that,
based on movements of interest rates in the future, the payments made by the Underlying
Fund under a swap agreement will be greater than the payments it received. Credit risk
arises from the possibility that the counterparty will default. If the counterparty
defaults, the Underlying Fund's loss will consist of the net amount of contractual interest
payments that the Underlying Fund has not yet received. The Manager will monitor the
creditworthiness of counterparties to the Underlying Fund's interest rate swap transactions
on an ongoing basis.

The Underlying Fund can enter into swap transactions with certain counterparties
pursuant to master netting agreements. A master netting agreement provides that all swaps
done between the Underlying Fund and that counterparty shall be regarded as parts of an
integral agreement. If amounts are payable on a particular date in the same currency in
respect of one or more swap transactions, the amount payable on that date in that currency
shall be the net amount. In addition, the master netting agreement may provide that if one
party defaults generally or on one swap, the counterparty can terminate all of the swaps
with that party. Under these agreements, if a default results in a loss to one party, the
measure of that party's damages is calculated by reference to the average cost of a
replacement swap for each swap. It is measured by the mark-to-market value at the time of
the termination of each swap. The gains and losses on all swaps are then netted, and the
result is the counterparty's gain or loss on termination. The termination of all swaps and
the netting of gains and losses on termination is generally referred to as "aggregation."

|_| Regulatory Aspects of Hedging Instruments. The Commodities Futures Trading
Commission (the "CFTC") recently eliminated limitations on futures trading by certain
regulated entities including registered investment companies. Consequently, registered
investment companies may engage in unlimited futures transactions and options thereon
provided that the Fund claims an exclusion from regulation as a commodity pool operator.
The Fund has claimed such an exclusion from registration as a commodity pool operator under
the Commodity Exchange Act ("CEA"). The Fund may use futures and options for hedging and
non-hedging purposes to the extent consistent with its investment objective, internal risk
management guidelines adopted by the Fund's investment advisor (as they may be amended from
time to time), and as otherwise set forth in the Fund's prospectus or this Statement of
Additional Information.

Transactions in options by the Underlying 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 Underlying Fund can write
or hold may be affected by options written or held by other entities, including other
investment companies having the same advisor as the Underlying Fund (or an advisor that is
an affiliate of the Underlying 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 Underlying Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an amount equal to
the market value of the securities underlying the future, less the margin deposit
applicable to it.

|_| Tax Aspects of Certain Hedging Instruments. Certain foreign currency exchange
contracts in which the Underlying Fund can 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 Underlying 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
Underlying Fund to exempt those transactions from this marked-to-market treatment.

Certain forward contracts the Underlying 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 Underlying Fund on straddle positions. Generally, a
loss sustained on the disposition of a position making up a straddle is allowed only to the
extent that the loss exceeds any unrecognized gain in the offsetting positions making up
the straddle. Disallowed loss is generally allowed at the point where there is no
unrecognized gain in the offsetting positions making up the straddle, or the offsetting
position is disposed of.

Under the Internal Revenue Code, the following gains or losses are treated as
ordinary income or loss:
(1) gains or losses attributable to fluctuations in exchange rates that occur between the
time the Underlying Fund accrues interest or other receivables or accrues expenses
or other liabilities denominated in a foreign currency and the time the Underlying
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 Underlying Fund's investment
income available for distribution to its shareholders.

|X| Temporary Defensive and Interim Investments. The Underlying Fund's temporary
defensive investments can include (i) obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities; (ii) commercial paper rated in the highest
category by an established rating organization; (iii) certificates of deposit or bankers'
acceptances of domestic banks with assets of $1 billion or more; (iv) any of the foregoing
securities that mature in one year or less (generally known as "cash equivalents"); (v)
other short-term corporate debt obligations; and (vi) repurchase agreements.

Investment Restrictions

|X| What Are "Fundamental Policies?" Fundamental policies are those policies that the
Underlying Fund has adopted to govern its investments that can be changed only by the vote
of a "majority" of the Underlying 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 Underlying Fund's investment objective is a fundamental policy. Other policies
described in the Underlying Fund's Prospectus or its Statement of Additional Information
and in this Appendix C are "fundamental" only if they are identified as such. The
Underlying Fund's Board of Directors can change non-fundamental policies without
shareholder approval. However, significant changes to investment policies will be described
in supplements or updates to the Underlying Fund's Prospectus or Statement of Additional
Information, as appropriate. The Underlying Fund's most significant investment policies are
described in its Prospectus as well as in the Oppenheimer Principal Protected Main Street
Fund III Prospectus.

|X| Does the Underlying Fund Have Additional Fundamental Policies? The following
investment restrictions are Fundamental policies of the Underlying Fund.

o The Underlying Fund cannot make loans except (a) through lending of securities, (b)
through the purchase of debt instruments or similar evidences of indebtedness, (c) through
an interfund lending program with other affiliated funds, and (d) through repurchase
agreements

Unless the Underlying Fund's Prospectus or Statement of Additional Information state
that a percentage restriction applies on an ongoing basis, it applies only at the time the
Underlying Fund makes an investment (except in the case of borrowing and investments in
illiquid securities). The Underlying Fund need not sell securities to meet the percentage
limits if the value of the investment increases in proportion to the size of the Underlying
Fund.

For purposes of the Underlying Fund's policy not to concentrate its investments as
described above, the Underlying Fund has adopted the industry classifications set forth in
Appendix A to this Statement of Additional Information. This is not a fundamental policy.

Oppenheimer Principal Protected Main Street Fund III(R)

Internet Website:
www.oppenheimerfunds.com

Investment Adviser
OppenheimerFunds, Inc.
Two World Financial Center
225 Liberty Street, 11th Floor
New York, New York 10281-1008

Distributor
OppenheimerFunds Distributor, Inc.
Two World Financial Center
225 Liberty Street, 11th Floor
New York, New York 10281-1008

Transfer Agent
OppenheimerFunds Services
P.O. Box 5270
Denver, Colorado 80217
1.800.CALL.OPP (225.5677)

Custodian Bank
JPMorgan Chase Bank
4 Chase MetroTech Center
Brooklyn, New York 11245

Independent Registered Public Accounting Firm
Deloitte & Touche LLP
555 Seventeenth Street
Denver, Colorado 80202

Counsel to the Fund
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway, Suite 1480
Denver, CO 80202

Counsel to the Independent Trustees
Bell, Boyd & Lloyd LLC
70 West Madison Street, Suite 3100
Chicago, Illinois 60602
1234
PX0771.001.1205

(1) In accordance with Rule 12b-1 of the Investment Company Act, the term "Independent
Trustees" in this Statement of Additional Information refers to those Trustees who are not
"interested persons" of the Fund and who do not have any direct or indirect financial
interest in the operation of the distribution plan or any agreement under the plan.
(1) Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund.
(2) In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered closed-end
fund, references to contingent deferred sales charges mean the Fund's Early Withdrawal
Charges and references to "redemptions" mean "repurchases" of shares.
(3) An "employee benefit plan" means any plan or arrangement, whether or not it is
"qualified" under the Internal Revenue Code, under which Class N shares of an Oppenheimer
fund or funds are purchased by a fiduciary or other administrator for the account of
participants who are employees of a single employer or of affiliated employers. These may
include, for example, medical savings accounts, payroll deduction plans or similar plans.
The fund accounts must be registered in the name of the fiduciary or administrator
purchasing the shares for the benefit of participants in the plan.
(4) The term "Group Retirement Plan" means any qualified or non-qualified retirement plan
for employees of a corporation or sole proprietorship, members and employees of a
partnership or association or other organized group of persons (the members of which may
include other groups), if the group has made special arrangements with the Distributor and
all members of the group participating in (or who are eligible to participate in) the plan
purchase shares of an Oppenheimer fund or funds through a single investment dealer, broker
or other financial institution designated by the group. Such plans include 457 plans,
SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans other than plans for public school
employees. The term "Group Retirement Plan" also includes qualified retirement plans and
non-qualified deferred compensation plans and IRAs that purchase shares of an Oppenheimer
fund or funds through a single investment dealer, broker or other financial institution
that has made special arrangements with the Distributor.
(5) However, that concession will not be paid on purchases of shares in amounts of $1
million or more (including any right of accumulation) by a Retirement Plan that pays for
the purchase with the redemption proceeds of Class C shares of one or more Oppenheimer
funds held by the Plan for more than one year.
(6) This provision does not apply to IRAs.
(7) This provision only applies to qualified retirement plans and 403(b)(7) custodial plans
after your separation from service in or after the year you reached age 55.
(8) The distribution must be requested prior to Plan termination or the elimination of the
Oppenheimer funds as an investment option under the Plan.
(9) This provision does not apply to IRAs.
(10) This provision does not apply to loans from 403(b)(7) custodial plans and loans from
the OppenheimerFunds-sponsored Single K retirement plan.
(11) This provision does not apply to 403(b)(7) custodial plans if the participant is less
than age 55, nor to IRAs.