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Oppenheimer International Bond Fund
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6803 South Tucson Way, Centennial, Colorado 80112
1.800.225.5677



Statement of Additional  Information dated November 26, 2004, revised February
2, 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  November 24, 2004.  It should be read  together with the
Prospectus.  You can obtain  the  Prospectus  by writing to the Fund's  Transfer
Agent,  OppenheimerFunds  Services, at P.O. Box 5270, Denver, Colorado 80217, or
by calling  the  Transfer  Agent at the  toll-free  number  shown  above,  or by
downloading    it   from    the    OppenheimerFunds    Internet    website    at
www.oppenheimerfunds.com.


Contents
                                                                        Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks..
    The Fund's Investment Policies.....................................
    Other Investment Techniques and Strategies.........................
    Other Investment Restrictions......................................
How the Fund is Managed ...............................................
    Organization and History...........................................
    Board of Trustees and Oversight Committees.........................
    Trustees and Officers of the Fund..................................
    The Manager........................................................
Brokerage Policies of the Fund.........................................
Distribution and Service Plans.........................................
Performance of the Fund................................................

About Your Account
How To Buy Shares......................................................
How To Sell Shares.....................................................
How To Exchange Shares.................................................
Dividends, Capital Gains and Taxes.....................................
Additional Information About the Fund..................................

Financial Information About the Fund
Independent Auditors' Report...........................................
Financial Statements...................................................

Appendix A: Ratings Definitions ....................................... A-1
Appendix B: Industry Classifications................................... B-1
Appendix C: Special Sales Charge Arrangements and Waivers.............. C-1






ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

      The investment objectives, the principal investment policies and the
main risks of the Fund are described in the Prospectus. This Statement of
Additional Information contains supplemental information about those policies
and risks and the types of securities that the Fund's investment Manager,
OppenheimerFunds, Inc., can select for the Fund. Additional information is
also provided about the strategies that the Fund may use to try to achieve
its objectives.

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

      In selecting securities for the Fund's portfolio, the Manager evaluates
the merits of particular securities primarily through the exercise of its own
investment analysis. That process may include, among other things, evaluation
of the issuer's historical operations, prospects for the industry of which
the issuer is part, the issuer's financial condition, its pending product
developments and business (and those of competitors), the effect of general
market and economic conditions on the issuer's business, and legislative
proposals that might affect the issuer.

|X|   Foreign Securities. The Fund expects to invest primarily in foreign
securities. For the most part, these will be debt securities issued or
guaranteed by foreign companies or governments, including supra-national
entities. "Foreign securities" include equity and debt securities of
companies organized under the laws of countries other than the United States
and debt securities issued or guaranteed by governments other than the U.S.
government or by foreign supra-national entities. They also include
securities of companies (including those that are located in the U.S. or
organized under U.S. law) that derive a significant portion of their revenue
or profits from foreign businesses, investments or sales, or that have a
significant portion of their assets abroad. They may be traded on foreign
securities exchanges or in the foreign over-the-counter markets.

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

      Because the Fund may purchase securities denominated in foreign
currencies, a change in the value of such foreign currency against the U.S.
dollar will result in a change in the amount of income the Fund has available
for distribution.  Because a portion of the Fund's investment income may be
received in foreign currencies, the Fund will be required to compute its
income in U.S. dollars for distribution to shareholders, and therefore the
Fund will absorb the cost of currency fluctuations.  After the Fund has
distributed income, subsequent foreign currency losses may result in the
Fund's having distributed more income in a particular fiscal period than was
available from investment income, which could result in a return of capital
to shareholders.
      Investing in foreign securities offers potential benefits not available
from investing solely in securities of domestic issuers. They include the
opportunity to invest in foreign issuers that appear to offer growth
potential, or in foreign countries with economic policies or business cycles
different from those of the U.S., or to reduce fluctuations in portfolio
value by taking advantage of foreign stock markets that do not move in a
manner parallel to U.S. markets. The Fund will hold foreign currency only in
connection with the purchase or sale of foreign securities.

o     Foreign Debt Obligations. The debt obligations of foreign governments
and entities may or may not be supported by the full faith and credit of the
foreign government. The Fund may buy securities issued by certain
"supra-national" entities, which include entities designated or supported by
governments to promote economic reconstruction or development, international
banking organizations and related government agencies. Examples are the
International Bank for Reconstruction and Development (commonly called the
"World Bank"), the Asian Development bank and the Inter-American Development
Bank.

      The governmental members of these supranational entities are
"stockholders" that typically make capital contributions and may be committed
to make additional capital contributions if the entity is unable to repay its
borrowings. A supra-national entity's lending activities may be limited to a
percentage of its total capital, reserves and net income. There can be no
assurance that the constituent foreign governments will continue to be able
or willing to honor their capitalization commitments for those entities.

      The Fund can invest in U.S. dollar-denominated "Brady Bonds." These
foreign debt obligations may be fixed-rate par bonds or floating-rate
discount bonds. They are generally collateralized in full as to repayment of
principal at maturity by U.S. Treasury zero coupon obligations that have the
same maturity as the Brady Bonds.  Brady Bonds can be viewed as having three
or four valuation components: (i) the collateralized repayment of principal
at final maturity; (ii) the collateralized interest payments; (iii) the
uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity. Those uncollateralized amounts constitute what is
called the "residual risk."

      If there is a default on collateralized Brady Bonds resulting in
acceleration of the payment obligations of the issuer, the zero coupon U.S.
Treasury securities held as collateral for the payment of principal will not
be distributed to investors, nor will those obligations be sold to distribute
the proceeds.  The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds. The defaulted bonds will
continue to remain outstanding, and the face amount of the collateral will
equal the principal payments which would have then been due on the Brady
Bonds in the normal course.  Because of the residual risk of Brady Bonds and
the history of defaults with respect to commercial bank loans by public and
private entities of countries issuing Brady Bonds, Brady Bonds are considered
speculative investments.

o     Risks of Foreign Investing.  Investments in foreign securities may
offer special opportunities for investing but also present special additional
risks and considerations not typically associated with investments in
domestic securities. Some of these additional risks are:
o     reduction of income by foreign taxes;
o     fluctuation in value of foreign investments due to changes in currency
            rates or currency control regulations (for example, currency
            blockage);
o     transaction charges for currency exchange;
o     lack of public information about foreign issuers;
o     lack of uniform accounting, auditing and financial reporting standards
            in foreign countries comparable to those applicable to domestic
            issuers;
o     less volume on foreign exchanges than on U.S. exchanges;
o     greater volatility and less liquidity on foreign markets than in the
            U.S.;
o     less governmental regulation of foreign issuers, stock exchanges and
            brokers than in the U.S.;
o     greater difficulties in commencing lawsuits;
o     higher brokerage commission rates than in the U.S.;
o     increased risks of delays in settlement of portfolio transactions or
            loss of certificates for portfolio securities;
o     possibilities in some countries of expropriation, confiscatory
            taxation, political, financial or social instability or adverse
            diplomatic developments; and
o     unfavorable differences between the U.S. economy and foreign
            economies.

      In the past, U.S. government policies have discouraged certain
investments abroad by U.S. investors, through taxation or other restrictions,
and it is possible that such restrictions could be re-imposed.

Special Risks of Emerging Markets. Emerging and developing markets abroad may
also offer special opportunities for growth investing but have greater risks
than more developed foreign markets, such as those in Europe and Canada,
Australia, New Zealand and Japan. There may be even less liquidity in their
securities markets, and settlements of purchases and sales of securities may
be subject to additional delays. They are subject to greater risks of
limitations on the repatriation of income and profits because of currency
restrictions imposed by local governments. Those countries may also be
subject to the risk of greater political and economic instability, which can
greatly affect the volatility of prices of securities in those countries. The
Manager will consider these factors when evaluating securities in these
markets, because the selection of those securities must be consistent with
the Fund's investment objectives.

|X|   Passive Foreign Investment Companies.  Some securities of corporations
domiciled outside the U.S. which the Fund may purchase, may be considered
passive foreign investment companies ("PFICs") under U.S. tax laws. PFICs are
those foreign corporations which generate primarily passive income. They tend
to be growth companies or "start-up" companies. For federal tax purposes, a
corporation is deemed a PFIC if 75% or more of the foreign corporation's
gross income for the income year is passive income or if 50% or more of its
assets are assets that produce or are held to produce passive income. Passive
income is further defined as any income to be considered foreign personal
holding company income within the subpart F provisions defined by IRCss.954.

      Investing in PFICs involves the risks associated with investing in
foreign securities, as described above. There are also the risks that the
Fund may not realize that a foreign corporation it invests in is a PFIC for
federal tax purposes. Federal tax laws impose severe tax penalties for
failure to properly report investment income from PFICs. Following industry
standards, the Fund makes every effort to ensure compliance with federal tax
reporting of these investments. PFICs are considered foreign securities for
the purposes of the Fund's minimum percentage requirements or limitations of
investing in foreign securities.
      Subject to the limits under the Investment Company Act of 1940 (the
"Investment Company Act") and under its own non-fundamental policies, the
Fund may also invest in foreign mutual funds which are also deemed PFICs
(since nearly all of the income of a mutual fund is generally passive
income). Investing in these types of PFICs may allow exposure to varying
countries because some foreign countries limit, or prohibit, all direct
foreign investment in the securities of companies domiciled therein.

      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. Additional risks of investing in
other investment companies are described below under "Investment in Other
Investment Companies.

|X|   Debt Securities. The Fund can invest in a variety of debt securities to
seek its objectives. Foreign debt securities are subject to the risks of
foreign securities described above. In general, debt securities are also
subject to two additional types of risk: credit risk and interest rate risk.

o     Credit Risks.  Credit risk relates to the ability of the issuer to meet
interest or principal payments or both as they become due.  In general,
lower-grade, higher-yield bonds are subject to credit risk to a greater
extent than lower-yield, higher-quality bonds.

      The Fund's debt investments can include investment-grade and
non-investment-grade bonds (commonly referred to as "junk bonds").
Investment-grade bonds are bonds rated at least "Baa" by Moody's Investors
Service, Inc., ("Moody's") at least "BBB" by Standard & Poor's Ratings Group
("Standard & Poor's") or Fitch, Inc., ("Fitch") or have comparable ratings by
another nationally recognized statistical rating organization.

      In making investments in debt securities, the Manager may rely to some
extent on the ratings of ratings organizations or it may use its own research
to evaluate a security's credit-worthiness. If the securities are unrated, to
be considered part of the Fund's holdings of investment-grade securities,
they must be judged by the Manager to be of comparable quality to bonds rated
as investment grade by a rating organization.

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

      Fluctuations in the market value of fixed-income securities after the
Fund buys them will not affect the interest payable on those securities, nor
the cash income from them.  However, those price fluctuations will be
reflected in the valuations of the securities, and therefore the Fund's net
asset values will be affected by those fluctuations.

o     Special Risks of Lower-Grade Securities. The Fund can invest without
limit in lower-grade debt securities, if the Manager believes it is
consistent with the Fund's objectives. Because lower-rated securities tend to
offer higher yields than investment grade securities, the Fund may invest in
lower grade securities if the Manager is trying to achieve greater income. In
some cases, the appreciation possibilities of lower-grade securities may be a
reason they are selected for the Fund's portfolio. However, these investments
will be made only when consistent with the Fund's overall goal of total
return.

      "Lower-grade" debt securities are those rated below "investment grade"
which means they have a rating lower than "Baa" by Moody's or lower than
"BBB" by Standard & Poor's or Fitch, or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be
of comparable quality to debt securities rated below investment grade, they
are considered part of the Fund's portfolio of lower-grade securities.  The
Fund can invest in securities rated as low as "C" or "D" or which may be in
default at the time the Fund buys them.

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

      To the extent they can be converted into stock, convertible securities
may be less subject to some of these risks than non-convertible high yield
bonds, since stock may be more liquid and less affected by some of these risk
factors.

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

|X|   Portfolio Turnover.  "Portfolio turnover" describes the rate at which
the Fund traded its portfolio securities during its last fiscal year.  For
example, if a fund sold all of its securities during the year, its portfolio
turnover rate would have been 100%. The Fund's portfolio turnover rate will
fluctuate from year to year, and the Fund may continue to have a portfolio
turnover rate of more than 250% annually.

      Increased portfolio turnover creates higher brokerage and transaction
costs for the Fund, which may reduce its overall performance. Additionally,
the realization of capital gains from selling portfolio securities may result
in distributions of taxable capital gains to shareholders, since the Fund
will normally distribute all of its capital gains realized each year, to
avoid excise taxes under the Internal Revenue Code.

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

|X|   Zero Coupon Securities. The Fund may buy zero-coupon, delayed interest
and "stripped" securities. Stripped securities are debt securities whose
interest coupons are separated from the security and sold separately.  The
Fund can buy different types of zero-coupon or stripped securities,
including, among others, foreign debt securities and U.S. Treasury notes or
bonds that have been stripped of their interest coupons, U.S. Treasury bills
issued without interest coupons, and certificates representing interests in
stripped securities.

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

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

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

|X|   U.S. Government Securities.  These are securities issued or guaranteed
by the U.S. Treasury or other government agencies or corporate entities
referred to as "instrumentalities." The obligations of U.S. government
agencies or instrumentalities in which the Fund may invest may or may not be
guaranteed or supported by the "full faith and credit" of the United States.
"Full faith and credit" means generally that the taxing power of the U.S.
government is pledged to the payment of interest and repayment of principal
on a security. If a security is not backed by the full faith and credit of
the United States, the owner of the security must look principally to the
agency issuing the obligation for repayment. The owner might be able to
assert a claim against the United States if the issuing agency or
instrumentality does not meet its commitment.  The Fund will invest in
securities of U.S. government agencies and instrumentalities only if the
Manager is satisfied that the credit risk with respect to such
instrumentality is minimal.

o     U.S. Treasury Obligations. These include Treasury bills (maturities of
one year or less when issued), Treasury notes (maturities of more than one
year and up to 10 years), and Treasury bonds (maturities of more than 10
years). Treasury securities are backed by the full faith and credit of the
United States as to timely payments of interest and repayments of principal.
They also can include U. S. Treasury securities that have been "stripped" by
a Federal Reserve Bank, zero-coupon U.S. Treasury securities described above,
and Treasury Inflation-Protection Securities ("TIPS").

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.
Some are supported by the full faith and credit of the U.S. government, such
as Government National Mortgage Association pass-through mortgage
certificates (called "Ginnie Maes"). Some are supported by the right of the
issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association bonds ("Fannie Maes"). Others are
supported only by the credit of the entity that issued them, such as Federal
Home Loan Mortgage Corporation obligations ("Freddie Macs").

o     GNMA Certificates. The Government National Mortgage Association
("GNMA") is a wholly-owned corporate instrumentality of the United States
within the U.S. Department of Housing and Urban Development.  GNMA's
principal programs involve its guarantees of privately-issued securities
backed by pools of mortgages.  Ginnie Maes are debt securities representing
an interest in one or a pool of mortgages that are insured by the Federal
Housing Administration or the Farmers Home Administration or guaranteed by
the Veterans Administration

      The Ginnie Maes in which the Fund invests are of the "fully modified
pass-through" type. They provide that the registered holders of the Ginnie
Maes will receive timely monthly payments of the pro-rata share of the
scheduled principal payments on the underlying mortgages, whether or not
those amounts are collected by the issuers.  Amounts paid include, on a pro
rata basis, any prepayment of principal of such mortgages and interest (net
of servicing and other charges) on the aggregate unpaid principal balance of
the Ginnie Maes, whether or not the interest on the underlying mortgages has
been collected by the issuers.

      Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid under
any guaranty issued by GNMA as to such mortgage pools.  An opinion of an
Assistant Attorney General of the United States, dated December 9, 1969,
states that such guaranties "constitute general obligations of the United
States backed by its full faith and credit."  GNMA is empowered to borrow
from the United States Treasury to the extent necessary to make any payments
of principal and interest required under those guaranties.

      Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to
the extent of payments received by the issuers on account of such mortgages,
Ginnie Maes do not constitute a liability of those issuers, nor do they
evidence any recourse against those issuers. Recourse is solely against
GNMA.  Holders of Ginnie Maes (such as the Fund) have no security interest in
or lien on the underlying mortgages.

o     Mortgage-Related U.S. Government Securities. These include interests in
pools of residential or commercial mortgages, in the form of collateralized
mortgage obligations ("CMOs") and other "pass-through" mortgage securities.
CMOs that are U.S. government securities have collateral to secure payment of
interest and principal. They may be issued in different series with different
interest rates and maturities. The collateral is either in the form of
mortgage pass-through certificates issued or guaranteed by a U.S. agency or
instrumentality or
mortgage loans insured by a U.S. government agency. The Fund can have
significant amounts of its assets invested in mortgage related U.S.
government securities.

      The prices and yields of CMOs are determined, in part, by assumptions
about the cash flows from the rate of payments of the underlying mortgages.
Changes in interest rates may cause the rate of expected prepayments of those
mortgages to change. In general, prepayments increase when general interest
rates fall and decrease when interest rates rise.

      If prepayments of mortgages underlying a CMO occur faster than expected
when interest rates fall, the market value and yield of the CMO will be
reduced. Additionally, the Fund may have to reinvest the prepayment proceeds
in other securities paying interest at lower rates, which could reduce the
Fund's yield.

      When interest rates rise rapidly, if prepayments occur more slowly than
expected, a short- or medium-term CMO can in effect become a long-term
security, subject to greater fluctuations in value. These are the prepayment
risks described above and can make the prices of CMOs very volatile when
interest rates change. The prices of longer-term debt securities tend to
fluctuate more than those of shorter-term debt securities. That volatility
will affect the Fund's share prices.

|X|   Commercial (Privately-Issued) Mortgage Related Securities. The Fund may
invest in commercial mortgage related securities issued by private entities.
Generally these are multi-class debt or pass through certificates secured by
mortgage loans on commercial properties. They are subject to the credit risk
of the issuer. These securities typically are structured to provide
protection to investors in senior classes from possible losses on the
underlying loans. They do so by having holders of subordinated classes take
the first loss if there are defaults on the underlying loans. They may also
be protected to some extent by guarantees, reserve funds or additional
collateralization mechanisms.

|X|   "Stripped" Mortgage Related Securities. The Fund may invest in stripped
mortgage-related securities that are created by segregating the cash flows
from underlying mortgage loans or mortgage securities to create two or more
new securities. Each has a specified percentage of the underlying security's
principal or interest payments. These are a form of derivative investment.

      Mortgage securities may be partially stripped so that each class
receives some interest and some principal. However, they may be completely
stripped. In that case all of the interest is distributed to holders of one
type of security, known as an "interest-only" security, or "I/O," and all of
the principal is distributed to holders of another type of security, known as
a "principal-only" security or "P/O." Strips can be created for pass through
certificates or CMOs.

      The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.  The market for some of these securities may be limited,
making it difficult for the Fund to dispose of its holdings at an acceptable
price.

|X|   Floating Rate and Variable Rate Obligations.  The interest rate on a
floating rate note is based on a stated prevailing market rate, such as a
bank's prime rate, the 91-day U.S. Treasury Bill rate, or some other
standard, and is adjusted automatically each time such rate is adjusted.  The
interest rate on a variable rate note is also based on a stated prevailing
market rate but is adjusted automatically at specified intervals of not less
than one year. Generally, the changes in the interest rate on such securities
reduce the fluctuation in their market value.  As interest rates decrease or
increase, the potential for capital appreciation or depreciation is less than
that for fixed-rate obligations of the same maturity. The Manager may
determine that an unrated floating rate or variable rate demand obligation
meets the Fund's quality standards by reason of being backed by a letter of
credit or guarantee issued by a bank that meets those quality standards.

      Some variable rate and floating rate obligations have a demand feature
that allows the Fund to tender the obligation to the issuer or a third party
prior to its maturity. The tender may be at par value plus accrued interest,
according to the terms of the obligations. Floating rate and variable rate
demand notes that have a stated maturity in excess of one year may have
features that permit the holder to recover the principal amount of the
underlying security at specified intervals not exceeding one year and upon no
more than 30 days' notice.  The issuer of that type of note normally has a
corresponding right in its discretion, after a given period, to prepay the
outstanding principal amount of the note plus accrued interest. Generally the
issuer must provide a specified number of days' notice to the holder.

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

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

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

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

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

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

|X|   Participation Interests.  The Fund may invest in participation
interests, subject to the Fund's limitation on investments in illiquid
investments.  A participation interest is an undivided interest in a loan
made by the issuing financial institution in the proportion that the buyers
participation interest bears to the total principal amount of the loan.  No
more than 5% of the Fund's net assets can be invested in participation
interests of the same borrower.  The issuing financial institution may have
no obligation to the Fund other than to pay the Fund the proportionate amount
of the principal and interest payments it receives.


      Participation interests are primarily dependent upon the
creditworthiness of the borrowing corporation, which is obligated to make
payments of principal and interest on the loan. There is a risk that a
borrower may have difficulty making payments.  If a borrower fails to pay
scheduled interest or principal payments, the Fund could experience a
reduction in its income. The value of that participation interest might also
decline, which could affect the net asset value of the Fund's shares. If the
issuing financial institution fails to perform its obligations under the
participation agreement, the Fund might incur costs and delays in realizing
payment and suffer a loss of principal and/or interest.

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

      In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an
agreed-upon future date. The resale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for the period
during which the repurchase agreement is in effect.  Approved vendors include
U.S. commercial banks, U.S. branches of foreign banks, or broker-dealers that
have been designated as primary dealers in government securities. They must
meet credit requirements set by the Manager from time to time.

      The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the
purchase. Repurchase agreements having a maturity beyond seven days are
subject to the Fund's limits on holding illiquid investments. The Fund will
not enter into a repurchase agreement that causes more than 10% of its net
assets to be subject to repurchase agreements having a maturity beyond seven
days. There is no limit on the amount of the Fund's net assets that may be
subject to repurchase agreements having maturities of seven days or less.

      Repurchase agreements, considered "loans" under the Investment Company
Act of 1940 ("Investment Company Act"), are collateralized by the underlying
security.  The Fund's repurchase agreements require that at all times while
the repurchase agreement is in effect, the value of the collateral must equal
or exceed the repurchase price to fully collateralize the repayment
obligation. However, if the vendor fails to pay the resale price on the
delivery date, the Fund may incur costs in disposing of the collateral and
may experience losses if there is any delay in its ability to do so. The
Manager will monitor the vendor's creditworthiness to confirm that the vendor
is financially sound and will continuously monitor the collateral's value.

      Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission (the "SEC"), the Fund, along with other affiliated entities
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.

Illiquid and Restricted Securities.  Under the policies and procedures
established by the Fund's Board of Trustees, the Manager determines the
liquidity of certain of the Fund's investments. To enable the Fund to sell
its holdings of a restricted security not registered under the Securities Act
of 1933, the Fund may have to cause those securities to be registered.  The
expenses of registering restricted securities may be negotiated by the Fund
with the issuer at the time the Fund buys the securities. When the Fund must
arrange registration because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell
the security and the time the security is registered so that the Fund could
sell it. The Fund would bear the risks of any downward price fluctuation
during that period.

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

      The Fund has limitations that apply to purchases of restricted
securities, as stated in the Prospectus. Those percentage restrictions do not
limit purchases of restricted securities that are eligible for sale to
qualified institutional purchasers under Rule 144A of the Securities Act of
1933, if those securities have been determined to be liquid by the Manager
under Board-approved guidelines. Those guidelines take into account the
trading activity for such securities and the availability of reliable pricing
information, among other factors.  If there is a lack of trading interest in
a particular Rule 144A security, the Fund's holdings of that security may be
considered to be illiquid.

      Illiquid securities include repurchase agreements maturing in more than
seven days and participation interests that do not have puts exercisable
within seven days.

|X|   Forward Rolls. The Fund can enter into "forward roll" transactions with
respect to mortgage related securities. In this type of transaction, the Fund
sells a mortgage related security to a buyer and simultaneously agrees to
repurchase a similar security (the same type of security having the same
coupon and maturity) at a later date at a set price. The securities that are
repurchased will have the same interest rate as the securities that are sold,
but typically will be collateralized by different pools of mortgages (with
different prepayment histories) than the securities that have been sold.
Proceeds from the sale are invested in short-term instruments, such as
repurchase agreements. The income from those investments, plus the fees from
the forward roll transaction, are expected to generate income to the Fund in
excess of the yield on the securities that have been sold.

      The Fund will only enter into "covered" rolls. To assure its future
payment of the purchase price, the Fund will identify on its books liquid
assets in an amount equal to the payment obligation under the roll.

      These transactions have risks. During the period between the sale and
the repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities that have been sold or repurchased. It
is possible that the market value of the securities the Fund sells may
decline below the price at which the Fund is obligated to repurchase
securities.

|X|   Investments in Equity Securities. Under normal market conditions the
Fund can invest up to 20% of its assets in securities other than debt
securities, including equity securities of both foreign and U.S. companies.
However, it does not anticipate investing significant amounts of its assets
in these securities as part of its normal investment strategy. Equity
securities include common stocks, preferred stocks, rights and warrants, and
securities convertible into common stock. The Fund's investments can include
stocks of companies in any market capitalization range, if the Manager
believes the investment is consistent with the Fund's objectives of total
return and income. Certain equity securities may be selected not only for
their appreciation possibilities but because they may provide dividend income.

o     Risks of Investing in Stocks. Stocks fluctuate in price, and their
short-term volatility at times may be great. To the extent that the Fund
invests in equity securities, the value of the Fund's portfolio will be
affected by changes in the stock markets. Market risk can affect the Fund's
net asset values per share, which will fluctuate as the values of the Fund's
portfolio securities change.  The prices of individual stocks do not all move
in the same direction uniformly or at the same time. Different stock markets
may behave differently from each other.

      Other factors can affect a particular stock's price, such as poor
earnings reports by the issuer, loss of major customers, major litigation
against the issuer, or changes in government regulations affecting the issuer
or its industry. The Fund can invest in securities of large companies and
mid-size companies, but may also buy stocks of small companies, which may
have more volatile stock prices than large companies.

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

      While some convertible securities are a form of debt security, in many
cases their conversion feature (allowing conversion into equity securities)
causes them to be regarded by the Manager more as "equity equivalents."  As a
result, the rating assigned to the security has less impact on the Manager's
investment decision than in the case of non-convertible debt fixed income
securities.

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

(1)   whether, at the option of the investor, the convertible security can be
         exchanged for a fixed number of shares of common stock of the
         issuer,
(2)   whether the issuer of the convertible securities has restated its
         earnings per share of common stock on a fully diluted basis
         (considering the effect of conversion of the convertible
         securities), and
(3)   the extent to which the convertible security may be a defensive "equity
         substitute," providing the ability to participate in any
         appreciation in the price of the issuer's common stock.
o     Rights and Warrants.  The Fund may invest up to 5% of its total assets
in warrants or rights. That limit does not apply to warrants and rights the
Fund has acquired as part of units of securities or that are attached to
other securities that the Fund buys. The Fund does not expect that it will
have significant investments in warrants and rights.

      Warrants basically are options to purchase equity securities at
specific prices valid for a specific period of time.  Their prices do not
necessarily move parallel to the prices of the underlying securities.  Rights
are similar to warrants, but normally have a short duration and are
distributed directly by the issuer to its shareholders.  Rights and warrants
have no voting rights, receive no dividends and have no rights with respect
to the assets of the issuer.

|X|   Loans of Portfolio Securities.  The Fund may lend its portfolio
securities pursuant to the Securities Lending Agreement (the "Securities
Lending Agreement") with JP Morgan Chase, subject to the restrictions
stated in the Prospectus. The Fund will lend such portfolio securities to
attempt to increase the Fund's income. Under the Securities Lending
Agreement and applicable regulatory requirements (which are subject to
change), the loan collateral must, on each business day, be at least equal
to the value of the loaned securities and must consist of cash, bank
letters of credit or securities of the U.S. government (or its agencies or
instrumentalities), or other cash equivalents in which the Fund is
permitted to invest.  To be acceptable as collateral, letters of credit
must obligate a bank to pay to JP Morgan Chase, as agent, amounts demanded
by the Fund if the demand meets the terms of the letter.  Such terms of
the letter of credit and the issuing bank must be satisfactory to JP
Morgan Chase and the Fund.  The Fund will receive, pursuant to the
Securities Lending Agreement, 80% of all annual net income (i.e., net of
rebates to the Borrower) from securities lending transactions. JP Morgan
Chase has agreed, in general, to guarantee the obligations of borrowers to
return loaned securities and to be responsible for expenses relating to
securities lending. The Fund will be responsible, however, for risks
associated with the investment of cash collateral, including the risk that
the issuer of the security in which the cash collateral has been invested
defaults.  The Securities Lending Agreement may be terminated by either JP
Morgan Chase or the Fund on 30 days' written notice. The terms of the
Fund's loans must also meet applicable tests under the Internal Revenue
Code and permit the Fund to reacquire loaned securities on five business
days' notice or in time to vote on any important matter.

|X|   Borrowing for Leverage.  The fund may borrow for leverage as described
below under "Investment Restrictions." 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 values per share might fluctuate more
than that of funds that do not borrow. Currently, the Fund does not
contemplate using this technique in the next year but if it does so, it
will not likely be to a substantial degree.

|X|   Asset-Backed Securities.  Asset-backed securities are fractional
interests in pools of assets, typically accounts receivable or consumer
loans. They are issued by trusts or special-purpose corporations. They are
similar to mortgage-backed securities, described above, and are backed by a
pool of assets that consist of obligations of individual borrowers. The
income from the pool is passed through to the holders of participation
interest in the pools. The pools may offer a credit enhancement, such as a
bank letter of credit, to try to reduce the risks that the underlying debtors
will not pay their obligations when due. However, the enhancement, if any,
might not be for the full par value of the security.  If the enhancement is
exhausted and any required payments of principal are not made, the Fund could
suffer losses on its investment or delays in receiving payment.

      The value of an asset-backed security is affected by changes in the
market's perception of the asset backing the security, the creditworthiness
of the servicing agent for the loan pool, the originator of the loans, or the
financial institution providing any credit enhancement, and is also affected
if any credit enhancement has been exhausted. The risks of investing in
asset-backed securities are ultimately related to payment of consumer loans
by the individual borrowers. As a purchaser of an asset-backed security, the
Fund would generally have no recourse to the entity that originated the loans
in the event of default by a borrower. The underlying loans are subject to
prepayments, which may shorten the weighted average life of asset-backed
securities and may lower their return, in the same manner as in the case of
mortgage-backed securities and CMOs, described above. Unlike mortgage-backed
securities, asset-backed securities typically do not have the benefit of a
security interest in the underlying collateral.

|X|   Bank Obligations and Securities That Are Secured By Them.  The Fund can
invest in bank obligations, including time deposits, certificates of deposit,
and bankers' acceptances. They must be either obligations of a domestic bank
with total assets of at least $1 billion or obligations of a foreign bank
with total assets of at least U.S. $1 billion. The Fund may also invest in
instruments secured by bank obligations (for example, debt which is
guaranteed by the bank). For purposes of this policy, the term "bank"
includes commercial banks, savings banks, and savings and loan associations
that may or may not be members of the Federal Deposit Insurance Corporation.

      Time deposits are non-negotiable deposits in a bank for a specified
period of time at a stated interest rate. They may or may not be subject to
withdrawal penalties. However, time deposits that are subject to withdrawal
penalties, other than those maturing in seven days or less, are subject to
the limitation on investments by the Fund in illiquid investments.

      Bankers' acceptances are marketable short-term credit instruments used
to finance the import, export, transfer or storage of goods.  They are deemed
"accepted" when a bank guarantees their payment at maturity.

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


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

      Other derivative investments the Fund can use include "debt
exchangeable for common stock" of an issuer or "equity-linked debt
securities" of an issuer.  At maturity, the debt security is exchanged for
common stock of the issuer or it is payable in an amount based on the price
of the issuer's common stock at the time of maturity.  Both alternatives
present a risk that the amount payable at maturity will be less than the
principal amount of the debt because the price of the issuer's common stock
might not be as high as the Manager expected.

o     Credit Derivatives. The Fund may enter into credit default swaps, both
directly ("unfunded swaps") and indirectly in the form of a swap embedded
within a structured note ("funded swaps"), to protect against the risk that a
security will default.  Unfunded and funded credit default swaps may be on a
single security, or on a basket of securities. The Fund pays a fee to enter
into the swap and receives a fixed payment during the life of the swap.  The
Fund may take a short position in the credit default swap (also known as
"buying credit protection"), or may take a long position in the credit
default swap note (also known as "selling credit protection").

      The Fund would take a short position in a credit default swap (the
"unfunded swap") against a long portfolio position to decrease exposure to
specific high yield issuers.  If the short credit default swap is against a
corporate issue, the Fund must own that corporate issue. However, if the
short credit default swap is against sovereign debt, the Fund may own either:
(i) the reference obligation, (ii) any sovereign debt of that foreign
country, or (iii) sovereign debt of any country that the Manager determines
is closely correlated as an inexact bona fide hedge.

      If the Fund takes a short position in the credit default swap, and if
there is a credit event (including bankruptcy, failure to timely pay interest
or principal, or a restructuring), the Fund will deliver the defaulted bonds
and the swap counterparty will pay the par amount of the bonds.  An
associated risk is adverse pricing when purchasing bonds to satisfy the
delivery obligation.  If the swap is on a basket of securities, the notional
amount of the swap is reduced by the par amount of the defaulted bond, and
the fixed payments are then made on the reduced notional amount.

      Taking a long position in the credit default swap note (i.e.,
purchasing the "funded swap") would increase the Fund's exposure to specific
high yield corporate issuers.  The goal would be to increase liquidity in
that market sector via the swap note and its associated increase in the
number of trading instruments, the number and type of market participants,
and market capitalization.


      If the Fund takes a long position in the credit default swap note, if
there is a credit event the Fund will pay the par amount of the bonds and the
swap counterparty will deliver the bonds.   If the swap is on a basket of
securities, the notional amount of the swap is reduced by the par amount of
the defaulted bond, and the fixed payments are then made on the reduced
notional amount.

      The Fund will invest no more than 25% of its total assets in "unfunded"
credit default swaps.  The Fund will limit its investments in "funded" credit
default swap notes to no more than 10% of its total assets.

      Other risks of credit default swaps include the cost of paying for
credit protection if there are no credit events, pricing transparency when
assessing the cost of a credit default swap, counterparty risk, and the need
to fund the delivery obligation (either cash or the defaulted bonds,
depending on whether the Fund is long or short the swap, respectively).

|X|   Hedging.  Although the Fund does not anticipate the extensive use of
hedging instruments, the Fund can use hedging instruments. It is not
obligated to use them in seeking its objectives. To attempt to protect
against declines in the market value of the Fund's portfolio, to permit the
Fund to retain unrealized gains in the value of portfolio securities which
have appreciated, or to facilitate selling securities for investment reasons,
the Fund could:
o     sell futures contracts,
o     buy puts on such futures or on securities, or
o     write covered calls on securities or futures.  Covered calls may also
            be used to increase the Fund's income, but the Manager does not
            expect to engage extensively in that practice.

      The Fund can use hedging to establish a position in the securities
market as a temporary substitute for purchasing particular securities. In
that case the Fund would normally seek to purchase the securities and then
terminate that hedging position. The Fund might also use this type of hedge
to attempt to protect against the possibility that its portfolio securities
would not be fully included in a rise in value of the market. To do so the
Fund could:
o     buy futures, or
o     buy calls on such futures or on securities.

      The Fund's strategy of hedging with futures and options on futures will
be incidental to the Fund's activities in the underlying cash market.  The
particular hedging instruments the Fund can use are described below.  The
Fund may employ new hedging instruments and strategies when they are
developed, if those investment methods are consistent with the Fund's
investment objectives and are permissible under applicable regulations
governing the Fund.

o     Futures.  The Fund can buy and sell futures contracts that relate to
(1) broadly-based bond or stock indices (these are referred to as "financial
futures"), (2) commodities (these are referred to as "commodity futures"),
(3) debt securities (these are referred to as "interest rate futures"), and
(4) foreign currencies (these are referred to as "forward contracts").

      A broadly-based stock index is used as the basis for trading stock
index futures. They may in some cases be based on stocks of issuers in a
particular industry or group of industries. A stock index assigns relative
values to the securities included in the index and its value fluctuates in
response to the changes in value of the underlying securities. A stock index
cannot be purchased or sold directly. Bond index futures are similar
contracts based on the future value of the basket of securities that comprise
the index. These contracts obligate the seller to deliver, and the purchaser
to take, cash to settle the futures transaction. There is no delivery made of
the underlying securities to settle the futures obligation. Either party may
also settle the transaction by entering into an offsetting contract.

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

      The Fund can 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 Fund may purchase and sell commodity futures contracts, options
on futures contracts and options and futures on commodity indices with
respect to these five main commodity groups and the individual commodities
within each group, as well as other types of commodities.

      No payment is paid or received by the Fund on the purchase or sale of a
future.  Upon entering into a futures transaction, the Fund will be required
to deposit an initial margin payment with the futures commission merchant
(the "futures broker").  Initial margin payments will be deposited with the
Fund's custodian bank in an account registered in the futures broker's name.
However, the futures broker can gain access to that account only under
specified conditions.  As the future is marked to market (that is, its value
on the Fund's books is changed) to reflect changes in its market value,
subsequent margin payments, called variation margin, will be paid to or by
the futures broker daily.

      At any time prior to expiration of the future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be
paid by or released to the Fund.  Any loss or gain on the future is then
realized by the Fund for tax purposes.  All futures transactions are effected
through a clearinghouse associated with the exchange on which the contracts
are traded.

o     Put and Call Options.  The Fund can buy and sell certain kinds of put
options ("puts") and call options ("calls"). The Fund can buy and sell
exchange-traded and over-the-counter put and call options, including index
options, securities options, currency options, options on commodities
indices, and options on the other types of futures described above.

o     Writing Covered Call Options.  The Fund may write (that is, sell)
covered calls. If the Fund sells a call option, it must be covered.  That
means the Fund must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may be covered by
identifying liquid assets on the Fund's books to enable the Fund to satisfy
its obligations if the call is exercised.  Up to 50% of the Fund's total
assets may be subject to calls the Fund writes.

      When the Fund writes a call on a security, it receives cash (a
premium). The Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may
differ from the market price of the underlying security.  The Fund has the
risk of loss that the price of the underlying security may decline during the
call period. That risk may be offset to some extent by the premium the Fund
receives. If the value of the investment does not rise above the call price,
it is likely that the call will lapse without being exercised. In that case
the Fund would keep the cash premium and the investment.

      When the Fund writes a call on an index, it receives cash (a premium).
If the buyer of the call exercises it, the Fund will pay an amount of cash
equal to the difference between the closing price of the call and the
exercise price, multiplied by a specified multiple that determines the total
value of the call for each point of difference.  If the value of the
underlying investment does not rise above the call price, it is likely that
the call will lapse without being exercised.  In that case, the Fund would
keep the cash premium.

      The Fund's custodian, or a securities depository acting for the
custodian, will act as the Fund's escrow agent, through the facilities of the
Options Clearing Corporation ("OCC"), as to the investments on which the Fund
has written calls traded on exchanges or as to other acceptable escrow
securities. In that way, no margin will be required for such transactions.
OCC will release the securities on the expiration of the option or when the
Fund enters into a closing transaction.

      When the Fund writes an over-the-counter ("OTC") option, it will enter
into an arrangement with a primary U.S. government securities dealer which
will establish a formula price at which the Fund will have the absolute right
to repurchase that OTC option.  The formula price will generally be based on
a multiple of the premium received for the option, plus the amount by which
the option is exercisable below the market price of the underlying security
(that is, the option is "in the money"). When the Fund writes an OTC option,
it will treat as illiquid (for purposes of its restriction on holding
illiquid securities) the mark-to-market value of any OTC option it holds,
unless the option is subject to a buy-back agreement by the executing broker.

      To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction."  The Fund
will then realize a profit or loss, depending upon whether the net of the
amount of the option transaction costs and the premium received on the call
the Fund wrote is more or less than the price of the call the Fund purchases
to close out the transaction.  The Fund may realize a profit if the call
expires unexercised, because the Fund will retain the underlying security and
the premium it received when it wrote the call.  Any such profits are
considered short-term capital gains for federal income tax purposes, as are
the premiums on lapsed calls. When distributed by the Fund they are taxable
as ordinary income.  If the Fund cannot effect a closing purchase transaction
due to the lack of a market, it will have to hold the callable securities
until the call expires or is exercised.

      The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at
the time the call is written, the Fund must cover the call by identifying an
equivalent dollar amount of liquid assets on the Fund's books.  The Fund will
identify additional liquid assets on the Fund's books if the value of the
identified assets drops below 100% of the current value of the future.
Because of this segregation requirement, in no circumstances would the Fund's
receipt of an exercise notice as to that future require the Fund to deliver a
futures contract. It would simply put the Fund in a short futures position,
which is permitted by the Fund's hedging policies.

o     Writing Put Options.  The Fund can sell put options on securities,
broadly-based securities indices, foreign currencies, options on commodities
indices and futures. A put option on securities gives the purchaser the right
to sell, and the writer the obligation to buy, the underlying investment at
the exercise price during the option period.  The Fund will not write puts
if, as a result, more than 50% of the Fund's net assets would be required to
be identified to cover such put options.

      If the Fund writes a put, the put must be covered by liquid assets
identified on the Fund's books. The premium the Fund receives from writing a
put represents a profit, as long as the price of the underlying investment
remains equal to or above the exercise price of the put.  However, he Fund
also assumes the obligation during the option period to buy the underlying
investment from the buyer of the put at the exercise price, even if the value
of the investment falls below the exercise price.

      If a put the Fund has written expires unexercised, the Fund realizes a
gain in the amount of the premium less the transaction costs incurred.  If
the put is exercised, the Fund must fulfill its obligation to purchase the
underlying investment at the exercise price. That price will usually exceed
the market value of the investment at that time.  In that case, the Fund may
incur a loss if it sells the underlying investment. That loss will be equal
to the sum of the sale price of the underlying investment and the premium
received minus the sum of the exercise price and any transaction costs the
Fund incurred.

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

      As long as the Fund's obligation as the put writer continues, it may be
assigned an exercise notice by the broker-dealer through which the put was
sold. That notice will require the Fund to take delivery of the underlying
security and pay the exercise price.  The Fund has no control over when it
may be required to purchase the underlying security, since it may be assigned
an exercise notice at any time prior to the termination of its obligation as
the writer of the put.  That obligation terminates upon expiration of the
put. It may also terminate if, before it receives an exercise notice, the
Fund effects a closing purchase transaction by purchasing a put of the same
series as it sold.  Once the Fund has been assigned an exercise notice, it
cannot effect a closing purchase transaction.

      The Fund may decide to effect a closing purchase transaction to realize
a profit on an outstanding put option it has written or to prevent the
underlying security from being put. Effecting a closing purchase transaction
will also permit the Fund to write another put option on the security, or to
sell the security and use the proceeds from the sale for other investments.
The Fund will realize a profit or loss from a closing purchase transaction
depending on whether the cost of the transaction is less or more than the
premium received from writing the put option.  Any profits from writing puts
are considered short-term capital gains for federal tax purposes, and when
distributed by the Fund, are taxable as ordinary income.

o     Purchasing Calls and Puts.  The Fund can purchase calls only on
securities, broadly-based securities indices, foreign currencies, options on
commodities indices and futures. It may do so to protect against the
possibility that the Fund's portfolio will not participate in an anticipated
rise in the securities market. When the Fund buys a call (other than in a
closing purchase transaction), it pays a premium. The Fund then has the right
to buy the underlying investment from a seller of a corresponding call on the
same investment during the call period at a fixed exercise price.

      The Fund benefits only if it sells the call at a profit or if, during
the call period, the market price of the underlying investment is above the
sum of the call price plus the transaction costs and the premium paid for the
call and the Fund exercises the call.  If the Fund does not exercise the call
or sell it (whether or not at a profit), the call will become worthless at
its expiration date. In that case, the Fund will have paid the premium but
lost the right to purchase the underlying investment.

      The Fund can buy puts only on securities, broadly-based securities
indices, foreign currencies, options on commodities indices and futures,
whether or not it owns the underlying investment. When the Fund purchases a
put, it pays a premium and, except as to puts on indices, has the right to
sell the underlying investment to a seller of a put on a corresponding
investment during the put period at a fixed exercise price.

      Buying a put on an investment the Fund does not own (such as an index
or future) permits the Fund either to resell the put or to buy the underlying
investment and sell it at the exercise price. The resale price will vary
inversely to the price of the underlying investment. If the market price of
the underlying investment is above the exercise price and, as a result, the
put is not exercised, the put will become worthless on its expiration date.

      Buying a put on securities or futures the Fund owns enables the Fund to
attempt to protect itself during the put period against a decline in the
value of the underlying investment below the exercise price by selling the
underlying investment at the exercise price to a seller of a corresponding
put.  If the market price of the underlying investment is equal to or above
the exercise price and, as a result, the put is not exercised or resold, the
put will become worthless at its expiration date. In that case, the Fund will
have paid the premium but lost the right to sell the underlying investment.
However, the Fund may sell the put prior to its expiration. That sale may or
may not be at a profit.

      When the Fund purchases a call or put on an index or future, it pays a
premium, but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in
question (and thus on price movements in the securities market generally)
rather than on price movements in individual securities or futures contracts.

      The Fund may buy a call or put only if, after the purchase, the value
of all call and put options held by the Fund will not exceed 5% of the Fund's
total assets.

o     Buying and Selling Options on Foreign Currencies.  The Fund can buy and
sell calls and puts on foreign currencies.  They include puts and calls that
trade on a securities or commodities exchange or in the over-the-counter
markets or are quoted by major recognized dealers in such options.  The Fund
could use these calls and puts to try to protect against declines in the
dollar value of foreign securities and increases in the dollar cost of
foreign securities the Fund wants to acquire.

      If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased
cost of those securities may be partially offset by purchasing calls or
writing puts on that foreign currency.  If the Manager anticipates a decline
in the dollar value of a foreign currency, the decline in the dollar value of
portfolio securities denominated in that currency might be partially offset
by writing calls or purchasing puts on that foreign currency. However, the
currency rates could fluctuate in a direction adverse to the Fund's position.
The Fund will then have incurred option premium payments and transaction
costs without a corresponding benefit.

      A call the Fund writes on a foreign currency is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute
and immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration held in an
identified account by its custodian bank) upon conversion or exchange of
other foreign currency held in its portfolio.

      The Fund could write a call on a foreign currency to provide a hedge
against a decline in the U.S. dollar value of a security which the Fund owns
or has the right to acquire and which is denominated in the currency
underlying the option. That decline might be one that occurs due to an
expected adverse change in the exchange rate. In those circumstances, the
Fund covers the option by maintaining cash, U.S. government securities or
other liquid, high grade debt securities in an amount equal to the exercise
price of the option, in an identified account with the Fund's custodian bank.

o     Risks of Hedging with Options and Futures.  The use of hedging
instruments requires special skills and knowledge of investment techniques
that are different than what is required for normal portfolio management.  If
the Manager uses a hedging instrument at the wrong time or judges market
conditions incorrectly, hedging strategies may reduce the Fund's return. The
Fund could also experience losses if the prices of its futures and options
positions were not correlated with its other investments.

      The Fund's option activities could affect its portfolio turnover rate
and brokerage commissions. The exercise of calls written by the Fund might
cause the Fund to sell related portfolio securities, thus increasing its
turnover rate.  The exercise by the Fund of puts on securities will cause the
sale of underlying investments, increasing portfolio turnover.  Although the
decision whether to exercise a put it holds is within the Fund's control,
holding a put might cause the Fund to sell the related investments for
reasons that would not exist in the absence of the put.

      The Fund could pay a brokerage commission each time it buys a call or
put, sells a call or put, or buys or sells an underlying investment in
connection with the exercise of a call or put.  Those commissions could be
higher on a relative basis than the commissions for direct purchases or sales
of the underlying investments.  Premiums paid for options are small in
relation to the market value of the underlying investments. Consequently, put
and call options offer large amounts of leverage.  The leverage offered by
trading in options could result in the Fund's net asset values being more
sensitive to changes in the value of the underlying investment.

      If a covered call written by the Fund is exercised on an investment
that has increased in value, the Fund will be required to sell the investment
at the call price. It will not be able to realize any profit if the
investment has increased in value above the call price.

      An option position may be closed out only on a market that provides
secondary trading for options of the same series, and there is no assurance
that a liquid secondary market will exist for any particular option.  The
Fund might experience losses if it could not close out a position because of
an illiquid market for the future or option.  There is a risk in using short
hedging by selling futures or purchasing puts on broadly-based indices or
futures to attempt to protect against declines in the value of the Fund's
portfolio securities. The risk is that the prices of the futures or the
applicable index will correlate imperfectly with the behavior of the cash
prices of the Fund's securities.  For example, it is possible that while the
Fund has used hedging instruments in a short hedge, the market might advance
and the value of the securities held in the Fund's portfolio might decline.
If that occurred, the Fund would lose money on the hedging instruments and
also experience a decline in the value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree,
over time the value of a diversified portfolio of securities will tend to
move in the same direction as the indices upon which the hedging instruments
are based.

      The risk of imperfect correlation increases as the composition of the
Fund's portfolio diverges from the securities included in the applicable
index. To compensate for the imperfect correlation of movements in the price
of the portfolio securities being hedged and movements in the price of the
hedging instruments, the Fund might use hedging instruments in a greater
dollar amount than the dollar amount of portfolio securities being hedged. It
might do so if the historical volatility of the prices of the portfolio
securities being hedged is more than the historical volatility of the
applicable index.

      The ordinary spreads between prices in the cash and futures markets are
subject to distortions, due to differences in the nature of those markets.
First, all participants in the futures market are subject to margin deposit
and maintenance requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets.  Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or
taking delivery.  To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
markets.  Therefore, increased participation by speculators in the futures
market may cause temporary price distortions.

      The Fund can use hedging instruments to establish a position in the
securities markets as a temporary substitute for the purchase of individual
securities (long hedging) by buying futures and/or calls on such futures,
broadly-based indices or on securities. It is possible that when the Fund
does so the market might decline.  If the Fund then concludes not to invest
in securities because of concerns that the market might decline further or
for other reasons, the Fund will realize a loss on the hedging instruments
that is not offset by a reduction in the price of the securities purchased.

o     Forward Contracts.  Forward contracts are foreign currency exchange
contracts. They are used to buy or sell foreign currency for future delivery
at a fixed price.  The Fund uses them to "lock in" the U.S. dollar price of a
security denominated in a foreign currency that the Fund has bought or sold,
or to protect against possible losses from changes in the relative values of
the U.S. dollar and a foreign currency.  The Fund limits its exposure in
foreign currency exchange contracts in a particular foreign currency to the
amount of its assets denominated in that currency or a closely-correlated
currency.  The Fund may also use "cross-hedging" where the Fund hedges
against changes in currencies other than the currency in which a security it
holds is denominated.

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

      The Fund may use forward contracts to protect against uncertainty in
the level of future exchange rates.  The use of forward contracts does not
eliminate the risk of fluctuations in the prices of the underlying securities
the Fund owns or intends to acquire, but it does fix a rate of exchange in
advance. Although forward contracts may reduce the risk of loss from a
decline in the value of the hedged currency, at the same time they limit any
potential gain if the value of the hedged currency increases.

      When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent of the
dividend payments.  To do so, the Fund might enter into a forward contract
for the purchase or sale of the amount of foreign currency involved in the
underlying transaction, in a fixed amount of U.S. dollars per unit of the
foreign currency. This is called a "transaction hedge." The transaction hedge
will protect the Fund against a loss from an adverse change in the currency
exchange rates during the period between the date on which the security is
purchased or sold or on which the payment is declared, and the date on which
the payments are made or received.

      The Fund could also use forward contracts to lock in the U.S. dollar
value of portfolio positions. This is called a "position hedge."  When the
Fund believes that foreign currency might suffer a substantial decline
against the U.S. dollar, it might enter into a forward contract to sell an
amount of that foreign currency approximating the value of some or all of the
Fund's portfolio securities denominated in that foreign currency.  When the
Fund believes that the U.S. dollar could suffer a substantial decline against
a foreign currency, it could enter into a forward contract to buy that
foreign currency for a fixed dollar amount.  Alternatively, the Fund could
enter into a forward contract to sell a different foreign currency for a
fixed U.S. dollar amount if the Fund believes that the U.S. dollar value of
the foreign currency to be sold pursuant to its forward contract will fall
whenever there is a decline in the U.S. dollar value of the currency in which
portfolio securities of the Fund are denominated. That is referred to as a
"cross hedge."

      The Fund will cover its short positions in these cases by segregating
assets having a value equal to the aggregate amount of the Fund's commitment
under forward contracts.  The Fund will not enter into forward contracts or
maintain a net exposure to such contracts if the consummation of the
contracts would obligate the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency or another currency that is the subject of the
hedge.

      However, to avoid excess transactions and transaction costs, the Fund
may maintain a net exposure to forward contracts in excess of the value of
the Fund's portfolio securities or other assets denominated in foreign
currencies if the excess amount is "covered" by liquid securities denominated
in any currency. The cover must be at least equal at all times to the amount
of that excess.  As one alternative, the Fund may purchase a call option
permitting the Fund to purchase the amount of foreign currency being hedged
by a forward sale contract at a price no higher than the forward contract
price.  As another alternative, the Fund may purchase a put option permitting
the Fund to sell the amount of foreign currency subject to a forward purchase
contract at a price as high or higher than the forward contact price.

      The precise matching of the amounts under forward contracts and the
value of the securities involved generally will not be possible because the
future value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is
entered into and the date it is sold.  In some cases, the Manager might
decide to sell the security and deliver foreign currency to settle the
original purchase obligation. If the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver, the
Fund might have to purchase additional foreign currency on the "spot" (that
is, cash) market to settle the security trade. If the market value of the
security instead exceeds the amount of foreign currency the Fund is obligated
to deliver to settle the trade, the Fund might have to sell on the spot
market some of the foreign currency received upon the sale of the security.
There will be additional transaction costs on the spot market in those cases.
The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain.  Forward contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the Fund to
sustain losses on these contracts and to pay additional transactions costs.
The use of forward contracts in this manner might reduce the Fund's
performance if there are unanticipated changes in currency prices to a
greater degree than if the Fund had not entered into such contracts.

      At or before the maturity of a forward contract requiring the Fund to
sell a currency, the Fund might sell a portfolio security and use the sale
proceeds to make delivery of the currency. In the alternative the Fund might
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract. Under that contract the Fund will
obtain, on the same maturity date, the same amount of the currency that it is
obligated to deliver.  Similarly, the Fund might close out a forward contract
requiring it to purchase a specified currency by entering into a second
contract entitling it to sell the same amount of the same currency on the
maturity date of the first contract.  The Fund would realize a gain or loss
as a result of entering into such an offsetting forward contract under either
circumstance. The gain or loss will depend on the extent to which the
exchange rate or rates between the currencies involved moved between the
execution dates of the first contract and offsetting contract.

      The costs to the Fund of engaging in forward contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward contracts are
usually entered into on a principal basis, no brokerage fees or commissions
are involved.  Because these contracts are not traded on an exchange, the
Fund must evaluate the credit and performance risk of the counterparty under
each forward contract.

      Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis.  The Fund may convert foreign currency from time to
time, and will incur costs in doing so. Foreign exchange dealers do not
charge a fee for conversion, but they do seek to realize a profit based on
the difference between the prices at which they buy and sell various
currencies.  Thus, a dealer might offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange if the Fund
desires to resell that currency to the dealer.

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

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

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

o     Swaption Transactions. The Fund may enter into a swaption transaction,
which is a contract that grants the holder, in return for payment of the
purchase price (the "premium") of the option, the right, but not the
obligation, to enter into an interest rate swap at a preset rate within a
specified period of time, with the writer of the contract.  The writer of the
contract receives the premium and bears the risk of unfavorable changes in
the preset rate on the underlying interest rate swap.  Unrealized
gains/losses on swaptions are reflected in investment assets and investment
liabilities in the Fund's statement of financial condition.
o     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 and 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 Fund are subject to limitations
established by the option exchanges. The exchanges limit the maximum number
of options that may be written or held by a single investor or group of
investors acting in concert. Those limits apply regardless of whether the
options were written or purchased on the same or different exchanges or are
held in one or more accounts or through one or more different exchanges or
through one or more brokers.  Thus, the number of options that the Fund may
write or hold may be affected by options written or held by other entities,
including other investment companies having the same advisor as the Fund (or
an advisor that is an affiliate of the Fund's advisor).  The exchanges also
impose position limits on futures transactions.  An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.

      Under the Investment Company Act, when the Fund purchases a future, it
must maintain 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.

o     Tax Aspects of Hedging Instruments. Certain foreign currency exchange
contracts in which the Fund may invest are treated as "Section 1256
contracts" under the Internal Revenue Code.  In general, gains or losses
relating to Section 1256 contracts are characterized as 60% long-term and 40%
short-term capital gains or losses under the Code.  However, foreign currency
gains or losses arising from Section 1256 contracts that are forward
contracts generally are treated as ordinary income or loss.  In addition,
Section 1256 contracts held by the Fund at the end of each taxable year are
"marked-to-market," and unrealized gains or losses are treated as though they
were realized.  These contracts also may be marked-to-market for purposes of
determining the excise tax applicable to investment company distributions and
for other purposes under rules prescribed pursuant to the Internal Revenue
Code.  An election can be made by the Fund to exempt those transactions from
this marked-to-market treatment.

      Certain forward contracts the Fund enters into may result in
"straddles" for federal income tax purposes.  The straddle rules may affect
the character and timing of gains (or losses) recognized by the Fund on
straddle positions.  Generally, a loss sustained on the disposition of a
position making up a straddle is allowed only to the extent that the loss
exceeds any unrecognized gain in the offsetting positions making up the
straddle.  Disallowed loss is generally allowed at the point where there is
no unrecognized gain in the offsetting positions making up the straddle, or
the offsetting position is disposed of.

      Under the Internal Revenue Code, the following gains or losses are
treated as ordinary income or loss:
(1)   gains or losses attributable to fluctuations in exchange rates that
         occur between the time the Fund accrues interest or other
         receivables or accrues expenses or other liabilities denominated in
         a foreign currency and the time the Fund actually collects such
         receivables or pays such liabilities, and
(2)   gains or losses attributable to fluctuations in the value of a foreign
         currency between the date of acquisition of a debt security
         denominated in a foreign currency or foreign currency forward
         contracts and the date of disposition.

      Currency gains and losses are offset against market gains and losses on
each trade before determining a net "Section 988" gain or loss under the
Internal Revenue Code for that trade, which may increase or decrease the
amount of the Fund's investment income available for distribution to its
shareholders.

|X|   Temporary Defensive and Interim Investments.  When market, economic or
political conditions are unstable, or the Manager believes it is otherwise
appropriate to reduce holdings in stocks, the Fund can invest in a variety of
debt securities for defensive purposes. The Fund can also purchase these
securities for liquidity purposes to meet cash needs due to the redemption of
Fund shares, or to hold while waiting to invest cash received from the sale
of other portfolio securities. The Fund can buy:

o     high quality, short term money market instruments, including those
            issued by the U.S Treasury or other government obligations issued
            or guaranteed by the U. S. government or its instrumentalities or
            agencies,
o     commercial paper (short-term, unsecured, promissory notes of domestic
            or foreign companies) rated in the three top rating categories of
            a nationally recognized rating organization,
o     short-term debt obligations of corporate issuers, rated investment
            grade (rated at least Baa by Moody's or at least BBB by Standard
            & Poor's, or a comparable rating by another rating organization),
            or unrated securities judged by the Manager to have a comparable
            quality to rated securities in those categories,
o     certificates of deposit and bankers' acceptances of domestic and
            foreign banks and savings and loan associations, having total
            assets in excess of $1 billion, and
o     repurchase agreements.

      Short-term debt securities would normally be selected for defensive or
cash management purposes because they can normally be disposed of quickly,
are not generally subject to significant fluctuations in principal value and
their value will be less subject to interest rate risk than longer-term debt
securities.

Investment in Other Investment Companies. The 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, and
the following additional limitation: the Fund can not invest in the
securities of other registered 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.  For example, the Fund can invest in
Exchange-Traded Funds, which are typically open-end funds or unit investment
trusts, listed on a stock exchange.  The Fund might do so as a way of gaining
exposure to the segments of the equity or fixed-income markets represented by
the Exchange-Traded Funds' portfolio, at times when the Fund may not be able
to buy those portfolio securities directly. 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 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 Fund would be
subject to its ratable share of that investment company's expenses, including
its advisory and administration expenses.  The Fund does not anticipate
investing a substantial amount of its net assets in shares of other
investment companies.

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 objectives are fundamental policies. Other
policies described in the Prospectus or this Statement of Additional
Information are "fundamental" only if they are identified as such. The Fund's
Board of Trustees can change non-fundamental policies without shareholder
approval. However, significant changes to investment policies will be
described in supplements or updates to the Prospectus or this Statement of
Additional Information, as appropriate. The Fund's most significant
investment policies are described in the Prospectus.

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

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

o     The Fund cannot buy or sell real estate. However, the Fund can purchase
debt securities secured by real estate or interests in real estate or issued
by companies, including real estate investment trusts, which invest in real
estate or interests in real estate.

o     The Fund cannot underwrite securities of other companies. A permitted
exception is in case it is deemed to be an underwriter under the Securities
Act of 1933 when reselling any securities held in its own portfolio.

o     The Fund cannot 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 in excess of 33 1/3% of the value of its
total assets.  The Fund may borrow only from banks and/or affiliated
investment companies.  The Fund cannot make any investment at a time during
which its borrowings exceed 5% of the value of its total assets.  With
respect to this fundamental policy, the 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 Fund cannot concentrate investments. That means it cannot invest
25% or more of its total assets in any one industry. The Fund will not invest
25% or more of its total assets in government securities of any one foreign
company or in debt and equity securities issued by companies organized under
the laws of any one foreign country. Obligations of the U.S. government, its
agencies and instrumentalities are not considered to be part of an "industry"
for the purposes of this policy.

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

|X|   Does the Fund Have Additional Restrictions That Are Not "Fundamental"
Policies? The Fund has an additional operating policy which is stated below,
that is not "fundamental," and which can be changed by the Board of Trustees
without shareholder approval.

o     The Fund cannot invest in the securities of other registered 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.


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

Non-Diversification of the Fund's Investments.  The Fund is
"non-diversified," as defined in the Investment Company Act.  Funds that are
diversified have restrictions against investing too much of their assets in
the securities of any one "issuer."  That means that the Fund can invest more
of its assets in the securities of a single issuer than a fund that is
diversified.

      Being non-diversified poses additional investment risks, because if the
Fund invests more of its assets in fewer issuers, the value of its shares is
subject to greater fluctuations from adverse conditions affecting any one of
those issuers.  However, the Fund does limit its investments in the
securities of any one issuer to qualify for tax purposes as a "regulated
investment company" under the Internal Revenue Code.  By qualifying, it does
not have to pay federal income taxes if more than 90% of its earnings are
distributed to shareholders.  To qualify, the Fund must meet a number of
conditions.  First, not more than 25% of the market value of the Fund's total
assets may be invested in the securities of a single issuer.  Second, with
respect to 50% of the market value of its total assets, (1) no more than 5%
of the market value of its total assets may be invested in the securities of
a single issuer, and (2) the Fund must not own more than 10% of the
outstanding voting securities of a single issuer.  This is not a fundamental
policy.

How the Fund is Managed

Organization and History. The Fund is an open-end, non-diversified management
investment company with an unlimited number of authorized shares of
beneficial interest. The Fund was organized as a Massachusetts business trust
on February 28, 1995.

      The Fund is governed by a Board of Trustees, which is responsible for
protecting the interests of shareholders under Massachusetts law. The
Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager.

      Classes of Shares.  The Trustees  are  authorized,  without  shareholder
approval,  to create new  series and  classes  of  shares.  The  Trustees  may
reclassify  unissued shares of the Fund into  additional  series or classes of
shares.  The Trustees  also may divide or combine the shares of a class into a
greater  or  lesser  number  of  shares  without  changing  the  proportionate
beneficial  interest  of a  shareholder  in  the  Fund.  Shares  do  not  have
cumulative voting rights or preemptive or subscription  rights.  Shares may be
voted in person or by proxy at shareholder meetings.

      The Fund currently has five classes of shares: Class A, Class B, Class
C, Class N and Class Y.  All classes invest in the same investment
portfolio.  Only retirement plans may purchase Class N shares. Only certain
institutional investors may elect to purchase Class Y shares. Each class of
shares:
o     has its own dividends and distributions,
o     pays certain expenses which may be different for the different classes,
o     may have a different net asset value,
o     may have separate voting rights on matters in which interests of one
         class are different from interests of another class, and
o     votes as a class on matters that affect that class alone.

      Shares are freely transferable, and each share of each class has one
vote at shareholder meetings, with fractional shares voting proportionally on
matters submitted to the vote of shareholders.  Each share of the Fund
represents an interest in the Fund proportionately equal to the interest of
each other share of the same class.

      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 do so 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, whichever is less.
The Trustees may also take other action as permitted by the Investment
Company Act.

      Shareholder and Trustee Liability.  The Fund's Declaration of Trust
contains an express disclaimer of shareholder or Trustee liability for the
Fund's obligations. It also provides for indemnification and reimbursement of
expenses out of the Fund's property for any shareholder held personally
liable for its obligations.  The Declaration of Trust also states that upon
request, the Fund shall assume the defense of any claim made against a
shareholder for any act or obligation of the Fund and shall satisfy any
judgment on that claim.  Massachusetts law permits a shareholder of a
business trust (such as the Fund) to be held personally liable as a "partner"
under certain circumstances. However, the risk that a Fund shareholder will
incur financial loss from being held liable as a "partner" of the Fund is
limited to the relatively remote circumstances in which the Fund would be
unable to meet its obligations.

      The Fund's contractual arrangements state that any person doing
business with the Fund (and each shareholder of the Fund) agrees under its
Declaration of Trust to look solely to the assets of the Fund for
satisfaction of any claim or demand that may arise out of any dealings with
the Fund. Additionally, the Trustees shall have no personal liability to any
such person, to the extent permitted by law.

Board of Trustees 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. The Audit Committee is comprised solely of 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 held six meetings during the fiscal year ended September
30, 2004. The Audit Committee furnishes the Board with recommendations
regarding the selection of the Fund's independent auditors. Other main
functions of the Audit Committee 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)
maintaining a separate line of communication between the Fund's independent
auditors and its Independent Trustees; and (v) exercising all other functions
outlined in the Audit Committee Charter, including but not limited to
reviewing the independence of the Fund's independent auditors and the
pre-approval of the performance by the Fund's independent auditors of any
audit and non-audit service, including tax service, for the Fund and the
Manager and certain affiliates of the Manager that is not prohibited by the
Sarbanes-Oxley Act.


      The members of the Review Committee are Jon S. Fossel (Chairman),
Robert G. Avis, Sam Freedman, and Beverly Hamilton. The Review Committee held
six meetings during the fiscal year ended September 30, 2004. Among other
functions, the Review Committee reviews 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
and policies and procedures adopted by the Fund to comply with Investment
Company Act and other applicable law.

      The members of the  Governance  Committee are Robert Malone  (Chairman),
William Armstrong,  Beverly Hamilton and F. William Marshall,  Jr. Each member
of the  Committee is  independent,  meaning each person is not an  "interested
person" as defined in the  Investment  Company Act. The  Governance  Committee
was  established  in  August  2004 and did not hold any  meetings  during  the
Fund's  fiscal year ended  September  30, 2004.  The  Governance  Committee is
expected to consider general  governance  matters,  including a formal process
for shareholders to send  communications  to the Board and the  qualifications
of candidates for board  positions  including  consideration  of any candidate
recommended by shareholders.

      The Governance  Committee has not yet adopted a charter, but anticipates
that  it  will  do so by the end of this  calendar  year.  The  Committee  has
temporarily  adopted the  process  previously  adopted by the Audit  Committee
regarding   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 Committee in care of the Fund. The Committee
may  consider  such  persons  at such  time as it meets to  consider  possible
nominees.  The Committee,  however,  reserves sole discretion to determine the
candidates  for  trustees and  independent  trustees to recommend to the Board
and/or  shareholders and may identify candidates other than those submitted by
Shareholders.  The  Committee  may,  but need not,  consider  the  advice  and
recommendation  of the Manager and 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 of Trustees  of  Oppenheimer  the Fund,  or to an
individual  Trustee c/o the  Secretary  of the Fund at 6803 South  Tucson Way,
Centennial,  CO 80112 and may submit their  correspondence  electronically  at
www.opppenheimerfunds.com   under   the   caption   "contact   us."   If  your
- -------------------------
correspondence is intended for a particular Trustee,  please indicate the name
of the  Trustee for whom it is  intended.  The sender  should  indicate in the
address whether it is intended for the entire board, the Independent  Trustees
as a  group,  or to an  individual  Trustee.  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 are "Independent Trustees" under the Investment Company Act. 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 trustee or
director.

      The Fund's Trustees and officers and their positions held with the Fund
and length of service in such position(s) and their principal occupations and
business affiliations during the past five years are listed in the chart
below. The information for the Trustees also includes the dollar range of
shares of the Fund as well as the aggregate dollar range of shares
beneficially owned in any of the Oppenheimer funds overseen by the Trustees.
All of the Trustees are also trustees or directors of the following
Oppenheimer funds (except for Ms. Hamilton and Mr. Malone, who are not
Trustees of Oppenheimer Senior Floating Rate Fund) (referred to as "Board II
Funds"):

                                           Oppenheimer   Principal   Protected
Oppenheimer Cash Reserves                  Trust III
Oppenheimer Champion Income Fund           Oppenheimer Real Asset Fund
                                           Oppenheimer  Senior  Floating  Rate
Oppenheimer Capital Income Fund            Fund
Oppenheimer Equity Fund, Inc.              Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund                Oppenheimer Variable Account Funds
Oppenheimer International Bond Fund        Panorama Series Fund, Inc.
Oppenheimer Integrity Funds
Oppenheimer Limited-Term Government Fund   Centennial America Fund, L. P.
                                           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
Oppenheimer Principal Protected Trust II

      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  charges on Class A shares is
waived for that group because of the  economies of sales  efforts  realized by
the Distributor.

      Messrs. Gillespie, Miao, Murphy, Petersen, Steinmetz, Vottiero, Wixted
and Zack, and Mses. Bloomberg and Ives who are officers of the Fund,
respectively hold the same offices with one or more of the other Board II
Funds as with the Fund. As of October 29, 2004, the Trustees and officers of
the Fund, as a group, owned of record or beneficially less than 1% of each
class of shares of the Fund. The foregoing statement does not reflect
ownership of shares held of record by an employee benefit plan for employees
of the Manager, other than the shares beneficially owned under that plan by
the officers of the Fund listed above. In addition, each Independent Trustee
(and their immediate family members) do not own securities of either the
Manager or Distributor of the Board II Funds or any person directly or
indirectly controlling, controlled by or under common control with the
Manager or Distributor.

      The address of each Trustee in the chart below is 6803 South Tucson
Way, Centennial, CO 80112-3924. Each Trustee serves for an indefinite term,
until his or her resignation, retirement, death or removal.

- -------------------------------------------------------------------------------------
                                Independent Trustees
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Name,               Principal Occupation(s) During Past 5     Dollar     Aggregate
                                                                         Dollar
                                                                         Range Of
                                                                         Shares
                                                                         Beneficially
                                                                         Owned in
                    Years;                                    Range of   Any of the
Position(s) Held    Other Trusteeships/Directorships Held by  Shares     Oppenheimer
with Fund,          Trustee;                                  BeneficiallFunds
Length of Service,  Number of Portfolios in Fund Complex      Owned in   Overseen
Age                 Currently Overseen by Trustee             the Fund   by Trustee
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
                                                                As of December 31,
                                                                       2003
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
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 since 2003    Centennial  State Mortgage Company (since
and Trustee since   1994),   The  El  Paso  Mortgage  Company
1999                (since   1993),    Transland    Financial
Age: 67             Services,  Inc. (since 1997); Chairman of
                    the following  private  companies:  Great
                    Frontier  Insurance   (insurance  agency)
                    (since    1995),     Ambassador     Media
                    Corporation and Broadway  Ventures (since
                    1984);   a  director  of  the   following
                    public  companies:   Helmerich  &  Payne,
                    Inc.  (oil  and  gas  drilling/production
                    company)  (since 1992) and  UNUMProvident
                    (insurance  company)  (since  1991).  Mr.
                    Armstrong is also a  Director/Trustee  of
                    Campus   Crusade   for   Christ  and  the
                    Bradley  Foundation.  Formerly a director
                    of  the  following:   Storage  Technology
                    Corporation  (a  publicly-held   computer
                    equipment company)  (1991-February 2003),
                    and  International  Family  Entertainment
                    (television     channel)     (1992-1997),
                    Frontier Real Estate,  Inc.  (residential
                    real estate brokerage)  (1994-1999),  and
                    Frontier Title (title  insurance  agency)
                    (1995-June    1999);   a   U.S.   Senator
                    (January  1979-January 1991). Oversees 39
                    portfolios   in   the    OppenheimerFunds
                    complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert G. Avis,     Formerly,  Director and President of A.G. None       Over
Trustee since 1995  Edwards  Capital,  Inc.  (General Partner            $100,000
Age: 73             of private equity funds) (until  February
                    2001);  Chairman,   President  and  Chief
                    Executive   Officer   of   A.G.   Edwards
                    Capital,  Inc.  (until March 2000);  Vice
                    Chairman  and  Director of A.G.  Edwards,
                    Inc. and Vice Chairman of A.G.  Edwards &
                    Sons,   Inc.   (its   brokerage   company
                    subsidiary) (until March 1999);  Chairman
                    of A.G.  Edwards Trust Company and A.G.E.
                    Asset  Management   (investment  advisor)
                    (until  March   1999);   and  a  Director
                    (until  March  2000)  of A.G.  Edwards  &
                    Sons  and  A.G.  Edwards  Trust  Company.
                    Oversees    39    portfolios    in    the
                    OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
George C. Bowen,    Formerly   Assistant   Secretary   and  a $10,001-$50Over
Trustee since 1998  director  (December  1991-April  1999) of            $100,000
Age: 68             Centennial Asset Management  Corporation;
                    President,   Treasurer   and  a  director
                    (June   1989-April  1999)  of  Centennial
                    Capital   Corporation;   Chief  Executive
                    Officer  and a  director  of  MultiSource
                    Services,  Inc. (March  1996-April 1999).
                    Until April 1999 Mr.  Bowen held  several
                    positions  in  subsidiary  or  affiliated
                    companies  of the  Manager.  Oversees  39
                    portfolios   in   the    OppenheimerFunds
                    complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Edward L. Cameron,  A  member  of The  Life  Guard  of  Mount None       $50,001-$100,000
Trustee since 1999  Vernon,  George  Washington's home (since
Age: 66             June  2000).  Formerly  (March 2001 - May
                    2002)  Director of Genetic  ID, Inc.  and
                    its   subsidiaries   (a  privately   held
                    biotech   company);    a   partner   with
                    PricewaterhouseCoopers      LLP     (from
                    1974-1999)  (an   accounting   firm)  and
                    Chairman    (from    1994-1998),    Price
                    Waterhouse    LLP    Global    Investment
                    Management   Industry   Services   Group.
                    Oversees    39    portfolios    in    the
                    OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Jon S. Fossel,      Director  (since  February 1998) of Rocky Over       Over
Trustee since 1995  Mountain      Elk      Foundation      (a $1000,00   $100,000
Age: 62             not-for-profit  foundation);  a  director
                    (since  1997) of  Putnam  Lovell  Finance
                    (finance  company);   a  director  (since
                    June   2002)   of    UNUMProvident    (an
                    insurance  company).  Formerly a director
                    (October   1999-October   2003)  of  P.R.
                    Pharmaceuticals    (a   privately    held
                    company);  Chairman and a director (until
                    October  1996)  and  President  and Chief
                    Executive  Officer  (until  October 1995)
                    of   the   Manager;    President,   Chief
                    Executive  Officer and a director  (until
                    October 1995) of Oppenheimer  Acquisition
                    Corp.,  Shareholders  Services  Inc.  and
                    Shareholder   Financial  Services,   Inc.
                    Oversees    39    portfolios    in    the
                    OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Sam Freedman,       Director    of    Colorado    Uplift   (a $50,001-$10Over0
Trustee since 1996  non-profit   charity)  (since   September            $100,000
Age: 63             1984).  Formerly (until October 1994) Mr.
                    Freedman   held   several   positions  in
                    subsidiary  or  affiliated  companies  of
                    the Manager.  Oversees 38  portfolios  in
                    the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Beverly L.          Trustee of Monterey International         None       $10,001-$50,000
Hamilton,           Studies (an educational organization)
Trustee since 2002  (since February 2000); a director of The
Age: 58             California Endowment (a philanthropic
                    organization) (since April 2002) and of
                    Community Hospital of Monterey Peninsula
                    (educational organization) (since
                    February 2002); a director of America
                    Funds Emerging Markets Growth Fund
                    (since October 1991) (an investment
                    company); an advisor to Credit Suisse
                    First Boston's Sprout venture capital
                    unit. Mrs. Hamilton also is a member of
                    the investment committees of the
                    Rockefeller Foundation and of the
                    University of Michigan. Formerly,
                    Trustee of MassMutual Institutional
                    Funds (open-end investment company)
                    (1996-May 2004); a director of MML
                    Series Investment Fund (April 1989-May
                    2004) and MML Services (April 1987-May
                    2004) (investment companies); member of
                    the investment committee (2000-2003) of
                    Hartford Hospital; an advisor
                    (2000-2003) to Unilever (Holland)'s
                    pension fund; and President (February
                    1991-April 2000) of ARCO Investment
                    Management Company. Oversees 38
                    portfolios in the OppenheimerFunds
                    complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert J. Malone,   Chairman, Chief Executive Officer and     $50,000-$10Over0
Trustee since 2002  Director of Steele Street State Bank (a              $100,000
Age: 60             commercial banking entity) (since August
                    2003); director of Colorado UpLIFT (a
                    non-profit organization) (since 1986);
                    trustee (since 2000) of the Gallagher
                    Family Foundation (non-profit
                    organization). Formerly, Chairman of
                    U.S. Bank-Colorado (a subsidiary of U.S.
                    Bancorp and formerly Colorado National
                    Bank,) (July 1996-April 1, 1999), a
                    director of: Commercial Assets, Inc. (a
                    REIT) (1993-2000), Jones Knowledge, Inc.
                    (a privately held company) (2001-July
                    2004) and U.S. Exploration, Inc. (oil
                    and gas exploration) (1997-February
                    2004). Oversees 38 portfolios in the
                    OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
F. William          Trustee   of   MassMutual   Institutional $50,001-$10Over0
Marshall, Jr.,      Funds   (since   1996)  and  MML   Series            $100,000
Trustee since 2000  Investment   Fund   (since   1987)  (both
Age: 62             open-end  investment  companies)  and the
                    Springfield     Library     and    Museum
                    Association  (since 1995)  (museums)  and
                    the    Community    Music    School    of
                    Springfield  (music school) (since 1996);
                    Trustee  (since  1987),  Chairman  of the
                    Board  (since  2003) and  Chairman of the
                    investment  committee  (since  1994)  for
                    the    Worcester    Polytech    Institute
                    (private  university);  and President and
                    Treasurer  (since  January  1999)  of the
                    SIS  Fund  (a  private   not  for  profit
                    charitable  fund).  Formerly,  member  of
                    the    investment    committee   of   the
                    Community     Foundation    of    Western
                    Massachusetts  (1998  -  2003);  Chairman
                    (January  1999-July 1999) of SIS & Family
                    Bank,   F.S.B.    (formerly   SIS   Bank)
                    (commercial  bank);  and  Executive  Vice
                    President  (January  1999-July  1999)  of
                    Peoples Heritage  Financial  Group,  Inc.
                    (commercial     bank).     Oversees    39
                    portfolios   in   the    OppenheimerFunds
                    complex.
- -------------------------------------------------------------------------------------

      The address of Mr. Murphy in the chart below is Two World Financial
Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr.
Murphy serves for an indefinite term, until his resignation, retirement,
death or removal.

- -------------------------------------------------------------------------------------
                           Interested Trustee and Officer
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Name,              Principal Occupation(s) During Past 5      Dollar     Aggregate
                                                                         Dollar
                                                                         Range Of
                                                                         Shares
                   Years;                                     Range of   Beneficially
Position(s) Held   Other Trusteeships/Directorships Held by   Shares     Owned in
with Fund,         Trustee;                                   BeneficiallAny of the
Length of Service, Number of Portfolios in Fund Complex       Owned in   Oppenheimer
Age                Currently Overseen by Trustee              the Fund   Funds
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
                                                                As of December 31,
                                                                       2003
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
John V. Murphy,    Chairman, Chief Executive Officer and      $10,001-$50Over
President and      director (since June 2001) and President              $100,000
Trustee since 2001 (since September 2000) of the Manager;
Age: 55            President and a director or trustee of
                   other Oppenheimer funds; President and a
                   director (since July 2001) of Oppenheimer
                   Acquisition Corp. (the Manager's parent
                   holding company) and of Oppenheimer
                   Partnership Holdings, Inc. (a holding
                   company subsidiary of the Manager); a
                   director (since November 2001) of
                   OppenheimerFunds Distributor, Inc. (a
                   subsidiary of the Manager); Chairman and
                   a director (since July 2001) of
                   Shareholder Services, Inc. and of
                   Shareholder Financial Services, Inc.
                   (transfer agent subsidiaries of the
                   Manager); President and a director (since
                   July 2001) of OppenheimerFunds Legacy
                   Program (a charitable trust program
                   established by the Manager); a director
                   of the following investment advisory
                   subsidiaries of the Manager: 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 1, 2001) and a
                   director (since July 2001) of Oppenheimer
                   Real Asset Management, Inc.; Executive
                   Vice President (since February 1997) of
                   Massachusetts Mutual Life Insurance
                   Company (the Manager's parent company); a
                   director (since June 1995) of DLB
                   Acquisition Corporation (a holding
                   company that owns the shares of Babson
                   Capital Management LLC); a member of the
                   Investment Company Institute's Board of
                   Governors (elected to serve from October
                   3, 2003 through September 30, 2006).
                   Formerly, Chief Operating Officer
                   (September 2000-June 2001) of the
                   Manager; President and trustee (November
                   1999-November 2001) of MML Series
                   Investment Fund and MassMutual
                   Institutional Funds (open-end investment
                   companies); a director (September
                   1999-August 2000) of C.M. Life Insurance
                   Company; President, Chief Executive
                   Officer and director (September
                   1999-August 2000) of MML Bay State Life
                   Insurance Company; a director (June
                   1989-June 1998) of Emerald Isle Bancorp
                   and Hibernia Savings Bank (a wholly-owned
                   subsidiary of Emerald Isle Bancorp).
                   Oversees 63 portfolios as
                   Trustee/Director and 21 portfolios as
                   Officer in the OppenheimerFunds complex.

- -------------------------------------------------------------------------------------

      The address of the Officers in the chart below is as follows: Messrs.
Gillespie, Miao, Steinmetz and Zack, and Ms. Bloomberg, Two World Financial
Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008, for
Messrs. Petersen, Vandehey, Vottiero and Wixted and Ms. Ives, 6803 South
Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an indefinite
term or until his or her earlier resignation, death or removal.

- -------------------------------------------------------------------------------------
                                Officers of the Fund
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Name;                  Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund;
Length of Service;
Age
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Arthur P. Steinmetz,   Senior Vice President of the Manager (since March 1993 and
Vice President and     of HarbourView Asset Management Corporation (since March
Portfolio Manager      2000); an officer of 4 portfolios in the OppenheimerFunds
since 2004             complex.
Age: 46
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Brian W. Wixted,       Senior Vice President and Treasurer (since March 1999) of
Treasurer since 1999   the Manager; Treasurer of HarbourView Asset Management
Age: 45                Corporation, Shareholder Financial Services, Inc.,
                       Shareholder Services, Inc., Oppenheimer Real Asset
                       Management Corporation, and Oppenheimer Partnership
                       Holdings, Inc. (since March 1999), of OFI Private
                       Investments, Inc. (since March 2000), of OppenheimerFunds
                       International Ltd. and OppenheimerFunds plc (since May
                       2000), of OFI Institutional Asset Management, Inc. (since
                       November 2000), and of OppenheimerFunds Legacy Program (a
                       Colorado non-profit corporation) (since June 2003);
                       Treasurer and Chief Financial Officer (since May 2000) of
                       OFI Trust Company (a trust company subsidiary of the
                       Manager); Assistant Treasurer (since March 1999) of
                       Oppenheimer Acquisition Corp. Formerly Assistant Treasurer
                       of Centennial Asset Management Corporation (March
                       1999-October 2003) and OppenheimerFunds Legacy Program
                       (April 2000-June 2003); Principal and Chief Operating
                       Officer (March 1995-March 1999) at Bankers Trust
                       Company-Mutual Fund Services Division. An officer of 84
                       portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Mark S. Vandehey,      Senior Vice President and Chief Compliance Officer (since
Vice President and     March 2004) of the Manager; Vice President (since June 1983)
Chief Compliance       of OppenheimerFunds Distributor, Inc., Centennial Asset
Officer since 2004     Management Corporation and Shareholder Services, Inc.
Age:  54               Formerly (until February 2004) Vice President and Director
                       of Internal Audit of OppenheimerFunds, Inc. An officer of 84
                       portfolios in the Oppenheimer funds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Philip Vottiero,       Vice President/Fund Accounting of the Manager since March
Assistant Treasurer    2002. Formerly Vice President/Corporate Accounting of the
since 2002             Manager (July 1999-March 2002) prior to which he was Chief
Age: 41                Financial Officer at Sovlink Corporation (April 1996-June
                       1999). An officer of 84 portfolios in the OppenheimerFunds
                       complex. and a director (since November 2000)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert G. Zack,        Executive Vice President (since January 2004) and General
Vice President &       Counsel (since February 2002) of the Manager; General
Secretary since 2001   Counsel and a director (since November 2001) of the
Age: 56                Distributor; General Counsel (since November 2001) of
                       Centennial Asset Management Corporation; Senior Vice
                       President and General Counsel (since November 2001) of
                       HarbourView Asset Management Corporation; Secretary and
                       General Counsel (since November 2001) of Oppenheimer
                       Acquisition Corp.; Assistant Secretary and a director (since
                       October 1997) of OppenheimerFunds International Ltd. and
                       OppenheimerFunds plc; Vice President and a director (since
                       November 2001) of Oppenheimer Partnership Holdings, Inc.; a
                       director (since November 2001) of Oppenheimer Real Asset
                       Management, Inc.; Senior Vice President, General Counsel and
                       a director (since November 2001) of Shareholder Financial
                       Services, Inc., Shareholder Services, Inc., OFI Private
                       Investments, Inc. and OFI Trust Company; Vice President
                       (since November 2001) of OppenheimerFunds Legacy Program;
                       Senior Vice President and General Counsel (since November
                       2001) of OFI Institutional Asset Management, Inc.; a
                       director (since June 2003) of OppenheimerFunds (Asia)
                       Limited. Formerly 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 Shareholder Services, Inc.
                       (May 1985-November 2001), Shareholder Financial Services,
                       Inc. (November 1989-November 2001); and OppenheimerFunds
                       International Ltd. (October 1997-November 2001). An officer
                       of 84 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Kathleen T. Ives,      Vice President (since June 1998) and Senior Counsel and
Assistant Secretary    Assistant Secretary (since October 2003) of the Manager;
since 2001             Vice President (since 1999) and Assistant Secretary (since
Age: 39                October 2003) of the Distributor; Assistant Secretary (since
                       October 2003) of Centennial Asset Management Corporation;
                       Vice President and Assistant Secretary (since 1999) of
                       Shareholder Services, Inc.; Assistant Secretary (since
                       December 2001) of OppenheimerFunds Legacy Program and of
                       Shareholder Financial Services, Inc.. Formerly an Assistant
                       Counsel (August 1994-October 2003) and Assistant Vice
                       President of the Manager (August 1997-June 1998). An officer
                       of 84 portfolios in the OppenheimerFunds complex.Vice
                       President (since June 1998) and Senior Counsel (since
                       October 2003) of the Manager; Vice President (since 1999) of
                       OppenheimerFunds Distributor, Inc.; Vice President and
                       Assistant Secretary (since 1999) of Shareholder Services,
                       Inc.; Assistant Secretary (since December 2001) of
                       OppenheimerFunds Legacy Program and Shareholder Financial
                       Services, Inc.; formerly an Assistant Counsel (August
                       1994-October 2003) and Assistant Vice President of the
                       Manager (August 1997-June 1998). An officer of 82 portfolios
                       in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Lisa I. Bloomberg,     Vice President and Associate Counsel of the Manager since
Assistant Secretary    May 2004; formerly First Vice President and Associate
since 2004             General Counsel of UBS Financial Services Inc. (formerly,
Age:  36               PaineWebber Incorporated) (May 1999 - April 2004) prior to
                       which she was an Associate at Skaden, Arps, Slate, Meagher &
                       Flom, LLP (September 1996 - April 1999). An officer of 84
                       portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Phillip S. Gillespie,
Assistant Secretary    Senior Vice President and Deputy General Counsel of the
since 2004             Manager since September 2004. Formerly Mr. Gillespie held
Age: 40                the following positions at Merrill Lynch Investment
                       Management: First Vice President (2001-September 2004);
                       Director (from 2000) and Vice President (1998-2000). An
                       officer of 74 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Wayne Miao,            Assistant Vice President and Assistant Counsel of the
Assistant Secretary    Manager since June 2004. Formerly an Associate with Sidley
since 2004             Austin Brown & Wood LLP (September 1999 - May 2004). An
Age:  31               officer of 74 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------

      Remuneration of Trustees. The officers of the Fund and Mr. Murphy (who
is an officer and Trustee of the Fund) are affiliated with the Manager and
receive no salary or fee from the Fund.  The remaining Trustees of the Fund
received the compensation shown below from the Fund with respect to the
Fund's fiscal year ended September 30, 2004. The compensation from all 38 of
the Board II Funds (including the Fund) represents compensation received for
serving as a director or trustee and member of a committee (if applicable) of
the boards of those funds during the calendar year ended December 31, 2003.









- -------------------------------------------------------------------------------
Trustee Name and Other Fund             Aggregate         Total Compensation
                                                          From Fund and Fund
                                    Compensation from       Complex Paid to
Position(s) (as applicable)               Fund1                Trustees*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
William L. Armstrong                      $4,020                $118,649
Chairman of the Board and
Governance Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Robert G. Avis                            $2,651                $101,499
Review Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
George C. Bowen                           $2,651                $101,499
Audit Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Edward L. Cameron                         $3,047                $115,503
Audit Committee Chairman
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Jon S. Fossel                             $3,047                $115,503
Review Committee Chairman
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Sam Freedman                              $2,651                $101,499
Review Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Beverly Hamilton
Governance Committee Member and           $2,6512             $150,542 3,4
Review Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Robert J. Malone
Governance Committee Chairman and         $2,6515              $100,1793
Audit Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
F. William Marshall, Jr.
Audit Committee Member and                $2,651               $149,4996
Governance Committee Member
- -------------------------------------------------------------------------------
Effective  December  15,  2003,  James C. Swain,  retired as Trustee  from the
Board II Funds.  For the fiscal  year ended  September  30,  2004,  Mr.  Swain
received  $714  aggregate  compensation  from the Fund.  For the calendar year
ended December 31, 2003, Mr. Swain received  $178,000,  in total  compensation
from all of the Oppenheimer funds for which he served as Trustee or Director.
1.    Aggregate   Compensation   from   Fund   includes   fees  and   deferred
   compensation, if any, for a Trustee.
2.    Includes  $2,651  deferred  under Deferred  Compensation  Plan described
   below.
3.    Total  compensation for Mrs. Hamilton and Mr. Malone was paid by all the
   Board II Funds,  with the  exception of  Oppenheimer  Senior  Floating Rate
   Fund for  which  they  currently  do not  serve as  Trustees  (total  of 37
   Oppenheimer funds at December 31, 2003).
4.    Includes  $50,363  compensation  (of  which  100% was  deferred  under a
   deferred  compensation plan) paid to Mrs. Hamilton for serving as a trustee
   by two open-end investment  companies  (MassMutual  Institutional Funds and
   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 MassMutual  International  Equity Fund, a series of
   MassMutual Institutional Funds.
5.    Includes  $2,651  deferred  under Deferred  Compensation  Plan described
   below.
6.    Includes  $48,000  compensation  paid to Mr.  Marshall  for serving as a
   trustee by two  open-end  investment  companies  (MassMutual  Institutional
   Funds and 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 MassMutual  International  Equity Fund, a series
   of MassMutual Institutional Funds.

* For purposes of this section only, "Fund Complex" includes the Oppenheimer
funds, MassMutual Institutional Funds and MML Series Investment Fund in
accordance with the instructions for Form N-1A.  The Manager does not
consider MassMutual Institutional Funds and MML Series Investment Fund to be
part of the OppenheimerFunds "Fund Complex" as that term may be otherwise
interpreted.

|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 performance of the selected funds.

      Deferral of Trustee's fees under the plan will not materially affect
the Fund's assets, liabilities and net income per share.  The plan will not
obligate the Fund to retain the services of any Trustee or to pay any
particular level of compensation to any Trustee. Pursuant to an Order
issued by the SEC the Fund may invest in the funds selected by the Trustee
under the plan without shareholder approval for the limited purpose of
determining the value of the Trustee's deferred fee account.

|X|   Major Shareholders. As of October 29, 2004, the only persons who owned
of record or were known by the Fund to own beneficially 5% or more of the
Fund's outstanding securities of any class were the following:

      Charles Schwab & Co. Inc., Special Custody Acct for the Exclusive
      Benefit of Customers, 101 Montgomery Street, San Francisco, CA 94104,
      which owned 48,459,738.155, Class A shares (21.97% of the Class A
      shares then outstanding).

      Merrill Lynch, Pierce, Fenner & Smith, Attn #97G33, 4800 Deer Lake
      Drive, E., Floor 3, Jacksonville, FL 32246, which owned 22,930,303.872
      Class A shares (10.39% of the Class A shares then outstanding).

      Citigroup Global Markets, Inc., 333 West 34th Street, 7th Floor, New
      York, NY 10001-2483, which owned 6,664,052.799 Class C shares (15.20%
      of the Class C shares then outstanding).

      Merrill Lynch, Pierce, Fenner & Smith, Attn #97G35, 4800 Deer Lake
      Drive, E., Floor 3, Jacksonville, FL 32246, which owned 5,256,101.659
      Class C shares (11.99% of the Class C shares then outstanding).

      Wells Fargo Bank NA, FBO WF Wealthbuilder Growth Balanced Portfolio;
      13357300, PO Box 1533, Minneapolis, MN 55480-1533, which owned
      2,532,501.691 Class Y shares (83.71% of the Class Y shares then
      outstanding).

      IBT & CO Cust OppenheimerFunds Cap Accumu Plan, 200 Clarendon Street,
      FL 16, Boston MA 02116-5048, which owned 481,702.089 Class Y shares
      (15.92% of the Class Y shares then outstanding).

      UMB Bank NA, Cust, AMFO & Co, FBO 320 Pooled, 1010 Grand Blvd, Kansas
      City, MO 64106-2202, which owned 884,861.966 Class N Shares (25.76% of
      shares then outstanding).


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 OFI where an OFI
directly-controlled affiliate 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 auditors, unless circumstances indicate
            otherwise.
o     In general, the Fund opposes anti-takeover proposals and supports
            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 new 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
manager of the Fund is employed by the Manager and is the person who is
principally responsible for the day-to-day management of the Fund's
portfolio. Other members of the Manager's Fixed Income Portfolio Team provide
the portfolio manager with counsel and support in managing the Fund's
portfolio.

      The agreement requires the Manager, at its expense, to provide the Fund
with adequate office space, facilities and equipment. It also requires the
Manager to provide and supervise the activities of all administrative and
clerical personnel required to provide effective administration for the Fund.
Those responsibilities include the compilation and maintenance of records
with respect to its operations, the preparation and filing of specified
reports, and composition of proxy materials and registration statements for
continuous public sale of shares of the Fund.

      The Fund pays expenses not expressly assumed by the Manager under the
advisory agreement. The advisory agreement lists examples of expenses paid by
the Fund. The major categories relate to interest, taxes, brokerage
commissions, fees to certain Trustees, legal and audit expenses, custodian
and transfer agent expenses, share issuance costs, certain printing and
registration costs and non-recurring expenses, including litigation costs.
The management fees paid by the Fund to the Manager are calculated at the
rates described in the Prospectus, which are applied to the assets of the
Fund as a whole. The fees are allocated to each class of shares based upon
the relative proportion of the Fund's net assets represented by that class.
The management fees paid by the Fund to the Manager during its last three
fiscal years were:

      -------------------------------------------------------------------
      Fiscal Year ended 9/30: Management Fees Paid to OppenheimerFunds,
                                                 Inc.
      -------------------------------------------------------------------
      -------------------------------------------------------------------
               2002                           $1,851,525
      -------------------------------------------------------------------
      -------------------------------------------------------------------
               2003                           $3,415,246
      -------------------------------------------------------------------
      -------------------------------------------------------------------
               2004                           $7,484,558
      -------------------------------------------------------------------

      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 good faith errors or omissions in connection with 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 name "Oppenheimer" in
connection with other investment companies for which it may act as investment
advisor or general distributor. If the Manager shall no longer act as
investment advisor to the Fund, the Manager may withdraw the right of the
Fund to use the name "Oppenheimer" as part of its name.

|X|      Annual Approval of Investment Advisory Agreement. Each year, the
Board of Trustees, including a majority of the Independent Trustees, is
required to approve the renewal of the investment advisory agreement. The
Investment Company Act requires that the Board request and evaluate and the
Manager provide such information as may be reasonably necessary to evaluate
the terms of the investment advisory agreement. The Board employs an
independent consultant to prepare a report that provides such information as
the Board requests for this purpose.

      The Board also receives information about the 12b-1 distribution fees
the Fund pays. These distribution fees are reviewed and approved at a
different time of the year.

      The Board reviewed the foregoing information in arriving at its
decision to renew the investment advisory agreement. Among other factors, the
Board considered:
o     The nature, cost, and quality of the services provided to the Fund and
         its shareholders;
o     The profitability of the Fund to the Manager;
o     The investment performance of the Fund in comparison to regular market
         indices;
o     Economies of scale that may be available to the Fund from the Manager;
o     Fees paid by other mutual funds for similar services;
o     The value and quality of any other benefits or services received by the
         Fund from its relationship with the Manager, and
o     The direct and indirect benefits the Manager received from its
         relationship with the Fund. These included services provided by the
         Distributor and the Transfer Agent, and brokerage and soft dollar
         arrangements permissible under Section 28(e) of the Securities
         Exchange Act.

      The Board considered that the Manager must be able to pay and retain
high quality personnel at competitive rates to provide services to the Fund.
The Board also considered that maintaining the financial viability of the
Manager is important so that the Manager will be able to continue to provide
quality services to the Fund and its shareholders in adverse times. The Board
also considered the investment performance of other mutual funds advised by
the Manager. The Board is aware that there are alternatives to the use of the
Manager.

      These matters were also considered by the Independent Trustees, meeting
separately from the full Board with experienced Counsel to the Fund and as
well as Counsel to the Independent Trustees who assisted the Board in its
deliberations. The Fund's Counsel is independent of the Manager within the
meaning and intent of the SEC Rules regarding the independence of counsel.

      After careful deliberation, the Board, including the Independent
Trustees, concluded that it was in the best interest of shareholders to
continue the investment advisory agreement for another year. In arriving at a
decision, the Board did not single out any one factor or group of factors as
being more important than other factors, but considered all factors together.
The Board judged the terms and conditions of the investment advisory
agreement, including the investment advisory fee, in light of all of the
surrounding circumstances.

Brokerage Policies of the Fund

Brokerage Provisions of the Investment Advisory Agreement. One of the duties
of the Manager under the investment advisory agreement is to arrange the
portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers to effect the Fund's
portfolio transactions. The Manager is authorized by the advisory agreement
to employ broker-dealers, including "affiliated" brokers, as that term is
defined in the Investment Company Act. The Manager may employ broker-dealers
that the Manager thinks, in its best judgment based on all relevant factors,
will implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" of the Fund's portfolio transactions. "Best execution" means
prompt and reliable execution at the most favorable price obtainable. The
Manager need not seek competitive commission bidding. However, it is expected
to be aware of the current rates of eligible brokers and to minimize the
commissions paid to the extent consistent with the interests and policies of
the Fund as established by its Board of Trustees.

    Under the investment advisory agreement, 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 commission 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.

      Subject to those considerations, as a factor in selecting brokers for
the Fund's portfolio transactions, the investment advisory agreement also
permits the Manager to consider sales of shares of the Fund and other
investment companies for which the Manager or an affiliate serves as
investment adviser.  Notwithstanding that authority, and with the concurrence
of the Fund's Board, the Manager has determined not to consider sales of
shares of the Fund and other investment companies for which the Manager or an
affiliate serves as investment adviser as a factor in selecting brokers for
the Fund's portfolio transactions.  However, the Manager may continue to
effect portfolio transactions through brokers who sell shares of the Fund,
subject to SEC rules.

|X|   Brokerage Practices Followed by the Manager. Most purchases of debt
obligations made by the Fund are in 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.  Therefore, the Fund does not incur substantial
brokerage costs.  Portfolio securities purchased from underwriters include a
commission or concession paid by the issuer to the underwriter in the price
of the security.  Portfolio securities purchased 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 Manager allocates brokerage for the Fund subject to the provisions of the
investment advisory agreement and the procedures and rules described above.
Generally, the Manager's portfolio traders allocate brokerage based upon
recommendations from the Manager's portfolio managers. In certain instances,
portfolio managers may directly place trades and allocate brokerage. In
either case, the Manager's executive officers supervise the allocation of
brokerage.

      Transactions in securities other than those for which an exchange is
the primary market are generally done with principals or market makers. In
transactions on foreign exchanges, the Fund may be required to pay fixed
brokerage commissions and therefore would not have the benefit of negotiated
commissions available in U.S. markets. Brokerage commissions are paid
primarily for transactions in listed securities or for certain fixed-income
agency transactions in the secondary market. Otherwise, brokerage commissions
are paid only if it appears likely that a better price or execution can be
obtained by doing so. In an option transaction, the Fund ordinarily uses the
same broker for the purchase or sale of the option and any transaction in the
securities to which the option relates.

      Other funds advised by the Manager have investment policies similar to
those of the Fund. Those other funds may purchase or sell the same securities
as the Fund at the same time as the Fund, which could affect the supply and
price of the securities. If two or more funds advised by the Manager purchase
the same security on the same day from the same dealer, the transactions
under those combined orders are averaged as to price and allocated in
accordance with the purchase or sale orders actually placed for each account.

      In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, the Manager tries to combine
concurrent orders to purchase or sell the same security by more than one of
the accounts managed by the Manager or its affiliates. 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.

      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
              9/30:                          Fund1
      ---------------------------------------------------------------
      ---------------------------------------------------------------
              2002                          $34,536
      ---------------------------------------------------------------
      ---------------------------------------------------------------
              2003                          $81,962
      ---------------------------------------------------------------
      ---------------------------------------------------------------
              2004                          $250,091
      ---------------------------------------------------------------
1.    Amounts do not include spreads or commissions on principal  transactions
         on a net trade basis.


Distribution and Service Plans

The Distributor. Under its General Distributor's Agreement with the Fund, the
Distributor acts as the Fund's principal underwriter in the continuous public
offering of the Fund's classes of shares. The Distributor bears the expenses
normally attributable to sales, including advertising and the cost of
printing and mailing prospectuses, other than those furnished to existing
shareholders. The Distributor is not obligated to sell a specific number of
shares.

    The sales charges and concessions paid to, or retained by, the
Distributor from the sale of shares and the contingent deferred sales charges
retained by the Distributor on the redemption of shares during the Fund's
three most recent fiscal years are shown in the tables below.

- -------------------------------------------
Fiscal    Aggregate        Class A
                           Front-End
Year      Front-End Sales  Sales Charges
Ended     Charges on       Retained by
9/30:     Class A Shares   Distributor
- -------------------------------------------
- -------------------------------------------
  2002        $452,569        $98,2601
- -------------------------------------------
- -------------------------------------------
  2003       $1,607,039       $328,2231
- -------------------------------------------
- -------------------------------------------
  2004       $3,965,257       $822,2751
- -------------------------------------------
1.  Includes  amounts  retained by a  broker-dealer  that is an affiliate or a
parent of the Distributor.

- -----------------------------------------------------------------------------
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
9/30:     Distributor1     Distributor1     Distributor1    Distributor1
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2002        $115,077         $549,159        $128,269          $6,626
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2003        $366,872        $1,414,536       $474,412         $21,566
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2004        $778,522        $1,640,329      $1,505,179        $62,270
- -----------------------------------------------------------------------------
1.    The  Distributor  advances  concession  payments  to dealers for certain
   sales of Class A shares  and for  sales of Class B,  Class C and Class N
   shares from its own resources at the time of sale.

- -----------------------------------------------------------------------------
Fiscal    Class A          Class B          Class C          Class N
          Contingent       Contingent       Contingent       Contingent
Year      Deferred Sales   Deferred Sales   Deferred Sales   Deferred Sales
Ended     Charges          Charges          Charges          Charges
9/30      Retained by      Retained by      Retained by      Retained by
          Distributor      Distributor      Distributor      Distributor
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2002        $11,854          $276,434          $7,123          $1,255
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2003        $10,937          $475,852         $57,864          $6,737
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2004        $27,674          $353,364         $116,729         $1,248
- -----------------------------------------------------------------------------

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 Trustees1, 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.

      Financial intermediaries, brokers and dealers may receive other
payments from the Distributor or the Manager from their own resources in
connection with the promotion and/or sale of shares of the Fund, including
payments to defray expenses incurred in connection with educational seminars
and meetings.  The Manager or Distributor may share expenses incurred by
financial intermediaries in conducting training and educational meetings
about aspects of the Fund for employees of the intermediaries or for hosting
client seminars or meetings at which the Fund is discussed.  In their sole
discretion, the Manager and/or the Distributor may increase or decrease the
amount of payments they make from their own resources for these purposes.
You should ask your dealer or financial intermediary for more details about
such payments it receives.

      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 72 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 quarter in which the aggregate net asset value of all Fund shares of
that class held by the recipient for itself and its customers does not exceed
a minimum amount, if any, that may be set from time to time by a majority of
the Independent Trustees. The Board of Trustees has set no minimum amount of
assets to qualify for payments under the plans.

|X|   Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as
"recipients") for personal services and account maintenance services they
provide for their customers who hold Class A shares. The services include,
among others, answering customer inquiries about the Fund, assisting in
establishing and maintaining accounts in the Fund, making the Fund's
investment plans available and providing other services at the request of the
Fund or the Distributor. 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 on 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 quarterly at an annual rate not to exceed 0.25% of the average
annual net assets consisting of Class A shares held in the accounts of the
recipients or their customers.

      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
quarterly on those shares. The advance payment is based on the net asset
value of shares sold. Shares purchased by exchange do not qualify for the
advance service fee payment. If Class 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 September 30, 2004, payments under the Class A plan
totaled $1,987,821, of which $8,959 was retained by the Distributor under the
arrangement described above, regarding grandfathered retirement accounts, and
included $32,472 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 for the Service Fee 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
quarterly basis, without payment in advance. However, the Distributor
currently intends to pay the service fee to recipients in advance for the
first year after 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 quarterly on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee
payment. If Class B, Class C or Class N shares are redeemed during the first
year after their purchase, the recipient of the service fees on those shares
will be obligated to repay the Distributor a pro rata portion of the advance
payment of the service fee made on those shares. Class B, Class C or Class N
shares may not be purchased by an investor directly from the Distributor
without the investor designating another broker-dealer of record.  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.  The Distributor
does not receive or retain the service fee on Class B, Class C or Class N
shares in accounts for which it is listed as the broker-dealer of record.

      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 quarterly 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 Year Ended 9/30/04
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class:       Total          Amount Retained  Distributor's    Distributor's
                                              Aggregate        Unreimbursed
                                              Unreimbursed     Expenses as a %
              Payments                        Expenses Under   of Net Assets
              Under Plan     by Distributor   Plan             of Class
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class B Plan  $1,529,1961      $1,222,743       $6,272,974         3.74%
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class C Plan  $1,703,454 2      $995,475        $3,468,952         1.49%
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class N Plan   $53,586 3        $35,718          $130,925          0.70%
 -------------------------------------------------------------------------------
1.    Includes  $10,732  paid  to an  affiliate  of the  Distributor's  parent
   company.
2.    Includes  $12,956  paid  to an  affiliate  of the  Distributor's  parent
   company.
3.    Includes  $1,190  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.


Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "standardized
yield," "dividend yield," "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     Yields and total returns measure the performance of a hypothetical
         account in the Fund over various periods and do not show the
         performance of each shareholder's account. Your account's
         performance will vary from the model performance data if your
         dividends are received in cash, or you buy or sell shares during the
         period, or you bought your shares at a different time and price than
         the shares used in the model.
o     The Fund's performance returns may 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, its yields and total returns
         are not guaranteed and normally will fluctuate on a daily basis.
o     When an investor's shares are redeemed, they may be worth more or less
         than their original cost.
o     Yields and total returns for any given past period represent historical
         performance information and are not, and should not be considered, a
         prediction of future yields or returns.

      The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The yields and
total returns of each class of shares of the Fund are affected by market
conditions, the quality of the Fund's investments, the maturity of debt
investments, the types of investments the Fund holds, and its operating
expenses that are allocated to the particular class.

|X|   Yields. The Fund uses a variety of different yields to illustrate its
current returns. Each class of shares calculates its yield separately because
of the different expenses that affect each class.

o     Standardized Yield. The "standardized yield" (sometimes referred to
just as "yield") is shown for a class of shares for a stated 30-day period.
It is not based on actual distributions paid by the Fund to shareholders in
the 30-day period, but is a hypothetical yield based upon the net investment
income from the Fund's portfolio investments for that period. It may
therefore differ from the "dividend yield" for the same class of shares,
described below.

      Standardized yield is calculated using the following formula set forth
in rules adopted by the SEC, designed to assure uniformity in the way that
all funds calculate their yields:

Standardized Yield  = 2[( a - b +1)6   -1 ]
                          ------
                           cd

      The symbols above represent the following factors:
      a =  dividends and interest earned during the 30-day period.
      b =  expenses accrued for the period (net of any expense assumptions).
      c =  the  average  daily  number  of shares  of that  class  outstanding
           during the 30-day period that were entitled to receive dividends.
      d =  the maximum  offering price per share of that class on the last day
           of the period, adjusted for undistributed net investment income.

      The standardized yield for a particular 30-day period may differ from
the yield for other periods. The SEC formula assumes that the standardized
yield for a 30-day period occurs at a constant rate for a six-month period
and is annualized at the end of the six-month period. Additionally, because
each class of shares is subject to different expenses, it is likely that the
standardized yields of the Fund's classes of shares will differ for any
30-day period.

o     Dividend Yield. The Fund may quote a "dividend yield" for each class of
its shares. Dividend yield is based on the dividends paid on a class of
shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated period are added together, and
the sum is multiplied by 12 (to annualize the yield) and divided by the
maximum offering price on the last day of the dividend period. The formula is
shown below:

  Dividend Yield = dividends paid x 12/maximum offering price (payment date)

      The maximum offering price for Class A shares includes the current
maximum initial sales charge. The maximum offering price for Class B, Class C
and Class N shares is the net asset value per share, without considering the
effect of contingent deferred sales charges. There is no sales charge on
Class Y shares.  The Class A dividend yield may also be quoted without
deducting the maximum initial sales charge.

  -----------------------------------------------------------------------
          The Fund's Yields for the 30-Day Periods Ended 9/30/04
  -----------------------------------------------------------------------
  -----------------------------------------------------------------------
  Class of        Standardized Yield              Dividend Yield
  Shares
  -----------------------------------------------------------------------
  -----------------------------------------------------------------------
                Without         After         Without         After
                 Sales          Sales          Sales          Sales
                 Charge         Charge         Charge         Charge
  -----------------------------------------------------------------------
  -----------------------------------------------------------------------
  Class A        2.65%          2.52%          2.67%          2.55%
  -----------------------------------------------------------------------
  -----------------------------------------------------------------------
  Class B        1.74%           N/A           1.86%           N/A
  -----------------------------------------------------------------------
  -----------------------------------------------------------------------
  Class C        1.87%           N/A           1.92%           N/A
  -----------------------------------------------------------------------
  -----------------------------------------------------------------------
  Class N        2.21%           N/A           2.27%           N/A
  -----------------------------------------------------------------------
  -----------------------------------------------------------------------
  Class Y         N/A            N/A            N/A            N/A
  -----------------------------------------------------------------------

      |X|   Total Return Information. There are different types of "total
returns" to measure the Fund's performance. Total return is the change in
value of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares and that the investment is redeemed at the end of the
period. Because of differences in expenses for each class of shares, the
total returns for each class are separately measured. The cumulative total
return measures the change in value over the entire period (for example, ten
years). An average annual total return shows the average rate of return for
each year in a period that would produce the cumulative total return over the
entire period. However, average annual total returns do not show actual
year-by-year performance. The Fund uses standardized calculations for its
total returns as prescribed by the SEC. The methodology is discussed below.

         In calculating total returns for Class A shares, the current maximum
sales charge of 4.75% (as a percentage of the offering price) is deducted
from the initial investment ("P" 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 period, and total returns for the
periods prior to 03/01/01 (the inception date for Class N shares) are based
on the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1
fees. [There is no sales charge on Class Y shares.

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   l/n - 1  Average Annual Total
               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
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.
There is no sales charge on Class Y 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 September 30, 2004
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class    Cumulative Total              Average Annual Total Returns
of       Returns (Life of
Shares   Class)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                                 1-Year            5-Year       Life of Class
                                                (or life of
                                                   Class)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
         After    Without   After    Without  After   Without  After    Without
         Sales    Sales     Sales    Sales    Sales   Sales    Sales    Sales
         Charge   Charge    Charge   Charge   Charge  Charge   Charge   Charge
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A1 133.62%   145.28%   6.26%    11.56%  11.66%   12.76%   9.56%   10.14%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B2 134.40%   134.40%   5.66%    10.66%  11.61%   11.87%   9.60%    9.60%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C3 128.21%   128.21%   9.75%    10.75%  11.89%   11.89%   9.29%    9.29%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class N4  58.24%   58.24%    10.00%   11.00%  13.68%   13.68%    N/A      N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y5  0.92%     0.92%     N/A      N/A      N/A     N/A      N/A      N/A
- --------------------------------------------------------------------------------
1.    Inception of Class A:   6/15/95
2.    Inception of Class B:   6/15/95
3.    Inception of Class C:   6/15/95
4.     Inception of Class N:  3/01/01
5.    Inception of Class Y:   9/27/04

- --------------------------------------------------------------------------
  Average Annual Total Returns for Class A Shares (After Sales Charge)
                For the Periods Ended September 30, 2004
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
                                 1-Year         5-Year     Life of Class
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
After Taxes on Distributions     4.27%          9.98%          6.55%1
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
After Taxes on                   4.00%          9.03%          6.24%1
Distributions and
Redemption of Fund Shares
- --------------------------------------------------------------------------
   1. Inception date of Class A: 6/15/95

Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer
Agent at the addresses or telephone numbers shown on the cover of this
Statement of Additional Information. The Fund may also compare its
performance to that of other investments, including other mutual funds, or
use rankings of its performance by independent ranking entities. Examples of
these performance comparisons are set forth below.

      |X|   Lipper Rankings. From time to time the Fund may publish the
ranking of the performance of its classes of shares by Lipper, 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 ranked among international bond
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


How to Buy Shares

Additional information is presented below about the methods that can be used
to buy shares of the Fund. Appendix C contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances
in which sales charges may be reduced or waived for certain classes of
investors.

When you purchase shares of the Fund, your ownership interest in the shares
of the Fund will be recorded as a book entry on the records of the Fund.  The
Fund will not issue or re-register physical share certificates.

AccountLink. When shares are purchased through AccountLink, each purchase
must be at least $50 and shareholders must invest at least $500 before an
                     ---
Asset Builder Plan (described below) can be established on a new account.
Accounts established prior to November 1, 2002 will remain at $25 for
additional purchases. Shares will be purchased on the regular business day
the Distributor is instructed to initiate the Automated Clearing House
("ACH") transfer to buy the shares. Dividends will begin to accrue on shares
purchased with the proceeds of ACH transfers on the business day the Fund
receives Federal Funds for the purchase through the ACH system before the
close of The New York Stock Exchange (the "Exchange"). The Exchange normally
closes at 4:00 P.M., but may close earlier on certain days. If Federal Funds
are received on a business day after the close of the Exchange, the shares
will be purchased and dividends will begin to accrue on the next regular
business day. The proceeds of ACH transfers are normally received by the Fund
three days after the transfers are initiated. If the proceeds of the ACH
transfer are not received on a timely basis, the Distributor reserves the
right to cancel the purchase order. The Distributor and the Fund are not
responsible for any delays in purchasing shares resulting from delays in ACH
transmissions.

Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and
Letters of Intent because of the economies of sales efforts and reduction in
expenses realized by the Distributor, dealers and brokers making such sales.
No sales charge is imposed in certain other circumstances described in
Appendix C to this Statement of Additional Information because the
Distributor or dealer or broker incurs little or no selling expenses.

A fiduciary can count all shares purchased for a trust, estate or other
fiduciary account (including one or more employee benefit plans of the same
employer) that has multiple accounts. The Distributor will add the value, at
current offering price, of the shares you previously purchased and currently
own to the value of current purchases to determine the sales charge rate that
applies. The reduced sales charge will apply only to current purchases. You
must request it when you buy shares.

The Oppenheimer Funds. The Oppenheimer funds are those mutual funds for which
the Distributor acts as the distributor and currently include the following:

Oppenheimer AMT-Free Municipals           Oppenheimer Limited Term Municipal Fund
Oppenheimer AMT-Free New York Municipals  Oppenheimer Main Street Fund
Oppenheimer Balanced Fund                 Oppenheimer Main Street Opportunity Fund
Oppenheimer Bond Fund                     Oppenheimer Main Street Small Cap Fund
Oppenheimer California Municipal Fund     Oppenheimer MidCap Fund
Oppenheimer Capital Appreciation Fund     Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Preservation Fund     Oppenheimer Pennsylvania Municipal Fund
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Capital Income Fund           Street Fund
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Champion Income Fund          Street Fund II
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Convertible Securities Fund   Street Fund III
Oppenheimer Developing Markets Fund       Oppenheimer Quest Balanced Fund
                                          Oppenheimer  Quest  Capital  Value Fund,
Oppenheimer Disciplined Allocation Fund   Inc.
                                          Oppenheimer  Quest  International  Value
Oppenheimer Discovery Fund                Fund, Inc.
Oppenheimer Emerging Growth Fund          Oppenheimer Quest Opportunity Value Fund
Oppenheimer Emerging Technologies Fund    Oppenheimer Quest Value Fund, Inc.
Oppenheimer Enterprise Fund               Oppenheimer Real Asset Fund
Oppenheimer Equity Fund, Inc.             Oppenheimer Real Estate Fund
                                          Oppenheimer      Rochester      National
Oppenheimer Global Fund                   Municipals
Oppenheimer Global Opportunities Fund     Oppenheimer Select Value Fund
Oppenheimer Gold & Special Minerals Fund  Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund                   Oppenheimer Small Cap Value Fund
Oppenheimer High Yield Fund               Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund       Oppenheimer Total Return Bond Fund
Oppenheimer International Growth Fund     Oppenheimer U.S. Government Trust
Oppenheimer  International  Small Company
Fund                                      Oppenheimer Value Fund
Oppenheimer International Value Fund      Limited-Term New York Municipal Fund
Oppenheimer   Limited   Term   California
Municipal Fund                            Rochester Fund Municipals
Oppenheimer Limited-Term Government Fund
And the following money market funds:

Oppenheimer Cash Reserves                 Centennial Government Trust
Oppenheimer Money Market Fund, Inc.       Centennial Money Market Trust
Centennial America Fund, L. P.            Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust    Centennial Tax Exempt Trust


      There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds described above except the money market funds.
Under certain circumstances described in this Statement of Additional
Information, redemption proceeds of certain money market fund shares may be
subject to a contingent deferred sales charge.

Letters of Intent. Under a Letter of Intent ("Letter"), if you purchase Class
A shares or Class A and Class B shares of the Fund and other Oppenheimer
funds during a 13-month period, you can reduce the sales charge rate that
applies to your purchases of Class A shares. The total amount of your
intended purchases of both Class A and Class B shares will determine the
reduced sales charge rate for the Class A shares purchased during that
period. You can include purchases made up to 90 days before the date of the
Letter. Letters do not consider Class C or Class N shares you purchase or may
have purchased.

      A Letter is an investor's statement in writing to the Distributor of
the intention to purchase Class A shares or Class A and Class B shares of the
Fund (and other Oppenheimer funds) during a 13-month period (the "Letter
period"). At the investor's request, this may include purchases made up to 90
days prior to the date of the Letter. The Letter states the investor's
intention to make the aggregate amount of purchases of shares which, when
added to the investor's holdings of shares of those funds, will equal or
exceed the amount specified in the Letter. Purchases made by reinvestment of
dividends or distributions of capital gains and purchases made at net asset
value without sales charge do not count toward satisfying the amount of the
Letter.

      A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on
purchases of Class A shares of the Fund (and other Oppenheimer funds) that
applies under the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter will be made at the
offering price (including the sales charge) that applies to a single lump-sum
purchase of shares in the amount intended to be purchased under the Letter.

      In submitting a Letter, the investor makes no commitment to purchase
shares. However, if the investor's purchases of shares within the Letter
period, when added to the value (at offering price) of the investor's
holdings of shares on the last day of that period, do not equal or exceed the
intended purchase amount, the investor agrees to pay the additional amount of
sales charge applicable to such purchases. That amount is described in "Terms
of Escrow," below (those terms may be amended by the Distributor from time to
time). The investor agrees that shares equal in value to 5% of the intended
purchase amount will be held in escrow by the Transfer Agent subject to the
Terms of Escrow. Also, the investor agrees to be bound by the terms of the
Prospectus, this Statement of Additional Information and the application used
for a Letter. If those terms are amended, as they may be from time to time by
the Fund, the investor agrees to be bound by the amended terms and that those
amendments will apply automatically to existing Letters.

      If the total eligible purchases made during the Letter period do not
equal or exceed the intended purchase amount, the concessions previously paid
to the dealer of record for the account and the amount of sales charge
retained by the Distributor will be adjusted to the rates applicable to
actual total purchases. If total eligible purchases during the Letter period
exceed the intended purchase amount and exceed the amount needed to qualify
for the next sales charge rate reduction set forth in the Prospectus, the
sales charges paid will be adjusted to the lower rate. That adjustment will
be made only if and when the dealer returns to the Distributor the excess of
the amount of concessions allowed or paid to the dealer over the amount of
concessions that apply to the actual amount of purchases. The excess
concessions returned to the Distributor will be used to purchase additional
shares for the investor's account at the net asset value per share in effect
on the date of such purchase, promptly after the Distributor's receipt
thereof.

      The  Transfer  Agent  will not hold  shares in escrow for  purchases  of
shares of the Fund and other Oppenheimer funds by  OppenheimerFunds  prototype
401(k) plans under a Letter.  If the intended  purchase  amount under a Letter
entered into by an OppenheimerFunds  prototype 401(k) plan is not purchased by
the plan by the end of the  Letter  period,  there  will be no  adjustment  of
concessions paid to the  broker-dealer or financial  institution of record for
accounts held in the name of that plan.

      In determining the total amount of purchases made under a Letter,
shares redeemed by the investor prior to the termination of the Letter period
will be deducted. It is the responsibility of the dealer of record and/or the
investor to advise the Distributor about the Letter when placing any purchase
orders for the investor during the Letter period. All of such purchases must
be made through the Distributor.

      |X|   Terms of Escrow That Apply to Letters of Intent.

      1. Out of the initial purchase (or subsequent purchases if necessary)
made pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by
the Transfer Agent. For example, if the intended purchase amount is $50,000,
the escrow shall be shares valued in the amount of $2,500 (computed at the
offering price adjusted for a $50,000 purchase). Any dividends and capital
gains distributions on the escrowed shares will be credited to the investor's
account.

      2. If the total minimum investment specified under the Letter is
completed within the 13-month Letter period, the escrowed shares will be
promptly released to the investor.

      3. If, at the end of the 13-month Letter period the total purchases
pursuant to the Letter are less than the intended purchase amount specified
in the Letter, the investor must remit to the Distributor an amount equal to
the difference between the dollar amount of sales charges actually paid and
the amount of sales charges which would have been paid if the total amount
purchased had been made at a single time. That sales charge adjustment will
apply to any shares redeemed prior to the completion of the Letter. If the
difference in sales charges is not paid within twenty days after a request
from the Distributor or the dealer, the Distributor will, within sixty days
of the expiration of the Letter, redeem the number of escrowed shares
necessary to realize such difference in sales charges. Full and fractional
shares remaining after such redemption will be released from escrow. If a
request is received to redeem escrowed shares prior to the payment of such
additional sales charge, the sales charge will be withheld from the
redemption proceeds.

      4. By signing the Letter, the investor irrevocably constitutes and
appoints the Transfer Agent as attorney-in-fact to surrender for redemption
any or all escrowed shares.

5.    The shares eligible for purchase under the Letter (or the holding of
which may be counted toward completion of a Letter) include:
(a)   Class A shares sold with a front-end sales charge or subject to a Class
            A contingent deferred sales charge,
(b)   Class B shares of other Oppenheimer funds acquired subject to a
            contingent deferred sales charge, and
(c)   Class A or Class B shares acquired by exchange of either (1) Class A
            shares of one of the other Oppenheimer funds that were acquired
            subject to a Class A initial or contingent deferred sales charge
            or (2) Class B shares of one of the other Oppenheimer funds that
            were acquired subject to a contingent deferred sales charge.

      6. Shares held in escrow hereunder will automatically be exchanged for
shares of another fund to which an exchange is requested, as described in the
section of the Prospectus entitled "How to Exchange Shares" and the escrow
will be transferred to that other fund.

Asset Builder Plans. As explained in the Prospectus, you must initially
establish your account with $500. Subsequently, you can establish an Asset
Builder Plan to automatically purchase additional shares directly from a bank
account for as little as $50. For those accounts established prior to
November 1, 2002 and which have previously established Asset Builder Plans,
additional purchases will remain at $25. Shares purchased by Asset Builder
Plan payments from bank accounts are subject to the redemption restrictions
for recent purchases described in the Prospectus. Asset Builder Plans are
available only if your bank is an ACH member. Asset Builder Plans may not be
used to buy shares for OppenheimerFunds employer-sponsored qualified
retirement accounts. Asset Builder Plans also enable shareholders of
Oppenheimer Cash Reserves to use their fund account to make monthly automatic
purchases of shares of up to four other Oppenheimer funds.

      If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit
will be made two business days prior to the investment dates you selected on
your application. Neither the Distributor, the Transfer Agent nor the Fund
shall be responsible for any delays in purchasing shares that result from
delays in ACH transmissions.

      Before you establish Asset Builder payments, you should obtain a
prospectus of the selected fund(s) from your financial advisor (or the
Distributor) and request an application from the Distributor. Complete the
application and return it. You may change the amount of your Asset Builder
payment or you can terminate these automatic investments at any time by
writing to the Transfer Agent. The Transfer Agent requires a reasonable
period (approximately 10 days) after receipt of your instructions to
implement them. The Fund reserves the right to amend, suspend or discontinue
offering Asset Builder plans at any time without prior notice.

Retirement Plans.  Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charges or at reduced sales charge rates, as
described in Appendix C to this Statement of Additional Information.  Certain
special sales charge arrangements described in Appendix C apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill
Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent record
keeper that has a contract or special arrangement with Merrill Lynch.  If on
the date the plan sponsor signed the Merrill Lynch record keeping service
agreement the plan has less than $1 million in assets invested in applicable
investments (other than assets invested in money market funds), then the
retirement plan may purchase only Class C shares of the Oppenheimer funds.
If on the date the plan sponsor signed the Merrill Lynch record keeping
service agreement the plan has $1 million or more in assets but less than $5
million in assets invested in applicable investments (other than assets
invested in money market funds), then the retirement plan may purchase only
Class N shares of the Oppenheimer funds.  If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has $5
million or more in assets invested in applicable investments (other than
assets invested in money market funds), then the retirement plan may purchase
only Class A shares of the Oppenheimer funds.

      OppenheimerFunds has entered into arrangements with certain record
keepers whereby the Transfer Agent compensates the record keeper for its
record keeping and account servicing functions that it performs on behalf of
the participant level accounts of a retirement plan. While such compensation
may act to reduce the record keeping fees charged by the retirement plan's
record keeper, that compensation arrangement may be terminated at any time,
potentially affecting the record keeping fees charged by the retirement
plan's record keeper.

Cancellation of Purchase Orders. Cancellation of purchase orders for the
Fund's shares (for example, when a purchase check is returned to the Fund
unpaid) causes a loss to be incurred when the net asset values of the Fund's
shares on the cancellation date is less than on the purchase date. That loss
is equal to the amount of the decline in the net asset value per share
multiplied by the number of shares in the purchase order. The investor is
responsible for that loss. If the investor fails to compensate the Fund for
the loss, the Distributor will do so. The Fund may reimburse the Distributor
for that amount by redeeming shares from any account registered in that
investor's name, or the Fund or the Distributor may seek other redress.

Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has
different shareholder privileges and features. The net income attributable to
Class B, Class C or Class N shares and the dividends payable on Class B,
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 permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time
the investor expects to hold shares, and other relevant circumstances. Class
A shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and
Class N shares is the same as that of the initial sales charge on Class A
shares - to compensate the Distributor and brokers, dealers and financial
institutions that sell shares of the Fund. A salesperson who is entitled to
receive compensation from his or her firm for selling Fund shares may receive
different levels of compensation for selling one class of shares rather than
another.

      The Distributor will not accept purchase order of $100,000 or more for
Class B shares or a purchase order of $1 million or more to purchase Class C
shares on behalf of a single investor (not including dealer "street name" or
omnibus accounts).

      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 72 months after 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 six years.

      |X|   Availability of Class N Shares. In addition to the description of
the types of retirement plans which may purchase Class N shares contained in
the prospectus, Class N shares also are offered to the following:
o     to all rollover IRAs (including SEP IRAs and SIMPLE IRAs),
o     to all rollover contributions made to Individual 401(k) plans,
            Profit-Sharing Plans and Money Purchase Pension Plans,
o     to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and
            Ascender retirement plans,
o     to all trustee-to-trustee IRA transfers,
o     to all 90-24 type 403(b) transfers,
o     to Group Retirement Plans (as defined in Appendix C to this Statement
            of Additional Information) which have entered into a special
            agreement with the Distributor for that purpose,
o     to Retirement Plans qualified under Sections 401(a) or 401(k) of the
            Internal Revenue Code, the recordkeeper or the plan sponsor for
            which has entered into a special agreement with the Distributor,
o     to Retirement Plans of a plan sponsor where the aggregate assets of all
            such plans invested in the Oppenheimer funds is $500,000 or more,
o     to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the
            purchase with the redemption proceeds of Class A shares of one or
            more Oppenheimer funds, and
o     to certain customers of broker-dealers and financial advisors that are
            identified in a special agreement between the broker-dealer or
            financial advisor and the Distributor for that purpose.

      The sales concession and the advance of the service fee, as described
in the Prospectus, will not be paid to dealers of record on sales of Class N
shares on:
         purchases of Class N shares in amounts of $500,000 or more by a
            retirement plan that pays for the purchase with the redemption
            proceeds of Class A shares of one or more Oppenheimer funds
            (other than rollovers from an OppenheimerFunds-sponsored Pinnacle
            or Ascender 401(k) plan to any IRA invested in the Oppenheimer
            funds),
         purchases of Class N shares in amounts of $500,000 or more by a
            retirement plan that pays for the purchase with the redemption
            proceeds of  Class C shares of one or more Oppenheimer funds held
            by the plan for more than one year (other than rollovers from an
            OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to
            any IRA invested in the Oppenheimer funds), and
         on purchases of Class N shares by an OppenheimerFunds-sponsored
            Pinnacle or Ascender 401(k) plan made with the redemption
            proceeds of Class A shares of one or more Oppenheimer funds.

      No sales concessions will be paid to the broker-dealer of record, as
described in the Prospectus, on sales of Class N 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.

      |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
on or about the second to last business day of 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 Exchange on each day that the Exchange is open. The
calculation is done by dividing the value of the Fund's net assets
attributable to a class by the number of shares of that class that are
outstanding. The Exchange normally closes at 4:00 P.M., 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 Exchange'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 Exchange members may conduct trading in certain
securities on days on which the Exchange 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, trading on European and
Asian stock exchanges and over-the-counter markets normally is completed
before the close of the Exchange.

      Changes in the values of securities traded on foreign exchanges or
markets as a result of events that occur after the prices of those securities
are determined, but before the close of the Exchange, will not be reflected
in the Fund's calculation of its net asset values that day unless the Manager
determines that the event is likely to effect a material change in the value
of the security. The Manager, 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     Equity securities traded on a U.S. securities exchange or on Nasdaq(R)
are valued as follows:
(1)   if last sale information is regularly reported, they are valued at the
               last reported sale price on the principal exchange on which
               they are traded or on Nasdaq(R), as applicable, on that day, or
(2)   if last sale information is not available on a valuation date, they are
               valued at the last reported sale price preceding the valuation
               date if it is within the spread of the closing "bid" and
               "asked" prices on the valuation date or, if not,  at the
               closing "bid" price on the valuation date.
o     Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:
(1)   at the last sale price available to the pricing service approved by the
               Board of Trustees, or
(2)   at the last sale price obtained by the Manager from the report of the
               principal exchange on which the security is traded at its last
               trading session on or immediately before the valuation date, or
(3)   at the mean between the "bid" and "asked" prices obtained from the
               principal exchange on which the security is traded or, on the
               basis of reasonable inquiry, from two market makers in the
               security.
o     Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
o     The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board
of Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1)   debt instruments that have a maturity of more than 397 days when
               issued,
(2)   debt instruments that had a maturity of 397 days or less when issued
               and have a remaining maturity of more than 60 days, and
(3)   non-money market debt instruments that had a maturity of 397 days or
               less when issued and which have a remaining maturity of 60
               days or less.
o     The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1)   money market debt securities held by a non-money market fund that had a
               maturity of less than 397 days when issued that have a
               remaining maturity of 60 days or less, and
(2)   debt instruments held by a money market fund that have a remaining
               maturity of 397 days or less.
o     As explained in the Prospectus, if the Manager is unable to locate two
market makers willing to give quotes, a security may be priced at the mean
between the "bid" and "asked" prices provided by a single active market maker
(which in certain cases may be the "bid" price if no "asked" price is
available).

      In the case of U.S. government securities, mortgage-backed securities,
corporate bonds and foreign government securities, when last sale information
is not generally available, the Manager may use pricing services approved by
the Board of Trustees. The pricing service may use "matrix" comparisons to
the prices for comparable instruments on the basis of quality, yield and
maturity. Other special factors may be involved (such as the tax-exempt
status of the interest paid by municipal securities). The Manager will
monitor the accuracy of the pricing services. That monitoring may include
comparing prices used for portfolio valuation to actual sales prices of
selected securities. Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures.

      The closing prices at the close of the Exchange on a particular
business day that are provided to the Manager by a bank, dealer or pricing
service that the Manager has determined to be reliable are used to value
foreign currency, including forward contracts, and to convert to U.S. dollars
securities that are denominated in foreign currency.

      Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded or on Nasdaq(R), as applicable, as
determined by a pricing service approved by the Board of Trustees or by the
Manager. If there were no sales that day, they shall be valued at the last
sale price on the preceding trading day if it is within the spread of the
closing "bid" and "asked" prices on the principal exchange or on Nasdaq(R)on
the valuation date. If not, the value shall be the closing bid price on the
principal exchange or on Nasdaq(R)on the valuation date. If the put, call or
future is not traded on an exchange or on Nasdaq(R), it shall be valued by the
mean between "bid" and "asked" prices obtained by the Manager from two active
market makers. In certain cases that may be at the "bid" price if no "asked"
price is available.

      When the Fund writes an option, an amount equal to the premium received
is included in the Fund's Statement of Assets and Liabilities as an asset. An
equivalent credit is included in the liability section. The credit is
adjusted ("marked-to-market") to reflect the current market value of the
option. In determining the Fund's gain on investments, if a call or put
written by the Fund is exercised, the proceeds are increased by the premium
received. If a call or put written by the Fund expires, the Fund has a gain
in the amount of the premium. If the Fund enters into a closing purchase
transaction, it will have a gain or loss, depending on whether the premium
received was more or less than the cost of the closing transaction. If the
Fund exercises a put it holds, the amount the Fund receives on its sale of
the underlying investment is reduced by the amount of premium paid by the
Fund.


How to Sell Shares

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

Checkwriting. When a check is presented to United Missouri Bank (the "Bank")
for clearance, the Bank will ask the Fund to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the amount
of the check. This enables the shareholder to continue receiving dividends on
those shares until the check is presented to the Fund. Checks may not be
presented for payment at the offices of the Bank or the Fund's custodian
bank. This limitation does not affect the use of checks for the payment of
bills or to obtain cash at other banks. The Fund reserves the right to amend,
suspend or discontinue offering checkwriting privileges at any time. The Fund
will provide you notice whenever it is required to do so by applicable law.

      In choosing to take advantage of the Checkwriting privilege, by signing
the account application or by completing a Checkwriting card, each individual
who signs:
(1)   for individual accounts, represents that they are the registered
         owner(s) of the shares of the Fund in that account;
(2)   for accounts for corporations, partnerships, trusts and other entities,
         represents that they are an officer, general partner, trustee or
         other fiduciary or agent, as applicable, duly authorized to act on
         behalf of the registered owner(s);
(3)   authorizes the Fund, its Transfer Agent and any bank through which the
         Fund's drafts (checks) are payable to pay all checks drawn on the
         Fund account of such person(s) and to redeem a sufficient amount of
         shares from that account to cover payment of each check;
(4)   specifically acknowledges that if they choose to permit checks to be
         honored if there is a single signature on checks drawn against joint
         accounts, or accounts for corporations, partnerships, trusts or
         other entities, the signature of any one signatory on a check will
         be sufficient to authorize payment of that check and redemption from
         the account, even if that account is registered in the names of more
         than one person or more than one authorized signature appears on the
         Checkwriting card or the application, as applicable;
(5)   understands that the Checkwriting privilege may be terminated or
         amended at any time by the Fund and/or the Fund's bank; and
(6)   acknowledges and agrees that neither the Fund nor its bank shall incur
         any liability for that amendment or termination of checkwriting
         privileges or for redeeming shares to pay checks reasonably believed
         by them to be genuine, or for returning or not paying checks that
         have not been accepted for any reason.


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 or any of the other Oppenheimer funds into which shares of
the Fund are exchangeable as described in "How to Exchange Shares" below.
Reinvestment will be at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the Transfer
Agent for that privilege at the time of reinvestment. This privilege does not
apply to Class C, Class N or Class Y 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 $200 or such lesser amount as
the Board may fix. The Board will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of such shares has
fallen below the stated minimum solely as a result of market fluctuations. If
the Board exercises this right, it may also fix the requirements for any
notice to be given to the shareholders in question (not less than 30 days).
The Board may alternatively set requirements for the shareholder to increase
the investment, or set other terms and conditions so that the shares would
not be involuntarily redeemed.

Transfers of Shares. A transfer of shares to a different registration is not
an event that triggers the payment of sales charges. Therefore, shares are
not subject to the payment of a contingent deferred sales charge of any class
at the time of transfer to the name of another person or entity. It does not
matter whether the transfer occurs by absolute assignment, gift or bequest,
as long as it does not involve, directly or indirectly, a public sale of the
shares. When shares subject to a contingent deferred sales charge are
transferred, the transferred shares will remain subject to the contingent
deferred sales charge. It will be calculated as if the transferee shareholder
had acquired the transferred shares in the same manner and at the same time
as the transferring shareholder.

      If less than all shares held in an account are transferred, and some
but not all shares in the account would be subject to a contingent deferred
sales charge if redeemed at the time of transfer, the priorities described in
the Prospectus under "How to Buy Shares" for the imposition of the Class B,
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 Exchange on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from
its customers prior to the time the Exchange closes. Normally, the Exchange
closes at 4:00 P.M., but may do so earlier on some days. Additionally, the
order must have been transmitted to and received by the Distributor prior to
its close of business that day (normally 5:00 P.M.).

      Ordinarily, for accounts redeemed by a broker-dealer under this
procedure, payment will be made within three business days after the shares
have been redeemed upon the Distributor's receipt of the required redemption
documents in proper form. The signature(s) of the registered owners on the
redemption documents must be guaranteed as described in the Prospectus.

Automatic Withdrawal and Exchange Plans. Investors owning shares of the Fund
valued at $5,000 or more can authorize the Transfer Agent to redeem shares
(having a value of at least $50) automatically on a monthly, quarterly,
semi-annual or annual basis under an Automatic Withdrawal Plan. Shares will
be redeemed three business days prior to the date requested by the
shareholder for receipt of the payment. Automatic withdrawals of up to $1,500
per month may be requested by telephone if payments are to be made by check
payable to all shareholders of record. Payments must also be sent to the
address of record for the account and the address must not have been changed
within the prior 30 days. Required minimum distributions from
OppenheimerFunds-sponsored retirement plans may not be arranged on this
basis.

      Payments are normally made by check, but shareholders having
AccountLink privileges (see "How To Buy Shares") may arrange to have
Automatic Withdrawal Plan payments transferred to the bank account designated
on the account application or by signature-guaranteed instructions sent to
the Transfer Agent. Shares are normally redeemed pursuant to an Automatic
Withdrawal Plan three business days before the payment transmittal date you
select in the account application. If a contingent deferred sales charge
applies to the redemption, the amount of the check or payment will be reduced
accordingly.

      The Fund cannot guarantee receipt of a payment on the date requested.
The Fund reserves the right to amend, suspend or discontinue offering these
plans at any time without prior notice. Because of the sales charge assessed
on Class A share purchases, shareholders should not make regular additional
Class A share purchases while participating in an Automatic Withdrawal Plan.
Class B, Class C and Class N shareholders should not establish automatic
withdrawal plans, because of the potential imposition of the contingent
deferred sales charge on such withdrawals (except where the Class B, Class C
or Class N contingent deferred sales charge is waived as described in
Appendix C to this Statement of Additional Information).

      By requesting an Automatic Withdrawal or Exchange Plan, the shareholder
agrees to the terms and conditions that apply to such plans, as stated below.
These provisions may be amended from time to time by the Fund and/or the
Distributor. When adopted, any amendments will automatically apply to
existing Plans.

      |X|   Automatic Exchange Plans. Shareholders can authorize the Transfer
Agent to exchange a pre-determined amount of shares of the Fund for shares
(of the same class) of other Oppenheimer funds automatically on a monthly,
quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The
minimum amount that may be exchanged to each other fund account is $50.
Instructions should be provided on the OppenheimerFunds application or
signature-guaranteed instructions. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How to
Exchange Shares" in the Prospectus and below in this Statement of Additional
Information.

      Automatic  Withdrawal  Plans.  Fund shares will be redeemed as necessary
to meet withdrawal  payments.  Shares acquired  without a sales charge will be
redeemed first.  Shares  acquired with reinvested  dividends and capital gains
distributions will be redeemed next,  followed by shares acquired with a sales
charge,  to the extent necessary to make withdrawal  payments.  Depending upon
the amount withdrawn, the investor's principal may be depleted.  Payments made
under  these  plans  should  not be  considered  as a yield or  income on your
investment.

      The Transfer Agent will administer the investor's Automatic Withdrawal
Plan as agent for the shareholder(s) (the "Planholder") who executed the plan
authorization and application submitted to the Transfer Agent. Neither the
Fund nor the Transfer Agent shall incur any liability to the Planholder for
any action taken or not taken by the Transfer Agent in good faith to
administer the plan. Share certificates will not be issued for shares of the
Fund purchased for and held under the plan, but the Transfer Agent will
credit all such shares to the account of the Planholder on the records of the
Fund. Any share certificates held by a Planholder may be surrendered
unendorsed to the Transfer Agent with the plan application so that the shares
represented by the certificate may be held under the plan.

      For accounts subject to Automatic Withdrawal Plans, distributions of
capital gains must be reinvested in shares of the Fund, which will be done at
net asset value without a sales charge. Dividends on shares held in the
account may be paid in cash or reinvested.

      Shares will be redeemed to make withdrawal payments at the net asset
value per share determined on the redemption date. Checks or AccountLink
payments representing the proceeds of Plan withdrawals will normally be
transmitted three business days prior to the date selected for receipt of the
payment, according to the choice specified in writing by the Planholder.
Receipt of payment on the date selected cannot be guaranteed.

      The amount and the interval of disbursement payments and the address to
which checks are to be mailed or AccountLink payments are to be sent may be
changed at any time by the Planholder by writing to the Transfer Agent. The
Planholder should allow at least two weeks' time after mailing such
notification for the requested change to be put in effect. The Planholder
may, at any time, instruct the Transfer Agent by written notice to redeem
all, or any part of, the shares held under the plan. That notice must be in
proper form in accordance with the requirements of the then-current
Prospectus of the Fund. In that case, the Transfer Agent will redeem the
number of shares requested at the net asset value per share in effect and
will mail a check for the proceeds to the Planholder.

      The Planholder may terminate a plan at any time by writing to the
Transfer Agent. The Fund may also give directions to the Transfer Agent to
terminate a plan. The Transfer Agent will also terminate a plan upon its
receipt of evidence satisfactory to it that the Planholder has died or is
legally incapacitated. Upon termination of a plan by the Transfer Agent or
the Fund, shares that have not been redeemed will be held in uncertificated
form in the name of the Planholder. The account will continue as a
dividend-reinvestment, uncertificated account unless and until proper
instructions are received from the Planholder, his or her executor or
guardian, or another authorized person.

      If the Transfer Agent ceases to act as transfer agent for the Fund, the
Planholder will be deemed to have appointed any successor transfer agent to
act as agent in administering the plan.

How to Exchange Shares

As stated in the Prospectus, shares of a particular class of Oppenheimer
funds having more than one class of shares may be exchanged only for shares
of the same class of other Oppenheimer funds. Shares of Oppenheimer funds
that have a single class without a class designation are deemed "Class A"
shares for this purpose. You can obtain a current list showing which funds
offer which classes 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 America Fund, L.P.             Centennial Money Market Trust
   Centennial California Tax Exempt Trust    Centennial New York Tax Exempt
                                             Trust
   Centennial Government Trust               Centennial Tax Exempt 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 International Small Company
                                             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 Developing Markets Fund      Oppenheimer Senior Floating Rate Fund
   Oppenheimer Gold & Special Minerals Fund Oppenheimer Small Cap Value Fund
   Oppenheimer International Bond Fund      Oppenheimer Total Return Bond Fund
   Oppenheimer International Growth 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, Class C and Class N 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 or Oppenheimer Cash Reserves acquired by exchange of Class M
      shares.
o     Shares of Oppenheimer Capital Preservation Fund may not be exchanged
      for shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash
      Reserves or Oppenheimer Limited-Term Government Fund. Only participants
      in certain retirement plans may purchase shares of Oppenheimer Capital
      Preservation Fund, and only those participants may exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Capital Preservation
      Fund.
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
      (2/4/2011).
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
      (12/6/2011).

      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     With respect to Class B shares (other than Limited-Term Government
Fund, Limited Term Municipal Fund, Limited Term New York Municipal Fund,
Oppenheimer Capital Preservation Fund and Oppenheimer Senior Floating Rate
Fund), the Class B 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 Limited-Term Government Fund, Limited
Term Municipal Fund, Limited Term New York Municipal Fund, Oppenheimer
Capital Preservation Fund and Oppenheimer Senior Floating Rate Fund, the
Class B contingent deferred sales charge is imposed on Class B shares
acquired by exchange if they are redeemed within 5 years of the initial
purchase of the exchanged Class B shares.

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. The Fund may accept requests for
exchanges of up to 50 accounts per day from representatives of authorized
dealers that qualify for this privilege.

      |X|   Telephone Exchange Requests. When exchanging shares by telephone,
a shareholder must have an existing account in the fund to which the exchange
is to be made. Otherwise, the investors must obtain a prospectus of that fund
before the exchange request may be submitted. If all telephone lines are busy
(which might occur, for example, during periods of substantial market
fluctuations), shareholders might not be able to request exchanges by
telephone and would have to submit written exchange requests.

      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
and Class Y 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.

      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 January of each year.

      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. All income and any tax
withheld (in this situation) by the Fund is remitted by the Fund to the U.S.
Treasury and is identified in reports mailed to shareholders in January of
each year.

      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.
To elect this option, the shareholder must notify the Transfer Agent in
writing and must have an existing account in the fund selected for
reinvestment. Otherwise the shareholder first must obtain a prospectus for
that fund and an application from the Distributor to establish an account.
Dividends and/or distributions from shares of certain other Oppenheimer funds
(other than Oppenheimer Cash Reserves) may be invested in shares of this Fund
on the same basis.

Additional Information About the Fund

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

The Transfer Agent. OppenheimerFunds Services, the Fund's Transfer Agent, is
a division of the Manager. It is responsible for maintaining the Fund's
shareholder registry and shareholder accounting records, and for paying
dividends and distributions to shareholders. It also handles shareholder
servicing and administrative functions. It 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 Custodian. J.P. Morgan 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 served
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.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER INTERNATIONAL BOND FUND: We have audited the accompanying statement of assets and liabilities of Oppenheimer International Bond Fund, including the statement of investments, as of September 30, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2004, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Oppenheimer International Bond Fund as of September 30, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Denver, Colorado November 16, 2004 STATEMENT OF INVESTMENTS September 30, 2004 - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 - ---------------------------------------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS--10.9% - ---------------------------------------------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp. Nts., 3.75%, 7/15/09 [EUR] 16,635,000 $ 20,764,657 - ---------------------------------------------------------------------------------------------------------------------- Federal National Mortgage Assn. Sr. Unsec. Nts., 2.125%, 10/9/07 [JPY] 510,000,000 4,886,061 - ---------------------------------------------------------------------------------------------------------------------- U.S. Treasury Nts., 2.25%, 4/30/06 1,2 151,000,000 150,610,722 ---------------- Total U.S. Government Obligations (Cost $175,283,161) 176,261,440 - ---------------------------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT OBLIGATIONS--66.5% - ---------------------------------------------------------------------------------------------------------------------- ARGENTINA--1.7% Argentina (Republic of) Bonds: 1.389%, 5/3/05 3 396,000 389,285 1.98%, 8/3/12 3 15,620,000 11,381,294 Series PRE8, 2%, 1/3/10 4,5,6 [ARP] 15,670,000 6,833,613 Series PR12, 2%, 1/3/16 4,5,6 [ARP] 18,075,972 6,300,213 - ---------------------------------------------------------------------------------------------------------------------- Argentina (Republic of) Disc. Bonds, 3/31/23 4,6 660,000 339,900 - ---------------------------------------------------------------------------------------------------------------------- Argentina (Republic of) Letras del Banco Central de la Republica Treasury Bills, 14.75%, 10/8/04 7 [ARP] 412,000 138,105 - ---------------------------------------------------------------------------------------------------------------------- Argentina (Republic of) Unsec. Bonds: Series 4BR, 5%, 12/20/49 4,5 [JPY] 119,000,000 281,234 Series 4RG, 5%, 12/20/49 4,5 [JPY] 178,000,000 420,670 - ---------------------------------------------------------------------------------------------------------------------- Argentina (Republic of) Unsec. Unsub. Bonds, Series 6RG, 5.125%, 6/14/04 4,5 [JPY] 494,000,000 1,167,477 - ---------------------------------------------------------------------------------------------------------------------- Buenos Aires (Province of) Bonds, Bonos de Consolidacion de Deudas, Series PBA1, 4/1/07 4,6 [ARP] 1,599,187 627,003 ---------------- 27,878,794 - ---------------------------------------------------------------------------------------------------------------------- AUSTRALIA--2.9% Queensland Treasury Corp. Unsec. Nts., Series 09G, 6%, 7/14/09 [AUD] 62,395,000 46,371,134 - ---------------------------------------------------------------------------------------------------------------------- AUSTRIA--3.9% Austria (Republic of) Nts.: 3.40%, 10/20/04 [EUR] 1,580,000 1,966,126 3.80%, 10/20/13 [EUR] 29,045,000 35,656,554 5.50%, 10/20/07 [EUR] 2,440,000 3,261,592 Series 98-1, 5%, 1/15/08 [EUR] 9,795,000 12,947,585 - ---------------------------------------------------------------------------------------------------------------------- Austria (Republic of) Sr. Unsec. Unsub. Nts., Series 1, 5%, 7/15/12 [EUR] 6,525,000 8,753,693 ---------------- 62,585,550 - ---------------------------------------------------------------------------------------------------------------------- BELGIUM--3.7% Belgium (Kingdom of) Bonds: 5%, 9/28/11 [EUR] 3,545,000 4,755,265 5.50%, 3/28/28 [EUR] 5,400,000 7,535,024 Series 19, 6.50%, 3/31/05 [EUR] 7,460,000 9,471,529 Series 32, 3.75%, 3/28/09 [EUR] 19,125,000 24,258,116 Series 35, 5.75%, 9/28/10 [EUR] 9,415,000 13,084,764 ---------------- 59,104,698 20 | OPPENHEIMER INTERNATIONAL BOND FUND PRINCIPAL VALUE AMOUNT SEE NOTE 1 - ---------------------------------------------------------------------------------------------------------------------- BRAZIL--2.7% Brazil (Federal Republic of) Bonds, Series 15 yr., 2.125%, 4/15/09 3 $ 17,648 $ 17,339 - ---------------------------------------------------------------------------------------------------------------------- Brazil (Federal Republic of) Debt Capitalization Bonds, Series 20 yr., 8%, 4/15/14 27,753,602 27,458,720 - ---------------------------------------------------------------------------------------------------------------------- Brazil (Federal Republic of) Nts., 12%, 4/15/10 2,290,000 2,739,985 - ---------------------------------------------------------------------------------------------------------------------- Brazil (Federal Republic of) Unsec. Bonds, 4.75%, 4/10/07 6 [JPY] 500,000,000 4,613,007 - ---------------------------------------------------------------------------------------------------------------------- Brazil (Federal Republic of) Unsec. Unsub. Bonds: 10%, 8/7/11 1,530,000 1,696,005 11%, 2/4/10 [EUR] 840,000 1,186,740 11%, 8/17/40 5,345,200 5,998,651 Cl. B, 8.875%, 4/15/24 81,000 77,760 ---------------- 43,788,207 - ---------------------------------------------------------------------------------------------------------------------- BULGARIA--0.2% Bulgaria (Republic of) Bonds: 8.25%, 1/15/15 1,505,000 1,862,438 8.25%, 1/15/15 8 1,505,000 1,862,438 ---------------- 3,724,876 - ---------------------------------------------------------------------------------------------------------------------- COLOMBIA--0.6% Colombia (Republic of) Unsec. Unsub. Bonds, 5.50%, 4/27/05 [JPY] 960,000,000 8,885,770 - ---------------------------------------------------------------------------------------------------------------------- DENMARK--0.7% Denmark (Kingdom of) Nts., 4%, 8/15/08 [DKK] 61,610,000 10,584,071 - ---------------------------------------------------------------------------------------------------------------------- EL SALVADOR--0.1% El Salvador (Republic of) Bonds, 7.625%, 9/21/34 8 1,185,000 1,220,550 - ---------------------------------------------------------------------------------------------------------------------- FINLAND--3.1% Finland (Republic of) Bonds, 5.375%, 7/4/13 [EUR] 20,985,000 28,885,122 - ---------------------------------------------------------------------------------------------------------------------- Finland (Republic of) Sr. Unsec. Unsub. Bonds: 2.75%, 7/4/06 [EUR] 3,470,000 4,333,084 5%, 7/4/07 [EUR] 12,415,000 16,326,084 ---------------- 49,544,290 - ---------------------------------------------------------------------------------------------------------------------- FRANCE--3.2% France (Government of) Obligations Assimilables du Tresor Bonds: 4%, 10/25/13 [EUR] 13,960,000 17,415,169 5.50%, 10/25/07 [EUR] 12,375,000 16,544,426 5.50%, 10/25/10 [EUR] 3,080,000 4,232,637 5.75%, 10/25/32 [EUR] 5,300,000 7,722,022 - ---------------------------------------------------------------------------------------------------------------------- France (Government of) Treasury Nts., 5 yr., 5%, 7/12/05 [EUR] 5,050,000 6,412,539 ---------------- 52,326,793 21 | OPPENHEIMER INTERNATIONAL BOND FUND STATEMENT OF INVESTMENTS Continued - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 - ---------------------------------------------------------------------------------------------------------------------- GERMANY--2.5% Germany (Republic of) Bonds: 2%, 6/17/05 [EUR] 7,865,000 $ 9,766,143 3%, 12/10/04 [EUR] 2,385,000 2,970,969 5.375%, 1/4/10 [EUR] 7,205,000 9,811,743 Series 01, 5%, 7/4/11 [EUR] 9,135,000 12,273,007 Series 02, 5%, 7/4/12 [EUR] 4,200,000 5,642,239 ---------------- 40,464,101 - ---------------------------------------------------------------------------------------------------------------------- GREECE--4.0% Greece (Republic of) Bonds: 5.35%, 5/18/11 [EUR] 25,040,000 34,021,060 6.50%, 1/11/14 [EUR] 14,195,000 20,846,349 - ---------------------------------------------------------------------------------------------------------------------- Greece (Republic of) Sr. Unsub. Bonds, 4.65%, 4/19/07 [EUR] 6,980,000 9,072,390 ---------------- 63,939,799 - ---------------------------------------------------------------------------------------------------------------------- GUATEMALA--0.0% Guatemala (Republic of) Nts.: 10.25%, 11/8/11 525,000 614,250 10.25%, 11/8/11 8 160,000 187,200 ---------------- 801,450 - ---------------------------------------------------------------------------------------------------------------------- HUNGARY--0.6% Hungary (Government of) Bonds, Series 05/I, 8.50%, 10/12/05 [HUF] 1,918,660,000 9,474,926 - ---------------------------------------------------------------------------------------------------------------------- IRELAND--4.0% Ireland (Republic of) Treasury Bonds, 3.25%, 4/18/09 [EUR] 52,335,000 65,027,825 - ---------------------------------------------------------------------------------------------------------------------- ITALY--3.2% Italy (Republic of) Treasury Bonds: Buoni del Tesoro Poliennali, 4%, 3/1/05 [EUR] 6,980,000 8,748,123 Buoni del Tesoro Poliennali, 4.25%, 2/1/19 [EUR] 13,785,000 16,828,266 Buoni del Tesoro Poliennali, 4.50%, 3/1/07 [EUR] 14,745,000 19,094,957 Buoni del Tesoro Poliennali, 5%, 10/15/07 [EUR] 5,125,000 6,765,687 ---------------- 51,437,033 - ---------------------------------------------------------------------------------------------------------------------- IVORY COAST--0.0% Ivory Coast (Government of) Past Due Interest Bonds, 1.90%, 3/29/18 4,5,6 [FRF] 16,007,500 527,316 - ---------------------------------------------------------------------------------------------------------------------- JAPAN--4.5% Japan (Government of) Bonds, 5 yr., Series 14, 0.40%, 6/20/06 [JPY] 7,893,800,000 72,114,956 - ---------------------------------------------------------------------------------------------------------------------- KOREA, REPUBLIC OF SOUTH--0.2% Korea (Republic of) Nts.: 4.25%, 6/1/13 1,445,000 1,389,006 8.875%, 4/15/08 2,160,000 2,535,300 ---------------- 3,924,306 22 | OPPENHEIMER INTERNATIONAL BOND FUND PRINCIPAL VALUE AMOUNT SEE NOTE 1 - ---------------------------------------------------------------------------------------------------------------------- MEXICO--0.8% Mexican Williams Sr. Nts., 2.31%, 11/15/08 3,6 $ 500,000 $ 516,875 - ---------------------------------------------------------------------------------------------------------------------- United Mexican States Bonds: 7.50%, 4/8/33 6,500,000 6,847,750 Series M20, 8%, 12/7/23 [MXN] 43,415,000 2,935,046 - ---------------------------------------------------------------------------------------------------------------------- United Mexican States Unsec. Unsub. Nts., Series 6 BR, 6.75%, 6/6/06 [JPY] 205,000,000 2,050,466 ---------------- 12,350,137 - ---------------------------------------------------------------------------------------------------------------------- NEW ZEALAND--0.3% New Zealand (Government of) Bonds, 7%, 7/15/09 [NZD] 7,110,000 4,983,816 - ---------------------------------------------------------------------------------------------------------------------- NIGERIA--0.1% Central Bank of Nigeria Gtd. Bonds, Series WW, 6.25%, 11/15/20 1,375,000 1,285,625 - ---------------------------------------------------------------------------------------------------------------------- Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10 654,554 592,311 ---------------- 1,877,936 - ---------------------------------------------------------------------------------------------------------------------- PERU--0.4% Peru (Republic of) Sr. Nts., 4.53%, 2/28/16 7 5,860,848 3,350,647 - ---------------------------------------------------------------------------------------------------------------------- Peru (Republic of) Unsec. Unsub. Bonds, 8.75%, 11/21/33 3,400,000 3,391,500 ---------------- 6,742,147 - ---------------------------------------------------------------------------------------------------------------------- POLAND--2.7% Poland (Republic of) Bonds: Series 0K0805, 5.15%, 8/12/05 7 [PLZ] 102,160,000 27,411,901 Series WS0922, 5.75%, 9/23/22 [PLZ] 10,000,000 2,607,235 Series DS0509, 6%, 5/24/09 [PLZ] 50,015,000 13,702,057 ---------------- 43,721,193 - ---------------------------------------------------------------------------------------------------------------------- PORTUGAL--3.7% Portugal (Republic of) Obrig Do Tes Medio Prazo Nts., 4.875%, 8/17/07 [EUR] 9,710,000 12,733,609 - ---------------------------------------------------------------------------------------------------------------------- Portugal (Republic of) Obrig Do Tes Medio Prazo Unsec. Unsub. Nts., 5.85%, 5/20/10 [EUR] 34,195,000 47,601,510 ---------------- 60,335,119 - ---------------------------------------------------------------------------------------------------------------------- RUSSIA--1.4% Aries Vermoegensverwaltungs GmbH Unsub. Nts., Series B, 7.75%, 10/25/09 6 [EUR] 2,500,000 3,294,272 - ---------------------------------------------------------------------------------------------------------------------- Ministry Finance of Russian Debs.: Series V, 3%, 5/14/08 10,615,000 9,632,348 Series VI, 3%, 5/14/06 3,590,000 3,515,867 - ---------------------------------------------------------------------------------------------------------------------- Russian Federation Unsub. Nts., 5%, 3/31/30 3 5,730,000 5,525,869 ---------------- 21,968,356 - ---------------------------------------------------------------------------------------------------------------------- SPAIN--4.1% Spain (Kingdom of) Bonds: Bonos y Obligacion del Estado, 4.25%, 10/31/07 [EUR] 8,945,000 11,560,802 Bonos y Obligacion del Estado, 4.80%, 10/31/06 [EUR] 5,500,000 7,140,523 23 | OPPENHEIMER INTERNATIONAL BOND FUND STATEMENT OF INVESTMENTS Continued - -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT SEE NOTE 1 - ---------------------------------------------------------------------------------------------------------------------- SPAIN Continued Spain (Kingdom of) Bonds: Continued Bonos y Obligacion del Estado, 5.35%, 10/31/11 [EUR] 21,360,000 $ 29,261,302 Bonos y Obligacion del Estado, 5.75%, 7/30/32 [EUR] 5,200,000 7,561,320 - ---------------------------------------------------------------------------------------------------------------------- Spain (Kingdom of) Treasury Bills, 2.03%, 10/22/04 7 [EUR] 8,420,000 10,461,016 ---------------- 65,984,963 - ---------------------------------------------------------------------------------------------------------------------- SWEDEN--0.6% Sweden (Kingdom of) Bonds, Series 1043, 5%, 1/28/09 [SEK] 65,420,000 9,471,761 - ---------------------------------------------------------------------------------------------------------------------- THE NETHERLANDS--3.1% Netherlands (Kingdom of the) Bonds: 3.75%, 7/15/09 [EUR] 8,000,000 10,145,196 4.25%, 7/15/13 [EUR] 9,660,000 12,283,158 5%, 7/15/11 [EUR] 15,405,000 20,670,022 5.50%, 1/15/28 [EUR] 5,300,000 7,421,852 ---------------- 50,520,228 - ---------------------------------------------------------------------------------------------------------------------- TURKEY--0.1% Turkey (Republic of) Nts., 7.25%, 3/15/15 9 1,915,000 1,895,850 - ---------------------------------------------------------------------------------------------------------------------- UNITED KINGDOM--6.2% United Kingdom Treasury Nts., 4%, 3/7/09 [GBP] 56,685,000 99,616,042 - ---------------------------------------------------------------------------------------------------------------------- VENEZUELA--1.2% Venezuela (Republic of) Collateralized Par Bonds, Series W-B, 6.75%, 3/31/20 159,000 155,224 - ---------------------------------------------------------------------------------------------------------------------- Venezuela (Republic of) Debs., Series DL, 2.75%, 12/18/07 3 13,362 13,309 - ---------------------------------------------------------------------------------------------------------------------- Venezuela (Republic of) Front-Loaded Interest Reduction Bonds, Series A, 2.063%, 3/31/07 3 10,213,775 10,162,706 - ---------------------------------------------------------------------------------------------------------------------- Venezuela (Republic of) Nts.: 8.50%, 10/8/14 9 2,610,000 2,556,821 10.75%, 9/13/13 4,350,000 4,904,625 - ---------------------------------------------------------------------------------------------------------------------- Venezuela (Republic of) Sr. Unsec. Unsub. Bonds, 11%, 3/5/08 [EUR] 840,000 1,194,836 ---------------- 18,987,521 ---------------- Total Foreign Government Obligations (Cost $1,033,520,851) 1,072,181,514 - ---------------------------------------------------------------------------------------------------------------------- LOAN PARTICIPATIONS--1.1% - ---------------------------------------------------------------------------------------------------------------------- Algeria (Republic of) Loan Participation Nts.: 0.938%, 3/4/10 3,6 [JPY] 194,879,283 1,722,675 2%, 9/4/06 3,6 657,141 652,212 2.183%, 3/4/10 3,6 745,250 734,071 - ---------------------------------------------------------------------------------------------------------------------- Deutsche Bank AG: Indonesia (Republic of) Rupiah Loan Participation Nts., 2.636%, 3/21/05 3 5,390,000 5,364,667 Indonesia (Republic of) Rupiah Loan Participation Nts., 2.636%, 1/25/06 3 3,155,000 3,084,959 OAO Gazprom Loan Participation Nts., 6.50%, 8/4/05 6 3,005,000 3,079,524 - ---------------------------------------------------------------------------------------------------------------------- Morgan Stanley Bank AG, OAO Gazprom Unsec. Loan Participation Nts., 9.625%, 3/1/13 3,020,000 3,355,975 ---------------- Total Loan Participations (Cost $17,356,188) 17,994,083 24 | OPPENHEIMER INTERNATIONAL BOND FUND PRINCIPAL VALUE AMOUNT SEE NOTE 1 - ---------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES--6.9% - ---------------------------------------------------------------------------------------------------------------------- Capital Gaming International, Inc., 11.50% Promissory Nts., 8/1/1995 4,5,6 $ 2,000 $ -- - ---------------------------------------------------------------------------------------------------------------------- European Investment Bank Nts., 2.125%, 9/20/07 [JPY] 136,000,000 1,305,373 - ---------------------------------------------------------------------------------------------------------------------- Gazprom International SA, 7.201% Sr. Unsec. Bonds, 2/1/20 7,850,000 7,969,556 - ---------------------------------------------------------------------------------------------------------------------- General Electric Capital Corp., 1.40% Sr. Unsec. Unsub. Nts., 11/2/06 [JPY] 4,101,000,000 38,174,098 - ---------------------------------------------------------------------------------------------------------------------- Inter-American Development Bank, 1.90% Unsec. Bonds, 7/8/09 [JPY] 113,000,000 1,092,510 - ---------------------------------------------------------------------------------------------------------------------- International Bank for Reconstruction and Development (The), 2% Nts., 2/18/08 [JPY] 121,000,000 1,162,371 - ---------------------------------------------------------------------------------------------------------------------- Japan (Government of) Unsec. Unsub. Nts., 2.875%, 7/28/05 [JPY] 3,320,000,000 30,882,956 - ---------------------------------------------------------------------------------------------------------------------- KfW International Finance, Inc., 2.05% Unsec. Unsub. Nts., 9/21/09 [JPY] 104,000,000 1,011,990 - ---------------------------------------------------------------------------------------------------------------------- Ongko International Finance Co. BV, 10.50% Sec. Nts., 3/29/10 4,5,6 550,000 3,438 - ---------------------------------------------------------------------------------------------------------------------- Petroleos Mexicanos, 7.375% Unsec. Nts., 8/13/07 [ITL] 14,895,000,000 10,506,882 - ---------------------------------------------------------------------------------------------------------------------- Pfizer, Inc., 0.80% Unsec. Nts., Series INTL, 3/18/08 [JPY] 1,980,000,000 18,199,118 ---------------- Total Corporate Bonds and Notes (Cost $111,387,048) 110,308,292 SHARES - ---------------------------------------------------------------------------------------------------------------------- COMMON STOCKS--1.6% - ---------------------------------------------------------------------------------------------------------------------- BASF AG 9,224 542,598 - ---------------------------------------------------------------------------------------------------------------------- Berkeley Group plc (The) 22,830 524,571 - ---------------------------------------------------------------------------------------------------------------------- Brambles Industries plc 114,390 532,203 - ---------------------------------------------------------------------------------------------------------------------- British Land Co. plc 38,554 519,782 - ---------------------------------------------------------------------------------------------------------------------- CNP Assurances SA 8,242 536,083 - ---------------------------------------------------------------------------------------------------------------------- Corus Group plc 5 630,456 582,645 - ---------------------------------------------------------------------------------------------------------------------- DaimlerChrysler AG 12,005 494,930 - ---------------------------------------------------------------------------------------------------------------------- E.ON AG 7,030 518,014 - ---------------------------------------------------------------------------------------------------------------------- Gecina SA 6,004 507,747 - ---------------------------------------------------------------------------------------------------------------------- Heidelberger Zement AG 11,342 531,071 - ---------------------------------------------------------------------------------------------------------------------- Hilton Group plc 106,590 534,544 - ---------------------------------------------------------------------------------------------------------------------- Hokkaido Electric Power Co. 27,424 491,820 - ---------------------------------------------------------------------------------------------------------------------- Japan Real Estate Investment Corp. 65 516,975 - ---------------------------------------------------------------------------------------------------------------------- Karstadt Quelle AG 31,462 494,574 - ---------------------------------------------------------------------------------------------------------------------- Kawasaki Kisen Kaisha Ltd. 77,943 534,191 - ---------------------------------------------------------------------------------------------------------------------- Kelda Group plc 52,585 510,270 - ---------------------------------------------------------------------------------------------------------------------- Klepierre 6,911 500,221 - ---------------------------------------------------------------------------------------------------------------------- Lafarge SA 5,825 510,358 - ---------------------------------------------------------------------------------------------------------------------- Land Securities Group plc 24,125 512,796 - ---------------------------------------------------------------------------------------------------------------------- Leopalace21 Corp. 26,000 480,934 - ---------------------------------------------------------------------------------------------------------------------- Liberty International plc 33,441 501,145 - ---------------------------------------------------------------------------------------------------------------------- Lloyds TSB Group plc 66,521 520,138 - ---------------------------------------------------------------------------------------------------------------------- MAN AG 14,732 503,840 25 | OPPENHEIMER INTERNATIONAL BOND FUND STATEMENT OF INVESTMENTS Continued - -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 - ---------------------------------------------------------------------------------------------------------------------- COMMON STOCKS Continued - ---------------------------------------------------------------------------------------------------------------------- Mitsui O.S.K. Lines Ltd. 84,301 $ 506,503 - ---------------------------------------------------------------------------------------------------------------------- Nippon Building Fund, Inc. 67 528,010 - ---------------------------------------------------------------------------------------------------------------------- Nippon Mining Holdings, Inc. 108,668 551,168 - ---------------------------------------------------------------------------------------------------------------------- Novar plc 226,450 476,003 - ---------------------------------------------------------------------------------------------------------------------- Omron Corp. 23,603 522,413 - ---------------------------------------------------------------------------------------------------------------------- PSA Peugeot Citroen 8,331 513,898 - ---------------------------------------------------------------------------------------------------------------------- Rakuten, Inc. 72 469,245 - ---------------------------------------------------------------------------------------------------------------------- RWE AG 10,213 487,734 - ---------------------------------------------------------------------------------------------------------------------- Sammy Corp. 10,061 493,836 - ---------------------------------------------------------------------------------------------------------------------- ScottishPower plc 68,960 527,962 - ---------------------------------------------------------------------------------------------------------------------- Severn Trent plc 32,030 509,601 - ---------------------------------------------------------------------------------------------------------------------- Showa Shell Sekiyu K.K. 56,398 501,361 - ---------------------------------------------------------------------------------------------------------------------- Societe Generale, Cl. A 5,845 517,926 - ---------------------------------------------------------------------------------------------------------------------- Suez SA 25,774 553,249 - ---------------------------------------------------------------------------------------------------------------------- Sumitomo Bakelite Co. Ltd. 80,931 488,462 - ---------------------------------------------------------------------------------------------------------------------- Tate & Lyle plc 77,590 542,715 - ---------------------------------------------------------------------------------------------------------------------- Technip SA 3,332 538,699 - ---------------------------------------------------------------------------------------------------------------------- ThyssenKrupp AG 26,817 520,942 - ---------------------------------------------------------------------------------------------------------------------- Tohoku Electric Power Co. 29,100 480,878 - ---------------------------------------------------------------------------------------------------------------------- TonenGeneral Sekiyu K.K. 59,852 517,377 - ---------------------------------------------------------------------------------------------------------------------- Trend Micro, Inc. 11,500 495,478 - ---------------------------------------------------------------------------------------------------------------------- TUI AG 27,742 517,175 - ---------------------------------------------------------------------------------------------------------------------- Unibail 4,418 532,686 - ---------------------------------------------------------------------------------------------------------------------- United Utilities plc 50,100 504,314 - ---------------------------------------------------------------------------------------------------------------------- Vinci 4,675 538,673 - ---------------------------------------------------------------------------------------------------------------------- Volkswagen AG, Preference 18,860 514,842 - ---------------------------------------------------------------------------------------------------------------------- William Hill plc 51,044 493,467 ---------------- Total Common Stocks (Cost $24,057,563) 25,746,067 UNITS - ---------------------------------------------------------------------------------------------------------------------- RIGHTS, WARRANTS AND CERTIFICATES--0.0% - ---------------------------------------------------------------------------------------------------------------------- ICG Communications, Inc. Wts., Exp. 9/15/05 5,6 495 5 - ---------------------------------------------------------------------------------------------------------------------- Loral Space & Communications Ltd. Wts., Exp. 1/15/07 5,6 50 1 - ---------------------------------------------------------------------------------------------------------------------- Protection One, Inc. Wts., Exp. 6/30/05 5,6 640 -- - ---------------------------------------------------------------------------------------------------------------------- Venezuela (Republic of) Oil Linked Payment Obligation Wts., Exp. 4/15/20 5,6 500 -- ---------------- Total Rights, Warrants and Certificates (Cost $481) 6 26 | OPPENHEIMER INTERNATIONAL BOND FUND PRINCIPAL VALUE AMOUNT SEE NOTE 1 - ---------------------------------------------------------------------------------------------------------------------- STRUCTURED NOTES--8.3% - ---------------------------------------------------------------------------------------------------------------------- Citigroup Global Markets Holdings, Inc.: Brazilian Real Linked Unsec. Nts., 1.12%, 2/2/05 $ 9,500,000 $ 10,523,340 Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 3/15/07 10 [COP] 22,700,000,000 10,104,232 Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 3/15/07 [COP] 7,400,000,000 3,293,891 Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP] 31,110,000,000 13,389,519 Indonesia (Republic of) Recapitalization Unsec. Credit Linked Nts., 13.15%, 3/17/10 9,523,810 9,681,734 OAO Gazprom Russian Local Market Unsec. Credit Linked Nts., 15.462%, 11/8/05 10 4,406,270 5,206,901 Peruvian Sol Unsec. Linked Nts., 1.466%, 1/14/05 [PEN] 17,650,000 5,488,228 - ---------------------------------------------------------------------------------------------------------------------- Credit Suisse First Boston, Inc. (Nassau Branch): Turkey (Republic of) Credit Linked Nts., Series EM 868, 25.01%, 8/25/05 4,070,000 3,337,441 Turkey (Republic of) Credit Linked Nts., Series EM 872, 23.57%, 10/20/05 3 19,769,000 20,865,240 - ---------------------------------------------------------------------------------------------------------------------- Credit Suisse First Boston, Inc. (USA), U.S. Dollar/South African Rand Linked Nts., Series FBi 43, 1.44%, 5/23/22 2,100,000 2,043,300 - ---------------------------------------------------------------------------------------------------------------------- Deutsche Bank AG: Korea (Republic of) Credit Bonds, 1.56%, 6/20/09 7,225,000 7,296,528 OAO Gazprom I Credit Nts., 5.588%, 10/20/07 1,435,000 1,499,013 OAO Gazprom II Credit Nts., 5.338%, 4/20/07 1,435,000 1,494,249 Romania (The State of) 3 yr. Linked Nts., 12.89%, 9/27/07 [ROL] 56,400,000,000 1,707,480 Russian Federation Linked Nts., 15%, 3/11/05 [RUR] 141,112,000 5,044,144 Ukraine (Republic of) Credit Linked Nts., 6.541%, 8/5/11 7,740,000 7,964,460 - ---------------------------------------------------------------------------------------------------------------------- Lehman Brothers International: Turkey (Republic of) Treasury Bills Total Return Linked Nts., 25.70%, 1/26/05 9,368,029 7,741,739 Turkey (Republic of) Treasury Bills Total Return Linked Nts., 28.25%, 5/26/05 11,674,353 10,027,102 - ---------------------------------------------------------------------------------------------------------------------- Morgan Stanley Capital Services, Inc., Venezuela (Republic of) Credit Bonds, 5%, 9/20/09 3,260,000 3,401,622 - ---------------------------------------------------------------------------------------------------------------------- UBS AG, OAO Gazprom III Credit Nts., 4.705%, 7/5/06 3,590,000 3,731,149 ---------------- Total Structured Notes (Cost $130,985,113) 133,841,312 DATE STRIKE CONTRACTS - ---------------------------------------------------------------------------------------------------------------------- OPTIONS PURCHASED--0.0% - ---------------------------------------------------------------------------------------------------------------------- Japanese Yen Put 5,6 (Cost $978,607) 10/8/04 111.55JPY 14,995,000,000JPY 209,930 PRINCIPAL AMOUNT - ---------------------------------------------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--4.5% - ---------------------------------------------------------------------------------------------------------------------- Undivided interest of 4.98% in joint repurchase agreement (Principal Amount/ Value $1,446,038,000, with a maturity value of $1,446,110,302) with UBS Warburg LLC, 1.80%, dated 9/30/04, to be repurchased at $72,068,603 on 10/1/04, collateralized by Federal National Mortgage Assn., 5%, with a 3/1/34, value of $1,477,979,332 (Cost $72,065,000) $ 72,065,000 72,065,000 - ---------------------------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $1,565,634,012) 99.8% 1,608,607,644 - ---------------------------------------------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 0.2 2,862,758 ----------------------------------- NET ASSETS 100.0% $ 1,611,470,402 =================================== 27 | OPPENHEIMER INTERNATIONAL BOND FUND STATEMENT OF INVESTMENTS Continued - -------------------------------------------------------------------------------- FOOTNOTES TO STATEMENT OF INVESTMENTS Principal amount, strike, contracts and exercise price are reported in U.S. Dollars, except for those denoted in the following currencies: ARP Argentine Peso AUD Australian Dollar COP Colombian Peso DKK Danish Krone EUR Euro FRF French Franc GBP British Pound Sterling HUF Hungarian Forint ITL Italian Lira JPY Japanese Yen MXN Mexican Nuevo Peso NZD New Zealand Dollar PEN Peruvian New Sol PLZ Polish Zloty ROL Romanian Leu RUR Russian Ruble SEK Swedish Krona 1. A sufficient amount of securities has been designated to cover outstanding foreign currency contracts. See Note 5 of Notes to Financial Statements. 2. A sufficient amount of liquid assets has been designated to cover outstanding written call options, as follows: CONTRACTS EXPIRATION EXERCISE PREMIUM VALUE SUBJECT TO CALL DATES PRICE RECEIVED SEE NOTE 1 - ------------------------------------------------------------------------------------------------------------------ Japanese Yen (JPY) 14,995,000,000JPY 10/8/04 104.400JPY $ 1,075,791 $ -- New Zealand (Government of) Bonds, 7%, 7/15/09 7,110NZD 12/9/04 6.205NZD 21,095 27,100 -------------------------- $ 1,096,886 $ 27,100 ========================== 3. Represents the current interest rate for a variable or increasing rate security. 4. Issue is in default. See Note 1 of Notes to Financial Statements. 5. Non-income producing security. 6. Illiquid or restricted security. See Note 11 of Notes to Financial Statements. 7. Zero coupon bond reflects effective yield on the date of purchase. 8. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended. These securities have been determined to be liquid under guidelines established by the Board of Trustees. These securities amount to $3,270,188 or 0.20% of the Fund's net assets as of September 30, 2004. 9. When-issued security or forward commitment to be delivered and settled after September 30, 2004. See Note 1 of Notes to Financial Statements. 10. All or a portion of the security is held in collateralized accounts to cover initial margin requirements on open futures sales contracts with an aggregate market value of $14,790,443. See Note 6 of Notes to Financial Statements. 28 | OPPENHEIMER INTERNATIONAL BOND FUND DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC HOLDINGS, AS A PERCENTAGE OF TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS: GEOGRAPHIC HOLDINGS VALUE PERCENT - --------------------------------------------------------------------------- United States $ 305,921,582 19.0% Japan 110,576,563 6.9 Great Britain 107,408,198 6.7 Spain 65,984,963 4.1 Ireland 65,027,825 4.0 Greece 63,939,799 4.0 Austria 62,585,550 3.9 Portugal 60,335,119 3.8 Belgium 59,104,698 3.7 France 57,576,333 3.6 Brazil 54,311,547 3.4 Russia 53,348,867 3.3 Italy 51,437,033 3.2 The Netherlands 50,520,228 3.1 Finland 49,544,290 3.1 Australia 46,371,134 2.9 Germany 45,589,821 2.8 Turkey 43,867,372 2.7 Poland 43,721,193 2.7 Colombia 35,673,412 2.2 Argentina 27,878,794 1.7 Mexico 22,857,019 1.4 Venezuela 22,389,143 1.4 Indonesia 18,134,798 1.1 Peru 12,230,375 0.8 Korea, Republic of South 11,220,834 0.7 Denmark 10,584,071 0.7 Hungary 9,474,926 0.6 Sweden 9,471,761 0.6 Ukraine 7,964,460 0.5 New Zealand 4,983,816 0.3 Bulgaria 3,724,876 0.2 Supranational 3,560,254 0.2 Algeria 3,108,958 0.2 South Africa 2,043,300 0.1 Nigeria 1,877,936 0.1 Romania 1,707,480 0.1 El Salvador 1,220,550 0.1 Guatemala 801,450 0.1 Ivory Coast 527,316 -- -------------------------------- TOTAL $ 1,608,607,644 100.0% ================================ SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 29 | OPPENHEIMER INTERNATIONAL BOND FUND STATEMENT OF ASSETS AND LIABILITIES September 30, 2004 - -------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- ASSETS - ---------------------------------------------------------------------------------------------------------------------- Investments, at value (including securities loaned of approximately $151,985,000) (cost $1,565,634,012)--see accompanying statement of investments $ 1,608,607,644 - ---------------------------------------------------------------------------------------------------------------------- Collateral for securities loaned 155,142,317 - ---------------------------------------------------------------------------------------------------------------------- Unrealized appreciation on foreign currency contracts 3,355,102 - ---------------------------------------------------------------------------------------------------------------------- Receivables and other assets: Interest, dividends and principal paydowns 21,385,506 Shares of beneficial interest sold 13,734,037 Investments sold 535,563 Futures margins 131,127 Other 10,934 ---------------- Total assets 1,802,902,230 - ---------------------------------------------------------------------------------------------------------------------- LIABILITIES - ---------------------------------------------------------------------------------------------------------------------- Bank overdraft 89,592 - ---------------------------------------------------------------------------------------------------------------------- Bank overdraft-foreign currencies (cost $532,050) 543,718 - ---------------------------------------------------------------------------------------------------------------------- Options written, at value (premiums received $1,096,886)--see accompanying statement of investments 27,100 - ---------------------------------------------------------------------------------------------------------------------- Swaptions written, at value (premiums received $791,373) 1,045,863 - ---------------------------------------------------------------------------------------------------------------------- Return of collateral for securities loaned 155,142,317 - ---------------------------------------------------------------------------------------------------------------------- Unrealized depreciation on foreign currency contracts 7,967,087 - ---------------------------------------------------------------------------------------------------------------------- Unrealized depreciation on swap contracts 2,451,716 - ---------------------------------------------------------------------------------------------------------------------- Payables and other liabilities: Investments purchased (including $4,368,635 purchased on a when-issued basis or forward commitment) 9,502,430 Closed foreign currency contracts 9,759,128 Shares of beneficial interest redeemed 2,691,739 Distribution and service plan fees 908,429 Dividends 707,681 Transfer and shareholder servicing agent fees 244,871 Shareholder communications 103,808 Trustees' compensation 17,309 Other 229,040 ---------------- Total liabilities 191,431,828 - ---------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 1,611,470,402 ================ 30 | OPPENHEIMER INTERNATIONAL BOND FUND - ---------------------------------------------------------------------------------------------------------------------- COMPOSITION OF NET ASSETS - ---------------------------------------------------------------------------------------------------------------------- Par value of shares of beneficial interest $ 286,670 - ---------------------------------------------------------------------------------------------------------------------- Additional paid-in capital 1,512,692,070 - ---------------------------------------------------------------------------------------------------------------------- Accumulated net investment income 44,819,377 - ---------------------------------------------------------------------------------------------------------------------- Accumulated net realized gain on investments and foreign currency transactions 16,866,869 - ---------------------------------------------------------------------------------------------------------------------- Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies 36,805,416 ---------------- NET ASSETS $ 1,611,470,402 ================ - ---------------------------------------------------------------------------------------------------------------------- NET ASSET VALUE PER SHARE - ---------------------------------------------------------------------------------------------------------------------- Class A Shares: Net asset value and redemption price per share (based on net assets of $1,177,628,477 and 209,317,185 shares of beneficial interest outstanding) $ 5.63 Maximum offering price per share (net asset value plus sales charge of 4.75% of offering price) $ 5.91 - ---------------------------------------------------------------------------------------------------------------------- Class B Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $167,621,429 and 29,885,779 shares of beneficial interest outstanding) $ 5.61 - ---------------------------------------------------------------------------------------------------------------------- Class C Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $233,311,139 and 41,609,376 shares of beneficial interest outstanding) $ 5.61 - ---------------------------------------------------------------------------------------------------------------------- Class N Shares: Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $18,641,018 and 3,320,854 shares of beneficial interest outstanding) $ 5.61 - ---------------------------------------------------------------------------------------------------------------------- Class Y Shares: Net asset value, redemption price and offering price per share (based on net assets of $14,268,339 and 2,536,575 shares of beneficial interest outstanding) $ 5.63 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 31 | OPPENHEIMER INTERNATIONAL BOND FUND STATEMENT OF OPERATIONS For the Year Ended September 30, 2004 - -------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME - ---------------------------------------------------------------------------------------------------------------------- Interest $ 37,536,465 - ---------------------------------------------------------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $75,375) 638,192 - ---------------------------------------------------------------------------------------------------------------------- Portfolio lending fees 43,240 ----------------- Total investment income 38,217,897 - ---------------------------------------------------------------------------------------------------------------------- EXPENSES - ---------------------------------------------------------------------------------------------------------------------- Management fees 7,484,558 - ---------------------------------------------------------------------------------------------------------------------- Distribution and service plan fees: Class A 1,987,821 Class B 1,529,196 Class C 1,703,454 Class N 53,586 - ---------------------------------------------------------------------------------------------------------------------- Transfer and shareholder servicing agent fees: Class A 1,450,702 Class B 387,581 Class C 303,793 Class N 30,206 Class Y 3 - ---------------------------------------------------------------------------------------------------------------------- Shareholder communications: Class A 127,694 Class B 45,892 Class C 26,433 Class N 2,175 - ---------------------------------------------------------------------------------------------------------------------- Custodian fees and expenses 344,485 - ---------------------------------------------------------------------------------------------------------------------- Trustees' compensation 31,233 - ---------------------------------------------------------------------------------------------------------------------- Other 143,861 ----------------- Total expenses 15,652,673 Less reduction to custodian expenses (28,349) Less payments and waivers of expenses (17,908) ----------------- Net expenses 15,606,416 - ---------------------------------------------------------------------------------------------------------------------- NET INVESTMENT INCOME 22,611,481 32 | OPPENHEIMER INTERNATIONAL BOND FUND - ---------------------------------------------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) - ---------------------------------------------------------------------------------------------------------------------- Net realized gain (loss) on: Investments (including premiums on options exercised) $ 12,632,724 Closing of futures contracts (1,812,061) Closing and expiration of option contracts written 2,688,999 Closing and expiration of swaption contracts (226,999) Foreign currency transactions 52,057,715 Swap contracts 12,508,030 ----------------- Net realized gain 77,848,408 - ---------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation on: Investments 9,901,970 Translation of assets and liabilities denominated in foreign currencies (8,651,844) Futures contracts (880,170) Option contracts 451,883 Swaption contracts (563,469) Swap contracts (2,492,218) ----------------- Net change in unrealized appreciation (2,233,848) - ---------------------------------------------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 98,226,041 ================= SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 33 | OPPENHEIMER INTERNATIONAL BOND FUND STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 2003 - ---------------------------------------------------------------------------------------------------------------------- OPERATIONS - ---------------------------------------------------------------------------------------------------------------------- Net investment income $ 22,611,481 $ 17,157,924 - ---------------------------------------------------------------------------------------------------------------------- Net realized gain 77,848,408 51,584,451 - ---------------------------------------------------------------------------------------------------------------------- Net change in unrealized appreciation (2,233,848) 37,514,665 ------------------------------------ Net increase in net assets resulting from operations 98,226,041 106,257,040 - ---------------------------------------------------------------------------------------------------------------------- DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS - ---------------------------------------------------------------------------------------------------------------------- Dividends from net investment income: Class A (35,086,382) (11,257,243) Class B (6,602,563) (3,817,825) Class C (6,093,022) (1,988,035) Class N (397,275) (94,512) Class Y (2,820) -- - ---------------------------------------------------------------------------------------------------------------------- BENEFICIAL INTEREST TRANSACTIONS - ---------------------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from beneficial interest transactions: Class A 713,652,173 193,984,034 Class B 25,122,862 11,875,148 Class C 136,111,001 39,379,694 Class N 13,528,377 2,842,914 Class Y 14,179,799 -- - ---------------------------------------------------------------------------------------------------------------------- NET ASSETS - ---------------------------------------------------------------------------------------------------------------------- Total increase 952,638,191 337,181,215 - ---------------------------------------------------------------------------------------------------------------------- Beginning of period 658,832,211 321,650,996 ------------------------------------ End of period (including accumulated net investment income of $44,819,377 and $16,341,168, respectively) $ 1,611,470,402 $ 658,832,211 ==================================== SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 34 | OPPENHEIMER INTERNATIONAL BOND FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- CLASS A YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 5.33 $ 4.38 $ 3.95 $ 4.19 $ 4.23 - -------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .13 .20 .24 .30 .45 Net realized and unrealized gain (loss) .47 .95 .41 (.24) (.08) ------------------------------------------------------------------------------- Total from investment operations .60 1.15 .65 .06 .37 - -------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.30) (.20) (.19) -- (.21) Tax return of capital distribution -- -- (.03) (.30) (.20) ------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.30) (.20) (.22) (.30) (.41) - -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.63 $ 5.33 $ 4.38 $ 3.95 $ 4.19 =============================================================================== - -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 1 11.56% 26.67% 16.78% 1.40% 8.93% - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - -------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 1,177,628 $ 429,283 $ 181,456 $ 118,733 $ 100,928 - -------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 811,608 $ 285,391 $ 134,912 $ 117,000 $ 110,968 - -------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income 2.19% 3.94% 5.16% 7.10% 10.23% Total expenses 1.13% 1.22% 1.37% 1.38% 1.31% Expenses after payments and waivers and reduction to custodian expenses N/A 3,4 N/A 3 N/A 3 N/A 3 1.29% - -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 133% 341% 372% 377% 288% 1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. 4. Voluntary waiver of transfer agent fees less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 35 | OPPENHEIMER INTERNATIONAL BOND FUND FINANCIAL HIGHLIGHTS Continued - -------------------------------------------------------------------------------- CLASS B YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 5.31 $ 4.37 $ 3.94 $ 4.17 $ 4.22 - --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .08 .16 .21 .26 .42 Net realized and unrealized gain (loss) .47 .94 .40 (.22) (.09) -------------------------------------------------------------------------------- Total from investment operations .55 1.10 .61 .04 .33 - --------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.25) (.16) (.15) -- (.20) Tax return of capital distribution -- -- (.03) (.27) (.18) -------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.25) (.16) (.18) (.27) (.38) - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.61 $ 5.31 $ 4.37 $ 3.94 $ 4.17 ================================================================================ - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 1 10.66% 25.48% 15.90% 0.85% 7.94% - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 167,621 $ 134,661 $ 100,049 $ 84,427 $ 98,272 - --------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 153,117 $ 119,232 $ 85,244 $ 93,455 $ 115,116 - --------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income 1.40% 3.20% 4.41% 6.40% 9.63% Total expenses 1.98% 2.03% 2.14% 2.14% 2.05% Expenses after payments and waivers and reduction to custodian expenses N/A 3,4 N/A 3 N/A 3 N/A 3 2.03% - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 133% 341% 372% 377% 288% 1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. 4. Voluntary waiver of transfer agent fees less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 36 | OPPENHEIMER INTERNATIONAL BOND FUND CLASS C YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING DATA - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 5.31 $ 4.37 $ 3.94 $ 4.17 $ 4.22 - --------------------------------------------------------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .09 .16 .21 .26 .41 Net realized and unrealized gain (loss) .46 .94 .40 (.22) (.08) -------------------------------------------------------------------------------- Total from investment operations .55 1.10 .61 .04 .33 - --------------------------------------------------------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.25) (.16) (.15) -- (.19) Tax return of capital distribution -- -- (.03) (.27) (.19) -------------------------------------------------------------------------------- Total dividends and/or distributions to shareholders (.25) (.16) (.18) (.27) (.38) - --------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $ 5.61 $ 5.31 $ 4.37 $ 3.94 $ 4.17 ================================================================================ - --------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 1 10.75% 25.48% 15.90% 0.85% 7.95% - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 233,311 $ 90,248 $ 38,865 $ 25,221 $ 27,663 - --------------------------------------------------------------------------------------------------------------------------------- Average net assets (in thousands) $ 170,796 $ 63,198 $ 28,635 $ 27,125 $ 30,710 - --------------------------------------------------------------------------------------------------------------------------------- Ratios to average net assets: 2 Net investment income 1.46% 3.15% 4.37% 6.39% 9.55% Total expenses 1.88% 2.02% 2.14% 2.14% 2.05% Expenses after payments and waivers and reduction to custodian expenses N/A 3,4 N/A 3 N/A 3 N/A 3 2.03% - --------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 133% 341% 372% 377% 288% 1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. 4. Voluntary waiver of transfer agent fees less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 37 | OPPENHEIMER INTERNATIONAL BOND FUND FINANCIAL HIGHLIGHTS Continued - -------------------------------------------------------------------------------- CLASS N YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 1 - ------------------------------------------------------------------------------------------------------------------ PER SHARE OPERATING DATA - ------------------------------------------------------------------------------------------------------------------ Net asset value, beginning of period $ 5.32 $ 4.37 $ 3.95 $ 4.23 - ------------------------------------------------------------------------------------------------------------------ Income (loss) from investment operations: Net investment income .12 .18 .21 .16 Net realized and unrealized gain (loss) .45 .95 .42 (.28) ----------------------------------------------------------------- Total from investment operations .57 1.13 .63 (.12) - ------------------------------------------------------------------------------------------------------------------ Dividends and/or distributions to shareholders: Dividends from net investment income (.28) (.18) (.18) -- Tax return of capital distribution -- -- (.03) (.16) ----------------------------------------------------------------- Total dividends and/or distributions to shareholders (.28) (.18) (.21) (.16) - ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $ 5.61 $ 5.32 $ 4.37 $ 3.95 ================================================================= - ------------------------------------------------------------------------------------------------------------------ TOTAL RETURN, AT NET ASSET VALUE 2 11.00% 26.31% 16.23% (2.88)% - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------------------------------ Net assets, end of period (in thousands) $ 18,641 $ 4,640 $ 1,280 $ 109 - ------------------------------------------------------------------------------------------------------------------ Average net assets (in thousands) $ 10,769 $ 2,653 $ 297 $ 34 - ------------------------------------------------------------------------------------------------------------------ Ratios to average net assets: 3 Net investment income 1.83% 3.56% 4.87% 6.56% Total expenses 1.49% 4,5 1.57% 4 1.57% 4 1.39% 4 - ------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 133% 341% 372% 377% 1. For the period from March 1, 2001 (inception of offering) to September 30, 2001. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 38 | OPPENHEIMER INTERNATIONAL BOND FUND CLASS Y PERIOD ENDED SEPTEMBER 30, 2004 1 - --------------------------------------------------------------------------- PER SHARE OPERATING DATA - --------------------------------------------------------------------------- Net asset value, beginning of period $ 5.58 - --------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income -- 2 Net realized and unrealized gain .05 -------------- Total from investment operations .05 - --------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- 2 Tax return of capital distribution -- -------------- Total dividends and/or distributions to shareholders -- - --------------------------------------------------------------------------- Net asset value, end of period $ 5.63 ============== - --------------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE 3 0.92% - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA - --------------------------------------------------------------------------- Net assets, end of period (in thousands) $ 14,268 - --------------------------------------------------------------------------- Average net assets (in thousands) $ 7,086 - --------------------------------------------------------------------------- Ratios to average net assets: 4 Net investment income 4.84% Total expenses 1.17% 5 - --------------------------------------------------------------------------- Portfolio turnover rate 133% 1. For the period from September 27, 2004 (inception of offering) to September 30, 2004. 2. Less than $0.005 per share. 3. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 4. Annualized for periods of less than one full year. 5. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 39 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Oppenheimer International Bond Fund (the Fund) is a registered investment company organized as a Massachusetts Business Trust. The Fund is registered as a non-diversified, open-end management investment company under the Investment Company Act of 1940, as amended. The Fund's investment objective is to seek total return. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. Class Y shares are sold to certain institutional investors without either a front-end sales charge or a CDSC, however, the institutional investor may impose charges on those accounts. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. Class A, B, C and N have separate distribution and/or service plans. No such plan has been adopted for Class Y shares. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund. - -------------------------------------------------------------------------------- SECURITIES VALUATION. The Fund calculates the net asset value of its shares as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open for business. Securities listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Fund's assets are valued. Securities traded on NASDAQ are valued based on the closing price provided by NASDAQ prior to the time when the Fund's assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Corporate, government and municipal debt instruments having a remaining maturity in excess of 60 days and all mortgage-backed securities will be valued at the mean between the "bid" and "asked" prices. Securities may be valued primarily using dealer-supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Securities (including restricted securities) for which market quotations are not readily available are valued at their fair value. Foreign and domestic securities whose values have been materially affected by what the Manager identifies as a significant event occurring before the Fund's assets are valued but after the close of their respective exchanges will be fair valued. Fair value is determined in good faith using consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with 40 | OPPENHEIMER INTERNATIONAL BOND FUND remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). - -------------------------------------------------------------------------------- STRUCTURED NOTES. The Fund invests in structured notes whose market values, interest rates and/or redemption prices are linked to the performance of underlying foreign currencies, interest rate spreads, stock market indices, prices of individual securities, commodities or other financial instruments or the occurrence of other specific events. The structured notes are often leveraged, increasing the volatility of each note's market value relative to the change in the underlying linked financial element or event. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying financial statements. The Fund records a realized gain or loss when a structured note is sold or matures. As of September 30, 2004, the market value of these securities comprised 8.3% of the Fund's net assets and resulted in unrealized gains of $2,856,199. - -------------------------------------------------------------------------------- SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis or forward commitment can take place up to ten days or more after the trade date. Normally the settlement date occurs within six months after the trade date; however, the Fund may, from time to time, purchase securities whose settlement date extends six months or more beyond trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The Fund maintains internally designated assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued basis or forward commitment may increase the volatility of the Fund's net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. The Fund may also sell securities that it purchased on a when-issued basis or forward commitment prior to settlement of the original purchase. As of September 30, 2004, the Fund had purchased $4,368,635 of securities on a when-issued basis or forward commitment. - -------------------------------------------------------------------------------- SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be subject to a greater degree of credit risk, market fluctuations and loss of income and principal, and may be more sensitive to economic conditions than lower-yielding, higher-rated fixed-income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of September 30, 2004, securities with an aggregate market value of $16,500,864, representing 1.02% of the Fund's net assets, were in default. - -------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars as of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M. Eastern time, on each day the Exchange is open. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions. Foreign exchange rates may be 41 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued valued primarily using dealer supplied valuations or a portfolio pricing service authorized by the Board of Trustees. Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, including investments in securities at fiscal period end, resulting from changes in exchange rates. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Fund's Statement of Operations. - -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings. - -------------------------------------------------------------------------------- ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than those attributable to a specific class), gains and losses are allocated on a daily basis to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. - -------------------------------------------------------------------------------- FEDERAL TAXES. The Fund intends to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its investment company taxable income, including any net realized gain on investments not offset by capital loss carryforwards, if any, to shareholders, therefore, no federal income or excise tax provision is required. The tax components of capital shown in the table below represent distribution requirements the Fund must satisfy under the income tax regulations, losses the Fund may be able to offset against income and gains realized in future years and unrealized appreciation or depreciation of securities and other investments for federal income tax purposes. 42 | OPPENHEIMER INTERNATIONAL BOND FUND NET UNREALIZED APPRECIATION BASED ON COST OF SECURITIES AND UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES --------------------------------------------------------------------------- $ 63,726,906 $-- $985,396 $33,373,297 1. As of September 30, 2004, the Fund had $629,834 of post-October losses available to offset future realized capital gains, if any. Such losses, if unutilized, will expire in 2013. 2. The Fund had $355,562 of straddle losses which were deferred. 3. During the fiscal year ended September 30, 2004, the Fund utilized $3,556,158 of capital loss carryforward to offset capital gains realized in that fiscal year. 4. During the fiscal year ended September 30, 2003, the Fund utilized $34,133,620 of capital loss carryforward to offset capital gains realized in that fiscal year. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund. Accordingly, the following amounts have been reclassified for September 30, 2004. Net assets of the Fund were unaffected by the reclassifications. REDUCTION TO REDUCTION TO ACCUMULATED NET INCREASE TO ACCUMULATED NET REALIZED GAIN PAID-IN CAPITAL INVESTMENT LOSS ON INVESTMENTS 5 ------------------------------------------------------------- $ 4,405,760 $54,048,790 $58,454,550 5. $2,931,783 was distributed in connection with Fund share redemptions. The tax character of distributions paid during the years ended September 30, 2004 and September 30, 2003 was as follows: YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------------------------------------------------------- Distributions paid from: Ordinary income $48,182,062 $17,157,615 The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of September 30, 2004 are noted below. The primary difference between book and tax appreciation or depreciation of securities and other investments, if applicable, is attributable to the tax deferral of losses or tax realization of financial statement unrealized gain or loss. 43 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued Federal tax cost of securities $ 1,566,262,346 Federal tax cost of other investments 238,544,957 ---------------- Total federal tax cost $ 1,804,807,303 ================ Gross unrealized appreciation $ 56,675,862 Gross unrealized depreciation (23,302,565) ---------------- Net unrealized appreciation $ 33,373,297 ================ - -------------------------------------------------------------------------------- TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of "Other" within the asset section of the Statement of Assets and Liabilities. Deferral of trustees' fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund's assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan. - -------------------------------------------------------------------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Income distributions, if any, are declared daily and paid monthly. Capital gain distributions, if any, are declared and paid annually. - -------------------------------------------------------------------------------- INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned. - -------------------------------------------------------------------------------- EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable, represents earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- SECURITY TRANSACTIONS. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. - -------------------------------------------------------------------------------- OTHER. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of 44 | OPPENHEIMER INTERNATIONAL BOND FUND income and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 2. SHARES OF BENEFICIAL INTEREST The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows: YEAR ENDED SEPTEMBER 30, 2004 1 YEAR ENDED SEPTEMBER 30, 2003 SHARES AMOUNT SHARES AMOUNT - ------------------------------------------------------------------------------------------------ CLASS A Sold 172,839,291 $ 957,396,128 66,619,226 $ 327,783,210 Dividends and/or distributions reinvested 5,072,488 27,463,043 1,800,877 8,831,110 Redeemed (49,156,351) (271,206,998) (29,286,342) (142,630,286) -------------------------------------------------------------------- Net increase 128,755,428 $ 713,652,173 39,133,761 $ 193,984,034 ==================================================================== - ------------------------------------------------------------------------------------------------ CLASS B Sold 14,676,405 $ 80,808,899 14,881,963 $ 71,989,537 Dividends and/or distributions reinvested 944,780 5,057,584 560,961 2,725,698 Redeemed (11,077,428) (60,743,621) (13,006,585) (62,840,087) -------------------------------------------------------------------- Net increase 4,543,757 $ 25,122,862 2,436,339 $ 11,875,148 ==================================================================== - ------------------------------------------------------------------------------------------------ CLASS C Sold 30,576,433 $ 168,801,488 12,729,289 $ 62,063,352 Dividends and/or distributions reinvested 830,062 4,457,967 292,444 1,431,897 Redeemed (6,789,922) (37,148,454) (4,932,108) (24,115,555) -------------------------------------------------------------------- Net increase 24,616,573 $ 136,111,001 8,089,625 $ 39,379,694 ==================================================================== - ------------------------------------------------------------------------------------------------ CLASS N Sold 2,975,732 $ 16,429,938 682,672 $ 3,342,355 Dividends and/or distributions reinvested 66,020 357,127 15,660 77,211 Redeemed (593,448) (3,258,688) (118,748) (576,652) -------------------------------------------------------------------- Net increase 2,448,304 $ 13,528,377 579,584 $ 2,842,914 ==================================================================== - ------------------------------------------------------------------------------------------------ CLASS Y Sold 2,536,075 $ 14,176,984 -- $ -- Dividends and/or distributions reinvested 500 2,815 -- -- Redeemed -- -- -- -- -------------------------------------------------------------------- Net increase 2,536,575 $ 14,179,799 -- $ -- ==================================================================== 1. For the year ended September 30, 2004, for Class A, B, C and N shares and for the period from September 27, 2004 (inception of offering) to September 30, 2004 for Class Y shares. 45 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES The aggregate cost of purchases and proceeds from sales of securities, other than U.S. government obligations and short-term obligations, for the year ended September 30, 2004, were $1,506,398,131 and $1,057,381,523, respectively. There were purchases of $566,162,511 and sales of $236,279,983 of U.S. government and government agency obligations for the year ended September 30, 2004. - -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the investment advisory agreement with the Fund which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets of the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets in excess of $1 billion. - -------------------------------------------------------------------------------- ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year for preparing and filing the Fund's tax returns. - -------------------------------------------------------------------------------- TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the year ended September 30, 2004, the Fund paid $2,019,276 to OFS for services to the Fund. Additionally, Class Y shares are subject to minimum fees of $10,000 for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLAN (12b-1) FEES. Under its General Distributor's Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's principal underwriter in the continuous public offering of the Fund's classes of shares. - -------------------------------------------------------------------------------- SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions quarterly for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares to compensate the Distributor for its services in connection with the distribution of those shares and servicing accounts. Under the plans, the Fund pays the Distributor an annual asset- 46 | OPPENHEIMER INTERNATIONAL BOND FUND based sales charge of 0.75% per year on Class B and Class C shares and 0.25% per year on Class N shares. The Distributor also receives a service fee of up to 0.25% per year under each plan. If either the Class B, Class C or Class N plan is terminated by the Fund or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Fund of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributor's aggregate uncompensated expenses under the plan at September 30, 2004 for Class B, Class C and Class N shares were $6,272,974, $3,468,952 and $130,925, respectively. Fees incurred by the Fund under the plans are detailed in the Statement of Operations. - -------------------------------------------------------------------------------- SALES CHARGES. Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. The sales charges retained by the Distributor from the sale of shares and the CDSC retained by the Distributor on the redemption of shares is shown in the table below for the period indicated. CLASS A CLASS B CLASS C CLASS N CLASS A CONTINGENT CONTINGENT CONTINGENT CONTINGENT FRONT-END DEFERRED DEFERRED DEFERRED DEFERRED SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES SALES CHARGES RETAINED BY RETAINED BY RETAINED BY RETAINED BY RETAINED BY YEAR ENDED DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR DISTRIBUTOR - ----------------------------------------------------------------------------------------------------------- September 30, 2004 $822,275 $27,674 $353,364 $116,729 $1,248 - -------------------------------------------------------------------------------- PAYMENTS AND WAIVERS OF EXPENSES. OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes to 0.35% of average annual net assets per class. During the year ended September 30, 2004, OFS waived $7,603, $7,798, $2,257 and $250 for Class A, Class B, Class C and Class N shares, respectively. This undertaking may be amended or withdrawn at any time. - -------------------------------------------------------------------------------- 5. FOREIGN CURRENCY CONTRACTS A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts to settle specific purchases or sales of securities denominated in a foreign currency and for protection from adverse exchange rate fluctuation. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract. The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using prevailing foreign currency exchange rates. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations with the change in unrealized appreciation or depreciation. 47 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 5. FOREIGN CURRENCY CONTRACTS Continued The Fund may realize a gain or loss upon the closing or settlement of the foreign transaction. Contracts closed or settled with the same broker are recorded as net realized gains or losses. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations. As of September 30, 2004, the Fund had outstanding foreign currency contracts as follows: CONTRACT VALUATION EXPIRATION AMOUNT AS OF UNREALIZED UNREALIZED CONTRACT DESCRIPTION DATES (000s) SEPT. 30, 2004 APPRECIATION DEPRECIATION - ----------------------------------------------------------------------------------------------------------------- CONTRACTS TO PURCHASE Argentine Peso (ARP) 1/18/05-2/2/05 32,660ARP $ 10,675,380 $ 1,118 $ 13,900 Australian Dollar (AUD) 10/18/04 17,195AUD 12,490,856 450,745 -- Brazilian Real (BRR) 12/14/04-10/13/05 69,174BRR 23,396,425 731,427 -- British Pound Sterling (GBP) 10/18/04 7,160GBP 12,954,841 105,505 -- Columbian Peso (COP) 3/16/05 16,492,230COP 6,143,108 342,113 -- Euro (EUR) 11/16/04 44,415EUR 55,221,056 834,888 -- Japanese Yen (JPY) 3/15/05-4/1/05 32,006,300JPY 294,007,602 487,523 5,593,956 New Zealand Dollar (NZD) 10/18/04 19,895NZD 13,448,884 333,006 -- Polish Zloty (PLZ) 12/27/04 10,297PLZ 2,895,764 12,823 -- South African Rand (ZAR) 10/25/04 80,940ZAR 12,484,038 -- 13,646 ---------------------------- 3,299,148 5,621,502 ---------------------------- CONTRACTS TO SELL British Pound Sterling (GBP) 10/4/04-11/18/04 31,690GBP 57,377,355 -- 670,206 Euro (EUR) 11/17/04-12/27/04 35,617EUR 44,282,233 -- 1,194,961 Japanese Yen (JPY) 10/12/04-11/18/04 4,242,000JPY 38,600,909 55,954 315,166 Mexican Nuevo Peso (MXN) 10/26/04 31,210MXN 2,729,619 -- 20,888 Swiss Franc (CHF) 10/18/04 16,910CHF 13,589,755 -- 144,364 ---------------------------- 55,954 2,345,585 ---------------------------- Total unrealized appreciation and depreciation $ 3,355,102 $ 7,967,087 ============================ - -------------------------------------------------------------------------------- 6. FUTURES CONTRACTS A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a negotiated price on a stipulated future date. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices (financial futures) or debt securities (interest rate futures) in order to gain exposure to or protection from changes in market value of stocks and bonds or interest rates. The Fund may also buy or write put or call options on these futures contracts. The Fund generally sells futures contracts as a hedge against increases in interest rates and decreases in market value of portfolio securities. The Fund may also purchase futures 48 | OPPENHEIMER INTERNATIONAL BOND FUND contracts to gain exposure to market changes as it may be more efficient or cost effective than actually buying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or has expired. Cash held by the broker to cover initial margin requirements on open futures contracts is noted in the Statement of Assets and Liabilities. Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin. Realized gains and losses are reported in the Statement of Operations as the closing and expiration of futures contracts. The net change in unrealized appreciation and depreciation is reported on the Statement of Operations. Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. As of September 30, 2004, the Fund had outstanding futures contracts as follows: VALUATION UNREALIZED EXPIRATION NUMBER OF AS OF APPRECIATION CONTRACT DESCRIPTION DATES CONTRACTS SEPT. 30, 2004 (DEPRECIATION) - ------------------------------------------------------------------------------------------------- CONTRACTS TO SELL CAC-40 10 Index 12/17/04 68 $ 3,086,738 $ 2,114 DAX Index 12/17/04 42 5,105,803 79,656 FTSE 100 Index 12/17/04 65 5,422,850 (21,790) Japan (Government of) Bonds, 10 yr. 12/9/04 25 31,352,543 (445,395) Japan (Government of) Bonds, 10 yr. 12/8/04 23 2,885,897 (45,367) Nikkei 225 Index 12/9/04 60 5,939,190 226,345 --------------- $ (204,437) =============== - -------------------------------------------------------------------------------- 7. OPTION ACTIVITY The Fund may buy and sell put and call options, or write put and covered call options on portfolio securities in order to produce incremental earnings or protect against changes in the value of portfolio securities. The Fund generally purchases put options or writes covered call options to hedge against adverse movements in the value of portfolio holdings. When an option is written, the Fund receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. Options are valued daily based upon the last sale price on the principal exchange on which the option is traded and unrealized appreciation or depreciation is recorded. The Fund will realize a gain or loss upon the expiration or closing of the option transaction. 49 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 7. OPTION ACTIVITY Continued When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option is adjusted by the amount of premium received or paid. Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Contracts subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Realized gains and losses are reported in the Statement of Operations. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended September 30, 2004 was as follows: CALL OPTIONS PUT OPTIONS --------------------------------- -------------------------------- PRINCIPAL/ PRINCIPAL/ NUMBER OF AMOUNT OF NUMBER OF AMOUNT OF CONTRACTS PREMIUMS CONTRACTS PREMIUMS - ---------------------------------------------------------------------------------------------------- Options outstanding as of September 30, 2003 9,887,303,797 $ 1,566,192 2,163,660,000 $ 414,161 Options written 15,096,642,110 3,363,750 3,870,000,000 666,309 Options closed or expired (136,183,797) (2,789,693) (6,033,660,000) (1,080,470) Options exercised (9,852,755,000) (1,043,363) -- -- -------------------------------------------------------------------- Options outstanding as of September 30, 2004 14,995,007,110 $ 1,096,886 -- $ -- ==================================================================== - -------------------------------------------------------------------------------- 8. INTEREST RATE SWAP CONTRACTS The Fund may enter into an interest rate swap transaction to maintain a total return or yield spread on a particular investment, or portion of its portfolio, or for other non-speculative purposes. Interest rate swaps involve the exchange of commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments. The coupon payments are based on an agreed upon principal amount and a specified index. Because the principal amount is not exchanged, it represents neither an asset nor a liability to either counterparty, and is referred to as notional. The Fund records an increase or decrease to unrealized gain (loss), in the amount due to or owed by the Fund at termination or settlement. Interest rate swaps are subject to credit risk (if the counterparty fails to meet its obligations) and interest rate risk. The Fund could be obligated to pay more under its swap agreements than it receives under them, as a result of interest rate changes. 50 | OPPENHEIMER INTERNATIONAL BOND FUND As of September 30, 2004, the Fund had entered into the following interest rate swap agreements: FIXED RATE FLOATING RATE PAID BY RECEIVED BY THE FUND AT THE FUND AT UNREALIZED SWAP NOTIONAL SEPT. 30, SEPT. 30, FLOATING TERMINATION APPRECIATION COUNTERPARTY PRINCIPAL 2004 2004 RATE INDEX DATES (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------------------- Citigroup Global Markets 90 Day Holdings, Inc. 333,000,000TWD 2.02% 1.057% CPTW Rate 3/4/09 $ 95,928 Citigroup Global Markets 90 Day Holdings, Inc. 333,000,000TWD 2.02 1.112 CPTW Rate 3/23/09 109,241 Citigroup Global Markets Three-Month Holdings, Inc., LIBOR BBA 10 yr. 30,000,000 4.96 1.18 Rate 5/6/14 1,592,903 Deutsche Six-Month Bank AG 500,000,000INR 4.87 4.547 MIFOR Rate 3/22/09 539,025 Deutsche Bank AG, 5 yr. 454,000,000INR 4.83 4.50 IRS Rate 1/14/09 443,413 Deutsche 90 Day Bank AG, 5yr. 187,000,000TWD 1.024 1.02 CPTW Rate 8/19/09 (1,434) Three-Month Deutsche LIBOR BBA Bank AG, 10 yr. 36,000,000 5.32 1.68 Rate 5/12/14 3,072,327 JPMorgan Three-Month Chase Bank 13,500,000 3.342 1.289999 LIBOR flat 3/31/08 (91,996) JPMorgan Six-Month Chase Bank 8,000,000 1.289988 2.92 LIBOR flat 5/13/08 (75,512) JPMorgan Six-Month Chase Bank 3,880,000EUR 3.135 2.08 LIBOR flat 7/14/08 (400) JPMorgan Six-Month Chase Bank 1,080,000,000HUF 7.00 7.00 LIBOR flat 7/14/08 (517,245) JPMorgan Six-Month Chase Bank 231,500,000 1.17 3.535 LIBOR flat 12/23/08 1,408,585 JPMorgan Three-Month Chase Bank 66,000,000ZAR 9.78 9.78 LIBOR flat 2/20/11 344,867 JPMorgan Three-Month Chase Bank 66,000,000ZAR 9.68 9.68 LIBOR flat 2/18/11 295,586 Morgan Stanley Capital Services, Six-Month Inc. 147,000,000EUR 3.064 2.243 EURIBOR 12/3/05 (4,582,506) --------------- $ 2,632,782 =============== 51 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 8. INTEREST RATE SWAP CONTRACTS Continued Notional amount is reported in U.S. Dollars, except for those denoted in the following currencies. Index abbreviations and currencies are as follows: EUR Euro HUF Hungary Forints INR Indian Rupee TWD New Taiwan Dollar ZAR South African Rand CPTW Bloomberg Taiwan Secondary Commercial Papers EURIBOR Euro Interbank Offered Rate IRS India Swap Composites LIBOR London-Interbank Offered Rate LIBOR BBA London-Interbank Offered Rate British Bankers Association MIFOR Mumbai Interbank Forward Offer Rates - -------------------------------------------------------------------------------- 9. CREDIT SWAP CONTRACTS The Fund may enter into a credit swap transaction to maintain a total return on a particular investment or portion of its portfolio, or for other non-speculative purposes. Because the principal amount is not exchanged, it represents neither an asset nor a liability to either counterparty, and is referred to as a notional principal amount. The Fund records an increase or decrease to unrealized gain (loss), in the amount due to or owed by the Fund at termination or settlement. Credit swaps are subject to credit risks (if the counterparty fails to meet its obligations). The Fund pays an annual interest fee on the notional amount in exchange for the counterparty paying in a potential credit event. During the year ended September 30, 2004, the Fund entered into transactions to hedge credit risk. Information regarding the credit swaps is as follows: VALUATION UNREALIZED EXPIRATION NOTIONAL AS OF APPRECIATION CONTRACT DESCRIPTION DATES AMOUNT SEPT. 30, 2004 (DEPRECIATION) - ----------------------------------------------------------------------------------------------- Deutsche Bank AG: Export-Import Bank of Korea Credit Bonds 6/20/09 $ 1,440,000 $ (11,952) $ (11,952) Korea Deposit Insurance Corp. Credit Bonds 6/20/09 1,440,000 (12,096) (12,096) Korea Development Bank Credit Bonds 6/20/09 1,440,000 (11,376) (11,376) Korea Electric Power Corp. Credit Bonds 6/20/09 1,440,000 (12,528) (12,528) Panama (Republic of) Credit Nts. 5/13/08 1,835,000 (91,281) (91,281) Philippines (Republic of) 10 yr. Credit Bonds 7/25/13 2,335,000 23,530 23,530 Samsung Electronic Co. Ltd. Credit Bonds 6/20/09 1,440,000 (10,800) (10,800) Turkey (Republic of) 2 yr. Credit Nts. 5/7/06 3,070,000 (146,682) (146,682) 52 | OPPENHEIMER INTERNATIONAL BOND FUND VALUATION UNREALIZED EXPIRATION NOTIONAL AS OF APPRECIATION CONTRACT DESCRIPTION DATES AMOUNT SEPT. 30, 2004 (DEPRECIATION) - ----------------------------------------------------------------------------------------------- Deutsche Bank AG: Continued Turkey (Republic of) 5 yr. Credit Nts. 5/7/09 $ 1,445,000 $ 325,859 $ 325,859 United Mexican States Credit Bonds 9/20/13 2,790,000 (119,387) (119,387) Venezuela (Republic of) Credit Bonds 8/20/14 2,950,000 (308,796) (308,796) Venezuela (Republic of) Credit Bonds 9/28/09 6,960,000 (47,890) (47,890) Venezuela (Republic of) Credit Bonds 10/20/09 11,475,000 (3,482) (3,482) - ----------------------------------------------------------------------------------------------- JP Morgan Chase Bank: Chile (Republic of) Credit Bonds 12/20/13 8,500,000 (329,067) (329,067) Export-Import Bank of Korea Credit Bonds 6/20/09 720,000 (12,250) (12,250) Inter-American Development Bank Credit Bonds 12/20/13 15,910,000 (11,794) (11,794) Jordan (Kingdom of) Credit Nts. 6/6/06 390,000 (2,840) (2,840) Korea Deposit Insurance Corp. Credit Bonds 6/20/09 720,000 (12,257) (12,257) Korea Development Bank Credit Bonds 6/20/09 720,000 (11,930) (11,930) Korea Electric Power Co. Credit Bonds 6/20/09 720,000 (13,391) (13,391) Russian Federation Credit Bonds 10/9/13 550,000 7,789 7,789 Samsung Electronics Co. Ltd. Credit Bonds 6/20/09 720,000 (12,285) (12,285) - ----------------------------------------------------------------------------------------------- Lehman Brothers Special Financing, Inc.: Brazil (Federal Republic of) Credit Bonds 8/20/09 5,120,000 (456,613) (456,613) Brazil (Federal Republic of) Credit Bonds 10/20/09 840,000 1,688 1,688 Venezuela (Republic of) Credit Bonds 3/5/08 840,000 (12,953) (12,953) - ----------------------------------------------------------------------------------------------- Morgan Stanley Capital Services, Inc.: Brazil (Federal Republic of) Credit Bonds 8/20/09 5,770,000 (471,117) (471,117) Brazil (Federal Republic of) Credit Bonds 8/20/09 5,770,000 (483,389) (483,389) Philippines (Republic of) Credit Bonds 6/20/09 5,000,000 (125,353) (125,353) Philippines (Republic of) Credit Bonds 6/20/09 2,500,000 (67,701) (67,701) Philippines (Republic of) Credit Bonds 6/20/09 5,000,000 (155,499) (155,499) 53 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 9. CREDIT SWAP CONTRACTS Continued VALUATION UNREALIZED EXPIRATION NOTIONAL AS OF APPRECIATION CONTRACT DESCRIPTION DATES AMOUNT SEPT. 30, 2004 (DEPRECIATION) - ----------------------------------------------------------------------------------------------- Morgan Stanley Capital Services, Inc.: Continued Turkey (Republic of) 2 yr. Credit Nts. 5/8/06 $ 3,070,000 $ (160,563) $ (160,563) Turkey (Republic of) 5 yr. Credit Nts. 5/8/09 1,445,000 165,652 165,652 Venezuela (Republic of) Credit Bonds 2/20/14 2,135,000 (447,650) (447,650) Venezuela (Republic of) Credit Bonds 8/20/06 4,890,000 182,963 182,963 Venezuela (Republic of) Credit Bonds 8/20/09 2,445,000 (171,844) (171,844) Venezuela (Republic of) Credit Bonds 7/20/14 5,000,000 (862,701) (862,701) - ----------------------------------------------------------------------------------------------- UBS AG: Venezuela (Republic of) Credit Bonds 6/20/14 6,040,000 (1,184,681) (1,184,681) Venezuela (Republic of) Credit Bonds 8/20/06 3,260,000 (117,954) (117,954) Venezuela (Republic of) Credit Bonds 8/20/09 1,630,000 108,123 108,123 --------------- $ (5,084,498) =============== - -------------------------------------------------------------------------------- 10. SWAPTION ACTIVITY The Fund may enter into a swaption transaction, whereby a contract that grants the holder, in return for payment of the purchase price (the "premium") of the option, the right, but not the obligation, to enter into an interest rate swap at a preset rate within a specified period of time, with the writer of the contract. The writer receives premiums and bears the risk of unfavorable changes in the preset rate on the underlying interest rate swap. Swaption contracts written by the Fund do not give rise to counterparty credit risk as they obligate the Fund, not its counterparty, to perform. Swaptions written are reported as a liability in the Statement of Assets and Liabilities. Written swaption activity for the year ended September 30, 2004 was as follows: NOTIONAL AMOUNT OF AMOUNT PREMIUMS ------------------------------------------------------------------ Swaptions outstanding as of September 30, 2003 $ 79,335,000 $ 694,082 Swaptions written 168,910,000 1,451,074 Swaptions closed or expired (135,300,000) (1,353,783) --------------------------------- Swaptions outstanding as of September 30, 2004 $ 112,945,000 $ 791,373 ================================= 54 | OPPENHEIMER INTERNATIONAL BOND FUND As of September 30, 2004, the Fund had entered into the following swaption contracts: NOTIONAL EXPIRATION EXERCISE PREMIUM VALUE SWAPTIONS AMOUNT DATES PRICE RECEIVED SEE NOTE 1 - --------------------------------------------------------------------------------------------------- Deutsche Bank AG 62,395,000GBP 11/4/04 5.997% $ 291,178 $ 542,058 Lehman Brothers International 50,550,000AUD 12/30/04 5.150 500,195 503,805 ------------------------- $ 791,373 $ 1,045,863 ========================= Notional amount is denoted in the following currencies: AUD Australian Dollar GBP British Pound Sterling - -------------------------------------------------------------------------------- 11. ILLIQUID OR RESTRICTED SECURITIES AND CURRENCY As of September 30, 2004, investments in securities included issues that are illiquid or restricted. Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund will not invest more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of September 30, 2004 was $29,998,722, which represents 1.86% of the Fund's net assets, of which $544,667 is considered restricted. Information concerning restricted securities and currency is as follows: ACQUISITION VALUATION AS OF UNREALIZED SECURITY DATE COST SEPTEMBER 30, 2004 DEPRECIATION - --------------------------------------------------------------------------------------------------- CURRENCY Argentine Peso 9/13/04 $548,747 $544,667 $4,080 - -------------------------------------------------------------------------------- 12. SECURITIES LENDING The Fund lends portfolio securities from time to time in order to earn additional income. In return, the Fund receives collateral in the form of US Treasury obligations or cash, against the loaned securities and maintains collateral in an amount not less than 100% of the market value of the loaned securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the funds and any additional required collateral is delivered to the Fund on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, the Fund could experience delays and cost in recovering the securities loaned or in gaining access to the collateral. Cash collateral is invested in cash equivalents. The Fund retains a portion of the interest earned from the collateral. The Fund also continues to receive interest or dividends paid on the securities loaned. As of September 30, 2004, the Fund had on loan securities valued at approximately $151,985,000. Cash of $155,142,317 was received as collateral for the loans, and has been invested in approved instruments. 55 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 13. LITIGATION Six complaints have been filed as putative derivative and class actions against the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as well as 51 of the Oppenheimer funds (collectively, the "Funds") including this Fund, and nine Directors/ Trustees of certain of the Funds other than this Fund (collectively, the "Directors/Trustees"). The complaints allege that the Manager charged excessive fees for distribution and other costs, improperly used assets of the Funds in the form of directed brokerage commissions and 12b-1 fees to pay brokers to promote sales of the Funds, and failed to properly disclose the use of Fund assets to make those payments in violation of the Investment Company Act of 1940 and the Investment Advisers Act of 1940. The complaints further allege that by permitting and/or participating in those actions, the Directors/Trustees breached their fiduciary duties to Fund shareholders under the Investment Company Act of 1940 and at common law. By order dated October 27, 2004, these six actions, and future related actions, were consolidated by the U.S. District Court for the Southern District of New York into a single consolidated proceeding in contemplation of the filing of a superceding consolidated and amended complaint. OppenheimerFunds believes that it is premature to render any opinion as to the likelihood of an outcome unfavorable to them, the Funds or the Directors/Trustees and that no estimate can yet be made with any degree of certainty as to the amount or range of any potential loss. However, OppenheimerFunds, the Funds and the Directors/Trustees believe that the allegations contained in the complaints are without merit and intend to defend these lawsuits vigorously. 56 | OPPENHEIMER INTERNATIONAL BOND FUND

                                     A-7
                                  Appendix A

                             RATINGS DEFINITIONS
                             -------------------

Below are summaries of the rating definitions used by the
nationally-recognized rating agencies listed below. Those ratings represent
the opinion of the agency as to the credit quality of issues that they rate.
The summaries below are based upon publicly available information provided by
the rating organizations.

Moody's Investors Service, Inc. ("Moody's")

LONG-TERM RATINGS: BONDS AND PREFERRED STOCK ISSUER RATINGS

Aaa: Bonds and preferred stock rated "Aaa" are judged to be the best quality.
They carry the smallest degree of investment risk.  Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure.  While the various protective elements are likely to change, the
changes that can be expected are most unlikely to impair the fundamentally
strong position of such issues.

Aa: Bonds and preferred stock rated "Aa" are judged to be of high quality by
all standards. Together with the "Aaa" group, they comprise what are
generally known as high-grade bonds.  They are rated lower than the best
bonds because margins of protection may not be as large as with "Aaa"
securities or fluctuation of protective elements may be of greater amplitude
or there may be other elements present which make the long-term risk appear
somewhat larger than that of "Aaa" securities.

A: Bonds and preferred stock rated "A" possess many favorable investment
attributes and are to be considered as upper-medium grade obligations.
Factors giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment some
time in the future.

Baa: Bonds and preferred stock rated "Baa" are considered medium-grade
obligations; that is, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and have speculative characteristics as well.

Ba: Bonds and preferred stock rated "Ba" are judged to have speculative
elements. Their future cannot be considered well-assured.  Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B: Bonds and preferred stock rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.

Caa: Bonds and preferred stock rated "Caa" are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds and preferred stock rated "Ca" represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C:  Bonds and preferred stock rated "C" are the lowest class of rated bonds
and can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from "Aa" through "Caa." The modifier "1" indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a
ranking in the lower end of that generic rating category. Advanced refunded
issues that are secured by certain assets are identified with a # symbol.

PRIME RATING SYSTEM (SHORT-TERM RATINGS - TAXABLE DEBT)
These ratings are opinions of the ability of issuers to honor senior
financial obligations and contracts. Such obligations generally have an
original maturity not exceeding one year, unless explicitly noted.

Prime-1: Issuer has a superior ability for repayment of senior short-term
debt obligations.

Prime-2: Issuer has a strong ability for repayment of senior short-term debt
obligations. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while appropriate, may
be more affected by external conditions. Ample alternate liquidity is
maintained.

Prime-3: Issuer has an acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market compositions
may be more pronounced. Variability in earnings and profitability may result
in changes in the level of debt protection measurements and may require
relatively high financial leverage. Adequate alternate liquidity is
maintained.

Not Prime: Issuer does not fall within any Prime rating category.


Standard & Poor's Ratings  Services  ("Standard & Poor's"),  a division of The
McGraw-Hill Companies, Inc.

LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based in varying degrees, on the following
considerations:
o     Likelihood of payment-capacity and willingness of the obligor to meet
      its financial commitment on an obligation in accordance with the terms
      of the obligation;
o     Nature of and provisions of the obligation; and
o     Protection afforded by, and relative position of, the obligation in the
      event of bankruptcy, reorganization, or other arrangement under the
      laws of bankruptcy and other laws affecting creditors' rights.
   The issue ratings definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority
in bankruptcy, as noted above.

AAA: An obligation  rated "AAA" have the highest rating assigned by Standard &
Poor's.  The  obligor's  capacity  to meet  its  financial  commitment  on the
obligation is extremely strong.

AA: An obligation  rated "AA" differ from the highest rated  obligations  only
in small degree.  The obligor's  capacity to meet its financial  commitment on
the obligation is very strong.

A: An  obligation  rated "A" are  somewhat  more  susceptible  to the  adverse
effects of changes in circumstances  and economic  conditions than obligations
in  higher-rated  categories.  However,  the  obligor's  capacity  to meet its
financial commitment on the obligation is still strong.

BBB:  An  obligation  rated  "BBB"  exhibit  adequate  protection  parameters.
However,  adverse  economic  conditions  or  changing  circumstances  are more
likely to lead to a weakened  capacity  of the  obligor to meet its  financial
commitment on the obligation.

BB, B, CCC, CC, and C
An obligation rated `BB', `B', `CCC', `CC', and `C' are regarded as having
significant speculative characteristics. `BB' indicates the least degree of
speculation and `C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

BB: An obligation  rated "BB" are less  vulnerable  to  nonpayment  than other
speculative  issues.   However,  they  face  major  ongoing  uncertainties  or
exposure to adverse business,  financial,  or economic  conditions which could
lead to the obligor's  inadequate capacity to meet its financial commitment on
the obligation.

B: An obligation  rated "B" are more vulnerable to nonpayment than obligations
rated "BB",  but the obligor  currently has the capacity to meet its financial
commitment  on  the  obligation.  Adverse  business,  financial,  or  economic
conditions  will likely impair the obligor's  capacity or  willingness to meet
its financial commitment on the obligation.

CCC: An obligation  rated "CCC" are currently  vulnerable to  nonpayment,  and
are dependent upon favorable business,  financial, and economic conditions for
the obligor to meet its financial  commitment on the obligation.  In the event
of adverse business,  financial,  or economic  conditions,  the obligor is not
likely  to  have  the  capacity  to  meet  its  financial  commitment  on  the
obligation.

CC: An obligation rated "CC" are currently highly vulnerable to nonpayment.

C:  Subordinated  debt or preferred stock  obligations rated "C" are currently
highly  vulnerable  to  nonpayment.  The "C"  rating  may be  used to  cover a
situation where a bankruptcy  petition has been filed or similar action taken,
but  payments  on this  obligation  are  being  continued.  A "C" also will be
assigned to a preferred  stock issue in arrears on  dividends  or sinking fund
payments, but that is currently paying.

D: An obligation rated "D" are in payment default.  The "D" rating category is
used when payments on an  obligation  are not made on the date due even if the
applicable  grace period has not expired,  unless  Standard & Poor's  believes
that such payments will be made during such grace period.  The "D" rating also
will be used  upon the  filing of a  bankruptcy  petition  or the  taking of a
similar action if payments on an obligation are jeopardized.

The ratings from "AA" to "CCC" may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within the major rating
categories.

c: The `c' subscript is used to provide additional information to investors
that the bank may terminate its obligation to purchase tendered bonds if the
long-term credit rating of the issuer is below an investment-grade level
and/or the issuer's bonds are deemed taxable.

p: The letter `p' indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by the debt
being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the risk
of default upon failure of such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.

Continuance of the ratings is contingent upon Standard & Poor's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.


r: The `r' highlights derivative, hybrid, and certain other obligations that
Standard & Poor's believes may experience high volatility or high variability
in expected returns as a result of noncredit risks. Examples of such
obligations are securities with principal or interest return indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an `r'
symbol should not be taken as an indication that an obligation will exhibit
no volatility or variability in total return.

N.R. Not rated.

Debt obligations of issuers outside the United States and its territories are
rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.


Bond Investment Quality Standards

Under present commercial bank regulations issued by the Comptroller of the
Currency, bonds rated in the top four categories (`AAA', `AA', `A', `BBB',
commonly known as investment-grade ratings) generally are regarded as
eligible for bank investment. Also, the laws of various states governing
legal investments impose certain rating or other standards for obligations
eligible for investment by savings banks, trust companies, insurance
companies, and fiduciaries in general


SHORT-TERM ISSUE CREDIT RATINGS
Short-term ratings are generally assigned to those obligations considered
short-term in the relevant market. In the U.S., for example, that means
obligations with an original maturity of no more than 365 days-including
commercial paper.

A-1: A short-term obligation rated "A-1" is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity
to meet its financial commitment on these obligations is extremely strong.

A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.

A-3: A short-term obligation rated "A-3" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.

B: A short-term obligation rated "B" is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet
its financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet
its financial commitment on the obligation.

C: A short-term obligation rated "C" is currently vulnerable to nonpayment
and is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation.

D: A short-term obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the
taking of a similar action if payments on an obligation are jeopardized.

NOTES:
A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in
making that assessment:
o     Amortization schedule-the larger the final maturity relative to other
      maturities, the more likely it will
      be treated as a note; and
o     Source of payment-the more dependent the issue is on the market for its
      refinancing, the more likely
      it will be treated as a note.

SP-1: Strong capacity to pay principal and interest. An issue with a very
strong capacity to pay debt service is given a (+) designation.

SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

SP-3: Speculative capacity to pay principal and interest.

Fitch, Inc.
International credit ratings assess the capacity to meet foreign currency or
local currency commitments. Both "foreign currency" and "local currency"
ratings are internationally comparable assessments. The local currency rating
measures the probability of payment within the relevant sovereign state's
currency and jurisdiction and therefore, unlike the foreign currency rating,
does not take account of the possibility of foreign exchange controls
limiting transfer into foreign currency.

INTERNATIONAL LONG-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings.

Investment Grade:

AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.

AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.

A: High Credit Quality. "A" ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB: Good Credit Quality. "BBB" ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and
in economic conditions are more likely to impair this capacity. This is the
lowest investment-grade category.

Speculative Grade:

BB: Speculative. "BB" ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time. However, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.


B: Highly Speculative. "B" ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met. However, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.

CCC, CC C: High Default Risk.  Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A "CC" rating indicates that default of
some kind appears probable. "C" ratings signal imminent default.

DDD, DD, and D: Default. The ratings of obligations in this category are
based on their prospects for achieving partial or full recovery in a
reorganization or liquidation of the obligor. While expected recovery values
are highly speculative and cannot be estimated with any precision, the
following serve as general guidelines. "DDD" obligations have the highest
potential for recovery, around 90%-100% of outstanding amounts and accrued
interest. "DD" indicates potential recoveries in the range of 50%-90%, and
"D" the lowest recovery potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy
a higher portion of their outstanding obligations, while entities rated "D"
have a poor prospect for repaying all obligations.

Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the major rating categories.  Plus and minus signs are
not added to the "AAA" category or to categories below "CCC," nor to
short-term ratings other than "F1" (see below).

INTERNATIONAL SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings. A short-term rating has a time horizon of less than 12 months for
most obligations, or up to three years for U.S. public finance securities,
and thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.

F1: Highest credit quality. Strongest capacity for timely payment of
financial commitments. May have an added "+" to denote any exceptionally
strong credit feature.

F2: Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the
case of higher ratings.

F3: Fair credit quality. Capacity for timely payment of financial commitments
is adequate. However, near-term adverse changes could result in a reduction
to non-investment grade.

B: Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.

C: High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable business
and economic environment.

D: Default. Denotes actual or imminent payment default.








                                     B-1
                                  Appendix B

                           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












                                     C-11
                                  Appendix C

        OppenheimerFunds Special Sales Charge Arrangements and Waivers
        --------------------------------------------------------------

In certain cases, the initial sales charge that applies to purchases of Class
A shares1 of the Oppenheimer funds or the contingent deferred sales charge
that may apply to Class A, Class B or Class C shares may be waived.2  That is
because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors.

Not all waivers apply to all funds. For example, waivers relating to
Retirement Plans do not apply to Oppenheimer municipal funds, because shares
of those funds are not available for purchase by or on behalf of retirement
plans. Other waivers apply only to shareholders of certain funds.

For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds,
the term "Retirement Plan" refers to the following types of plans:
         1) plans qualified under Sections 401(a) or 401(k) of the Internal
            Revenue Code,
         2) non-qualified deferred compensation plans,
         3) employee benefit plans3
         4) Group Retirement Plans4
         5) 403(b)(7) custodial plan accounts
         6) Individual Retirement Accounts ("IRAs"), including traditional
            IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans

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

Waivers that apply at the time shares are redeemed must be requested by the
shareholder and/or dealer in the redemption request.
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.

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

Class A shares issued or purchased in the following transactions are not
subject to sales charges (and no concessions are paid by the Distributor on
such purchases):
|_|   Shares issued in plans of reorganization, such as mergers, asset
         acquisitions and exchange offers, to which the Fund is a party.
|_|   Shares purchased by the reinvestment of dividends or other
         distributions reinvested from the Fund or other Oppenheimer funds
         (other than Oppenheimer Cash Reserves) or unit investment trusts for
         which reinvestment arrangements have been made with the Distributor.
|_|   Shares purchased with the proceeds of maturing principal units of any
         Qualified Unit Investment Liquid Trust Series.
|_|   Shares purchased by the reinvestment of loan repayments by a
         participant in a Retirement Plan for which the Manager or an
         affiliate acts as sponsor.

C. Waivers of the Class A Contingent Deferred Sales Charge for Certain
Redemptions.

The Class A contingent deferred sales charge is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
|_|   To make Automatic Withdrawal Plan payments that are limited annually to
         no more than 12% of the account value adjusted annually.
|_|   Involuntary redemptions of shares by operation of law or involuntary
         redemptions of small accounts (please refer to "Shareholder Account
         Rules and Policies," in the applicable fund Prospectus).
|_|   For distributions from Retirement Plans, deferred compensation plans or
         other employee benefit plans for any of the following purposes:
         1) Following the death or disability (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established.
         2) To return excess contributions.
         3) To return contributions made due to a mistake of fact.
4)    Hardship withdrawals, as defined in the plan.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 by the Social Security
         Administration.
|_|   Distributions from accounts for which the broker-dealer of record has
         entered into a special agreement with the Distributor allowing this
         waiver.
|_|   Redemptions of Class B shares held by Retirement Plans whose records
         are maintained on a daily valuation basis by Merrill Lynch or an
         independent record keeper under a contract with Merrill Lynch.
|_|   Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
         accounts of clients of financial institutions that have entered into
         a special arrangement with the Distributor for this purpose.
|_|   Redemptions 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.
|_|   Distributions8 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 Cap Value
   Fund
   Oppenheimer Quest Balanced Value 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 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.









Oppenheimer International Bond Fund

Internet Website:
      www.oppenheimerfunds.com
      ------------------------

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

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

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

Custodian Bank
      J. P. Morgan Chase Bank
      4 Chase Metro Tech Center
      Brooklyn, New York 11245

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

Counsel to the Funds
      Myer, Swanson, Adams & Wolf, P.C.
      1600 Broadway
      Denver, Colorado 80202

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

1234
PX880.001104rev0205


- --------
1 In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees/Director" 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.