Oppenheimer International Bond Fund

497 1 sai.htm REVISED SAI WITH FINANCIAL INFORMATION Oppenheimer International Bond Fund

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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 January 27, 2006

This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated January 27, 2006. 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......................................
Disclosure of Portfolio Holdings...................................
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.........................................
Payments to Fund Intermediaries........................................
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
Report of the Independent Registered Public Accounting Firm............
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. (the "Manager"), 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. Borrowing may entail
"leverage," and may be speculative investment strategy. Any borrowing will
be made only from banks and pursuant to the requirements of the Investment
Company Act, will be made only to the extent that the value of the Fund's
assets, less its liabilities other than borrowings, is equal to at least
300% of all borrowings including the proposed borrowing. If the value of
the Fund's assets, when computed in that manner, should fail to meet the
300% asset coverage requirement, the Fund is required within three days to
reduce its bank debt to the extent necessary to meet that coverage
requirement. To do so, the Fund may be to sell a portion of its
investment at a time when it would otherwise not want to sell the
securities. Interest on money the Fund borrows is an expense the Fund
would not otherwise incur, so that during periods of substantial
borrowings, its expenses may increase more than the expenses of funds that
do not borrow. The use of leverage also may make the Fund's share prices
more sensitive to interest rate changes.

|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 Foreign Exchange Volatility Swap Contracts. The Fund may enter into a
foreign exchange volatility swap transaction to hedge the direction of
volatility in a particular currency, or for other non-speculative purposes.
In foreign exchange volatility swaps, counterparties agree to buy or sell
volatility at a specific volatility level over a fixed period. Payment is
normally made on the basis of a currency amount per percentage point above or
below the volatility strike level at maturity. 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 a daily increase or decrease to unrealized gain (loss) based on
changes in the amount due to or owed by the Fund at the expiration date of
the swap. Foreign exchange volatility swaps are subject to credit risks (if
the counterparty fails to meet its obligations).

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.

Disclosure of Portfolio Holdings. The Fund has adopted policies and
procedures concerning the dissemination of information about its portfolio
holdings by employees, officers and/or directors of the Manager, Distributor
and Transfer Agent. These policies are designed to assure that non-public
information about portfolio securities is distributed only for a legitimate
business purpose, and is done in a manner that (a) conforms to applicable
laws and regulations and (b) is designed to prevent that information from
being used in a way that could negatively affect the Fund's investment
program or enable third parties to use that information in a manner that is
harmful to the Fund.

o Public Disclosure. The Fund's portfolio holdings are made publicly
available no later than 60 days after the close of each of the
Fund's fiscal quarters in semi-annual and annual reports to
shareholders, or in its Statements of Investments on Form N-Q,
which are publicly available at the SEC. In addition, the top 10
or more holdings are posted on the OppenheimerFunds' website at
www.oppenheimerfunds.com in the "Fund Profiles" section. Other
general information about the Fund's portfolio investments, such
as portfolio composition by asset class, industry, country,
currency, credit rating or maturity, may also be posted with a
15-day lag.

Until publicly disclosed, the Fund's portfolio holdings are
proprietary, confidential business information. While recognizing the
importance of providing Fund shareholders with information about their
Fund's investments and providing portfolio information to a variety of
third parties to assist with the management, distribution and
administrative process, the need for transparency must be balanced
against the risk that third parties who gain access to the Fund's
portfolio holdings information could attempt to use that information to
trade ahead of or against the Fund, which could negatively affect the
prices the Fund is able to obtain in portfolio transactions or the
availability of the securities that portfolio managers are trading on the
Fund's behalf.

The Manager and its subsidiaries and affiliates, employees, officers, and
directors, shall neither solicit nor accept any compensation or other
consideration (including any agreement to maintain assets in the Fund or
in other investment companies or accounts managed by the Manager or any
affiliated person of the Manager) in connection with the disclosure of
the Fund's non-public portfolio holdings. The receipt of investment
advisory fees or other fees and compensation paid to the Manager and its
subsidiaries pursuant to agreements approved by the Fund's Board shall
not be deemed to be "compensation" or "consideration" for these purposes.
It is a violation of the Code of Ethics for any covered person to release
holdings in contravention of portfolio holdings disclosure policies and
procedures adopted by the Fund.

A list of the top 10 or more portfolio securities holdings (based on
invested assets), listed by security or by issuer, as of the end of each
month may be disclosed to third parties (subject to the procedures below)
no sooner than 15 days after month-end.

Except under special limited circumstances discussed below, month-end
lists of the Fund's complete portfolio holdings may be disclosed no
sooner than 30-days after the relevant month-end, subject to the
procedures below. If the Fund's complete portfolio holdings have not been
disclosed publicly, they may be disclosed pursuant to special requests
for legitimate business reasons, provided that:

o The third-party recipient must first submit a request for release of
Fund portfolio holdings, explaining the business reason for the
request;
o Senior officers (a Senior Vice President or above) in the Manager's
Portfolio and Legal departments must approve the completed
request for release of Fund portfolio holdings; and
o The third-party recipient must sign the Manager's portfolio holdings
non-disclosure agreement before receiving the data, agreeing to
keep information that is not publicly available regarding the
Fund's holdings confidential and agreeing not to trade directly
or indirectly based on the information.

The Fund's complete portfolio holdings positions may be released to the
following categories of entities or individuals on an ongoing basis,
provided that such entity or individual either (1) has signed an
agreement to keep such information confidential and not trade on the
basis of such information or (2) is subject to fiduciary obligations, as
a member of the Fund's Board, or as an employee, officer and/or director
of the Manager, Distributor, or Transfer Agent, or their respective legal
counsel, not to disclose such information except in conformity with these
policies and procedures and not to trade for his/her personal account on
the basis of such information:

o Employees of the Fund's Manager, Distributor and Transfer Agent who
need to have access to such information (as determined by senior
officers of such entity),
o The Fund's certified public accountants and independent registered
public accounting firm,
o Members of the Fund's Board and the Board's legal counsel,
o The Fund's custodian bank,
o A proxy voting service designated by the Fund and its Board,
o Rating/ranking organizations (such as Lipper and Morningstar),
o Portfolio pricing services retained by the Manager to provide portfolio
security prices, and
o Dealers, to obtain bids (price quotations if securities are not priced
by the Fund's regular pricing services).

Portfolio holdings information of the Fund may be provided, under limited
circumstances, to brokers and/or dealers with whom the Fund trades and/or
entities that provide investment coverage and/or analytical information
regarding the Fund's portfolio, provided that there is a legitimate
investment reason for providing the information to the broker, dealer or
other entity. Month-end portfolio holdings information may, under this
procedure, be provided to vendors providing research information and/or
analytics to the fund, with at least a 15-day delay after the month end,
but in certain cases may be provided to a broker or analytical vendor
with a 1-2 day lag to facilitate the provision of requested investment
information to the manager to facilitate a particular trade or the
portfolio manager's investment process for the Fund. Any third party
receiving such information must first sign the Manager's portfolio
holdings non-disclosure agreement as a pre-condition to receiving this
information.

Portfolio holdings information (which may include information on
individual securities positions or multiple securities) may be provided
to the entities listed below (1) by portfolio traders employed by the
Manager in connection with portfolio trading, and (2) by the members of
the Manager's Security Valuation Group and Accounting Departments in
connection with portfolio pricing or other portfolio evaluation purposes:

o Brokers and dealers in connection with portfolio transactions
(purchases and sales)
o Brokers and dealers to obtain bids or bid and asked prices (if
securities held by the Fund are not priced by the fund's regular
pricing services)
o Dealers to obtain price quotations where the fund is not identified as
the owner

Portfolio holdings information (which may include information on the
Fund's entire portfolio or individual securities therein) may be provided
by senior officers of the Manager or attorneys on the legal staff of the
Manager, Distributor, or Transfer Agent, in the following circumstances:

o Response to legal process in litigation matters, such as responses to
subpoenas or in class action matters where the Fund may be part
of the plaintiff class (and seeks recovery for losses on a
security) or a defendant,
o Response to regulatory requests for information (the SEC, NASD, state
securities regulators, and/or foreign securities authorities,
including without limitation requests for information in
inspections or for position reporting purposes),
o To potential sub-advisers of portfolios (pursuant to confidentiality
agreements),
o To consultants for retirement plans for plan sponsors/discussions at
due diligence meetings (pursuant to confidentiality agreements),
o Investment bankers in connection with merger discussions (pursuant to
confidentiality agreements)

Portfolio managers and analysts may, subject to the Manager's
policies on communications with the press and other media, discuss
portfolio information in interviews with members of the media, or in due
diligence or similar meetings with clients or prospective purchasers of
Fund shares or their financial intermediary representatives.

The Fund's shareholders may, under unusual circumstances (such as a lack
of liquidity in the Fund's portfolio to meet redemptions), receive
redemption proceeds of their Fund shares paid as pro rata shares of
securities held in the Fund's portfolio. In such circumstances,
disclosure of the Fund's portfolio holdings may be made to such
shareholders.

The Chief Compliance Officer of the Fund and the Manager, Distributor,
and Transfer Agent (the "CCO") shall oversee the compliance by the
Manager, Distributor, Transfer Agent, and their personnel with these
policies and procedures. At least annually, the CCO shall report to the
Fund's Board on such compliance oversight and on the categories of
entities and individuals to which disclosure of portfolio holdings of the
Funds has been made during the preceding year pursuant to these policies.
The CCO shall report to the Fund's Board any material violation of these
policies and procedures during the previous calendar quarter and shall
make recommendations to the Board as to any amendments that the CCO
believes are necessary and desirable to carry out or improve these
policies and procedures.

The Manager and/or the Fund have entered into ongoing arrangements to
make available information about the Fund's portfolio holdings. One or
more of the Oppenheimer funds may currently disclose portfolio holdings
information based on ongoing arrangements to the following parties:
---------------------------------------------------------
A.G. Edwards & Sons Keijser Securities
---------------------------------------------------------
---------------------------------------------------------
ABG Securities Kempen & Co. USA Inc.
---------------------------------------------------------
---------------------------------------------------------
ABN AMRO Kepler Equities/Julius
Baer Sec
---------------------------------------------------------
---------------------------------------------------------
Advest KeyBanc Capital Markets
---------------------------------------------------------
---------------------------------------------------------
AG Edwards Leerink Swan
---------------------------------------------------------
---------------------------------------------------------
American Technology Research Legg Mason
---------------------------------------------------------
---------------------------------------------------------
Auerbach Grayson Lehman
---------------------------------------------------------
---------------------------------------------------------
Banc of America Securities Lehman Brothers
---------------------------------------------------------
---------------------------------------------------------
Barclays Lipper
---------------------------------------------------------
---------------------------------------------------------
Baseline Loop Capital Markets
---------------------------------------------------------
---------------------------------------------------------
Bear Stearns MainFirst Bank AG
---------------------------------------------------------
---------------------------------------------------------
Belle Haven Makinson Cowell US Ltd
---------------------------------------------------------
---------------------------------------------------------
Bloomberg Maxcor Financial
---------------------------------------------------------
---------------------------------------------------------
BNP Paribas Merrill
---------------------------------------------------------
---------------------------------------------------------
BS Financial Services Merrill Lynch
---------------------------------------------------------
---------------------------------------------------------
Buckingham Research Group Midwest Research
---------------------------------------------------------
---------------------------------------------------------
Caris & Co. Mizuho Securities
---------------------------------------------------------
---------------------------------------------------------
CIBC World Markets Morgan Stanley
---------------------------------------------------------
---------------------------------------------------------
Citigroup Morningstar
---------------------------------------------------------
---------------------------------------------------------
Citigroup Global Markets Natexis Bleichroeder
---------------------------------------------------------
---------------------------------------------------------
Collins Stewart Ned Davis Research Group
---------------------------------------------------------
---------------------------------------------------------
Craig-Hallum Capital Group LLCNomura Securities
---------------------------------------------------------
---------------------------------------------------------
Credit Agricole Cheuvreux Pacific Crest
N.A. Inc.
---------------------------------------------------------
---------------------------------------------------------
Credit Suisse First Boston Pacific Crest Securities
---------------------------------------------------------
---------------------------------------------------------
Daiwa Securities Pacific Growth Equities
---------------------------------------------------------
---------------------------------------------------------
Davy Petrie Parkman
---------------------------------------------------------
---------------------------------------------------------
Deutsche Bank Pictet
---------------------------------------------------------
---------------------------------------------------------
Deutsche Bank Securities Piper Jaffray Inc.
---------------------------------------------------------
---------------------------------------------------------
Dresdner Kleinwort WassersteinPlexus
---------------------------------------------------------
---------------------------------------------------------
Emmet & Co Prager Sealy & Co.
---------------------------------------------------------
---------------------------------------------------------
Empirical Research Prudential Securities
---------------------------------------------------------
---------------------------------------------------------
Enskilda Securities Ramirez & Co.
---------------------------------------------------------
---------------------------------------------------------
Essex Capital Markets Raymond James
---------------------------------------------------------
---------------------------------------------------------
Exane BNP Paribas RBC Capital Markets
---------------------------------------------------------
---------------------------------------------------------
Factset RBC Dain Rauscher
---------------------------------------------------------
---------------------------------------------------------
Fidelity Capital Markets Research Direct
---------------------------------------------------------
---------------------------------------------------------
Fimat USA Inc. Robert W. Baird
---------------------------------------------------------
---------------------------------------------------------
First Albany Roosevelt & Cross
---------------------------------------------------------
---------------------------------------------------------
First Albany Corporation Russell Mellon
---------------------------------------------------------
---------------------------------------------------------
Fixed Income Securities Ryan Beck & Co.
---------------------------------------------------------
---------------------------------------------------------
Fortis Securities Sanford C. Bernstein
---------------------------------------------------------
---------------------------------------------------------
Fox-Pitt, Kelton Scotia Capital Markets
---------------------------------------------------------
---------------------------------------------------------
Friedman, Billing, Ramsey SG Cowen & Co.
---------------------------------------------------------
---------------------------------------------------------
Fulcrum Global Partners SG Cowen Securities
---------------------------------------------------------
---------------------------------------------------------
Garp Research Soleil Securities Group
---------------------------------------------------------
---------------------------------------------------------
George K Baum & Co. Standard & Poors
---------------------------------------------------------
---------------------------------------------------------
Goldman Stone & Youngberg
---------------------------------------------------------
---------------------------------------------------------
Goldman Sachs SWS Group
---------------------------------------------------------
---------------------------------------------------------
HSBC Taylor Rafferty
---------------------------------------------------------
---------------------------------------------------------
HSBC Securities Inc Think Equity Partners
---------------------------------------------------------
---------------------------------------------------------
ING Barings Thomas Weisel Partners
---------------------------------------------------------
---------------------------------------------------------
ISI Group UBS
---------------------------------------------------------
---------------------------------------------------------
Janney Montgomery Wachovia
---------------------------------------------------------
---------------------------------------------------------
Jefferies Wachovia Corp
---------------------------------------------------------
---------------------------------------------------------
Jeffries & Co. Wachovia Securities
---------------------------------------------------------
---------------------------------------------------------
JP Morgan Wescott Financial
---------------------------------------------------------
---------------------------------------------------------
JP Morgan Securities William Blair
---------------------------------------------------------
---------------------------------------------------------
JPP Eurosecurities Yieldbook
---------------------------------------------------------
---------------------------------------------------------
Keefe, Bruyette & Woods
---------------------------------------------------------

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 in March 1995.

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

The Fund currently has 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 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 will generally have a different net asset value,
o will generally have separate voting rights on matters in which
interests of one class are different from interests of another
class, and
o votes as a class on matters that affect that class alone.

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

|X| Meetings of Shareholders. As a Massachusetts business trust, the Fund
is not required to hold, and does not plan to hold, regular annual meetings
of shareholders, but may hold shareholder meetings from time to time on
important matters or when required to do so by the Investment Company Act or
other applicable law. Shareholders have the right, upon a vote or
declaration in writing of two-thirds of the outstanding shares of the Fund,
to remove a Trustee or to take other action described in the Fund's
Declaration of Trust.

The Trustees will call a meeting of shareholders to vote on the removal
of a Trustee upon the written request of the record holders of 10% of its
outstanding shares. If the Trustees receive a request from at least 10
shareholders stating that they wish to communicate with other shareholders to
request a meeting to remove a Trustee, the Trustees will then either make the
Fund's shareholder list available to the applicants or mail their
communication to all other shareholders at the applicants' expense. The
shareholders making the request must have been shareholders for at least six
months and must hold shares of the Fund valued at $25,000 or more or
constituting at least 1% of the Fund's outstanding shares. The Trustees may
also take other action as permitted by the Investment Company Act.

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

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

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

The Board of Trustees has an Audit Committee, a Review Committee and a
Governance Committee. Each committee is comprised solely of Trustees who are
not "interested persons" under the Investment Company Act (the "Independent
Trustees"). The members of the Audit Committee are Edward L. Cameron
(Chairman), George C. Bowen, Robert J. Malone and F. William Marshall, Jr. The
Audit Committee held 8 meetings during the Fund's fiscal year ended September
30, 2005. The Audit Committee furnishes the Board with recommendations
regarding the selection of the Fund's independent registered public accounting
firm (also referred to as the "independent Auditors"). Other main functions of
the Audit Committee, outlined in the Audit Committee Charter, include, but are
not limited to: (i) reviewing the scope and results of financial statement
audits and the audit fees charged; (ii) reviewing reports from the Fund's
independent Auditors regarding the Fund's internal accounting procedures and
controls; (iii) reviewing reports from the Manager's Internal Audit
Department; (iv) reviewing certain reports from and meet periodically with
the Funds' Chief Compliance Officer; (v) maintaining a separate line of
communication between the Fund's independent Auditors and the Independent
Trustees; (vi) reviewing the independence of the Fund's independent Auditors;
and (vii) pre-approving the provision of any audit or non-audit services by
the Fund's independent Auditors, including tax services, that are not
prohibited by the Sarbanes-Oxley Act, to the Fund, the Manager and certain
affiliates of the Manager.

The Review Committee is comprised solely of Independent Trustees. The
members of the Review Committee are Jon S. Fossel (Chairman), Robert G. Avis,
Sam Freedman and Beverly L. Hamilton. The Review Committee held 6 meetings
during the Fund's fiscal year ended September 30, 2005. Among other duties, as
set forth in the Review Committee's Charter, the Review Committee reports and
makes recommendations to the Board concerning the fees paid to the Fund's
transfer agent and the Manager and the services provided to the Fund by the
transfer agent and the Manager. The Review Committee also reviews the Fund's
investment performance as well as the policies and procedures adopted by the
Fund to comply with the Investment Company Act and other applicable law.

The Governance Committee is comprised solely of Independent Trustees.
The members of the Governance Committee are, Robert J. Malone (Chairman),
William Armstrong, Beverly L. Hamilton and F. William Marshall, Jr. The
Governance Committee held 5 meetings during the Fund's fiscal year ended
September 30, 2005. The Governance Committee has adopted a charter setting
forth its duties and responsibilities. Among other duties, the Governance
Committee reviews and oversees the Fund's governance guidelines, the adequacy
of the Fund's Codes of Ethics and the nomination of Trustees, including
Independent Trustees. The Governance Committee has adopted a process for
shareholder submission of nominees for board positions. Shareholders may
submit names of individuals, accompanied by complete and properly supported
resumes, for the Governance Committee's consideration by mailing such
information to the Governance Committee in care of the Fund. The Governance
Committee may consider such persons at such time as it meets to consider
possible nominees. The Governance Committee, however, reserves sole
discretion to determine which candidates for Trustees and Independent
Trustees it will recommend to the Board and/or shareholders and it may
identify candidates other than those submitted by Shareholders. The
Governance Committee may, but need not, consider the advice and
recommendation of the Manager and/or its affiliates in selecting nominees.
The full Board elects new Trustees except for those instances when a
shareholder vote is required.

Shareholders who desire to communicate with the Board should address
correspondence to the Board or an individual Board member and may submit
their correspondence electronically at www.oppenheimerfunds.com under the
caption "contact us" or by mail to the Fund at the address below.

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

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

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

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

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

---------------------------------------------------------------------------------------------
Independent Trustees
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During the Past 5 Dollar Aggregate
Dollar
Range of
Shares
Range of Beneficially
Shares Owned in
with the Fund, Years; Other Trusteeships/Directorships Held; Beneficially All
Length of Service, Number of Portfolios in the Fund Complex Owned in Supervised
Age Currently Overseen the Fund Funds
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
As of December 31, 2005
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
William L. Chairman of the following private mortgage $0 Over
Armstrong, banking companies: Cherry Creek Mortgage $100,000
Chairman of the Company (since 1991), Centennial State
Board of Trustees Mortgage Company (since 1994), and The El
since 2003, Trustee Paso Mortgage Company (since 1993); Chairman
since 1999 of the following private companies:
Age: 68 Ambassador Media Corporation (since 1984) and
Broadway Ventures (since 1984); Director of
the following: Helmerich & Payne, Inc. (oil
and gas drilling/production company) (since
1992), Campus Crusade for Christ (since 1991)
and The Lynde and Harry Bradley Foundation,
Inc. (non-profit organization) (since 2002);
former Chairman of the following: Transland
Financial Services, Inc. (private mortgage
banking company) (1997-2003), Great Frontier
Insurance (insurance agency) (1995-2000),
Frontier Real Estate, Inc. (residential real
estate brokerage) (1994-2000) and Frontier
Title (title insurance agency) (1995-2000);
former Director of the following:
UNUMProvident (insurance company)
(1991-2004), Storage Technology Corporation
(computer equipment company) (1991-2003) and
International Family Entertainment
(television channel) (1992-1997); U.S.
Senator (January 1979-January 1991). Oversees
38 portfolios in the OppenheimerFunds complex.
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Robert G. Avis, Director and President of A.G. Edwards $0 Over
Trustee since 1995 Capital, Inc. (General Partner of private $100,000
Age: 74 equity funds) (until February 2001);
Chairman, President and Chief Executive
Officer of A.G. Edwards Capital, Inc. (until
March 2000); Director of A.G. Edwards & Sons,
Inc. (brokerage company) (until 2000) and
A.G. Edwards Trust Company (investment
adviser) (until 2000); Vice Chairman and
Director of A.G. Edwards, Inc. (until March
1999); Vice Chairman of A.G. Edwards & Sons,
Inc. (until March 1999); Chairman of A.G.
Edwards Trust Company (until March 1999) and
A.G.E. Asset Management (investment adviser)
(until March 1999). Oversees 38 portfolios in
the OppenheimerFunds complex.
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
George C. Bowen, Assistant Secretary and Director of $10,001-$50,0Over
Trustee since 1998 Centennial Asset Management Corporation $100,000
Age: 69 (December 1991-April 1999); President,
Treasurer and Director of Centennial Capital
Corporation (June 1989-April 1999); Chief
Executive Officer and Director of MultiSource
Services, Inc. (March 1996-April 1999); Mr.
Bowen held several positions with the Manager
and with subsidiary or affiliated companies
of the Manager (September 1987-April 1999).
Oversees 38 portfolios in the
OppenheimerFunds complex.
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Edward L. Cameron, Member of The Life Guard of Mount Vernon $0 Over
Trustee since 1999 (George Washington historical site) (since $100,000
Age: 67 June 2000); Director of Genetic ID, Inc.
(biotech company) (March 2001-May 2002);
Partner at PricewaterhouseCoopers LLP
(accounting firm) (July 1974-June 1999);
Chairman of Price Waterhouse LLP Global
Investment Management Industry Services Group
(July 1994-June 1998). Oversees 38 portfolios
in the OppenheimerFunds complex.
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Jon S. Fossel, Director of UNUMProvident (insurance company) $10,001-$50,0Over
Trustee since 1995 (since June 2002); Director of Northwestern $100,000
Age: 63 Energy Corp. (public utility corporation)
(since November 2004); Director of P.R.
Pharmaceuticals (October 1999-October 2003);
Director of Rocky Mountain Elk Foundation
(non-profit organization) (February
1998-February 2003); Chairman and Director
(until October 1996) and President and Chief
Executive Officer (until October 1995) of the
Manager; President, Chief Executive Officer
and Director of the following: Oppenheimer
Acquisition Corp. ("OAC") (parent holding
company of the Manager), Shareholders
Services, Inc. and Shareholder Financial
Services, Inc. (until October 1995). Oversees
38 portfolios in the OppenheimerFunds complex.
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Sam Freedman, Director of Colorado Uplift (charitable $10,001-$50,0Over
Trustee since 1996 organization) (since September 1984). Mr. $100,000
Age: 65 Freedman held several positions with the
Manager and with subsidiary or affiliated
companies of the Manager (until October
1994). Oversees 38 portfolios in the
OppenheimerFunds complex.
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Beverly L. Hamilton, Trustee of Monterey Institute for None Over
Trustee since 2002 International Studies (educational $100,000
Age: 59 organization) (since February 2000); Board
Member of Middlebury College (educational
organization) (since 2005); Director of The
California Endowment (philanthropic
organization) (since April 2002); Director
(February 2002-2005) and Chairman of Trustees
(since 2006) of the Community Hospital of
Monterey Peninsula; Director (October
1991-2005) and Vice Chairman (since 2006) of
American Funds' Emerging Markets Growth Fund,
Inc. (mutual fund); President of ARCO
Investment Management Company (February
1991-April 2000); Member of the investment
committees of The Rockefeller Foundation and
The University of Michigan; Advisor at Credit
Suisse First Boston's Sprout venture capital
unit (venture capital fund) (1994-January
2005); Trustee of MassMutual Institutional
Funds (investment company) (1996-June 2004);
Trustee of MML Series Investment Fund
(investment company) (April 1989-June 2004);
Member of the investment committee of
Hartford Hospital (2000-2003); and Advisor to
Unilever (Holland) pension fund (2000-2003).
Oversees 38 portfolios in the
OppenheimerFunds complex.
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Robert J. Malone, Director of Jones International University $50,001-$100,Over
Trustee since 2002 (educational organization) (since August $100,000
Age: 61 2005); Chairman, Chief Executive Officer and
Director of Steele Street State Bank
(commercial banking) (since August 2003);
Director of Colorado UpLIFT (charitable
organization) (since 1986); Trustee of the
Gallagher Family Foundation (non-profit
organization) (since 2000); Former Chairman
of U.S. Bank-Colorado (subsidiary of U.S.
Bancorp and formerly Colorado National Bank)
(July 1996-April 1999); Director of
Commercial Assets, Inc. (real estate
investment trust) (1993-2000); Director of
Jones Knowledge, Inc. (2001-July 2004); and
Director of U.S. Exploration, Inc. (oil and
gas exploration) (1997-February 2004).
Oversees 38 portfolios in the
OppenheimerFunds complex.
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
F. William Trustee of MassMutual Select Funds (formerly None Over
Marshall, Jr., MassMutual Institutional Funds) (investment $100,000
Trustee since 2000 company) (since 1996) and MML Series
Age: 63 Investment Fund (investment company) (since
1996) Trustee (since 2003) and Chairman
(1994-2005) of the Investment Committee of
the Worcester Polytech Institute (private
university); President and Treasurer of the
SIS Funds (private charitable fund) (since
January 1999); Chairman of SIS & Family Bank,
F.S.B. (formerly SIS Bank) (commercial bank)
(January 1999-July 1999); and Executive Vice
President of Peoples Heritage Financial
Group, Inc. (commercial bank) (January
1999-July 1999). Oversees 40 portfolios in
the OppenheimerFunds complex.*
---------------------------------------------------------------------------------------------
* Includes two open-end investment companies: MassMutual Select Funds and
MML Series Investment Fund. In accordance with the instructions for Form
N-1A, for purposes of this section only, MassMutual Select Funds and MML
Series Investment Fund are included in the "Fund Complex." The Manager
does not consider MassMutual Select Funds and MML Series Investment Fund
to be part of the OppenheimerFunds' "Fund Complex" as that term may be
otherwise interpreted.

The address of Mr. Murphy is Two World Financial Center, 225 Liberty Street,
11th Floor, New York, New York 10281-1008. Mr. Murphy serves as a Trustee for
an indefinite term and as an officer for an annual term, or until his
resignation, retirement, death or removal. Mr. Murphy is an "Interested
Trustee" because he is affiliated with the Manager by virtue of his positions
as an officer and director of the Manager, and as a shareholder of its parent
company. Mr. Murphy was elected as a Trustee of the Fund with the
understanding that in the event he ceases to be the Chief Executive Officer
of the Manager, he will resign as a Trustee of the Fund and the other Board
II Funds (defined below) for which he is a director or trustee.

--------------------------------------------------------------------------------------------
Interested Trustee and Officer
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During the Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Range of Beneficially
Shares Owned in
Held with the Fund, Years; Other Trusteeships/Directorships Held; Beneficially All
Length of Service, Number of Portfolios in the Fund Complex Owned in Supervised
Age Currently Overseen the Fund Funds
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
As of December 31, 2005
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and $10,001-$50,Over
President, Director (since June 2001) and President $100,000
Principal Executive (since September 2000) of the Manager;
Officer and Trustee President and director or trustee of other
since 2001 Oppenheimer funds; President and Director of
Age: 56 OAC and of Oppenheimer Partnership Holdings,
Inc. (holding company subsidiary of the
Manager) (since July 2001); Director of
OppenheimerFunds Distributor, Inc.
(subsidiary of the Manager) (since November
2001); Chairman and Director of Shareholder
Services, Inc. and of Shareholder Financial
Services, Inc. (transfer agent subsidiaries
of the Manager) (since July 2001); President
and Director of OppenheimerFunds Legacy
Program (charitable trust program established
by the Manager) (since July 2001); Director
of the following investment advisory
subsidiaries of the Manager: OFI
Institutional Asset Management, Inc.,
Centennial Asset Management Corporation,
Trinity Investment Management Corporation and
Tremont Capital Management, Inc. (since
November 2001), HarbourView Asset Management
Corporation and OFI Private Investments, Inc.
(since July 2001); President (since November
2001) and Director (since July 2001) of
Oppenheimer Real Asset Management, Inc.;
Executive Vice President of Massachusetts
Mutual Life Insurance Company (OAC's parent
company) (since February 1997); Director of
DLB Acquisition Corporation (holding company
parent of Babson Capital Management LLC)
(since June 1995); Member of the Investment
Company Institute's Board of Governors (since
October 3, 2003); Chief Operating Officer of
the Manager (September 2000-June 2001);
President and Trustee of MML Series
Investment Fund and MassMutual Select Funds
(open-end investment companies) (November
1999-November 2001); Director of C.M. Life
Insurance Company (September 1999-August
2000); President, Chief Executive Officer and
Director of MML Bay State Life Insurance
Company (September 1999-August 2000);
Director of Emerald Isle Bancorp and Hibernia
Savings Bank (wholly-owned subsidiary of
Emerald Isle Bancorp) (June 1989-June 1998).
Oversees 87 portfolios in the
OppenheimerFunds complex.
--------------------------------------------------------------------------------------------

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

-----------------------------------------------------------------------------------------
Other Officers of the Fund
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During Past 5 Years
Held with the Fund,
Length of Service, Age
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Arthur P. Steinmetz, Senior Vice President of the Manager (since March 1993 and of
Vice President and HarbourView Asset Management Corporation (since March 2000); an
Portfolio Manager officer of 4 portfolios in the OppenheimerFunds complex.
since 2004
Age: 46
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Mark S. Vandehey, Senior Vice President and Chief Compliance Officer of the
Vice President and Manager (since March 2004); Vice President of OppenheimerFunds
Chief Compliance Distributor, Inc., Centennial Asset Management Corporation and
Officer since 2004 Shareholder Services, Inc. (since June 1983); Vice President and
Age: 55 Director of Internal Audit of the Manager (1997-February 2004).
An officer of 87 portfolios in the OppenheimerFunds complex.
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer of the Manager (since March
Treasurer since 1999 1999); Treasurer of the following: HarbourView Asset Management
Age: 46 Corporation, Shareholder Financial Services, Inc., Shareholder
Services, Inc., Oppenheimer Real Asset Management Corporation,
and Oppenheimer Partnership Holdings, Inc. (since March 1999),
OFI Private Investments, Inc. (since March 2000),
OppenheimerFunds International Ltd. and OppenheimerFunds plc
(since May 2000), OFI Institutional Asset Management, Inc.
(since November 2000), and OppenheimerFunds Legacy Program
(since June 2003); Treasurer and Chief Financial Officer of OFI
Trust Company (trust company subsidiary of the Manager) (since
May 2000); Assistant Treasurer of the following: OAC (since
March 1999), Centennial Asset Management Corporation (March
1999-October 2003) and OppenheimerFunds Legacy Program (April
2000-June 2003); Principal and Chief Operating Officer of
Bankers Trust Company-Mutual Fund Services Division (March
1995-March 1999). An officer of 87 portfolios in the
OppenheimerFunds complex.
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Brian Petersen, Assistant Vice President of the Manager (since August 2002);
Assistant Treasurer Manager/Financial Product Accounting of the Manager (November
since 2004 1998-July 2002). An officer of 87 portfolios in the
Age: 35 OppenheimerFunds complex.

-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Brian C. Szilagyi Assistant Vice President of the Manager (since July 2004);
Assistant Treasurer Director of Financial Reporting and Compliance of First Data
since 2005 Corporation (April 2003-July 2004); Manager of Compliance of
Age: 35 Berger Financial Group LLC (May 2001-March 2003). An officer of
87 portfolios in the OppenheimerFunds complex.
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Robert G. Zack, Executive Vice President (since January 2004) and General
Secretary since 2001 Counsel (since March 2002) of the Manager; General Counsel and
Age: 57 Director of the Distributor (since December 2001); General
Counsel of Centennial Asset Management Corporation (since
December 2001); Senior Vice President and General Counsel of
HarbourView Asset Management Corporation (since December 2001);
Secretary and General Counsel of OAC (since November 2001);
Assistant Secretary (since September 1997) and Director (since
November 2001) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and Director of Oppenheimer
Partnership Holdings, Inc. (since December 2002); Director of
Oppenheimer Real Asset Management, Inc. (since November 2001);
Senior Vice President, General Counsel and Director of
Shareholder Financial Services, Inc. and Shareholder Services,
Inc. (since December 2001); Senior Vice President, General
Counsel and Director of OFI Private Investments, Inc. and OFI
Trust Company (since November 2001); Vice President of
OppenheimerFunds Legacy Program (since June 2003); Senior Vice
President and General Counsel of OFI Institutional Asset
Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003); Senior
Vice President (May 1985-December 2003), Acting General Counsel
(November 2001-February 2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant Secretary of the
following: Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November 1989-November
2001), and OppenheimerFunds International Ltd. (September
1997-November 2001). An officer of 87 portfolios in the
OppenheimerFunds complex.
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Lisa I. Bloomberg, Vice President and Associate Counsel of the Manager (since May
Assistant Secretary 2004); First Vice President (April 2001-April 2004), Associate
since 2004 General Counsel (December 2000-April 2004), Corporate Vice
Age: 37 President (May 1999-April 2001) and Assistant General Counsel
(May 1999-December 2000) of UBS Financial Services Inc.
(formerly, PaineWebber Incorporated). An officer of 87
portfolios in the OppenheimerFunds complex.
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel and
Assistant Secretary Assistant Secretary (since October 2003) of the Manager; Vice
since 2001 President (since 1999) and Assistant Secretary (since October
Age: 40 2003) of the Distributor; Assistant Secretary of Centennial
Asset Management Corporation (since October 2003); Vice
President and Assistant Secretary of Shareholder Services, Inc.
(since 1999); Assistant Secretary of OppenheimerFunds Legacy
Program and Shareholder Financial Services, Inc. (since December
2001); Assistant Counsel of the Manager (August 1994-October
2003). An officer of 87 portfolios in the OppenheimerFunds
complex.
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Phillip S. Gillespie, Senior Vice President and Deputy General Counsel of the Manager
Assistant Secretary (since September 2004); First Vice President (2000-September
since 2004 2004), Director (2000-September 2004) and Vice President
Age: 41 (1998-2000) of Merrill Lynch Investment Management. An officer
of 87 portfolios in the OppenheimerFunds complex.
-----------------------------------------------------------------------------------------

Remuneration of the Officers and Trustees. The officers and the
Interested Trustee of the Fund who are affiliated with the Manager receive no
salary or fee from the Fund. The Independent Trustees received the
compensation shown below from the Fund for serving as a Trustee and member of
a committee (if applicable), with respect to the Fund's fiscal year ended
September 30, 2005. The total compensation, including accrued retirement
benefits, from the Fund and fund complex represents compensation received for
serving as a Trustee and member of a committee (if applicable) of the boards
of the Fund and other funds in the OppenheimerFunds complex during the
calendar year ended December 31, 2005.

---------------------------------------------------------------------------------
Name of Trustee and Other Fund Aggregate Compensation Total Compensation
From the Fund and
Position(s) (as applicable) From the Fund(1) Fund Complex(2)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
William L. Armstrong $6,202 $178,000
Chairman of the Board and
Governance Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Robert G. Avis $4,128 $118,500
Review Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
George C. Bowen $4,128 $118,500
Audit Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Edward L. Cameron $4,739 $136,000
Audit Committee Chairman
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Jon S. Fossel $4,739 $124,100
Review Committee Chairman
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Sam Freedman $4,128 $118,500
Review Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Beverly Hamilton $4,152(3) $107,175
Review Committee Member and
Governance Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Robert J. Malone $4,765(4) $134,868
Governance Committee Chairman
and
Audit Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
F. William Marshall, Jr. $4,128 $169,500((5))
Audit Committee Member and
Governance Committee Member
---------------------------------------------------------------------------------
1. "Aggregate Compensation From the Fund" includes fees and deferred
compensation, if any.
2. In accordance with SEC regulations, for purposes of this section only,
"Fund Complex" includes the Oppenheimer funds, the MassMutual
Institutional Funds, MassMutual Select Funds and the MML Series Investment
Fund, the investment adviser for which is the indirect parent company of
the Fund's Manager. The Manager also serves as the Sub-Advisor to the
following: MassMutual Premier International Equity Fund, MassMutual
Premier Main Street Fund, MassMutual Premier Strategic Income Fund,
MassMutual Premier Capital Appreciation Fund, and MassMutual Premier
Global Fund. The Manager does not consider MassMutual Institutional Funds,
MassMutual Select Funds and MML Series Investment Fund to be part of the
OppenheimerFunds' "Fund Complex" as that term may be otherwise interpreted.
3. Includes $4,152 deferred by Ms. Hamilton under the "Deferred
Compensation Plan" described below.
4. Includes $4,765 deferred by Mr. Malone under the "Deferred Compensation
Plan" described below.
5. Includes $51,000 compensation paid to Mr. Marshall for serving as a
Trustee for MassMutual Select Funds and MML Series Investment Fund.

|X| Deferred Compensation Plan For Trustees. The Board of Trustees has
adopted a Deferred Compensation Plan for Independent Trustees that enables
them to elect to defer receipt of all or a portion of the annual fees they
are entitled to receive from the Fund. Under the plan, the compensation
deferred by a Trustee is periodically adjusted as though an equivalent amount
had been invested in shares of one or more Oppenheimer funds selected by the
Trustee. The amount paid to the Trustee under the plan will be determined
based upon the amount of compensation deferred and the performance of the
selected funds.

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

|X| Major Shareholders. As of December 30, 2005, the only persons or
entities who owned of record or were known by the Fund to own beneficially 5%
or more of any class of the Fund's outstanding shares were:

Charles Schwab & Co. Inc., Special Custody Acct for the Exclusive
Benefit of Customers, 101 Montgomery Street, San Francisco, CA
94104-4122, which owned 108,200,339.136, Class A shares (21.39% of the
Class A shares then outstanding).

Merrill Lynch, Pierce, Fenner & Smith, for the Sole Benefit of its
Customers, 4800 Deer Lake Drive, E., Floor 3, Jacksonville, FL
32246-6484, which owned 55,579,589.658 Class A shares (10.98% of the
Class A shares then outstanding).

Citigroup Global Markets, Inc., 333 West 34th Street, 7th Floor, New
York, NY 10001-2483, which owned 2,103,813.158 Class B shares (5.44% of
the Class B shares then outstanding).

Merrill Lynch, Pierce, Fenner & Smith, for the Sole Benefit of its
Customers, 4800 Deer Lake Drive, E., Floor 3, Jacksonville, FL
32246-6484, which owned 22,007,422.159 Class C shares (20.80% of the
Class C shares then outstanding).

Citigroup Global Markets, Inc., 333 West 34th Street, 7th Floor, New
York, NY 10001-2483, which owned 16,471,019.216 Class C shares (15.57%
of the Class C shares then outstanding).

Wells Fargo Bank NA, FBO WF Wealthbuilder Growth Balanced Portfolio; PO
Box 1533, Minneapolis, MN 55480-1533, which owned 3,505,413.739 Class Y
shares (31.54% of the Class Y shares then outstanding).

SEI Private Trust Company, c/o M&T Bank, One Freedom Valley Dr., Oaks,
PA 19456,which owned 2,598,393.052 Class Y shares (23.32% of the Class
Y shares then outstanding).

Oppenheimer Portfolio Series Moderate Investor, Moderate Investor, 6803
South Tucson Way, Centennial, CO 80112-3924, which owned 1,462,764.117
Class Y shares (13.16% of the Class Y shares then outstanding).

Oppenheimer Portfolio Series Diversified Fund, 6803 South Tucson Way,
Centennial, CO 80112-3924, which owned 780,507.862 Class Y shares
(7.02% of the Class Y shares then outstanding).

Dingle & Co, c/o Comerica Bank, 411 Lafayette Blvd, Detroit, MI 48226,
which owned 733,441.840 Class Y shares (6.60% of the Class Y shares
then outstanding).

Taynik & Co, c/o Investors Bank & Trust, PO Box, Boston, MA 02117-9130,
which owned 676,023.494 Class Y shares (6.08% of the Class Y shares
then outstanding).

Oppenheimer Portfolio Series Conservative Investor, 6803 South Tucson
Way, Centennial, CO 80112-3924, which owned 653,308.051 Class Y shares
(5.87% of the Class Y shares then outstanding).

UMB Bank NA Cust., AMFO & Co., 1010 Grand Blvd, Kansas City, MO
64106-2202, which owned 1,524,035.139 Class N shares (17.24% of the
Class N shares then outstanding).

Hartford Life Insurance Co, PO Box 2999, Hartford, CT 06104-2999, which
owned 827,478.499 Class N shares (9.36% of the Class N shares then
outstanding).

AST Trust Co Tr., PO Box 52129, Phoenix, AZ 85072-2129, which owned
601,678.964 Class N shares (6.80% of the Class N 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 Portfolio Proxy Voting Policies and Procedures include
provisions to address conflicts of interest that may arise between the Fund
and the Manager or the Manager's affiliates or business relationships. Such
a conflict of interest may arise, for example, where the Manager or an
affiliate of the Manager manages or administers the assets of a pension plan
or other investment account of the portfolio company soliciting the proxy or
seeks to serve in that capacity. The Manager and its affiliates generally
seek to avoid such conflicts by maintaining separate investment decision
making processes to prevent the sharing of business objectives with respect
to proposed or actual actions regarding portfolio proxy voting decisions.
Additionally, the Manager employs the followings two procedures: (1) if the
proposal that gives rise to the conflict is specifically addressed in the
Guidelines, the Manager will vote the portfolio proxy in accordance with the
Guidelines provided that they do not provide discretion to the Manager on how
to vote on the matter; and (2) if such proposal is not specifically addressed
in the Guidelines or the Guidelines provide discretion to the Manager on how
to vote, the Manager will vote in accordance with the third-party proxy
voting agent's general recommended guidelines on the proposal provided that
the Manager has reasonably determined that there is no conflict of interest
on the Part of the proxy voting agent. If neither of the previous two
procedures provides an appropriate voting recommendation, the Manager may
retain an independent fiduciary to advise the Manager on how to vote the
proposal or may abstain from voting. The Guidelines' provisions with respect
to certain routine and non-routine proxy proposals are summarized below:

o The Fund generally votes with the recommendation of the issuer's
management on routine matters, including election of directors
nominated by management and ratification of independent registered
public accounting firm, unless circumstances indicate otherwise.
o The Fund evaluates nominees for director nominated by management on a
case-by-case basis, examining the following factors, among others:
Composition of the board and key board committees, attendance at board
meetings, corporate governance provisions and takeover activity,
long-term company performance and the nominee's investment in the
company.
o In general, the Fund opposes "anti-takeover" proposals and supports
elimination, or the ability of shareholders to vote on the preservation
or 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 without shareholder
approval.
o The Fund generally considers executive compensation questions such as
stock option plans and bonus plans to be ordinary business activity.
The Fund analyzes stock option plans, paying particular attention to
their dilutive effect. While the Fund generally supports management
proposals, the Fund opposes plans it considers to be excessive.

The Fund is required to file Form N-PX, with its complete proxy voting
record for the 12 months ended June 30th, no later than August 31st of each
year. The Fund's Form N-PX filing is available (i) without charge, upon
request, by calling the Fund toll-free at 1.800.525-7048 and (ii) on the
SEC's website at www.sec.gov.

|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities
for the Fund's portfolio and handles its day-to-day business. The portfolio
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.
-------------------------------------------------------------------
-------------------------------------------------------------------
2003 $3,415,246
-------------------------------------------------------------------
-------------------------------------------------------------------
2004 $7,484,558
-------------------------------------------------------------------
-------------------------------------------------------------------
2005 $14,728,663
-------------------------------------------------------------------

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 any matters to
which the investment advisory agreement relates. .

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.

Portfolio Manager. The Fund's portfolio is managed by Arthur P. Steinmetz
(referred to as the "Portfolio Manager"). He is the person responsible for
the day-to-day management of the Fund's investments.

Other Accounts Managed. In addition to managing the
Fund's investment portfolio, Mr. Steinmetz also manages other
investment portfolios and other accounts on behalf of the Manager or
its affiliates. The following table provides information regarding the
other portfolios and accounts managed by Mr. Steinmetz as of September
30, 2005. No portfolio or account has an advisory fee based on
performance:

Registered Other Pooled
Investment Investment Other
Companies Vehicles Accounts**
------------------------------------------------------------------------
------------------------------------------------------------------------
6 3 4
Accounts Managed
------------------------------------------------------------------------
------------------------------------------------------------------------
$11,778.8 $56.4 $1,018.9
Total Assets Managed*

* In millions.
**Does not include personal accounts of portfolio managers and their
families, which are subject to the Code of Ethics

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

Compensation of the Oppenheimer Portfolio Managers. The Fund's
Portfolio Manager is employed and compensated by the Manager, not the
Fund. Under the Manager's compensation program for its portfolio
managers and portfolio analysts, their compensation is based primarily
on the investment performance results of the funds and accounts they
manage, rather than on the financial success of the Manager. This is
intended to align the portfolio managers' and analysts' interests with
the success of the funds and accounts and their investors. The
Manager's compensation structure is designed to attract and retain
highly qualified investment management professionals and to reward
individual and team contributions toward creating shareholder value.
As of September 30, 2005, the portfolio managers' compensation
consisted of three elements: a base salary, an annual discretionary
bonus and eligibility to participate in long-term awards of options and
appreciation rights in regard to the common stock of the Manager's
holding company parent. Senior portfolio managers may also be eligible
to participate in the Manager's deferred compensation plan.

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

Ownership of Fund Shares. As of September 30, 2005,
the Portfolio Manager beneficially owned shares of the Fund as follows:

----------------------------------------------------------
Range of Shares
Beneficially
Portfolio Manager Owned in the Fund
----------------------------------------------------------
----------------------------------------------------------
Arthur Steinmetz None
----------------------------------------------------------

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, 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 for the services provided. 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 both brokerage and research services to the
Fund. The commissions paid to those brokers may be higher than another
qualified broker would charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided.

Brokerage Practices Followed by the Manager. The Manager allocates brokerage
for the Fund subject to the provisions of the investment advisory agreement
and other applicable rules and procedures described below.

The Manager's portfolio traders allocate brokerage based upon
recommendations from the Manager's portfolio managers, together with the
portfolio traders' judgment as to the execution capability of the broker or
dealer. 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.

Most securities purchases made by the Fund are in principal
transactions at net prices. The Fund usually deals directly with the selling
or purchasing principal or market maker without incurring charges for the
services of a broker on its behalf unless the Manager determines that a
better price or execution may 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 commissions 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
price. In an option transaction the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the investment to
which the option relates.

Other accounts advised by the Manager have investment policies similar
to those of the Fund. Those other accounts 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 accounts 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. 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.

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

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

The investment advisory agreement permits the Manager to allocate
brokerage for research services. The research services provided by a
particular broker may be useful both to the Fund and to one or more of the
other accounts advised by the Manager or its affiliates. Investment research
may be supplied to the Manager by the broker or 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, analytical
software 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.

Although the Manager currently does not do so, the Board of Trustees
may permit 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 may also permit 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 broaden the scope and
supplement 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.

During the fiscal year ended September 30, 2005, the Fund executed no
transactions and paid no commissions to firms that provide research services.

---------------------------------------------------------------
Fiscal Year Ended Total Brokerage Commissions Paid by the
9/30: Fund*
---------------------------------------------------------------
---------------------------------------------------------------
2003 $81,962
---------------------------------------------------------------
---------------------------------------------------------------
2004 $250,091
---------------------------------------------------------------
---------------------------------------------------------------
2005 $125,717
---------------------------------------------------------------
*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
-------------------------------------------
-------------------------------------------
2003 $1,607,039 $328,223(1)
-------------------------------------------
-------------------------------------------
2004 $3,965,257 $822,275(1)
-------------------------------------------
-------------------------------------------
2005 $7,989,659 $1,626,798
-------------------------------------------
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: Distributor(1) Distributor(1) Distributor(1) Distributor(1)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2003 $366,872 $1,414,536 $474,412 $21,566
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2004 $778,522 $1,640,329 $1,505,179 $62,270
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2005 $1,569,603 $1,974,193 $3,149,011 $103,181
-----------------------------------------------------------------------------
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
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2003 $10,937 $475,852 $57,864 $6,737
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2004 $27,674 $353,364 $116,729 $1,248
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
2005 $54,701 $368,223 $143,287 $73,709
-----------------------------------------------------------------------------

Distribution and Service Plans. The Fund has adopted a Service Plan for Class
A shares and Distribution and Service Plans for Class B, Class C and Class N
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class. Each plan has been approved by a vote of the Board of
Trustees, including a majority of the Independent Trustees(1), cast in person
at a meeting called for the purpose of voting on that plan.

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

Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose
of voting on continuing the plan. A plan may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the outstanding
shares of that class.

The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount
of payments to be made under a plan must be approved by shareholders of the
class affected by the amendment. Because Class B shares of the Fund
automatically convert into Class A shares 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.

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

With respect to purchases of Class A shares subject to a contingent
deferred sales charge by certain retirement plans that purchased such shares
prior to March 1, 2001 ("grandfathered retirement accounts"), the Distributor
currently intends to pay the service fee to recipients in advance for the
first year after the shares are purchased. During the first year the shares
are sold, the Distributor retains the service fee to reimburse itself for the
costs of distributing the shares. After the first year shares are
outstanding, the Distributor makes service fee payments to recipients
periodically on those shares. The advance payment is based on the net asset
value of shares sold. Shares purchased by exchange do not qualify for the
advance service fee payment. If Class A shares purchased by grandfathered
retirement accounts are redeemed during the first year after their purchase,
the recipient of the service fees on those shares will be obligated to repay
the Distributor a pro rata portion of the advance payment of the service fee
made on those shares.

For the fiscal year ended September 30, 2005, payments under the Class A plan
totaled $4,743,046, of which $934 was retained by the Distributor under the
arrangement described above, regarding grandfathered retirement accounts, and
included $50,207 paid to an affiliate of the Distributor's parent company.
Any unreimbursed expenses the Distributor incurs with respect to Class A
shares in any fiscal year cannot be recovered in subsequent years. The
Distributor may not use payments received under the Class A plan to pay any
of its interest expenses, carrying charges, or other financial costs, or
allocation of overhead.

|X| Class B, Class C and Class N Distribution and Service Plan Fees. Under
each plan, distribution and service fees are computed on the average of the
net asset value of shares in the respective class, determined as of the close
of each regular business day during the period. Each plan provides for the
Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund
under the plan during the period for which the fee is paid. The types of
services that recipients provide are similar to the services provided under
the Class A service plan, described above.

Each plan permits the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a
periodic basis, without payment in advance. However, the Distributor
currently intends to pay the service fee to recipients in advance for the
first year after Class B, Class C and Class N shares are purchased. After the
first year Class B, Class C or Class N shares are outstanding, after their
purchase, the Distributor makes service fee payments periodically on those
shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advance service fee
payment. If Class B, Class C or Class N shares are redeemed during the first
year after their purchase, the recipient of the service fees on those shares
will be obligated to repay the Distributor a pro rata portion of the advance
payment of the service fee made on those shares. Class B, Class C or Class N
shares may not be purchased by an investor directly from the Distributor
without the investor designating another 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 periodically in
lieu of paying the sales concession and service fee in advance at the time of
purchase.

The asset-based sales charge on Class B, Class C and Class N shares
allow investors to buy shares without a front-end sales charge while allowing
the Distributor to compensate dealers that sell those shares. The Fund pays
the asset-based sales charge to the Distributor for its services rendered in
distributing Class B, Class C and Class N shares. The payments are made to
the Distributor in recognition that the Distributor:
o pays sales concessions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales concessions and/or the advance of the
service fee payment to recipients under the plans, or may provide
such financing from its own resources or from the resources of an
affiliate,
o employs personnel to support distribution of Class B, Class C and Class
N shares,
o bears the costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue
sky" registration fees and certain other distribution expenses,
o may not be able to adequately compensate dealers that sell Class B,
Class C and Class N shares without receiving payment under the plans
and therefore may not be able to offer such Classes for sale absent
the plans,
o receives payments under the plans consistent with the service fees and
asset-based sales charges paid by other non-proprietary funds that
charge 12b-1 fees,
o may use the payments under the plan to include the Fund in various
third-party distribution programs that may increase sales of Fund
shares,
o may experience increased difficulty selling the Fund's shares if
payments under the plan are discontinued because most competitor
funds have plans that pay dealers for rendering distribution
services as much or more than the amounts currently being paid by
the Fund, and
o may not be able to continue providing, at the same or at a lesser cost,
the same quality distribution sales efforts and services, or to
obtain such services from brokers and dealers, if the plan payments
were to be discontinued.

The Distributor's actual expenses in selling Class B, Class C and Class
N shares may be more than the payments it receives from the contingent
deferred sales charges collected on redeemed shares and from the Fund under
the plans. If either the Class B, Class C or Class N plan is terminated by
the Fund, the Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to the Distributor for distributing shares
before the plan was terminated.

-------------------------------------------------------------------------------
Distribution and Service Fees Paid to the Distributor in the Fiscal Year
Ended 9/30/05
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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 $2,010,229(1) $1,604,966 $8,934,389 3.98%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C Plan $3,999,630 (2) $1,995,893 $7,425,451 1.33%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class N Plan $152,875 (3) $72,773 $329,175 0.71%
-------------------------------------------------------------------------------
1. Includes $12,479 paid to an affiliate of the Distributor's parent
company.
2. Includes $23,851 paid to an affiliate of the Distributor's parent
company.
3. Includes $2,870 paid to an affiliate of the Distributor's parent
company.

All payments under the Class B, Class C and Class N plans are subject to the
limitations imposed by the Conduct Rules of the National Association of
Securities Dealers, Inc. on payments of asset-based sales charges and service
fees.

Payments to Fund Intermediaries

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its investment performance. Those terms include "cumulative total
return," "average annual total return," "average annual total return at net
asset value," and "total return at net asset value." An explanation of how
total returns are calculated is set forth below. The charts below show the
Fund's performance as of the Fund's most recent fiscal year end. You can
obtain current performance information by calling the Fund's Transfer Agent
at 1.800.225.5677 or by visiting the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

The Fund's illustrations of its performance data in advertisements must
comply with rules of the SEC. Those rules describe the types of performance
data that may be used and how it is to be calculated. In general, any
advertisement by the Fund of its performance data must include the average
annual total returns for the advertised class of shares of the Fund.

Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other
investments:

o 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 9/30/05
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Class of Standardized Yield Dividend Yield
Shares
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Class A 3.64% 3.47% 3.96% 3.78%
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Class B 2.83% N/A 3.11% N/A
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Class C 2.88% N/A 3.22% N/A
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Class N 4.03% N/A 3.51% N/A
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Class Y 3.18% N/A 4.36% 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
o Total Returns at Net Asset Value. From time to time the Fund may also
quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B, Class C or Class N
shares. 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, 2005
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 156.73% 169.54% 10.04% 15.53% 12.99% 14.09% 9.89% 10.42%
A(1)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class 157.59% 157.59% 9.58% 14.58% 12.97% 13.21% 9.92% 9.92%
B(2)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class 149.92% 149.92% 13.70% 14.70% 13.25% 13.25% 9.59% 9.59%
C(3)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class 82.40%(4)82.40%(4) 14.27% 15.27% 14.02%(414.02%(4) N/A N/A
N(4)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class 17.02%(5)17.02%(5) 15.96% 15.96% 16.87%(516.87%(5) N/A N/A
Y(5)
--------------------------------------------------------------------------------
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, 2005
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1-Year 5-Year Life of Class
--------------------------------------------------------------------------
--------------------------------------------------------------------------
After Taxes on Distributions 7.06% 11.21% 6.91%(1)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
After Taxes on 6.45% 10.20% 6.57%(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 "NYSE"). The NYSE 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 NYSE , 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 Core 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 Income Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Principal Protected Main
Oppenheimer Champion Income Fund Street Fund
Oppenheimer Principal Protected Main
Oppenheimer Convertible Securities Fund Street Fund II
Oppenheimer Principal Protected Main
Oppenheimer Developing Markets Fund Street Fund III
Oppenheimer Disciplined Allocation Fund Oppenheimer Quest Balanced Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Discovery Fund Inc.
Oppenheimer Quest International Value
Oppenheimer Dividend Growth 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- & Mid- Cap Value Fund
Oppenheimer High Yield Fund Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund Oppenheimer Total Return Bond Fund
Oppenheimer International Diversified
Fund Oppenheimer U.S. Government Trust
Oppenheimer International Growth Fund Oppenheimer Value Fund
Oppenheimer International Small Company
Fund Limited-Term New York Municipal Fund
Oppenheimer International Value Fund Rochester Fund Municipals
Oppenheimer Limited Term California Fund Oppenheimer Portfolio Series:
Active Allocation Fund
Aggressive Investor Fund
Conservative Investor Fund
Oppenheimer Limited-Term Government Fund Moderate Investor Fund
And the following money market funds:

Oppenheimer Cash Reserves Centennial Money Market Trust
Oppenheimer Money Market Fund, Inc. Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust
Centennial Government 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"), you can reduce the
sales charge rate that applies to your purchases of Class A shares if you
purchase Class A, Class B or Class C shares of the Fund or other Oppenheimer
funds during a 13-month period. The total amount of your purchases of Class
A, Class B and Class C shares will determine the sales charge rate that
applies to your Class A share purchases during that period. You can choose to
include purchases that you made up to 90 days before the date of the Letter.
Class A shares of Oppenheimer Money Market Fund, Inc. and Oppenheimer Cash
Reserves on which you have not paid a sales charge and any Class N shares you
purchase, or may have purchased, will not be counted towards satisfying the
purchases specified in a Letter.

A Letter is an investor's statement in writing to the Distributor of
his or her intention to purchase a specified value of Class A, Class B and
Class C 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 will equal or exceed the amount specified in the Letter.
Purchases made by reinvestment of dividends or capital gains distributions
and purchases made at net asset value (i.e. without paying a front-end or
contingent deferred sales charge) do not count toward satisfying the amount
of the Letter.

Each purchase of Class A shares under the Letter will be made at the
offering price (including the sales charge) that would apply 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 and Class C shares of other Oppenheimer funds acquired subject
to a contingent deferred sales charge, and
(c) Class A, Class B or Class C 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 or Class C 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.

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 more than $100,000
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 B, Class C or Class N shares may not be purchased by an investor
directly from the Distributor without the investor designating another
registered broker-dealer.

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 Retirement Plans with at least 100 eligible employees or $500,000 or
more in plan assets,
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:

o purchases of Class N shares in amounts of $500,000 or more by a
retirement plan that pays for the purchase with the redemption
proceeds of Class A shares of one or more Oppenheimer funds
(other than rollovers from an OppenheimerFunds-sponsored Pinnacle
or Ascender 401(k) plan to any IRA invested in the Oppenheimer
funds),
o purchases of Class N shares in amounts of $500,000 or more by a
retirement plan that pays for the purchase with the redemption
proceeds of Class C shares of one or more 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
o on purchases of Class N shares by an OppenheimerFunds-sponsored
Pinnacle or Ascender 401(k) plan made with the redemption
proceeds of Class A shares of one or more 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
in September.

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

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

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

Determination of Net Asset Values Per Share. The net asset values per share
of each class of shares of the Fund are determined as of the close of
business of the NYSE on each day that the NYSE is open. The calculation is
done by dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The NYSE normally
closes at 4:00 p.m., Eastern time, but may close earlier on some other days
(for example, in case of weather emergencies or on days falling before a U.S.
holiday). All references to time in this Statement of Additional Information
mean "Eastern time." The NYSE's most recent annual announcement (which is
subject to change) states that it will close on New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. It may also close on other
days.

Dealers other than NYSE members may conduct trading in certain
securities on days on which the 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 NYSE.

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 NYSE, 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 NADAQ(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 Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the
"bid" and "asked" prices provided by a single active market maker (which in
certain cases may be the "bid" price if no "asked" price is available).

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

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

Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded or on NASDAQ(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 NYSE on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from
its customers prior to the time the NYSE closes. Normally, the NYSE closes at
4:00 p.m., but may do so earlier on some days. Additionally, the order must
have been transmitted to and received by the Distributor prior to its close
of business that day (normally 5:00 p.m.).

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

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 California Tax Exempt Trust Centennial New York Tax Exempt
Trust
Centennial Government Trust Centennial Tax Exempt Trust
Centennial Money Market Trust

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

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

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

The Fund may amend, suspend or terminate the exchange privilege at any
time. Although the Fund may impose these changes at any time, it will provide
you with notice of those changes whenever it is required to do so by
applicable law. It may be required to provide 60 days' notice prior to
materially amending or terminating the exchange privilege. That 60 day notice
is not required in extraordinary circumstances.

|X| How Exchanges Affect Contingent Deferred Sales Charges. No
contingent deferred sales charge is imposed on exchanges of shares of any
class purchased subject to a contingent deferred sales charge, with the
following exceptions:

o When Class A shares of any Oppenheimer fund (other than Oppenheimer
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 Oppenheimer Rochester National Municipals and
Rochester Fund Municipals acquired by exchange of Class A shares of any
Oppenheimer fund purchased subject to a Class A contingent deferred sales
charge are redeemed within 24 months of the beginning of the calendar month
of the initial purchase of the exchanged Class A shares, the Class A
contingent deferred sales charge is imposed on the redeemed shares.

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

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

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

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

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

o With respect to Class C shares, the Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they are redeemed
within 12 months of the initial purchase of the exchanged Class C shares.

o With respect to Class N shares, a 1% contingent deferred sales charge
will be imposed if the retirement plan (not including IRAs and 403(b) plans)
is terminated or Class N shares of all Oppenheimer funds are terminated as an
investment option of the plan and Class N shares are redeemed within 18
months after the plan's first purchase of Class N shares of any Oppenheimer
fund or with respect to an individual retirement plan or 403(b) plan, Class N
shares are redeemed within 18 months of the plan's first purchase of Class N
shares of any Oppenheimer fund.

o When Class B, Class C or Class N shares are redeemed to effect an
exchange, the priorities described in "How To Buy Shares" in the Prospectus
for the imposition of the Class B, Class C or Class N contingent deferred
sales charge will be followed in determining the order in which the shares
are exchanged. Before exchanging shares, shareholders should take into
account how the exchange may affect any contingent deferred sales charge that
might be imposed in the subsequent redemption of remaining shares.

Shareholders owning shares of more than one class must specify which
class of shares they wish to exchange.

|X| Limits on Multiple Exchange Orders. The Fund reserves the right
to reject telephone or written exchange requests submitted in bulk by anyone
on behalf of more than one account.

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

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

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

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

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

Dividends, Capital Gains and Taxes

Dividends and Distributions. The Fund has no fixed dividend rate and there
can be no assurance as to the payment of any dividends or the realization of
any capital gains. The dividends and distributions paid by a class of shares
will vary from time to time depending on market conditions, the composition
of the Fund's portfolio, and expenses borne by the Fund or borne separately
by a class. Dividends are calculated in the same manner, at the same time,
and on the same day for each class of shares. However, dividends on Class B,
Class C and Class N shares are expected to be lower than dividends on Class A
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. The Fund may be subject to U.S. Federal income tax, and an interest
charge, on certain distributions or gains from the sale of shares of a
foreign company considered to be a PFIC, even if those amounts are paid our
as dividends to shareholders. To avoid imposition of the interest charge, the
Fund may elect to "mark-to-market" all PFIC shares that it holds at the end
of each taxable year. In that case, any increase or decrease in the value of
those shares would be recognized as ordinary income or as ordinary loss (but
only to the extent of previously recognized "mark-to-market" gains).

Distributions by the Fund that do not constitute ordinary income
dividends or capital gain distributions will be treated as a return of
capital to the extent of the shareholder's tax basis in their shares. Any
excess will be treated as gain from the sale of those shares, as discussed
below. Shareholders will be advised annually as to the U.S. federal income
tax consequences of distributions made (or deemed made) during the year. If
prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of
the effect of the Fund's investment policies, they will be identified as such
in notices sent to shareholders.

Distributions by the Fund will be treated in the manner described above
regardless of whether the distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares
received, determined as of the reinvestment date.

The Fund will be required in certain cases to withhold 28% of ordinary
income dividends, capital gains distributions and the proceeds of the
redemption of shares, paid to any shareholder (1) who has failed to provide a
correct taxpayer identification number or to properly certify that number
when required, (2) who is subject to backup withholding for failure to report
the receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that the shareholder is not subject to backup withholding
or is an "exempt recipient" (such as a corporation). Any tax withheld by the
Fund is remitted by the Fund to the U.S. Treasury and all income and any tax
withheld is identified in reports mailed to shareholders in January of each
year with a copy sent to the IRS.

Tax Effects of Redemptions of Shares. If a shareholder redeems all or a
portion of his/her shares, the shareholder will recognize a gain or loss on
the redeemed shares in an amount equal to the difference between the proceeds
of the redeemed shares and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss recognized in that manner may be
disallowed if the shareholder purchases other shares of the Fund within 30
days before or after the redemption.

In general, any gain or loss arising from the redemption of shares of
the Fund will be considered capital gain or loss, if the shares were held as
a capital asset. It will be long-term capital gain or loss if the shares were
held for more than one year. However, any capital loss arising from the
redemption of shares held for six months or less will be treated as a
long-term capital loss to the extent of the amount of capital gain dividends
received on those shares. Special holding period rules under the Internal
Revenue Code apply in this case to determine the holding period of shares and
there are limits on the deductibility of capital losses in any year.

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

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

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

The tax consequences to foreign persons entitled to claim the benefits
of an applicable tax treaty may be different from those described herein.
Foreign shareholders are urged to consult their own tax advisors or the U.S.
Internal Revenue Service with respect to the particular tax consequences to
them of an investment in the Fund, including the applicability of the U.S.
withholding taxes described above.

Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the
same class of any of the other Oppenheimer funds into which you may exchange
shares. 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 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, 2005, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the 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.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of September 30, 2005, by correspondence with the
custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. 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, 2005, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the periods presented, in conformity with accounting
principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Denver, Colorado
November 18, 2005



STATEMENT OF INVESTMENTS  September 30, 2005
--------------------------------------------------------------------------------

                                                                                           PRINCIPAL              VALUE
                                                                                              AMOUNT         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--3.2%
-----------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Nts., 3.75%, 7/15/09 [EUR]                               16,635,000   $     20,747,517
-----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 3.32%, 10/6/05 1                                                     83,355,000         83,316,854
-----------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 3.75%, 3/31/07 2                                                      10,000,000          9,939,070
                                                                                                       ----------------
Total U.S. Government Obligations (Cost $113,435,333)                                                       114,003,441

-----------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--55.1%
-----------------------------------------------------------------------------------------------------------------------
ARGENTINA--1.8%
Argentina (Republic of) Bonds:
1.20%, 12/31/38 3 [EUR]                                                                    3,500,000          1,672,075
1.33%, 12/31/38 3                                                                         10,530,000          4,185,675
3.663%, 9/30/14 3,4 [ARP]                                                                 21,270,000          7,550,073
4.005%, 8/3/12 3                                                                          26,446,875         24,078,319
-----------------------------------------------------------------------------------------------------------------------
Argentina (Republic of) Unsec. Unsub. Bonds, 5.83%, 12/31/33 4 [ARP]                      33,513,245         11,837,598
-----------------------------------------------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds, Bonos de Consolidacion de
Deudas, Series PBA1, 4/1/07 4,5 [ARP]                                                        960,558            420,684
-----------------------------------------------------------------------------------------------------------------------
Central Bank of Argentina Bonds, 2%, 2/4/18 4 [ARP]                                       24,766,558         12,805,811
                                                                                                       ----------------
                                                                                                             62,550,235

-----------------------------------------------------------------------------------------------------------------------
AUSTRALIA--2.0%
Queensland Treasury Corp. Unsec. Nts., Series 09G, 6%, 7/14/09 [AUD]                      90,250,000         69,994,164
-----------------------------------------------------------------------------------------------------------------------
AUSTRIA--0.9%
Austria (Republic of) Nts.:
3.80%, 10/20/13 6 [EUR]                                                                    6,845,000          8,673,994
5.50%, 10/20/07 6 [EUR]                                                                    2,440,000          3,111,100
Series 98-1, 5%, 1/15/08 [EUR]                                                             9,795,000         12,436,430
-----------------------------------------------------------------------------------------------------------------------
Austria (Republic of) Sr. Unsec. Unsub. Nts., Series 1, 5%, 7/15/12 [EUR]                  6,525,000          8,834,217
                                                                                                       ----------------
                                                                                                             33,055,741

-----------------------------------------------------------------------------------------------------------------------
BELGIUM--0.2%
Belgium (Kingdom of) Bonds, Series 26, 6.25%, 3/28/07 [EUR]                                6,850,000          8,695,437
-----------------------------------------------------------------------------------------------------------------------
BRAZIL--1.9%
Brazil (Federal Republic of) Bonds:
8%, 1/15/18                                                                                1,471,000          1,561,467
8.75%, 2/4/25                                                                             25,990,000         27,523,410
8.875%, 10/14/19                                                                           3,830,000          4,168,955
12.50%, 1/5/16 [BRR]                                                                      65,816,000         28,360,316
Series 15 yr., 4.313%, 4/15/09 3                                                              14,119             14,119
-----------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Unsec. Bonds, 4.75%, 4/10/07 4 [JPY]                        500,000,000          4,602,713
                                                                                                       ----------------
                                                                                                             66,230,980


                    21 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

                                                                                           PRINCIPAL              VALUE
                                                                                              AMOUNT         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
BULGARIA--0.1%
Bulgaria (Republic of) Bonds:
8.25%, 1/15/15                                                                      $      1,505,000   $      1,864,319
8.25%, 1/15/15 6                                                                           1,505,000          1,864,319
                                                                                                       ----------------
                                                                                                              3,728,638

-----------------------------------------------------------------------------------------------------------------------
COLOMBIA--1.7%
Colombia (Republic of) Bonds, 12%, 10/22/15 [COP]                                     48,545,000,000         26,111,105
-----------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) Nts.:
8.25%, 12/22/14                                                                            6,655,000          7,490,203
11.75%, 3/1/10 [COP]                                                                  35,992,780,000         18,342,179
-----------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) Unsec. Bonds, 8.125%, 5/21/24                                       7,025,000          7,569,438
                                                                                                       ----------------
                                                                                                             59,512,925

-----------------------------------------------------------------------------------------------------------------------
DOMINICAN REPUBLIC--0.1%
Dominican Republic Unsec. Unsub. Bonds:
Series REG S, 9.04%, 1/23/18                                                               1,588,704          1,764,256
Series REG S, 9.50%, 9/27/11                                                               1,571,250          1,736,231
                                                                                                       ----------------
                                                                                                              3,500,487

-----------------------------------------------------------------------------------------------------------------------
EL SALVADOR--0.0%
El Salvador (Republic of) Bonds, 7.625%, 9/21/34 6                                         1,185,000          1,321,275
-----------------------------------------------------------------------------------------------------------------------
FINLAND--1.4%
Finland (Republic of) Bonds, 5.375%, 7/4/13 [EUR]                                         20,985,000         29,341,749
-----------------------------------------------------------------------------------------------------------------------
Finland (Republic of) Sr. Unsec. Unsub. Bonds:
2.75%, 7/4/06 [EUR]                                                                        3,470,000          4,187,021
5%, 7/4/07 [EUR]                                                                          12,415,000         15,585,559
                                                                                                       ----------------
                                                                                                             49,114,329

-----------------------------------------------------------------------------------------------------------------------
FRANCE--3.1%
France (Government of) Obligations Assimilables du Tresor Bonds,
5.50%, 10/25/10 [EUR]                                                                     80,255,000        108,984,949
-----------------------------------------------------------------------------------------------------------------------
GERMANY--4.8%
Germany (Republic of) Bonds:
5.25%, 1/4/11 [EUR]                                                                       23,640,000         31,836,365
5.375%, 1/4/10 [EUR]                                                                      38,715,000         51,561,838
Series 02, 5%, 7/4/12 [EUR]                                                                4,200,000          5,691,869
Series 03, 3.75% 7/4/13 7 [EUR]                                                           64,085,000         81,010,279
                                                                                                       ----------------
                                                                                                            170,100,351

-----------------------------------------------------------------------------------------------------------------------
GREECE--0.8%
Greece (Republic of) Bonds, 3.70%, 7/20/15 [EUR]                                          17,360,000         21,440,189
-----------------------------------------------------------------------------------------------------------------------
Greece (Republic of) Sr. Unsub. Bonds, 4.65%, 4/19/07 [EUR]                                6,980,000          8,672,674
                                                                                                       ----------------
                                                                                                             30,112,863


                    22 | OPPENHEIMER INTERNATIONAL BOND FUND


                                                                                           PRINCIPAL              VALUE
                                                                                              AMOUNT         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
GUATEMALA--0.0%
Guatemala (Republic of) Nts.:
10.25%, 11/8/11                                                                     $        525,000   $        643,781
10.25%, 11/8/11 6                                                                            160,000            196,200
                                                                                                       ----------------
                                                                                                                839,981

-----------------------------------------------------------------------------------------------------------------------
HUNGARY--0.3%
Hungary (Government of) Bonds, Series 05/I, 8.50%, 10/12/05 [HUF]                      1,918,660,000          9,240,000
-----------------------------------------------------------------------------------------------------------------------
INDONESIA--0.0%
Indonesia (Republic of) Nts.:
6.75%, 3/10/14 6                                                                             120,000            118,500
7.25%, 4/20/15 6                                                                             200,000            200,500
                                                                                                       ----------------
                                                                                                                319,000

-----------------------------------------------------------------------------------------------------------------------
IRELAND--0.9%
Ireland (Republic of) Treasury Bonds, 3.25%, 4/18/09 [EUR]                                25,900,000         31,833,140
-----------------------------------------------------------------------------------------------------------------------
ISRAEL--1.1%
Israel (State of) Bonds, Series 2682, 7.50%, 3/31/14 [ILS]                               167,800,000         40,399,669
-----------------------------------------------------------------------------------------------------------------------
ITALY--0.6%
Italy (Republic of) Treasury Bonds:
Buoni del Tesoro Poliennali, 4.50%, 3/1/07 [EUR]                                          14,745,000         18,258,246
Buoni del Tesoro Poliennali, 5%, 10/15/07 [EUR]                                            2,770,000          3,498,862
                                                                                                       ----------------
                                                                                                             21,757,108

-----------------------------------------------------------------------------------------------------------------------
JAPAN--9.0%
Japan (Government of) Bonds, 10 yr., Series 239, 1.40%, 6/20/12 [JPY]                 35,638,000,000        320,666,655
-----------------------------------------------------------------------------------------------------------------------
MALAYSIA--1.2%
Johor Corp. Malaysia (Government of) Bonds, Series P3, 1%, 7/31/12 3,4 [MYR]             107,980,000         30,225,232
-----------------------------------------------------------------------------------------------------------------------
Malaysia (Government of) Bonds, Series 2/05, 4.72%, 9/30/15 [MYR]                         41,730,000         11,761,128
                                                                                                       ----------------
                                                                                                             41,986,360

-----------------------------------------------------------------------------------------------------------------------
MEXICO--3.5%
Mexican Williams Sr. Nts., 4.24%, 11/15/08 3,4                                               500,000            516,875
-----------------------------------------------------------------------------------------------------------------------
United Mexican States Bonds:
Series M10, 10.50%, 7/14/11 3 [MXN]                                                      324,060,000         33,212,128
Series M20, 8%, 12/7/23 3 [MXN]                                                           43,415,000          3,739,764
Series M20, 10%, 12/5/24 3 [MXN]                                                         169,430,000         17,476,050
Series MI10, 8%, 12/19/13 [MXN]                                                          230,788,000         20,763,540
Series MI10, 9.50%, 12/18/14 3 [MXN]                                                     357,164,400         35,162,714
-----------------------------------------------------------------------------------------------------------------------
United Mexican States Treasury Bills, Series BI, 10.32%, 10/13/05 8 [MXN]                130,860,000         12,043,451
-----------------------------------------------------------------------------------------------------------------------
United Mexican States Unsec. Unsub. Nts., Series 6 BR, 6.75%, 6/6/06 [JPY]               205,000,000          1,871,943
                                                                                                       ----------------
                                                                                                            124,786,465


                    23 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

                                                                                           PRINCIPAL              VALUE
                                                                                              AMOUNT         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
NEW ZEALAND--0.9%
New Zealand (Government of) Bonds, 7%, 7/15/09 [NZD]                                      28,005,000   $     20,057,571
-----------------------------------------------------------------------------------------------------------------------
New Zealand (Government of) Treasury Bills, 6.46%, 3/22/06 8 [NZD]                        19,850,000         13,313,490
                                                                                                       ----------------
                                                                                                             33,371,061

-----------------------------------------------------------------------------------------------------------------------
NIGERIA--0.0%
Central Bank of Nigeria Gtd. Bonds, Series WW, 6.25%, 11/15/20                             1,375,000          1,378,438
-----------------------------------------------------------------------------------------------------------------------
Nigeria (Federal Republic of) Promissory Nts., Series RC, 5.092%, 1/5/10                     548,683            516,420
                                                                                                       ----------------
                                                                                                              1,894,858

-----------------------------------------------------------------------------------------------------------------------
PANAMA--0.6%
Panama (Republic of) Bonds:
8.125%, 4/28/34 1                                                                         15,845,000         18,063,300
9.375%, 4/1/29                                                                             1,650,000          2,103,750
                                                                                                       ----------------
                                                                                                             20,167,050

-----------------------------------------------------------------------------------------------------------------------
PERU--4.1%
Peru (Republic of) Bonds:
7.34%, 8/12/16 [PEN]                                                                      17,650,000          5,327,206
7.84%, 8/12/20 [PEN]                                                                     187,560,000         57,844,559
8.375%, 5/3/16 1                                                                           1,380,000          1,621,500
9.91%, 5/5/15 [PEN]                                                                      116,525,000         41,374,566
Series 2, 9%, 1/31/12 [PEN]                                                               18,850,000          6,345,734
Series 7, 8.60%, 8/12/17 [PEN]                                                            40,680,000         13,294,316
Series 8-1, 12.25%, 8/10/11 [PEN]                                                         18,633,000          7,134,382
-----------------------------------------------------------------------------------------------------------------------
Peru (Republic of) Sr. Nts., 4.53%, 2/28/16 8                                              5,169,696          3,324,683
-----------------------------------------------------------------------------------------------------------------------
Peru (Republic of) Unsec. Unsub. Bonds, 8.75%, 11/21/33 1                                  6,720,000          8,148,000
                                                                                                       ----------------
                                                                                                            144,414,946

-----------------------------------------------------------------------------------------------------------------------
PHILIPPINES--0.5%
Philippines (Republic of) Bonds:
8%, 1/15/16 1                                                                                550,000            554,813
9.50%, 2/2/30 1                                                                            4,026,000          4,307,820
Series 5-56, 12.375%, 10/28/09 [PHP]                                                     149,350,000          2,776,245
Series 5-57, 11.50%, 1/27/10 [PHP]                                                       507,800,000          9,233,818
-----------------------------------------------------------------------------------------------------------------------
Philippines (Republic of) Nts., 8.25%, 1/15/14                                               363,000            377,974
                                                                                                       ----------------
                                                                                                             17,250,670

-----------------------------------------------------------------------------------------------------------------------
POLAND--0.9%
Poland (Republic of) Bonds:
Series DS1013, 5%, 10/24/13 [PLZ]                                                         55,940,000         17,478,838
Series WS0922, 5.75%, 9/23/22 [PLZ]                                                       10,000,000          3,402,094
-----------------------------------------------------------------------------------------------------------------------
Poland (Republic of) Nts., Series 0K0807, 4.19%, 8/12/07 8 [PLZ]                          43,990,000         12,480,724
                                                                                                       ----------------
                                                                                                             33,361,656


                    24 | OPPENHEIMER INTERNATIONAL BOND FUND


                                                                                           PRINCIPAL              VALUE
                                                                                              AMOUNT         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
PORTUGAL--1.7%
Portugal (Republic of) Obrig Do Tes Medio Prazo Nts.:
3.25%, 7/15/08 [EUR]                                                                       8,160,000   $      9,991,476
4.875%, 8/17/07 [EUR]                                                                      9,710,000         12,191,153
-----------------------------------------------------------------------------------------------------------------------
Portugal (Republic of) Obrig Do Tes Medio Prazo Unsec. Unsub. Nts.,
5.85%, 5/20/10 [EUR]                                                                      28,945,000         39,458,326
                                                                                                       ----------------
                                                                                                             61,640,955

-----------------------------------------------------------------------------------------------------------------------
RUSSIA--1.6%
Aries Vermoegensverwaltungs GmbH Unsub. Nts.:
Series B, 7.75%, 10/25/09 6 [EUR]                                                          2,500,000          3,533,442
Series C, 9.60%, 10/25/14                                                                 23,330,000         30,829,615
-----------------------------------------------------------------------------------------------------------------------
Ministry Finance of Russia Debs., Series VII, 3%, 5/14/11                                  6,620,000          5,870,120
-----------------------------------------------------------------------------------------------------------------------
Russian Federation Unsec. Debs., Series V, 3%, 5/14/08                                     3,590,000          3,407,790
-----------------------------------------------------------------------------------------------------------------------
Russian Federation Unsec. Unsub. Bonds, 5%, 3/31/30 1,3,6                                  8,570,750          9,856,363
-----------------------------------------------------------------------------------------------------------------------
Russian Federation Unsub. Nts., 5%, 3/31/30 3                                              1,485,000          1,707,750
                                                                                                       ----------------
                                                                                                             55,205,080

-----------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA--1.5%
South Africa (Republic of) Bonds:
Series R157, 13.50%, 9/15/15 [ZAR]                                                        76,130,000         16,319,938
Series R186, 10.50%, 12/21/26 [ZAR]                                                      136,575,000         27,422,863
Series R203, 8.25%, 9/15/17 [ZAR]                                                         30,810,000          4,908,260
Series R204, 8%, 12/21/18 [ZAR]                                                           34,150,000          5,337,974
                                                                                                       ----------------
                                                                                                             53,989,035

-----------------------------------------------------------------------------------------------------------------------
SPAIN--0.8%
Spain (Kingdom of) Bonds:
Bonos y Obligacion del Estado, 4.25%, 10/31/07 [EUR]                                       8,945,000         11,154,562
Bonos y Obligacion del Estado, 4.80%, 10/31/06 [EUR]                                       5,500,000          6,789,216
Bonos y Obligacion del Estado, 5.35%, 10/31/11 [EUR]                                       8,060,000         11,022,986
                                                                                                       ----------------
                                                                                                             28,966,764

-----------------------------------------------------------------------------------------------------------------------
THE NETHERLANDS--0.8%
Netherlands (Kingdom of the) Bonds:
3.75%, 7/15/09 [EUR]                                                                       7,150,000          8,950,712
4.25%, 7/15/13 [EUR]                                                                       8,635,000         11,263,120
5.50%, 1/15/28 [EUR]                                                                       4,740,000          7,377,321
                                                                                                       ----------------
                                                                                                             27,591,153

-----------------------------------------------------------------------------------------------------------------------
TURKEY--0.6%
Turkey (Republic of) Bonds, 8%, 2/14/34                                                   13,820,000         14,649,200
-----------------------------------------------------------------------------------------------------------------------
Turkey (Republic of) Nts., 7.25%, 3/15/15 1                                                6,680,000          7,064,100
                                                                                                       ----------------
                                                                                                             21,713,300


                    25 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

                                                                                           PRINCIPAL              VALUE
                                                                                              AMOUNT         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM--4.8%
United Kingdom Treasury Nts., 4%, 3/7/09 [GBP]                                            96,885,000   $    169,723,053
-----------------------------------------------------------------------------------------------------------------------
VENEZUELA--0.9%
Venezuela (Republic of) Bonds:
7%, 12/1/18                                                                                  195,000            191,831
9.25%, 9/15/27 1                                                                          12,035,000         14,267,493
-----------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Nts.:
7%, 3/16/15 [EUR]                                                                          5,070,000          6,600,658
8.50%, 10/8/14                                                                             8,954,000          9,961,325
                                                                                                       ----------------
                                                                                                             31,021,307
                                                                                                       ----------------
Total Foreign Government Obligations (Cost $1,929,259,339)                                                1,959,041,640

-----------------------------------------------------------------------------------------------------------------------
LOAN PARTICIPATIONS--0.2%
-----------------------------------------------------------------------------------------------------------------------
Algeria (Republic of) Loan Participation Nts.:
0.878%, 3/4/10 3,4 [JPY]                                                                 159,446,686          1,397,546
4.809%, 9/4/06 3,4                                                                           328,572            327,751
4.809%, 3/4/10 3,4                                                                           609,750            605,177
-----------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, Indonesia (Republic of) Rupiah Loan
Participation Nts., 3.813%, 1/25/06 3                                                      3,155,000          3,173,299
                                                                                                       ----------------
Total Loan Participations (Cost $5,334,889)                                                                   5,503,773

-----------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--4.9%
-----------------------------------------------------------------------------------------------------------------------
Alrosa Finance SA:
8.875% Nts., 11/17/14                                                                      2,400,000          2,850,000
8.875% Nts., 11/17/14 6                                                                    4,675,000          5,551,563
-----------------------------------------------------------------------------------------------------------------------
Argentine Beverages Financial Trust, 7.375% Bonds, 3/22/12 4                               1,445,000          1,499,188
-----------------------------------------------------------------------------------------------------------------------
CITGO Trustees Cayman Ltd., 8.50% Nts., 12/21/14 4                                         1,330,000          1,356,600
-----------------------------------------------------------------------------------------------------------------------
Dresdner Bank AG (Ukreximbank), 8.75% Bonds, 2/10/10                                       2,580,000          2,705,772
-----------------------------------------------------------------------------------------------------------------------
Eletropaulo Metropolitana SA, 19.125% Nts., 6/28/10 4 [BRR]                               13,295,000          6,393,547
-----------------------------------------------------------------------------------------------------------------------
Gazprom International SA, 7.201% Sr. Unsec. Bonds, 2/1/20                                  7,850,000          8,594,730
-----------------------------------------------------------------------------------------------------------------------
HSBC Bank plc:
9.75% Sr. Unsec. Nts., 7/8/09 8                                                           30,220,000         21,033,120
11.60% Sr. Unsec. Nts., 1/12/10 8                                                         42,800,000         25,829,800
12.28% Sr. Unsec. Nts., 3/9/09 8                                                          30,220,000         19,763,880
-----------------------------------------------------------------------------------------------------------------------
Iansa Overseas, 7.25% Sr. Unsec. Nts., 7/28/12 6                                           4,000,000          3,990,000
-----------------------------------------------------------------------------------------------------------------------
Inter-American Development Bank:
6.26% Nts., 12/8/09 3 [BRR]                                                               11,200,000          4,721,758
8.81% Nts., 1/25/12 3 [COP]                                                           15,694,714,310          6,896,027
-----------------------------------------------------------------------------------------------------------------------
International Bank for Reconstruction & Development (The),
15% Nts., 1/7/10 4 [TRY]                                                                   3,000,000          2,439,658
-----------------------------------------------------------------------------------------------------------------------
Kuznetski Capital SA, Bank of Moscow, 7.375% Nts., 11/26/10 4                              5,560,000          5,879,700
-----------------------------------------------------------------------------------------------------------------------
Nak Naftogaz Ukraine, 8.125% Bonds, 9/30/09                                                3,900,000          4,147,845


                    26 | OPPENHEIMER INTERNATIONAL BOND FUND


                                                                                           PRINCIPAL              VALUE
                                                                                              AMOUNT         SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES Continued
-----------------------------------------------------------------------------------------------------------------------
Nordic Investment Bank, 12.50% Sr. Unsec. Nts., 2/15/09 4 [TRY]                            5,000,000   $      3,722,614
-----------------------------------------------------------------------------------------------------------------------
Ongko International Finance Co. BV, 10.50% Sec. Nts., 3/29/10 4,5                            550,000                 --
-----------------------------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 9.125% Unsec. Unsub. Nts., 10/13/10 1                  4,570,000          5,358,325
-----------------------------------------------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman SPV, 5.265% Sr. Nts., Cl. A3, 6/15/11 6                      13,380,000         13,341,586
-----------------------------------------------------------------------------------------------------------------------
Tengizchevroil LLP, 6.124% Nts., 11/15/14 1,6                                              5,840,000          6,000,600
-----------------------------------------------------------------------------------------------------------------------
Titan Petrochemicals Group Ltd., 8.50% Sr. Unsec. Nts., 3/18/12 6                          2,381,000          2,303,618
-----------------------------------------------------------------------------------------------------------------------
UBS Luxembourg SA, 6.23% Sub. Nts., 2/11/15 3                                              8,020,000          8,220,019
-----------------------------------------------------------------------------------------------------------------------
VTB Capital SA, 6.25% Bonds, 7/2/35 6                                                      9,490,000          9,905,188
                                                                                                       ----------------
Total Corporate Bonds and Notes (Cost $170,103,770)                                                         172,505,138

                                                                                              SHARES
-----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS--2.0%
-----------------------------------------------------------------------------------------------------------------------
Amada Co., Ltd.                                                                              171,000          1,368,998
-----------------------------------------------------------------------------------------------------------------------
Arcelor                                                                                       60,280          1,409,830
-----------------------------------------------------------------------------------------------------------------------
BAE Systems plc                                                                              225,040          1,363,434
-----------------------------------------------------------------------------------------------------------------------
BNP Paribas SA                                                                                18,200          1,383,511
-----------------------------------------------------------------------------------------------------------------------
BPB plc                                                                                      100,570          1,305,551
-----------------------------------------------------------------------------------------------------------------------
Daido Steel Co. Ltd.                                                                         264,000          1,715,379
-----------------------------------------------------------------------------------------------------------------------
DaimlerChrysler AG                                                                            25,867          1,372,547
-----------------------------------------------------------------------------------------------------------------------
Deutsche Telekom AG                                                                           70,200          1,277,361
-----------------------------------------------------------------------------------------------------------------------
Douglas Holding AG                                                                            34,102          1,297,192
-----------------------------------------------------------------------------------------------------------------------
E.ON AG                                                                                       13,907          1,280,303
-----------------------------------------------------------------------------------------------------------------------
Exel plc                                                                                      62,730          1,357,586
-----------------------------------------------------------------------------------------------------------------------
First Choice Holidays plc                                                                    360,890          1,347,863
-----------------------------------------------------------------------------------------------------------------------
Gecina SA                                                                                     11,120          1,309,729
-----------------------------------------------------------------------------------------------------------------------
GKN plc                                                                                      252,400          1,312,172
-----------------------------------------------------------------------------------------------------------------------
Hanson plc                                                                                   127,130          1,319,599
-----------------------------------------------------------------------------------------------------------------------
Hochtief AG                                                                                   32,609          1,450,465
-----------------------------------------------------------------------------------------------------------------------
IVG Immobilien AG                                                                             62,845          1,298,366
-----------------------------------------------------------------------------------------------------------------------
Keisei Electric Railway Co. Ltd.                                                             256,000          1,404,933
-----------------------------------------------------------------------------------------------------------------------
Kelda Group plc                                                                              108,690          1,346,739
-----------------------------------------------------------------------------------------------------------------------
Klepierre                                                                                     13,441          1,348,865
-----------------------------------------------------------------------------------------------------------------------
Kubota Corp.                                                                                 213,000          1,483,451
-----------------------------------------------------------------------------------------------------------------------
Lloyds TSB Group plc                                                                         162,041          1,334,718
-----------------------------------------------------------------------------------------------------------------------
MAN AG                                                                                        26,424          1,354,466
-----------------------------------------------------------------------------------------------------------------------
Matsui Securities Co. Ltd.                                                                   125,400          1,540,826
-----------------------------------------------------------------------------------------------------------------------
Nikon Corp.                                                                                  113,000          1,425,440
-----------------------------------------------------------------------------------------------------------------------
Nippon Mining Holdings, Inc.                                                                 195,500          1,549,947


                    27 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

                                                                                                                 VALUE
                                                                                             SHARES         SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------
COMMON STOCKS Continued
----------------------------------------------------------------------------------------------------------------------
Nippon Steel Corp.                                                                          454,000   $      1,703,700
----------------------------------------------------------------------------------------------------------------------
OKI Electric Industry Co.                                                                   412,000          1,411,584
----------------------------------------------------------------------------------------------------------------------
PagesJaunes Groupe SA                                                                        51,320          1,400,113
----------------------------------------------------------------------------------------------------------------------
Pilkington plc                                                                              557,670          1,367,224
----------------------------------------------------------------------------------------------------------------------
Resolution plc                                                                              117,850          1,282,515
----------------------------------------------------------------------------------------------------------------------
Royal Dutch Shell plc, B Shares                                                              39,280          1,356,537
----------------------------------------------------------------------------------------------------------------------
RWE AG                                                                                       19,848          1,311,988
----------------------------------------------------------------------------------------------------------------------
Scottish & Newcastle plc                                                                    159,770          1,306,853
----------------------------------------------------------------------------------------------------------------------
Scottish & Southern Energy plc                                                               74,940          1,360,118
----------------------------------------------------------------------------------------------------------------------
ScottishPower plc                                                                           146,730          1,479,050
----------------------------------------------------------------------------------------------------------------------
Shionogi & Co. Ltd.                                                                         102,000          1,392,650
----------------------------------------------------------------------------------------------------------------------
Societe Generale, Cl. A                                                                      12,265          1,399,630
----------------------------------------------------------------------------------------------------------------------
Suez SA                                                                                      45,674          1,320,185
----------------------------------------------------------------------------------------------------------------------
Sumitomo Metal Industries                                                                   577,000          2,047,333
----------------------------------------------------------------------------------------------------------------------
ThyssenKrupp AG                                                                              69,567          1,454,799
----------------------------------------------------------------------------------------------------------------------
Tokyo Electron Ltd.                                                                          23,400          1,248,978
----------------------------------------------------------------------------------------------------------------------
Tokyo Steel Manufacturing Co. Ltd.                                                           91,800          1,438,132
----------------------------------------------------------------------------------------------------------------------
TonenGeneral Sekiyu K.K.                                                                    121,000          1,406,977
----------------------------------------------------------------------------------------------------------------------
Tosoh Corp.                                                                                 329,000          1,407,235
----------------------------------------------------------------------------------------------------------------------
TUI AG                                                                                       56,146          1,195,730
----------------------------------------------------------------------------------------------------------------------
Unibail                                                                                       9,300          1,350,207
----------------------------------------------------------------------------------------------------------------------
United Utilities plc                                                                        115,550          1,334,931
----------------------------------------------------------------------------------------------------------------------
Veolia Environnement SA                                                                      32,556          1,373,765
----------------------------------------------------------------------------------------------------------------------
Vinci SA                                                                                     15,000          1,291,689
                                                                                                      ----------------
Total Common Stocks (Cost $62,499,483)                                                                      69,601,194

                                                                                              UNITS
----------------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
----------------------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. Wts., Exp. 1/15/07 4,9                                         50                 --
----------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Oil Linked Payment Obligation Wts., Exp. 4/15/20 4,9                    500             15,000
                                                                                                      ----------------
Total Rights, Warrants and Certificates (Cost $481)                                                             15,000


                    28 | OPPENHEIMER INTERNATIONAL BOND FUND


                                                                                          PRINCIPAL              VALUE
                                                                                             AMOUNT         SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--28.0%
----------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets Holdings, Inc.:
Brazil (Federal Republic of) Credit Linked Nts., 17.37%, 7/3/07 [BRR]                    55,270,000   $     18,737,576
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR]                38,356,000         14,603,726
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR]                59,878,000         22,798,048
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR]               100,000,000         38,074,164
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 18.41%, 10/4/05 [BRR]            34,700,000         15,559,143
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 18.80%, 1/3/08 [BRR]             24,719,335          7,793,097
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 19.85%, 1/2/09 [BRR]             28,074,132          7,670,097
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 20.40%, 1/5/10 [BRR]             32,035,902          7,673,275
Colombia (Republic of) Credit Linked Bonds, 11%, 7/24/20 [COP]                       12,570,000,000          6,732,082
Colombia (Republic of) Credit Linked Nts., Series II, 15%, 4/27/12 [COP]              6,942,469,928          4,272,320
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP]                 31,110,000,000         19,144,751
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP]                 12,430,000,000          7,649,285
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP]                 11,705,100,000          7,203,190
Colombia (Republic of) Credit Linked Nts., Series V, 13.50%, 9/15/14 [COP]           28,015,000,000         16,260,666
Dominican Republic Credit Linked Nts., 14.11%, 7/10/06
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                   274,400,000          7,996,573
Dominican Republic Credit Linked Nts., 15.64%, 5/2/06
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                   305,780,000          9,171,430
Dominican Republic Credit Linked Nts., 17%, 3/12/07 [DOP]                               256,400,000          8,304,718
Dominican Republic Credit Linked Nts., 19.69%, 3/31/06
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                   249,890,000          7,576,053
Dominican Republic Credit Linked Nts., 22.41%, 3/10/06
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                   319,516,460          9,777,615
Dominican Republic Unsec. Credit Linked Nts., 14.67%, 5/15/06
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                   165,940,000          4,949,715
Dominican Republic Unsec. Credit Linked Nts., 16.18%, 4/24/06
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                   102,260,000          3,075,507
Dominican Republic Unsec. Credit Linked Nts., 23.07%, 3/3/06
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                   493,299,200         15,140,870
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.01%,
10/28/05 (linked to Egyptian Treasury Bills) 8 [EGP]                                     50,120,000          8,646,918
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.21%,
9/19/06 (linked to Egyptian Treasury Bills) 8 [EGP]                                      41,300,000          6,594,520
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.407%,
2/9/06 (linked to Egyptian Treasury Bills) [EGP]                                         75,466,000         12,701,347
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.90%,
1/12/06 (linked to Egyptian Treasury Bills) [EGP]                                        57,210,000          9,692,625
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.90%,
12/29/05 (linked to Egyptian Treasury Bills) [EGP]                                       17,390,000          2,956,028
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 9.65%,
11/29/05 (linked to Egyptian Treasury Bills) 8 [EGP]                                     67,600,000         11,645,743
OAO Gazprom Russian Local Market Unsec. Credit Linked Nts.,
15.208%, 11/8/05                                                                          4,406,270          5,032,445
Ukraine Hryvnia Unsec. Credit Linked Nts., 11.94%, 1/4/10 [UAH]                          13,799,000          3,224,321
----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston Corp. (Cayman), Turkey (Republic of)
Credit Linked Nts., Series EMG 7, 15%, 2/10/10 [TRY]                                     37,857,000         30,195,632


                    29 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

                                                                                          PRINCIPAL              VALUE
                                                                                             AMOUNT         SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston International:
Lukoil Credit Linked Nts., Series Fbi 105, 7.25%, 11/17/09 [RUR]                        321,528,000   $     11,806,414
Moscow (City of) Credit Linked Nts., Series Fbi 98, 11%, 4/23/09 [RUR]                  280,840,000         11,406,737
Moscow (City of) Credit Linked Nts., Series Fbi 101, 10%, 12/31/10 [RUR]                277,800,000         11,437,353
OAO Gazprom Credit Linked Nts., 8.11%, 1/21/07 [RUR]                                    289,282,000         10,562,470
South African Rand Interest Bearing Linked Nts., Series FBi 43, 3.52%, 5/23/22            2,100,000          2,081,940
Ukraine (Republic of) Credit Linked Nts., Series EMG 13, 11.94%,
12/30/09 [UAH]                                                                           30,400,000          7,098,129
----------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc.:
(Nassau Branch), Turkey (Republic of) Credit Linked Nts., 20%, 10/18/07                   4,238,000          4,937,779
(Nassau Branch), Turkey (Republic of) Credit Linked Nts.,
Series EM 872, 22.88%, 10/20/05 3                                                        19,769,000         20,687,197
(Nassau Branch), Turkey (Republic of) Credit Linked Nts.,
Series EM 880, 20%, 10/18/07                                                             12,320,000         15,890,459
(Nassau Branch), Turkey (Republic of) Credit Linked Nts.,
Series EMG 4, 18.70%, 7/6/06 [TRY]                                                       24,930,576         16,621,557
(Nassau Branch), Turkey (Republic of) Credit Linked Nts.,
Series EMG 19, 16.90%, 7/5/06 8 [TRY]                                                    20,350,000         13,567,624
(Nassau Branch), Turkey (Republic of) Credit Linked Nts.,
Series NAS 316, 22.66%, 2/23/06 8                                                         7,266,000          9,430,251
(Nassau Branch), Ukraine (Republic of) Credit Linked Nts.,
Series EMG 11, 11.94%, 12/30/09 [UAH]                                                     9,163,000          2,139,479
(Nassau Branch), Ukraine (Republic of) Credit Linked Nts.,
Series NPC 12, 11.94%, 12/30/09 [UAH]                                                    65,490,000         15,291,331
----------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Argentina (Republic of) Credit Linked Nts., 4%, 12/21/11 10 [ARP]                        35,580,000         29,155,111
Brazil Real Credit Linked Nts., 13.88%, 3/3/10 8 [BRR]                                   61,128,560         17,246,027
Campania Total Return Linked Nts., 2.88%, 7/30/10 3 [EUR]                                34,900,000         42,141,734
Egypt (The Arab Republic of) Total Return Linked Nts., 8.52%,
1/17/06 (linked to Egyptian Treasury Bills) 8 [EGP]                                      50,610,000          8,571,190
Egypt (The Arab Republic of) Total Return Linked Nts., 9.63%,
3/9/06 (linked to Egyptian Treasury Bills) 8 [EGP]                                       36,390,000          6,080,794
European Investment Bank, Russian Federation Credit Linked Nts.,
5.65%, 1/19/10                                                                            8,475,000          6,729,998
Indonesia (Republic of) Credit Linked Nts., 9.50%, 6/22/15                               10,300,162          7,800,313
Indonesia (Republic of) Credit Linked Nts., Series III, 14.25%, 6/15/13                  12,412,800         12,476,105
Moscow (City of) Credit Linked Nts., 10%, 3/30/10 [RUR]                                 304,373,000         12,027,042
OAO Gazprom I Credit Nts., 6.201%, 10/20/07                                               1,435,000          1,570,854
OAO Gazprom II Credit Nts., 5.951%, 4/20/07                                               1,435,000          1,544,270
Philippines (Republic of) Credit Linked Nts., 12%, 1/20/09 [PHP]                        319,400,000          6,001,406
Philippines (Republic of) Credit Linked Nts., 12.375%, 11/1/09 [PHP]                    596,990,000         11,188,106
Philippines (Republic of) Credit Linked Nts., 12.375%, 3/1/15 [PHP]                     109,790,000          2,012,713
Romania (The State of) 3 yr. Linked Nts., 12.25%, 10/15/07 [RON]                         22,740,000          9,095,078
Romania (The State of) 3 yr. Linked Nts., 12.89%, 9/24/07 [RON]                           3,320,000          1,209,648
Romania (The State of) 3 yr. Linked Nts., 12.89%, 9/24/07 [RON]                           5,640,000          2,054,945
Romania (The State of) 3 yr. Linked Nts., 12.89%, 9/24/07 [RON]                          10,000,000          3,643,520
Romania (The State of) Credit Linked Nts., 11.49%, 12/7/06 [RON]                          9,118,650          3,449,626
Russian Federation Credit Linked Nts., 12/2/09 8 [RUR]                                  233,573,000          8,629,178


                    30 | OPPENHEIMER INTERNATIONAL BOND FUND


                                                                                          PRINCIPAL              VALUE
                                                                                             AMOUNT         SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
----------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG: Continued
Ukraine (Republic of) 5 yr. Credit Linked Nts., 4.05%, 8/25/10 4,10                $      1,345,000   $      1,347,556
Ukraine (Republic of) 5.5 yr. Credit Linked Nts., 4.05%, 2/25/11 4,10                     1,345,000          1,347,556
Ukraine (Republic of) 6 yr. Credit Linked Nts., 4.05%, 8/25/11 4,10                       1,345,000          1,347,556
Ukraine (Republic of) 6.5 yr. Credit Linked Nts., 4.05%, 2/27/12 4,10                     1,345,000          1,347,556
Ukraine (Republic of) 7 yr. Credit Linked Nts., 4.05%, 8/28/12 4,10                       1,345,000          1,347,556
Ukraine (Republic of) Credit Linked Nts., 5.592%, 5/16/07 [UAH]                          27,990,000          5,572,476
Ukraine (Republic of) Credit Linked Nts., 9.60%, 7/1/09 4 [UAH]                          13,256,000          2,323,081
Ukraine (Republic of) Credit Linked Nts., 10.208%, 7/1/09 4 [UAH]                        46,272,000          8,109,053
Ukraine (Republic of) Credit Linked Nts., 11.70%, 5/31/06 [UAH]                          20,689,000          4,274,204
Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH]                          3,228,000            753,869
Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH]                         11,438,000          2,671,237
Ukraine (Republic of) Credit Linked Nts., Series A, 5.592%, 5/16/07 [UAH]                27,980,000          5,570,486
Videocon International Ltd. Credit Linked Nts., 5.73%, 12/29/09                           7,300,000          7,312,410
----------------------------------------------------------------------------------------------------------------------
ING Bank NV, Ukraine (Republic of) Credit Linked Nts., Series 725,
11.89%, 12/30/09 4 [UAH]                                                                 64,285,000         14,949,696
----------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
Brazil (Federal Republic of) Credit Linked Nts., 12.08%, 1/2/15 8 [BRR]                  51,226,300          6,947,340
Brazil (Federal Republic of) Credit Linked Nts., 12.68%, 6/1/13 8 [BRR]                  75,340,000         12,124,548
Brazil (Federal Republic of) Credit Linked Nts., 13.85%, 4/1/10 8 [BRR]                 129,150,391         31,045,433
Brazil (Federal Republic of) Credit Linked Nts., 15.33%, 1/2/15 8 [BRR]                 138,200,796         18,742,871
Brazil (Federal Republic of) Credit Linked Nts., Series II, 13.55%, 1/2/15 8            114,770,000         15,565,173
[BRR]
Colombia (Republic of) Credit Linked Bonds, 13.50%, 8/3/20 [COP]                    132,560,000,000         16,118,383
Peru (Republic of) Credit Linked Nts., 8.12%, 9/2/15 8 [PEN]                             40,860,000          5,245,920
Swaziland (Kingdom of) Credit Linked Nts., 7.25%, 6/20/10                                 3,850,000          3,858,201
----------------------------------------------------------------------------------------------------------------------
Lehman Brothers International:
Romania (The State of) Total Return Linked Nts., 7.90%, 2/8/10
(linked to Romanian Treasury Bills) [RON]                                                10,726,400          3,891,150
Turkey (Republic of) Total Return Linked Nts., 20%, 10/17/07
(linked to Turkey Treasury Bills)                                                        13,040,000         16,631,216
----------------------------------------------------------------------------------------------------------------------
Lehman Brothers Special Financing, Inc.:
Romania (The State of) Total Return Linked Nts., 6.50%, 3/8/10
(linked to Romanian Treasury Bills) [RON]                                                30,904,100         10,531,163
Romania (The State of) Total Return Linked Nts., 6.75%, 3/10/08
(linked to Romanian Treasury Bills) [RON]                                                36,650,000         12,565,671
Romania (The State of) Total Return Linked Nts., 7.25%, 4/18/10
(linked to Romanian Treasury Bills) [RON]                                                 3,105,000          1,082,689
Romania (The State of) Total Return Linked Nts., 7.50%, 3/5/07
(linked to Romanian Treasury Bills) [RON]                                                 5,155,000          1,803,043
Romania (The State of) Total Return Linked Nts., 7.75%, 4/18/08
(linked to Romanian Treasury Bills) [RON]                                                 3,101,000          1,083,570
Romania (The State of) Total Return Linked Nts., 7.75%, 4/18/08
(linked to Romanian Treasury Bills) [RON]                                                 7,453,000          2,604,273
Romania (The State of) Total Return Linked Nts., 7.90%, 2/11/08
(linked to Romanian Treasury Bills) [RON]                                                24,895,500          8,846,125


                    31 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

                                                                                          PRINCIPAL              VALUE
                                                                                             AMOUNT         SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital Services, Inc.:
Brazil (Federal Republic of) Sr. Sub. Linked Nts., 15.45%, 1/2/14 [BRR]                  40,700,000   $     17,681,925
Philippines (Republic of) Credit Linked Nts., 8.652%, 9/20/15 3                          30,000,000         30,000,000
Venezuela (Republic of) Credit Linked Nts., 7.382%, 5/20/10                               3,850,000          4,192,650
----------------------------------------------------------------------------------------------------------------------
UBS AG:
Israel (State of) Credit Linked Nts., 7.50%, 4/5/14 [ILS]                                56,205,300         13,923,883
OAO Gazprom III Credit Nts., 5.88%, 7/5/06                                                3,590,000          3,719,113
                                                                                                      ----------------
Total Structured Notes (Cost $936,281,074)                                                                 992,918,490

                                                                       STRIKE              NOTIONAL
                                                           DATE         PRICE                AMOUNT
----------------------------------------------------------------------------------------------------------------------
SWAPTIONS PURCHASED--0.1%
----------------------------------------------------------------------------------------------------------------------
Australian Dollar Call 9                                 2/9/06          5.67AUD   $     81,810,000            146,494
----------------------------------------------------------------------------------------------------------------------
Brazilian Real Call 9                                   10/3/05         16.50BRR         55,510,000                262
----------------------------------------------------------------------------------------------------------------------
Mexican Neuvo Peso Call 9                              10/11/05          9.40MXN        560,400,000            593,333
----------------------------------------------------------------------------------------------------------------------
Mexican Neuvo Peso Call 9                              11/10/05          9.02MXN        478,300,000            336,422
----------------------------------------------------------------------------------------------------------------------
Mexican Neuvo Peso Call 9                               12/2/05          9.42MXN      1,117,400,000          2,016,925
----------------------------------------------------------------------------------------------------------------------
Mexican Neuvo Peso Call 9                               12/8/05          9.23MXN        480,400,000            558,033
----------------------------------------------------------------------------------------------------------------------
Mexican Neuvo Peso Call 9                              12/27/05          9.32MXN        485,160,000            697,441
                                                                                                             ---------
Total Swaptions Purchased (Cost $4,061,677)                                                                  4,348,910

                                                                                          PRINCIPAL
                                                                                             AMOUNT
----------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--3.4%
----------------------------------------------------------------------------------------------------------------------
Undivided interest of 30.56% in joint repurchase agreement (Principal
Amount/Value $400,132,000, with a maturity value of $400,240,369) with Cantor
Fitzgerald & Co./Cantor Fitzgerald Securities, 3.25%, dated 9/30/05, to be
repurchased at $122,333,123 on 10/3/05, collateralized by U.S. Treasury Bonds,
7.50%--8.875%, 11/15/16--11/15/21, with a value of $408,618,137
(Cost $122,300,000)                                                                $    122,300,000        122,300,000
----------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased with
Cash Collateral from Securities Loaned) (Cost $3,343,276,046)                                            3,440,237,586

----------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--1.0%
----------------------------------------------------------------------------------------------------------------------
ASSET-BACKED FLOATING NOTE--0.0%
Whitehawk CDO Funding Corp., 3.94%, 12/15/05 11                                           2,000,000          2,000,000
----------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--1.0%
Undivided interest of 0.46% in joint repurchase agreement (Principal
Amount/Value $3,300,000,000, with a maturity value of $3,301,064,250) with
Nomura Securities, 3.87%, dated 9/30/05, to be repurchased at $15,038,089 on
10/3/05, collateralized by U.S. Agency Mortgages, 5%--5.50%, 9/1/20--8/1/35,
with a value of $3,366,000,000 11                                                        15,033,241         15,033,241


                    32 | OPPENHEIMER INTERNATIONAL BOND FUND


                                                                                          PRINCIPAL             VALUE
                                                                                             AMOUNT         SEE NOTE 1
----------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS Continued
Undivided interest of 4.35% in joint repurchase agreement (Principal
Amount/Value $460,000,000 with a maturity value of $460,149,500) with BNP
Paribas Securities Corp., 3.90%, dated 9/30/05, to be repurchased at $20,006,500
on 10/3/05, collateralized by U.S. Agency Mortgages, 3.33%--7.50%,
9/1/08--9/1/44, with a value of $469,200,000 11                                    $     20,000,000   $     20,000,000
                                                                                                      ----------------

Total Investments Purchased with Cash Collateral from Securities
Loaned (Cost $37,033,241)                                                                                   37,033,241

----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $3,380,309,287)                                              97.9%     3,477,270,827
----------------------------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES                                                                 2.1         74,967,503
                                                                                   -----------------------------------
NET ASSETS                                                                                    100.0%  $  3,552,238,330
                                                                                   ===================================

FOOTNOTES TO STATEMENT OF INVESTMENTS

Principal amount is reported in U.S. Dollars, except for those denoted in the
following currencies:

ARP    Argentine Peso

AUD    Australian Dollar

BRR    Brazilian Real

COP    Colombian Peso

DOP    Dominican Republic Peso

EGP    Egyptian Pounds

EUR    Euro

GBP    British Pound Sterling

HUF    Hungarian Forint

ILS    Israeli Shekel

JPY    Japanese Yen

MXN    Mexican Nuevo Peso

MYR    Malaysian Ringgit

NZD    New Zealand Dollar

PEN    Peruvian New Sol

PHP    Philippines Peso

PLZ    Polish Zloty

RON    Romanian Leu

RUR    Russian Ruble

TRY    New Turkish Lira

UAH    Ukraine Hryvnia

ZAR    South African Rand

1. Partial or fully-loaned security. See Note 14 of Notes to Financial
Statements.

2. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts. The aggregate
market value of such securities is $9,939,070. See Note 6 of Notes to Financial
Statements.

3. Represents the current interest rate for a variable or increasing rate
security.

4. Illiquid or restricted security. The aggregate value of illiquid or
restricted securities as of September 30, 2005 was $123,715,377, which
represents 3.48% of the Fund's net assets, none of which is considered
restricted. In addition, the Fund held restricted currency with a value of
$1,284,296, which represents 0.04% of the Fund's net assets. See Note 13 of
Notes to Financial Statements.

5. Issue is in default. Non-income producing. See Note 1 of Notes to Financial
Statements.

6. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $69,968,248 or 1.97% of the Fund's net
assets as of September 30, 2005.

7. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of Notes to Financial Statements.

8. Zero coupon bond reflects effective yield on the date of purchase.

9. Non-income producing security.

10. When-issued security or forward commitment to be delivered and settled after
September 30, 2005. See Note 1 of Notes to Financial Statements.

11. The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 14 of Notes to Financial
Statements.


                    33 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF INVESTMENTS  Continued
--------------------------------------------------------------------------------

DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC HOLDINGS, AS A PERCENTAGE OF
TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS:

GEOGRAPHIC HOLDINGS (UNAUDITED)                             VALUE     PERCENT
------------------------------------------------------------------------------
Japan                                             $   343,212,218         9.9%
Brazil                                                324,887,232         9.3
United States                                         273,336,682         7.9
Turkey                                                216,301,815         6.2
United Kingdom                                        189,897,943         5.5
Germany                                               183,393,568         5.3
Russia                                                180,672,154         5.2
Peru                                                  149,660,866         4.3
Colombia                                              136,893,602         3.9
Mexico                                                134,346,944         3.9
France                                                121,162,643         3.5
Argentina                                              93,204,534         2.7
Ukraine                                                85,568,759         2.5
Egypt                                                  80,230,751         2.3
Australia                                              70,140,658         2.0
Dominican Republic                                     69,492,968         2.0
Philippines                                            66,452,895         1.9
Italy                                                  63,898,842         1.8
Romania                                                61,860,501         1.8
Portugal                                               61,640,955         1.8
South Africa                                           56,070,975         1.6
Israel                                                 54,323,552         1.6
Finland                                                49,114,329         1.4
Malaysia                                               41,986,360         1.2
Venezuela                                              35,228,957         1.0
New Zealand                                            33,371,061         0.9
Poland                                                 33,361,656         0.9
Austria                                                33,055,741         0.9
Ireland                                                31,833,140         0.9
Greece                                                 30,112,863         0.9
Spain                                                  28,966,764         0.8
The Netherlands                                        27,591,153         0.8
Indonesia                                              23,768,717         0.7
Panama                                                 20,167,050         0.6
Supranational                                          17,780,057         0.5
Hungary                                                 9,240,000         0.3
Belgium                                                 8,695,437         0.2
Luxembourg                                              7,410,430         0.2
India                                                   7,312,410         0.2
Chile                                                   3,990,000         0.1
Swaziland                                               3,858,201         0.1
Bulgaria                                                3,728,638         0.1
Algeria                                                 2,330,474         0.1
China                                                   2,303,618         0.1
Guatemala                                               2,196,581         0.1
Nigeria                                                 1,894,858         0.1
El Salvador                                             1,321,275         0.0
                                                  ----------------------------
Total                                             $ 3,477,270,827       100.0%
                                                  ============================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    34 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF ASSETS AND LIABILITIES  September 30, 2005
--------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------
ASSETS
-----------------------------------------------------------------------------------------
Investments, at value (including securities loaned of $119,714,105)
(cost $3,380,309,287)--see accompanying statement of investments          $ 3,477,270,827
-----------------------------------------------------------------------------------------
Cash                                                                           11,180,383
-----------------------------------------------------------------------------------------
Cash--foreign currencies (cost $1,301,399)                                      1,284,296
-----------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts                          48,877,902
-----------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts                                      34,046,740
-----------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns                                     39,251,330
Shares of beneficial interest sold                                             29,264,614
Investments sold on a when-issued basis or forward commitment                  21,115,788
Futures margins                                                                   158,689
Other                                                                              24,566
                                                                          ---------------
Total assets                                                                3,662,475,135

-----------------------------------------------------------------------------------------
LIABILITIES
-----------------------------------------------------------------------------------------
Swaptions written, at value (premiums received $251,576)                          333,827
-----------------------------------------------------------------------------------------
Return of collateral for securities loaned                                     37,033,241
-----------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts                          10,355,465
-----------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts                                       4,334,370
-----------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $30,601,442 purchased on a when-issued
basis or forward commitment)                                                   43,322,342
Shares of beneficial interest redeemed                                          9,349,327
Distribution and service plan fees                                              2,010,853
Dividends                                                                       1,998,576
Transfer and shareholder servicing agent fees                                     474,427
Closed foreign currency contracts                                                 409,319
Shareholder communications                                                        154,783
Trustees' compensation                                                             30,810
Other                                                                             429,465
                                                                          ---------------
Total liabilities                                                             110,236,805

-----------------------------------------------------------------------------------------
NET ASSETS                                                                $ 3,552,238,330
                                                                          ===============


                    35 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF ASSETS AND LIABILITIES  Continued
--------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
-----------------------------------------------------------------------------------------
Par value of shares of beneficial interest                                $       591,294
-----------------------------------------------------------------------------------------
Additional paid-in capital                                                  3,310,789,486
-----------------------------------------------------------------------------------------
Accumulated net investment income                                              63,991,108
-----------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency
transactions                                                                   14,591,260
-----------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets
and liabilities denominated in foreign currencies                             162,275,182
                                                                          ---------------
NET ASSETS                                                                $ 3,552,238,330
                                                                          ===============

-----------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
-----------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$2,683,900,318 and 446,413,842 shares of beneficial interest
outstanding)                                                              $          6.01
Maximum offering price per share (net asset value plus sales charge of
4.75% of offering price)                                                  $          6.31
-----------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $224,381,020 and 37,445,175 shares of beneficial interest
outstanding)                                                              $          5.99
-----------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $560,137,785 and 93,472,720 shares of beneficial interest
outstanding)                                                              $          5.99
-----------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net
assets of $46,533,080 and 7,758,366 shares of beneficial interest
outstanding)                                                              $          6.00
-----------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $37,286,127 and 6,204,011 shares of beneficial
interest outstanding)                                                     $          6.01

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    36 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF OPERATIONS  For the Year Ended September 30, 2005
--------------------------------------------------------------------------------

------------------------------------------------------------------------------------------
INVESTMENT INCOME
------------------------------------------------------------------------------------------
Interest (net of foreign withholding taxes of $575,418)                   $   124,369,306
------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $135,741)                        1,513,177
------------------------------------------------------------------------------------------
Portfolio lending fees                                                             58,192
------------------------------------------------------------------------------------------
Other income                                                                       13,172
                                                                          ----------------
Total investment income                                                       125,953,847

------------------------------------------------------------------------------------------
EXPENSES
------------------------------------------------------------------------------------------
Management fees                                                                14,728,663
------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                                         4,743,046
Class B                                                                         2,010,229
Class C                                                                         3,999,630
Class N                                                                           152,875
------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                         2,940,595
Class B                                                                           488,057
Class C                                                                           590,173
Class N                                                                           102,667
Class Y                                                                            10,366
------------------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                           279,418
Class B                                                                            65,458
Class C                                                                            59,116
Class N                                                                             5,577
Class Y                                                                             2,694
------------------------------------------------------------------------------------------
Custodian fees and expenses                                                       802,893
------------------------------------------------------------------------------------------
Trustees' compensation                                                             42,887
------------------------------------------------------------------------------------------
Other                                                                             309,533
                                                                          ----------------
Total expenses                                                                 31,333,877
Less reduction to custodian expenses                                             (101,076)
Less waivers and reimbursements of expenses                                        (1,201)
                                                                          ----------------
Net expenses                                                                   31,231,600

------------------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                          94,722,247


                    37 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF OPERATIONS  Continued
--------------------------------------------------------------------------------

------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
------------------------------------------------------------------------------------------
Net realized gain (loss) on:
Investments                                                               $    84,303,182
Closing and expiration of option contracts written                              1,131,468
Closing and expiration of swaption contracts                                   (3,179,824)
Closing of futures contracts                                                   (6,784,387)
Foreign currency transactions                                                  45,434,906
Swap contracts                                                                (19,435,525)
                                                                          ----------------
Net realized gain                                                             101,469,820
------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments                                                                    92,879,718
Translation of assets and liabilities denominated in foreign                    2,312,874
currencies
Futures contracts                                                              (2,059,151)
Swaption contracts                                                                172,239
Swap contracts                                                                 32,164,086
                                                                          ----------------
Net change in unrealized appreciation                                         125,469,766

------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                      $   321,661,833
                                                                          ================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    38 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

YEAR ENDED SEPTEMBER 30,                                                2005               2004
------------------------------------------------------------------------------------------------
OPERATIONS
------------------------------------------------------------------------------------------------
Net investment income                                        $    94,722,247    $    22,611,481
------------------------------------------------------------------------------------------------
Net realized gain                                                101,469,820         77,848,408
------------------------------------------------------------------------------------------------
Net change in unrealized appreciation                            125,469,766         (2,233,848)
                                                             -----------------------------------
Net increase in net assets resulting from operations             321,661,833         98,226,041

------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                         (119,863,500)       (35,086,382)
Class B                                                          (11,853,673)        (6,602,563)
Class C                                                          (21,678,102)        (6,093,022)
Class N                                                           (1,754,272)          (397,275)
Class Y                                                           (1,726,774)            (2,820)
------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A                                                          (15,265,136)                --
Class B                                                           (1,931,153)                --
Class C                                                           (3,155,872)                --
Class N                                                             (225,580)                --
Class Y                                                             (218,918)                --

------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial
interest transactions:
Class A                                                        1,399,327,451        713,652,173
Class B                                                           44,672,998         25,122,862
Class C                                                          305,107,070        136,111,001
Class N                                                           26,099,719         13,528,377
Class Y                                                           21,571,837         14,179,799

------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------
Total increase                                                 1,940,767,928        952,638,191
------------------------------------------------------------------------------------------------
Beginning of period                                            1,611,470,402        658,832,211
                                                             -----------------------------------
End of period (including accumulated net investment income
of $63,991,108 and $44,819,377, respectively)                $ 3,552,238,330    $ 1,611,470,402
                                                             ===================================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    39 | OPPENHEIMER INTERNATIONAL BOND FUND


FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

CLASS A      YEAR ENDED SEPTEMBER 30,                    2005            2004              2003            2002            2001
--------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $       5.63     $      5.33       $      4.38      $     3.95     $      4.19
--------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                     .23 1           .13               .20             .24             .30
Net realized and unrealized gain (loss)                   .62             .47               .95             .41            (.24)
                                                 -------------------------------------------------------------------------------
Total from investment operations                          .85             .60              1.15             .65             .06
--------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                     (.41)           (.30)             (.20)           (.19)             --
Distributions from net realized gain                     (.06)             --                --              --              --
Tax return of capital distribution                         --              --                --            (.03)           (.30)
                                                 -------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                          (.47)           (.30)             (.20)           (.22)           (.30)
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $       6.01     $      5.63       $      5.33      $     4.38     $      3.95
                                                 ===============================================================================

--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      15.53%          11.56%            26.67%          16.78%           1.40%
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $  2,683,900     $ 1,177,628       $   429,283      $  181,456     $   118,733
--------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $  1,925,344     $   811,608       $   285,391      $  134,912     $   117,000
--------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                    3.85%           2.19%             3.94%           5.16%           7.10%
Total expenses                                           1.03%           1.13%             1.22%           1.37%           1.38%
Expenses after payments and waivers
and reduction to custodian expenses                      1.02%           1.13%             1.22%           1.37%           1.38%
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                    90%            133%              341%            372%            377%

1. Per share amounts calculated based on the average shares outstanding during
the period.

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.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    40 | OPPENHEIMER INTERNATIONAL BOND FUND


CLASS B      YEAR ENDED SEPTEMBER 30,                    2005            2004              2003            2002           2001
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $       5.61     $      5.31       $      4.37      $     3.94     $     4.17
---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                     .17 1           .08               .16             .21            .26
Net realized and unrealized gain (loss)                   .63             .47               .94             .40           (.22)
                                                 --------------------------------------------------------------------------------
Total from investment operations                          .80             .55              1.10             .61            .04
---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                     (.36)           (.25)             (.16)           (.15)            --
Distributions from net realized gain                     (.06)             --                --              --             --
Tax return of capital distribution                         --              --                --            (.03)          (.27)
                                                 --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                          (.42)           (.25)             (.16)           (.18)          (.27)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $       5.99     $      5.61       $      5.31      $     4.37     $     3.94
                                                 ================================================================================

---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      14.58%          10.66%            25.48%          15.90%          0.85%
---------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $    224,381     $   167,621       $   134,661      $  100,049     $   84,427
---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $    201,541     $   153,117       $   119,232      $   85,244     $   93,455
---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                    2.95%           1.40%             3.20%           4.41%          6.40%
Total expenses                                           1.89% 4         1.98% 4,5         2.03% 4         2.14% 4        2.14% 4
---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                    90%            133%              341%            372%           377%

1. Per share amounts calculated based on the average shares outstanding during
the period.

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.


                    41 | OPPENHEIMER INTERNATIONAL BOND FUND


FINANCIAL HIGHLIGHTS  Continued
--------------------------------------------------------------------------------

CLASS C      YEAR ENDED SEPTEMBER 30,                    2005            2004              2003            2002           2001
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $       5.61     $      5.31       $      4.37      $     3.94     $     4.17
---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                     .18 1           .09               .16             .21            .26
Net realized and unrealized gain (loss)                   .63             .46               .94             .40           (.22)
                                                 --------------------------------------------------------------------------------
Total from investment operations                          .81             .55              1.10             .61            .04
---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                     (.37)           (.25)             (.16)           (.15)            --
Distributions from net realized gain                     (.06)             --                --              --             --
Tax return of capital distribution                         --              --                --            (.03)          (.27)
                                                 --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                          (.43)           (.25)             (.16)           (.18)          (.27)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $       5.99     $      5.61       $      5.31      $     4.37     $     3.94
                                                 ================================================================================

---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      14.70%          10.75%            25.48%          15.90%          0.85%
---------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $    560,138     $   233,311       $    90,248      $   38,865     $   25,221
---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $    401,401     $   170,796       $    63,198      $   28,635     $   27,125
---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                    3.10%           1.46%             3.15%           4.37%          6.39%
Total expenses                                           1.77% 4         1.88% 4,5         2.02% 4         2.14% 4        2.14% 4
---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                    90%            133%              341%            372%           377%

1. Per share amounts calculated based on the average shares outstanding during
the period.

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.


                    42 | OPPENHEIMER INTERNATIONAL BOND FUND


CLASS N      YEAR ENDED SEPTEMBER 30,                    2005            2004              2003            2002            2001 1
---------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $       5.61     $      5.32       $      4.37      $     3.95     $      4.23
---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                     .20 2           .12               .18             .21             .16
Net realized and unrealized gain (loss)                   .64             .45               .95             .42            (.28)
                                                 --------------------------------------------------------------------------------
Total from investment operations                          .84             .57              1.13             .63            (.12)
---------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                     (.39)           (.28)             (.18)           (.18)             --
Distributions from realized gain                         (.06)             --                --              --              --
Tax return of capital distribution                         --              --                --            (.03)           (.16)
                                                 --------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                          (.45)           (.28)             (.18)           (.21)           (.16)
---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $       6.00     $      5.61       $      5.32      $     4.37     $      3.95
                                                 ================================================================================

---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3                      15.27%          11.00%            26.31%          16.23%          (2.88)%
---------------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $     46,533     $    18,641       $     4,640      $    1,280     $       109
---------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $     30,696     $    10,769       $     2,653      $      297     $        34
---------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment income                                    3.45%           1.83%             3.56%           4.87%           6.56%
Total expenses                                           1.47%           1.49%             1.57%           1.57%           1.39%
Expenses after payments and waivers and
reduction to custodian expenses                          1.46%           1.49%             1.57%           1.57%           1.39%
---------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                    90%            133%              341%            372%            377%

1. For the period from March 1, 2001 (inception of offering) to September 30,
2001.

2. Per share amounts calculated based on the average shares outstanding during
the period.

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.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    43 | OPPENHEIMER INTERNATIONAL BOND FUND


FINANCIAL HIGHLIGHTS  Continued
--------------------------------------------------------------------------------

CLASS Y      YEAR ENDED SEPTEMBER 30,                                                         2005               2004 1
-----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                                                $         5.63     $         5.58
-----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                                                          .25 2               -- 3
Net realized and unrealized gain                                                               .63                .05
                                                                                    -----------------------------------
Total from investment operations                                                               .88                .05
-----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                                                          (.44)                --
Distributions from net realized gain                                                          (.06)                --
Tax return of capital distribution                                                              --                 --
                                                                                    -----------------------------------
Total dividends and/or distributions to shareholders                                          (.50)                --
-----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                                      $         6.01     $         5.63
                                                                                    ===================================

-----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4                                                           15.96%              0.92%
-----------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)                                            $       37,286     $       14,268
-----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                                                   $       25,559     $        7,086
-----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income                                                                         4.23%              4.84%
Total expenses                                                                                0.67%              1.17%
Expenses after payments and waivers and reduction to custodian expenses                       0.66%              1.17%
-----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                                                         90%               133%

1. For the period from September 27, 2004 (inception of offering) to September
30, 2004.

2. Per share amounts calculated based on the average shares outstanding during
the period.

3. Less than $0.005 per share.

4. 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.

5. Annualized for periods of less than one full year.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    44 | 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 primary investment objective is to
seek total return. As a secondary objective, the Fund seeks income when
consistent with 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 due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, 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 may be
valued primarily using dealer-supplied valuations or a portfolio pricing service
authorized by the Board of Trustees. Securities listed or traded on National
Stock Exchanges or other domestic 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. Securities traded on foreign
exchanges are valued based on the last sale price on the principal exchange on
which the security is traded, in the country that is identified by the portfolio
pricing service, prior to the time when the Fund's assets are valued. In the
absence of a sale, the security is valued at the official closing price on the
principal exchange. Corporate, government and municipal debt instruments having
a remaining maturity in excess of sixty days and all mortgage-backed securities
will be valued at the mean between the "bid" and "asked" prices.


                    45 | OPPENHEIMER INTERNATIONAL BOND FUND


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

Futures contracts traded on a commodities or futures exchange will be valued at
the final settlement price or official closing price on the principal exchange
as reported by such principal exchange at its trading session ending at, or most
recently prior to, the time when the Fund's assets are valued. 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 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 Statement of Operations. The Fund records a realized gain or loss
when a structured note is sold or matures. As of September 30, 2005, the market
value of these securities comprised 28.0% of the Fund's net assets and resulted
in unrealized cumulative gains of $56,637,416.

--------------------------------------------------------------------------------
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, 2005, the Fund had purchased
$30,601,442 of securities issued on a when-issued basis or forward commitment
and sold $21,115,788 of securities issued on a when-issued basis or forward
commitment.

      In connection with its ability to purchase or sell securities on a
when-issued basis, the Fund may enter into forward roll transactions with
respect to mortgage-related securities.


                    46 | OPPENHEIMER INTERNATIONAL BOND FUND


Forward roll transactions require the sale of securities for delivery in the
current month, and a simultaneous agreement with the same counterparty to
repurchase similar (same type, coupon and maturity) but not identical securities
on a specified future date. The Fund records the incremental difference between
the forward purchase and sale of each forward roll as realized gain (loss) on
investments or as fee income in the case of such transactions that have an
associated fee in lieu of a difference in the forward purchase and sale price.

      Risks of entering into forward roll transactions include the potential
inability of the counterparty to meet the terms of the agreement; the potential
of the Fund to receive inferior securities at redelivery as compared to the
securities sold to the counterparty; counterparty credit risk; and the potential
pay down speed variance between the mortgage-related pools.

--------------------------------------------------------------------------------
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, 2005, securities with an
aggregate market value of $420,684, representing 0.01% of the Fund's net assets,
were in default.

--------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income 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 for business. Foreign exchange rates may be 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


                    47 | OPPENHEIMER INTERNATIONAL BOND FUND


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

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.

                                                           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        TAX PURPOSES
      -------------------------------------------------------------------
      $  117,018,359  $  14,903,297             $  --      $  110,769,517

1. During the fiscal year ended September 30, 2005, the Fund did not utilize any
capital loss carryforward.

2. 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.

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, 2005. Net assets of
the Fund were unaffected by the reclassifications.


                    48 | OPPENHEIMER INTERNATIONAL BOND FUND


                               REDUCTION TO       REDUCTION TO
                                ACCUMULATED    ACCUMULATED NET
            INCREASE TO      NET INVESTMENT      REALIZED GAIN
            PAID-IN CAPITAL            LOSS   ON INVESTMENTS 3
            --------------------------------------------------
            $  1,622,965      $  81,325,805      $  82,948,770

3. $1,585,470, all of which was long-term capital gain, was distributed in
connection with Fund share redemptions.

The tax character of distributions paid during the years ended September 30,
2005 and September 30, 2004 was as follows:

                                          YEAR ENDED      YEAR ENDED
                                      SEPT. 30, 2005  SEPT. 30, 2004
            --------------------------------------------------------
            Distributions paid from:
            Ordinary income           $  177,672,980   $  48,182,062

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, 2005 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.

            Federal tax cost of securities         $3,373,356,518
            Federal tax cost of other investments     (59,627,677)
                                                   ---------------
            Total federal tax cost                 $3,313,728,841
                                                   ===============

            Gross unrealized appreciation          $  163,461,133
            Gross unrealized depreciation             (52,691,616)
                                                   ---------------
            Net unrealized appreciation            $  110,769,517
                                                   ===============

--------------------------------------------------------------------------------
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.


                    49 | OPPENHEIMER INTERNATIONAL BOND FUND


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

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.

--------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts at a rate equal to the Federal
Funds Rate plus 0.50%. The Reduction to Custodian Expenses line item, if
applicable, represents earnings on cash balances maintained by the Fund during
the period. Such interest expense and other custodian fees may be paid with
these earnings.

--------------------------------------------------------------------------------
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 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, 2005  YEAR ENDED SEPTEMBER 30, 2004 1
                                SHARES           AMOUNT         SHARES            AMOUNT
-----------------------------------------------------------------------------------------
CLASS A
Sold                       290,795,021  $ 1,714,084,347    172,839,291  $    957,396,128
Dividends and/or
distributions reinvested    17,749,603      105,430,621      5,072,488        27,463,043
Redeemed                   (71,447,967)    (420,187,517)   (49,156,351)     (271,206,998)
                          ---------------------------------------------------------------
Net increase               237,096,657  $ 1,399,327,451    128,755,428  $    713,652,173
                          ===============================================================

-----------------------------------------------------------------------------------------
CLASS B
Sold                        15,275,934  $    89,714,849     14,676,405  $     80,808,899
Dividends and/or
distributions reinvested     1,842,516       10,920,892        944,780         5,057,584
Redeemed                    (9,559,054)     (55,962,743)   (11,077,428)      (60,743,621)
                          ---------------------------------------------------------------
Net increase                 7,559,396  $    44,672,998      4,543,757  $     25,122,862
                          ===============================================================


                    50 | OPPENHEIMER INTERNATIONAL BOND FUND


                          YEAR ENDED SEPTEMBER 30, 2005  YEAR ENDED SEPTEMBER 30, 2004 1
                                SHARES           AMOUNT         SHARES            AMOUNT
-----------------------------------------------------------------------------------------
CLASS C
Sold                        59,355,223  $   348,932,998     30,576,433  $    168,801,488
Dividends and/or
distributions reinvested     2,925,804       17,330,636        830,062         4,457,967
Redeemed                   (10,417,683)     (61,156,564)    (6,789,922)      (37,148,454)
                          ---------------------------------------------------------------
Net increase                51,863,344  $   305,107,070     24,616,573  $    136,111,001
                          ===============================================================

-----------------------------------------------------------------------------------------
CLASS N
Sold                         5,802,889  $    34,052,865      2,975,732  $     16,429,938
Dividends and/or
distributions reinvested       310,916        1,843,537         66,020           357,127
Redeemed                    (1,676,293)      (9,796,683)      (593,448)       (3,258,688)
                          ---------------------------------------------------------------
Net increase                 4,437,512  $    26,099,719      2,448,304  $     13,528,377
                          ===============================================================

-----------------------------------------------------------------------------------------
CLASS Y
Sold                         4,755,499  $    27,879,481      2,536,075  $     14,176,984
Dividends and/or
distributions reinvested       328,793        1,945,692            500             2,815
Redeemed                    (1,416,856)      (8,253,336)            --                --
                          ---------------------------------------------------------------
Net increase                 3,667,436  $    21,571,837      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.

--------------------------------------------------------------------------------
3. PURCHASES AND SALES OF SECURITIES

The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended September 30, 2005, were as
follows:

                                      PURCHASES            SALES
----------------------------------------------------------------
Investment securities           $ 3,106,697,823  $ 1,739,262,495
U.S. government and government
agency obligations                  259,866,893      228,548,343

--------------------------------------------------------------------------------
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.


                    51 | OPPENHEIMER INTERNATIONAL BOND FUND


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued

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, 2005, the Fund paid
$3,901,101 to OFS for services to the Fund.

      Additionally, Class Y shares are subject to minimum fees of $10,000 per
annum 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-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of 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, 2005 for Class B, Class C
and Class N shares were $8,934,389, $7,425,451 and $329,175, respectively. Fees
incurred by the Fund under the plans are detailed in the Statement of
Operations.


                    52 | OPPENHEIMER INTERNATIONAL BOND FUND


--------------------------------------------------------------------------------
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, 2005   $  1,626,798      $  54,701     $  368,223     $  143,287      $  73,709

--------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS 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, 2005,
OFS waived $1,201 for Class N shares. 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.

      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.


                    53 | OPPENHEIMER INTERNATIONAL BOND FUND


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS Continued

As of September 30, 2005, the Fund had outstanding foreign currency contracts as
follows:

                                              CONTRACT         VALUATION
                                EXPIRATION      AMOUNT             AS OF    UNREALIZED    UNREALIZED
CONTRACT DESCRIPTION                 DATES      (000S)     SEPT.30, 2005  APPRECIATION  DEPRECIATION
----------------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Argentine Peso [ARP]        10/6/05-2/2/06     102,704ARP  $  35,274,494  $    174,389  $    343,715
Brazilian Real [BRR]      10/26/05-9/25/06     424,820BRR    219,299,375    35,528,555            --
Canadian Dollar [CAD]             10/21/05      38,280CAD     32,948,282       130,446            --
Chilean Peso [CLP]        10/6/05-12/22/05  12,345,000CLP     23,289,559       305,907            --
Indian Rupee [INR]       10/26/05-12/20/05   1,960,440INR     44,557,240       260,759            --
Indonesian Rupiah [IDR]             1/4/06  77,030,000IDR      7,478,641       191,034            --
Mexican Nuevo
Peso [MXN]               10/25/05-10/26/05     661,630MXN     61,247,499        89,681       112,992
Norwegian Krone [NOK]             10/24/05     192,390NOK     29,399,253            --       731,409
Philippines Peso [PHP]            10/26/05   1,873,300PHP     33,318,135       191,699            --
Russian Ruble [RUR]               10/27/05     302,480RUR     10,628,649       266,196            --
Slovakia Koruna [SKK]    11/14/05-12/21/05   1,524,670SKK     47,237,935            --     1,136,863
Swiss Franc [CHF]                 10/21/05     166,350CHF    128,741,309            --     1,864,494
Turkish Lira [TRY]        10/26/05-11/7/05     115,426TRY    102,285,820     2,783,629       260,124
                                                                          --------------------------
                                                                            39,922,295     4,449,597
                                                                          --------------------------
CONTRACTS TO SELL
Argentine Peso [ARP]               10/6/05      61,421ARP     21,114,699       248,970            --
Australian Dollar [AUD]            12/5/05      60,640AUD     46,109,730        43,381       911,147
British Pound
Sterling [GBP]             10/17/05-3/8/06      35,860GBP     63,214,315     1,535,464            --
Chinese Renminbi [CNY]            10/26/05     269,500CNY     33,331,275        53,673            --
Czech Koruna [CZK]                10/26/05     807,100CZK     32,792,647       683,090            --
Euro [EUR]                 10/17/05-3/8/06     228,315EUR    274,947,927     3,269,932            --
Japanese Yen [JPY]         10/26/05-3/8/06  19,428,000JPY    172,912,802     2,232,261            --
South African
Rand [ZAR]               10/11/05-11/15/05     222,795ZAR     34,942,780            --     2,772,308
Swedish Krone [SEK]               10/26/05     255,200SEK     32,966,434       367,117            --
Swiss Franc [CHF]                 10/26/05      42,260CHF     32,720,368       521,719            --
Turkish Lira [TRY]          11/1/05-2/8/06      87,322TRY     63,270,214            --     2,222,413
                                                                          --------------------------
                                                                             8,955,607     5,905,868
                                                                          --------------------------
Total unrealized appreciation and depreciation                            $ 48,877,902  $ 10,355,465
                                                                          ==========================

--------------------------------------------------------------------------------
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.


                    54 | OPPENHEIMER INTERNATIONAL BOND FUND


      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 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 in 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, 2005, the Fund had outstanding futures contracts as follows:

                                                            VALUATION AS OF      UNREALIZED
                                     EXPIRATION  NUMBER OF    SEPTEMBER 30,    APPRECIATION
CONTRACT DESCRIPTION                      DATES  CONTRACTS             2005  (DEPRECIATION)
--------------------------------------------------------------------------------------------
CONTRACTS TO PURCHASE
Amsterdam Exchange Index               10/21/05         58     $  5,626,080  $       94,959
CAC-40 10 Index                        10/21/05        315       17,418,605         315,607
Standard & Poor's ASX 200 Index        12/15/05         67        5,923,111         145,427
Standard & Poor's/MIB Index, 10 yr.    12/16/05         27        5,647,269          71,339
                                                                             ---------------
                                                                                    627,332
                                                                             ---------------
CONTRACTS TO SELL
CAC-40 10 Index                        10/21/05        256       14,156,072        (343,440)
DAX Index                              12/16/05        181       27,553,527        (830,300)
FTSE 100 Index                         12/16/05        190       18,379,692        (401,726)
Nikkei 225 Index                        12/8/05        161       19,231,501      (1,333,163)
Standard & Poor's 500 Index            12/15/05         18        5,554,350          17,708
                                                                             ---------------
                                                                                 (2,890,921)
                                                                             ---------------
                                                                             $   (2,263,589)
                                                                             ===============


                    55 | OPPENHEIMER INTERNATIONAL BOND FUND


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
7. OPTION ACTIVITY

The Fund may buy and sell put and call options, or write put and covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities.

      The Fund generally purchases put options or writes covered call options to
hedge against adverse movements in the value of portfolio holdings. When an
option is written, the Fund receives a premium and becomes obligated to sell or
purchase the underlying security at a fixed price, upon exercise of the option.

      Options are valued daily based upon the last sale price on the principal
exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid.

      Securities designated to cover outstanding call options are noted in the
Statement of Investments where applicable. 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, 2005 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, 2004          14,995,007,110  $  1,096,886           --  $        --
Options written                     14,160        25,557   28,100,000       64,863
Options closed or expired  (14,995,021,270)   (1,122,443) (28,100,000)     (64,863)
                           --------------------------------------------------------
Options outstanding as of
September 30, 2005                      --  $         --           --  $        --
                           ========================================================

--------------------------------------------------------------------------------
8. TOTAL RETURN SWAP CONTRACTS

The Fund may enter into a total return 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 notional. The Fund records an increase or


                    56 | OPPENHEIMER INTERNATIONAL BOND FUND


decrease to unrealized gain (loss), in the amount due to or owed by the Fund at
termination or settlement. Total return swaps are subject to risks (if the
counterparty fails to meet its obligations).

As of September 30, 2005, the Fund had entered into the following total return
swap agreements:

                                                          RECEIVED
                                 PAID BY THE      RATES     BY THE      RATES
                                     FUND AT      AS OF    FUND AT      AS OF
SWAP                   NOTIONAL    SEPT. 30,  SEPT. 30,  SEPT. 30,  SEPT. 30,  TERMINATION    UNREALIZED
COUNTERPARTY             AMOUNT         2005       2005       2005       2005        DATES  APPRECIATION
--------------------------------------------------------------------------------------------------------
Deutsche                           Six-Month
Bank AG             $16,760,000    BBA LIBOR    4.23063%      UDIS   3.586687%     5/13/15  $  1,805,649
--------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
                                   Six-Month
                     11,580,000    BBA LIBOR    4.23063       UDIS   3.586687      1/14/15     1,155,553
                                   Six-Month
                     11,580,000    BBA LIBOR    4.23063       UDIS   3.586687      1/20/15     1,177,464
                                                                                            ------------
                                                                                            $  4,138,666
                                                                                            ============

Index abbreviations are as follows:

BBA LIBOR   British Bankers' Association London-Interbank Offered Rate

UDIS        Mexican Indice Nacional de Precios al Consumidor

--------------------------------------------------------------------------------
9. 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.


                    57 | OPPENHEIMER INTERNATIONAL BOND FUND


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
9. INTEREST RATE SWAP CONTRACTS Continued

As of September 30, 2005, the Fund had entered into the following interest rate
swap agreements:

                                                       RATE          RATE
                                                    PAID BY   RECEIVED BY
                                                THE FUND AT   THE FUND AT                                   UNREALIZED
SWAP                              NOTIONAL        SEPT. 30,     SEPT. 30,      FLOATING   TERMINATION     APPRECIATION
COUNTERPARTY                        AMOUNT             2005          2005    RATE INDEX         DATES   (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------------
Citigroup
Global Markets
Holdings, Inc.:
                                                                                 90-Day
                               333,000,000TWD        2.0200%       1.2820%         CPTW        3/4/09   $      (68,339)
                                                                              Six-Month
                                16,830,000PLZ        4.3500        5.5200          WIBO       3/24/10          338,051
                                                                              Six-Month
                                26,928,000PLZ        4.3500        5.5500          WIBO       3/24/10          550,869
                                                                            Three-Month
                            18,776,000,000KRW        3.9300        4.3400         KWCDC       2/17/10         (121,890)
                             5,900,000,000KRW        3.4900        4.5750         KWCDC       8/26/10              604
                                                                                 90-Day
                               333,000,000TWD        2.0200        1.2860          CPTW       3/23/09          (52,864)
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse
First Boston,                                                                 Six-Month
Inc. (Nassau Branch)            46,785,000PLZ        4.9100        4.4800          WIBO        7/1/10         (100,547)
-----------------------------------------------------------------------------------------------------------------------
Credit Suisse
First Boston                                                                     28-Day
International                  112,580,000MXN       10.0300       10.0000      MXN TIIE        7/9/15          556,221
-----------------------------------------------------------------------------------------------------------------------
Deutsche
Bank AG:
                                                                            Three-Month
                                32,500,000           4.8160        3.8338     BBA LIBOR        3/8/15         (262,200)
                                                                            Three-Month
                                23,710,000EUR        2.1340        3.8300       EURIBOR        3/8/15        2,006,899
                                                                              Six-Month
                                11,050,000           3.6600        5.2500         LIBOR       6/23/15          787,415
                                                                              Six-Month
                               500,000,000INR        4.8700        5.1083         MIFOR       3/22/09          412,763
                               454,000,000INR        4.8300        5.0079           IRS       1/14/09          342,797
                                                                                 90-Day
                               187,000,000TWD        2.5850        1.3600          CPTW       8/19/09         (148,281)


                    58 | OPPENHEIMER INTERNATIONAL BOND FUND


                                                       RATE          RATE
                                                    PAID BY   RECEIVED BY
                                                THE FUND AT   THE FUND AT                                   UNREALIZED
SWAP                              NOTIONAL        SEPT. 30,     SEPT. 30,      FLOATING   TERMINATION     APPRECIATION
COUNTERPARTY                        AMOUNT             2005          2005    RATE INDEX         DATES   (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------------
Goldman
Sachs Capital
Markets LP:
                                94,500,000MXN        9.7350%      10.2900%     MXN TIIE       6/14/15   $      612,533
                                21,965,083BRR       18.2500       17.7200          BZDI        1/2/07          (91,495)
                               120,050,000MXN        9.6100       10.2200      MXN TIIE       1/30/15          720,776
                               187,935,994BRR       19.7300       17.1800          BZDI        1/2/08          130,741
                                38,987,000BRR       19.2000       18.1600          BZDI        1/2/08          389,742
                                55,700,000MXN        9.4900       10.0000      MXN TIIE       6/24/15          260,650
                                93,375,000MXN        9.4800       10.4300      MXN TIIE       5/29/15          682,310
                                93,375,000MXN        9.4800       10.3000      MXN TIIE        6/1/15          607,671
-----------------------------------------------------------------------------------------------------------------------
Goldman
Sachs Group,
Inc. (The):
                                48,030,000MXN        9.6250        9.4100      MXN TIIE       8/31/20           (4,455)
                               144,630,000MXN        9.6750        9.7400      MXN TIIE        1/5/10          409,671
                                61,200,000MXN        9.4950       10.8500      MXN TIIE        3/5/15          599,880
                                46,968,000BRR       18.6300       18.0000          BZDI        1/2/07         (77,250)
                                17,037,427BRR       18.2500       17.1700          BZDI        1/2/08          (41,721)
                                20,823,527BRR       18.2500       17.1700          BZDI        1/2/08          (50,992)
                               109,710,000MXN        9.7200       10.7000      MXN TIIE        5/8/15          986,593
                               100,000,000MXN        9.7200       10.7500      MXN TIIE        5/8/15          929,999
                               144,000,000MXN        9.6250        9.5100      MXN TIIE       8/26/25            3,397
                                96,930,000MXN        9.6750        9.5000      MXN TIIE       8/28/25           (6,060)
                               289,270,000MXN        9.6250        9.8400      MXN TIIE      12/31/09          917,796
-----------------------------------------------------------------------------------------------------------------------
JPMorgan
Chase Bank:
                                                                              Six-Month
                             1,080,000,000HUF        6.6300        7.0000    LIBOR flat       7/14/08          104,501
                                                                              Six-Month
                                94,000,000EUR        2.1940        4.1060         LIBOR       10/8/14       11,472,730
                                                                                 28-Day
                               161,780,000MXN        9.6500       10.8800      MXN TIIE      11/16/14        1,618,262
                                                                            Three-Month
                                66,000,000ZAR        6.9430        9.7800    LIBOR flat       2/20/11          823,353
                                                                            Three-Month
                                66,000,000ZAR        6.9430        9.6800    LIBOR flat       2/18/11          779,396
                               114,500,000MXN        9.5100        9.7600      MXN TIIE       8/17/15          394,554


                    59 | OPPENHEIMER INTERNATIONAL BOND FUND


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
9. INTEREST RATE SWAP CONTRACTS Continued

                                                       RATE          RATE
                                                    PAID BY   RECEIVED BY
                                                THE FUND AT   THE FUND AT                                   UNREALIZED
SWAP                              NOTIONAL        SEPT. 30,     SEPT. 30,      FLOATING   TERMINATION     APPRECIATION
COUNTERPARTY                        AMOUNT             2005          2005    RATE INDEX         DATES   (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing,
Inc.:
                                                                              Six-Month
                                55,540,000PLZ        4.7400%       4.5300%         WIBO        7/5/10   $      (84,275)
                                                                                 28-Day
                               111,440,000MXN        9.6250        9.9900      MXN TIIE       7/19/15          524,055
                                                                              Six-Month
                                28,640,000GBP        4.5152        4.5200     BBA LIBOR       2/17/08           66,395
                                                                              Six-Month
                                 6,840,000GBP        4.5980        4.5152     BBA LIBOR       2/17/16          (19,917)
-----------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services,
Inc.:
                                24,054,685BRR       18.6800       16.8800          BZDI        1/2/08         (137,270)
                                                                            Three-Month
                               150,000,000ZAR        6.9500        7.8100          JIBA        2/4/10          (35,336)
                                                                            Three-Month
                                50,970,000ZAR        7.0000        8.1400          JIBA       5/18/10           79,356
                                41,775,000BRR       19.7200       17.5900          BZDI        1/2/07          (89,773)
                                                                                                        ---------------
                                                                                                        $   26,717,315
                                                                                                        ===============

Notional amount is reported in U.S. Dollars, except for those denoted in the
following currencies:

BRR         Brazilian Real

EUR         Euro

GBP         British Pound Sterling

HUF         Hungarian Forint

KRW         South Korean Won

INR         Indian Rupee

MXN         Mexican Nuevo Peso

PLZ         Polish Zloty

TWD         New Taiwan Dollar

ZAR         South African Rand


                    60 | OPPENHEIMER INTERNATIONAL BOND FUND


Index abbreviations are as follows:

BBA LIBOR     British Bankers' Association London-Interbank Offered Rate

BZDI          Brazil Cetip Interbank Deposit Rate

CPTW          Bloomberg Taiwan Secondary Commercial Papers

EURIBOR       Euro Interbank Offered Rate

IRS           India Swap Composites

JIBA          South Africa Johannesburg Interbank Agreed Rate

KWCDC         South Korean Won

LIBOR         London-Interbank Offered Rate

MXN TIIE      Mexican Peso-Interbank Equilibrium Interest Rate

MIFOR         Mumbai Interbank Forward Offer Rate

WIBO          Poland Warsaw Interbank Offer Bid Rate

--------------------------------------------------------------------------------
10. CREDIT SWAP CONTRACTS

The Fund may enter into a credit default swap contract to seek to maintain a
total return on a particular investment or portion of its portfolio, or for
other non-speculative purposes. Credit default swap contracts are subject to
credit risks (for example if the counterparty fails to meet its obligations).

      As a purchaser of a credit default swap contract, the Fund pays a periodic
interest fee on the notional amount to the counterparty. This interest fee is
accrued daily as a component of unrealized appreciation (depreciation) and is
recorded as realized loss upon payment. Upon occurrence of a specific credit
event with respect to the underlying referenced debt obligation, the Fund is
obligated to deliver that security to the counter-party in exchange for receipt
of the notional amount from the counterparty. The difference between the value
of the security delivered and the notional amount received is recorded as
realized gain. Information regarding such credit swaps as of September 30, 2005
is as follows:

                                                                     NOTIONAL
                                                                       AMOUNT        ANNUAL
                                                              RECEIVED BY THE      INTEREST
                                                                    FUND UPON     RATE PAID     UNREALIZED
COUNTERPARTY                REFERENCED DEBT OBLIGATION           CREDIT EVENT   BY THE FUND   DEPRECIATION
----------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Limited             Russian Federation
London, UK                  5% Step-up Bond                   $    33,430,000          1.09%  $    926,255
----------------------------------------------------------------------------------------------------------
JPMorgan Chase
New York, NY:
                            Kingdom of Jordan
                            6% Step-up Bond                           390,000          2.00          3,819
                            Russian Federation
                            2.50% Step-up Bond                        550,000          2.40         66,400
----------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
                            Brazil 12.25% Global Bond               5,120,000          6.15        766,749
                            Republic of Turkey 11.875% Bond         1,660,000          3.15        105,298


                    61 | OPPENHEIMER INTERNATIONAL BOND FUND


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
10. CREDIT SWAP CONTRACTS Continued

                                                                     NOTIONAL
                                                                       AMOUNT        ANNUAL
                                                              RECEIVED BY THE      INTEREST
                                                                    FUND UPON     RATE PAID      UNREALIZED
COUNTERPARTY                REFERENCED DEBT OBLIGATION           CREDIT EVENT   BY THE FUND    DEPRECIATION
-----------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
                            Republic of Columbia
                            10.375% Bond                      $     1,980,000          3.70%  $     125,563
                            Turkey Government
                            11.875% International Bond              7,010,000          3.22         234,167
                            Ukrainian Government Bond               5,630,000          1.65           8,725
-----------------------------------------------------------------------------------------------------------
UBS AG,                     Federal Republic of Brazil
London Branch               12.25% Bond                             4,780,000          4.50         514,601
                                                                                              -------------
                                                                                              $   2,751,577
                                                                                              =============

As a seller of a credit default swap contract, the Fund receives a periodic
interest fee on the notional amount from the counterparty. This interest fee is
accrued daily as a component of unrealized appreciation (depreciation) and is
recorded as realized gain upon receipt. Upon occurrence of a specific credit
event with respect to the underlying referenced debt obligation, the Fund
receives that security from the counterparty in exchange for payment of the
notional amount to the counterparty. The difference between the value of the
security received and the notional amount paid is recorded as realized loss.
Information regarding such credit swaps as of September 30, 2005 is as follows:

                                                                     NOTIONAL        ANNUAL
                                                                       AMOUNT      INTEREST
                                                                  PAID BY THE          RATE      UNREALIZED
                                                                    FUND UPON   RECEIVED BY    APPRECIATION
COUNTERPARTY                REFERENCED DEBT OBLIGATION           CREDIT EVENT      THE FUND   (DEPRECIATION)
------------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Limited             Russian Federation
London, UK                  5% Step-up Bond                   $    58,500,000          0.70%  $      483,267
------------------------------------------------------------------------------------------------------------
Lehman Brothers             Republic of Turkey
Special Financing, Inc.     11.875% Bond                            3,645,000          1.87           80,723
------------------------------------------------------------------------------------------------------------
UBS AG,                     Federal Republic of Brazil
London Branch               12.25% Bond                            15,600,000          3.80        1,234,104
                                                                                              --------------
                                                                                               $   1,798,094
                                                                                              ==============

--------------------------------------------------------------------------------
11. FOREIGN EXCHANGE VOLATILITY SWAP CONTRACTS

The Fund may enter into a foreign exchange volatility swap transaction to hedge
the direction of volatility in a particular currency, or for other
non-speculative purposes. In foreign exchange volatility swaps, counterparties
agree to buy or sell volatility at a specific volatility level over a fixed
period. Payment is normally made on the basis of a currency amount per
percentage point above or below the volatility strike level at


                    62 | OPPENHEIMER INTERNATIONAL BOND FUND


maturity. 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 a daily increase or decrease to
unrealized gain (loss) based on changes in the amount due to or owed by the Fund
at the expiration date of the swap. Foreign exchange volatility swaps are
subject to credit risks (if the counterparty fails to meet its obligations).

As of September 30, 2005, the Fund had entered into the following foreign
exchange volatility swap agreements:

                                         NOTIONAL
                                        PRINCIPAL   EXPIRATION                 UNREALIZED
SWAP COUNTERPARTY   CURRENCY               AMOUNT         DATE    PRICE      DEPRECIATION
-----------------------------------------------------------------------------------------
Goldman Sachs       Mexican Nuevo
Group, Inc. (The)   Peso [MXN]      $  30,880,000     10/12/05   11.449MXN       $190,128

--------------------------------------------------------------------------------
12. SWAPTION TRANSACTIONS

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, 2005 was as follows:

                                            CALL SWAPTIONS                  PUT SWAPTIONS
                               ---------------------------    ---------------------------
                                    NOTIONAL     AMOUNT OF        NOTIONAL      AMOUNT OF
                                      AMOUNT      PREMIUMS          AMOUNT       PREMIUMS
-----------------------------------------------------------------------------------------
Swaptions outstanding as of
September 30, 2004             $  50,550,000   $   500,195   $  62,395,000   $   291,178
Swaptions written                324,545,000     2,047,112      62,395,000       215,509
Swaptions closed or expired     (313,735,000)   (2,295,731)   (124,790,000)     (506,687)
                               ----------------------------------------------------------
Swaptions outstanding as of
September 30, 2005             $  61,360,000   $   251,576   $          --   $        --
                               ==========================================================

As of September 30, 2005, the Fund had entered into the following swaption
contracts:

                                  NOTIONAL   EXPIRATION   STRIKE      PREMIUM       VALUE
SWAPTIONS                           AMOUNT         DATE    PRICE     RECEIVED  SEE NOTE 1
-----------------------------------------------------------------------------------------
U.S. Dollar                  $  61,360,000       2/9/06  $  4.74   $  251,576  $  333,827


                    63 | OPPENHEIMER INTERNATIONAL BOND FUND


NOTES TO FINANCIAL STATEMENTS  Continued
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
13. ILLIQUID OR RESTRICTED SECURITIES AND CURRENCY

As of September 30, 2005, 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.
Securities that are illiquid or restricted are marked with the applicable
footnote on the Statement of Investments. Information concerning currency is as
follows:

                                                   VALUATION AS OF
                          ACQUISITION                SEPTEMBER 30,    UNREALIZED
CURRENCY                        DATES         COST            2005  DEPRECIATION
--------------------------------------------------------------------------------
Argentine Peso [ARP]  7/14/05-9/15/05  $ 1,301,399     $ 1,284,296      $ 17,103

--------------------------------------------------------------------------------
14. 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 continues to receive the
economic benefit of interest or dividends paid on the securities loaned in the
form of a substitute payment received from the borrower. As of September 30,
2005, the Fund had on loan securities valued at $119,714,105. Collateral of
$121,771,638 was received for the loans, of which $37,033,241 was received in
cash and subsequently invested in approved instruments.

--------------------------------------------------------------------------------
15. LITIGATION

A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor, as well as 51 of the
Oppenheimer funds (as "Nominal Defendants") including the Fund, 30 present and
former Directors or Trustees and 8 present and former officers of the funds.
This complaint, initially filed in the U.S. District Court for the Southern
District of New York on January 10, 2005 and amended on March 4, 2005,
consolidates into a single action and amends six individual previously-


                    64 | OPPENHEIMER INTERNATIONAL BOND FUND


filed putative derivative and class action complaints. Like those prior
complaints, the complaint alleges 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 assets of the funds to
make those payments in violation of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. Also, like those prior complaints, the
complaint further alleges that by permitting and/or participating in those
actions, the Directors/Trustees and the Officers breached their fiduciary duties
to shareholders of the funds under the Investment Company Act of 1940 and at
common law. The complaint seeks unspecified compensatory and punitive damages,
rescission of the funds' investment advisory agreements, an accounting of all
fees paid, and an award of attorneys' fees and litigation expenses.

      The defendants believe that the allegations contained in the Complaints
are without merit and that they have meritorious defenses against the claims
asserted. The defendants intend to defend these lawsuits vigorously and to
contest any claimed liability. The defendants believe that it is premature to
render any opinion as to the likelihood of an outcome unfavorable to them and
that no estimate can yet be made with any degree of certainty as to the amount
or range of any potential loss.


                                     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-1
                                  Appendix C

        OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class
A shares(2) 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.(3)  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.

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 plans(4)
         4) Group Retirement Plans(5)
         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."(6) This waiver provision applies to:
|_|   Purchases of Class A shares aggregating $1 million or more.
|_|   Purchases of Class A shares by a Retirement Plan that was permitted to
         purchase such shares at net asset value but subject to a contingent
         deferred sales charge prior to March 1, 2001. That included plans
         (other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares
         costing $500,000 or more, 2) had at the time of purchase 100 or more
         eligible employees or total plan assets of $500,000 or more, or 3)
         certified to the Distributor that it projects to have annual plan
         purchases of $200,000 or more.
|_|   Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
         purchases are made:
         1) through a broker, dealer, bank or registered investment adviser
            that has made special arrangements with the Distributor for those
            purchases, or
         2) by a direct rollover of a distribution from a qualified
            Retirement Plan if the administrator of that Plan has made
            special arrangements with the Distributor for those purchases.
|_|   Purchases of Class A shares by Retirement Plans that have any of the
         following record-keeping arrangements:
         1) The record keeping is performed by Merrill Lynch Pierce Fenner &
            Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the
            Retirement Plan. On the date the plan sponsor signs the
            record-keeping service agreement with Merrill Lynch, the Plan
            must have $3 million or more of its assets invested in (a) mutual
            funds, other than those advised or managed by Merrill Lynch
            Investment Management, L.P. ("MLIM"), that are made available
            under a Service Agreement between Merrill Lynch and the mutual
            fund's principal underwriter or distributor, and  (b)  funds
            advised or managed by MLIM (the funds described in (a) and (b)
            are referred to as "Applicable Investments").
         2) The record keeping for the Retirement Plan is performed on a
            daily valuation basis by a record keeper whose services are
            provided under a contract or arrangement between the Retirement
            Plan and Merrill Lynch. On the date the plan sponsor signs the
            record keeping service agreement with Merrill Lynch, the Plan
            must have $3 million or more of its assets (excluding assets
            invested in money market funds) invested in Applicable
            Investments.
         3) The record keeping for a Retirement Plan is handled under a
            service agreement with Merrill Lynch and on the date the plan
            sponsor signs that agreement, the Plan has 500 or more eligible
            employees (as determined by the Merrill Lynch plan conversion
            manager).
II.






            Waivers of Class A Sales Charges of Oppenheimer Funds
------------------------------------------------------------------------------

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

Class A shares purchased by the following investors are not subject to any
Class A sales charges (and no concessions are paid by the Distributor on such
purchases):
|_|   The Manager or its affiliates.
|_|   Present or former officers, directors, trustees and employees (and
         their "immediate families") of the Fund, the Manager and its
         affiliates, and retirement plans established by them for their
         employees. The term "immediate family" refers to one's spouse,
         children, grandchildren, grandparents, parents, parents-in-law,
         brothers and sisters, sons- and daughters-in-law, a sibling's
         spouse, a spouse's siblings, aunts, uncles, nieces and nephews;
         relatives by virtue of a remarriage (step-children, step-parents,
         etc.) are included.
|_|   Registered management investment companies, or separate accounts of
         insurance companies having an agreement with the Manager or the
         Distributor for that purpose.
|_|   Dealers or brokers that have a sales agreement with the Distributor, if
         they purchase shares for their own accounts or for retirement plans
         for their employees.
|_|   Employees and registered representatives (and their spouses) of dealers
         or brokers described above or financial institutions that have
         entered into sales arrangements with such dealers or brokers (and
         which are identified as such to the Distributor) or with the
         Distributor. The purchaser must certify to the Distributor at the
         time of purchase that the purchase is for the purchaser's own
         account (or for the benefit of such employee's spouse or minor
         children).
|_|   Dealers, brokers, banks or registered investment advisors that have
         entered into an agreement with the Distributor providing
         specifically for the use of shares of the Fund in particular
         investment products made available to their clients. Those clients
         may be charged a transaction fee by their dealer, broker, bank or
         advisor for the purchase or sale of Fund shares.
|_|   Investment advisors and financial planners who have entered into an
         agreement for this purpose with the Distributor and who charge an
         advisory, consulting or other fee for their services and buy shares
         for their own accounts or the accounts of their clients.
|_|   "Rabbi trusts" that buy shares for their own accounts, if the purchases
         are made through a broker or agent or other financial intermediary
         that has made special arrangements with the Distributor for those
         purchases.
|_|   Clients of investment advisors or financial planners (that have entered
         into an agreement for this purpose with the Distributor) who buy
         shares for their own accounts may also purchase shares without sales
         charge but only if their accounts are linked to a master account of
         their investment advisor or financial planner on the books and
         records of the broker, agent or financial intermediary with which
         the Distributor has made such special arrangements. Each of these
         investors may be charged a fee by the broker, agent or financial
         intermediary for purchasing shares.
|_|   Directors, trustees, officers or full-time employees of OpCap Advisors
         or its affiliates, their relatives or any trust, pension, profit
         sharing or other benefit plan which beneficially owns shares for
         those persons.
|_|   Accounts for which Oppenheimer Capital (or its successor) is the
         investment advisor (the Distributor must be advised of this
         arrangement) and persons who are directors or trustees of the
         company or trust which is the beneficial owner of such accounts.
|_|   A unit investment trust that has entered into an appropriate agreement
         with the Distributor.
|_|   Dealers, brokers, banks, or registered investment advisers that have
         entered into an agreement with the Distributor to sell shares to
         defined contribution employee retirement plans for which the dealer,
         broker or investment adviser provides administration services.
|_|   Retirement Plans and deferred compensation plans and trusts used to
         fund those plans (including, for example, plans qualified or created
         under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
         Code), in each case if those purchases are made through a broker,
         agent or other financial intermediary that has made special
         arrangements with the Distributor for those purchases.
|_|   A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
         Advisors) whose Class B or Class C shares of a Former Quest for
         Value Fund were exchanged for Class A shares of that Fund due to the
         termination of the Class B and Class C TRAC-2000 program on November
         24, 1995.
|_|   A qualified Retirement Plan that had agreed with the former Quest for
         Value Advisors to purchase shares of any of the Former Quest for
         Value Funds at net asset value, with such shares to be held through
         DCXchange, a sub-transfer agency mutual fund clearinghouse, if that
         arrangement was consummated and share purchases commenced by
         December 31, 1996.
|_|   Effective October 1, 2005, taxable accounts established with the
         proceeds of Required Minimum Distributions from Retirement Plans.


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

1.   Class A shares issued or purchased in the following transactions are not
   subject to sales charges (and no concessions are paid by the Distributor
   on such purchases):
|_|   Shares issued in plans of reorganization, such as mergers, asset
         acquisitions and exchange offers, to which the Fund is a party.
|_|   Shares purchased by the reinvestment of dividends or other
         distributions reinvested from the Fund or other Oppenheimer funds or
         unit investment trusts for which reinvestment arrangements have been
         made with the Distributor.
|_|   Shares purchased by certain Retirement Plans that are part of a
         retirement plan or platform offered by banks, broker-dealers,
         financial advisors or insurance companies, or serviced by
         recordkeepers.
|_|   Shares purchased 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.
|_|   Shares purchased in amounts of less than $5

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


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

The Class A contingent deferred sales charge is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
|_|   To make Automatic Withdrawal Plan payments that are limited annually to
         no more than 12% of the account value adjusted annually.
|_|   Involuntary redemptions of shares by operation of law or involuntary
         redemptions of small accounts (please refer to "Shareholder Account
         Rules and Policies," in the applicable fund Prospectus).
|_|   For distributions from Retirement Plans, deferred compensation plans or
         other employee benefit plans for any of the following purposes:
         1) Following the death or disability (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established.
         2) To return excess contributions.
         3) To return contributions made due to a mistake of fact.
4)    Hardship withdrawals, as defined in the plan.(7)
         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.(8)
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) if the plan has made special
            arrangements with the Distributor.
         11)      Plan termination or "in-service distributions," if the
            redemption proceeds are rolled over directly to an
            OppenheimerFunds-sponsored IRA.
|_|   For distributions from 401(k) plans sponsored by broker-dealers that
         have entered into a special agreement with the Distributor allowing
         this waiver.
|_|   For distributions from retirement plans that have $10 million or more
         in plan assets and that have entered into a special agreement with
         the Distributor.
|_|   For distributions from retirement plans which are part of a retirement
         plan product or platform offered by certain banks, broker-dealers,
         financial advisors, insurance companies or record keepers which have
         entered into a special agreement with the Distributor.
III.    Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer
                                         Funds
---------------------------------------------------------------------------------

The Class B, Class C and Class N contingent deferred sales charges will not
be applied to shares purchased in certain types of transactions or redeemed
in certain circumstances described below.

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_|   Shares redeemed involuntarily, as described in "Shareholder Account
         Rules and Policies," in the applicable Prospectus.
|_|   Redemptions from accounts other than Retirement Plans following the
         death or disability of the last surviving shareholder. The death or
         disability must have occurred after the account was established, and
         for disability you must provide evidence of a determination of
         disability by the Social Security Administration.
|_|   The contingent deferred sales charges are generally not waived
         following the death or disability of a grantor or trustee for a
         trust account. The contingent deferred sales charges will only be
         waived in the limited case of the death of the trustee of a grantor
         trust or revocable living trust for which the trustee is also the
         sole beneficiary. The death or disability must have occurred after
         the account was established, and for disability you must provide
         evidence of a determination of disability (as defined in the
         Internal Revenue Code).
|_|   Distributions from accounts for which the broker-dealer of record has
         entered into a special agreement with the Distributor allowing this
         waiver.
|_|   Redemptions of Class B shares held by Retirement Plans whose records
         are maintained on a daily valuation basis by Merrill Lynch or an
         independent record keeper under a contract with Merrill Lynch.
|_|   Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
         accounts of clients of financial institutions that have entered into
         a special arrangement with the Distributor for this purpose.
|_|   Redemptions of Class C shares of an Oppenheimer fund in amounts of $1
         million or more requested in writing by a Retirement Plan sponsor
         and submitted more than 12 months after the Retirement Plan's first
         purchase of Class C shares, if the redemption proceeds are invested
         to purchase Class N shares of one or more Oppenheimer funds.
|_|   Distributions(9) 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.(10)
         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.(11)
         9) On account of the participant's separation from service.(12)
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) offered as an investment option in a
            Retirement Plan if the plan has made special arrangements with
            the Distributor.
         11)      Distributions made on account of a plan termination or
            "in-service" distributions, if the redemption proceeds are rolled
            over directly to an OppenheimerFunds-sponsored IRA.
         12)      For distributions from a participant's account under an
            Automatic Withdrawal Plan after the participant reaches age 59 1/2,
            as long as the aggregate value of the distributions does not
            exceed 10% of the account's value, adjusted annually.
         13)      Redemptions of Class B shares under an Automatic Withdrawal
            Plan for an account other than a Retirement Plan, if the
            aggregate value of the redeemed shares does not exceed 10% of the
            account's value, adjusted annually.
         14)      For distributions from 401(k) plans sponsored by
            broker-dealers that have entered into a special arrangement with
            the Distributor allowing this waiver.
|_|   Redemptions of Class B shares or Class C shares under an Automatic
         Withdrawal Plan from an account other than a Retirement Plan if the
         aggregate value of the redeemed shares does not exceed 10% of the
         account's value annually.

B. Waivers for Shares Sold or Issued in Certain Transactions.

The contingent deferred sales charge is also waived on Class B and Class C
shares sold or issued in the following cases:
|_|   Shares sold to the Manager or its affiliates.
|_|   Shares sold to registered management investment companies or separate
         accounts of insurance companies having an agreement with the Manager
         or the Distributor for that purpose.
|_|   Shares issued in plans of reorganization to which the Fund is a party.
|_|   Shares sold to present or former officers, directors, trustees or
         employees (and their "immediate families" as defined above in
         Section I.A.) of the Fund, the Manager and its affiliates and
         retirement plans established by them for their employees.
IV.






   Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer
           Funds Who Were Shareholders of Former Quest for Value Funds
-------------------------------------------------------------------------------

The initial and contingent deferred sales charge rates and waivers for Class
A, Class B and Class C shares described in the Prospectus or Statement of
Additional Information of the Oppenheimer funds are modified as described
below for certain persons who were shareholders of the former Quest for Value
Funds.  To be eligible, those persons must have been shareholders on November
24, 1995, when OppenheimerFunds, Inc. became the investment advisor to those
former Quest for Value Funds.  Those funds include:
   Oppenheimer Quest Value Fund, Inc.           Oppenheimer Small- & Mid- Cap
   Value Fund
   Oppenheimer Quest Balanced 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 Core Bond Fund,
   Oppenheimer Value Fund and
   Oppenheimer Disciplined Allocation Fund
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
   Connecticut Mutual Liquid Account         Connecticut Mutual Total Return
   Account
   Connecticut Mutual Government Securities Account   CMIA LifeSpan Capital
   Appreciation Account
   Connecticut Mutual Income Account         CMIA LifeSpan Balanced Account
   Connecticut Mutual Growth Account         CMIA Diversified Income Account

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

|X|   Class A Contingent Deferred Sales Charge. Certain shareholders of a
Fund and the other Former Connecticut Mutual Funds are entitled to continue
to make additional purchases of Class A shares at net asset value without a
Class A initial sales charge, but subject to the Class A contingent deferred
sales charge that was in effect prior to March 18, 1996 (the "prior Class A
CDSC"). Under the prior Class A CDSC, if any of those shares are redeemed
within one year of purchase, they will be assessed a 1% contingent deferred
sales charge on an amount equal to the current market value or the original
purchase price of the shares sold, whichever is smaller (in such redemptions,
any shares not subject to the prior Class A CDSC will be redeemed first).

      Those shareholders who are eligible for the prior Class A CDSC are:
         1) persons whose purchases of Class A shares of a Fund and other
            Former Connecticut Mutual Funds were $500,000 prior to March 18,
            1996, as a result of direct purchases or purchases pursuant to
            the Fund's policies on Combined Purchases or Rights of
            Accumulation, who still hold those shares in that Fund or other
            Former Connecticut Mutual Funds, and
         2) persons whose intended purchases under a Statement of Intention
            entered into prior to March 18, 1996, with the former general
            distributor of the Former Connecticut Mutual Funds to purchase
            shares valued at $500,000 or more over a 13-month period entitled
            those persons to purchase shares at net asset value without being
            subject to the Class A initial sales charge

      Any of the Class A shares of a Fund and the other Former Connecticut
Mutual Funds that were purchased at net asset value prior to March 18, 1996,
remain subject to the prior Class A CDSC, or if any additional shares are
purchased by those shareholders at net asset value pursuant to this
arrangement they will be subject to the prior Class A CDSC.

|X|





      Class A Sales Charge Waivers. Additional Class A shares of a Fund may
be purchased without a sales charge, by a person who was in one (or more) of
the categories below and acquired Class A shares prior to March 18, 1996, and
still holds Class A shares:
         1) any purchaser, provided the total initial amount invested in the
            Fund or any one or more of the Former Connecticut Mutual Funds
            totaled $500,000 or more, including investments made pursuant to
            the Combined Purchases, Statement of Intention and Rights of
            Accumulation features available at the time of the initial
            purchase and such investment is still held in one or more of the
            Former Connecticut Mutual Funds or a Fund into which such Fund
            merged;
         2) any participant in a qualified plan, provided that the total
            initial amount invested by the plan in the Fund or any one or
            more of the Former Connecticut Mutual Funds totaled $500,000 or
            more;
         3) Directors of the Fund or any one or more of the Former
            Connecticut Mutual Funds and members of their immediate families;
         4) employee benefit plans sponsored by Connecticut Mutual Financial
            Services, L.L.C. ("CMFS"), the prior distributor of the Former
            Connecticut Mutual Funds, and its affiliated companies;
         5) one or more members of a group of at least 1,000 persons (and
            persons who are retirees from such group) engaged in a common
            business, profession, civic or charitable endeavor or other
            activity, and the spouses and minor dependent children of such
            persons, pursuant to a marketing program between CMFS and such
            group; and
         6) an institution acting as a fiduciary on behalf of an individual
            or individuals, if such institution was directly compensated by
            the individual(s) for recommending the purchase of the shares of
            the Fund or any one or more of the Former Connecticut Mutual
            Funds, provided the institution had an agreement with CMFS.

      Purchases of Class A shares made pursuant to (1) and (2) above may be
subject to the Class A CDSC of the Former Connecticut Mutual Funds described
above.

      Additionally, Class A shares of a Fund may be purchased without a sales
charge by any holder of a variable annuity contract issued in New York State
by Connecticut Mutual Life Insurance Company through the Panorama Separate
Account which is beyond the applicable surrender charge period and which was
used to fund a qualified plan, if that holder exchanges the variable annuity
contract proceeds to buy Class A shares of the Fund.

B. Class A and Class B Contingent Deferred Sales Charge Waivers.

In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B
shares of a Fund into Class A or Class B shares of a Former Connecticut
Mutual Fund provided that the Class A or Class B shares of the Fund to be
redeemed or exchanged were (i) acquired prior to March 18, 1996 or (ii) were
acquired by exchange from an Oppenheimer fund that was a Former Connecticut
Mutual Fund. Additionally, the shares of such Former Connecticut Mutual Fund
must have been purchased prior to March 18, 1996:
   1) by the estate of a deceased shareholder;
   2) upon the disability of a shareholder, as defined in Section 72(m)(7) of
      the Internal Revenue Code;
   3) for retirement distributions (or loans) to participants or
      beneficiaries from retirement plans qualified under Sections 401(a) or
      403(b)(7)of the Code, or from IRAs, deferred compensation plans created
      under Section 457 of the Code, or other employee benefit plans;
4)    as tax-free returns of excess contributions to such retirement or
      employee benefit plans;
   5) in whole or in part, in connection with shares sold to any state,
      county, or city, or any instrumentality, department, authority, or
      agency thereof, that is prohibited by applicable investment laws from
      paying a sales charge or concession in connection with the purchase of
      shares of any registered investment management company;
   6) in connection with the redemption of shares of the Fund due to a
      combination with another investment company by virtue of a merger,
      acquisition or similar reorganization transaction;
   7) in connection with the Fund's right to involuntarily redeem or
      liquidate the Fund;
   8) in connection with automatic redemptions of Class A shares and Class B
      shares in certain retirement plan accounts pursuant to an Automatic
      Withdrawal Plan but limited to no more than 12% of the original value
      annually; or
   9) as involuntary redemptions of shares by operation of law, or under
      procedures set forth in the Fund's Articles of Incorporation, or as
      adopted by the Board of Directors of the Fund.
VI.       Special Reduced Sales Charge for Former Shareholders of Advance
                                America Funds, Inc.
------------------------------------------------------------------------------

Shareholders of Oppenheimer AMT-Free Municipals, Oppenheimer U.S. Government
Trust, Oppenheimer Strategic Income Fund and Oppenheimer Capital Income Fund
who acquired (and still hold) shares of those funds as a result of the
reorganization of series of Advance America Funds, Inc. into those
Oppenheimer funds on October 18, 1991, and who held shares of Advance America
Funds, Inc. on March 30, 1990, may purchase Class A shares of those four
Oppenheimer funds at a maximum sales charge rate of 4.50%.
VII.     Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
                            Convertible Securities Fund
------------------------------------------------------------------------------

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









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
PX880.001.0106



(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.
(2) Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
(7) This provision does not apply to IRAs.
(8) 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.
(9) The distribution must be requested prior to Plan termination or the
elimination of the Oppenheimer funds as an investment option under the Plan.
(10) This provision does not apply to IRAs.
(11) This provision does not apply to loans from 403(b)(7) custodial plans
and loans from the OppenheimerFunds-sponsored Single K retirement plan.
(12) This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.