Oppenheimer International Bond Fund

6803 S. Tucson Way, Centennial, CO 80112
1.800.CALL OPP (225.5677)

Statement of Additional Information dated November 24, 2006, revised as of
May 25, 2007


         This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated November 24, 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...................................  2
     The Fund's Investment Policies.....................................................................  2
     Other Investment Techniques and Strategies.........................................................  7
     Other Investment Restrictions......................................................................  31
     Disclosure of Portfolio Holdings...................................................................  33
How the Fund is Managed ................................................................................  37
     Organization and History...........................................................................  37
     Board of Trustees and Oversight Committees.........................................................  38
     Trustees and Officers of the Fund..................................................................  40
     The Manager........................................................................................  49
Brokerage Policies of the Fund..........................................................................  53
Distribution and Service Plans..........................................................................  55
Payments to Fund Intermediaries.........................................................................  60
Performance of the Fund.................................................................................  64

About Your Account
How To Buy Shares.......................................................................................  70
How To Sell Shares......................................................................................  80
How To Exchange Shares..................................................................................  85
Dividends, Capital Gains and Taxes......................................................................  90
Additional Information About the Fund...................................................................  94

Financial Information About the Fund
Report of the Independent Registered Public Accounting Firm.............................................  95
Financial Statements....................................................................................  96

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 ("SAI") 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 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.

         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.

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 Currency Risk. The Fund may purchase securities denominated in foreign
currencies and in derivative instruments linked to foreign currencies. A change
in the value of such foreign currency against the U.S. dollar will result in a
change in the U.S. dollar value of securities denominated in or derivatives
linked to that foreign currency and 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.

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) or due to currency devaluation;
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.

o Special Risks of Emerging Markets. Emerging and developing markets abroad may
also offer special opportunities for growth investing but have greater risks
than more developed foreign markets, such as those in Europe, Canada, Australia,
New Zealand and Japan. There may be even less liquidity in their securities
markets, and settlements of purchases and sales of securities may be subject to
additional delays. They are subject to greater risks of limitations on the
repatriation of income and profits because of currency restrictions imposed by
local governments. Those countries may also be subject to the risk of greater
political and economic instability, which can greatly affect the volatility of
prices of securities in those countries. 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 IRC ss.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"), 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 various 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. 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, 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.

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

         The Fund 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 net 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 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. 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 JPMorgan 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 JPMorgan 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 JPMorgan 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. JPMorgan 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 JPMorgan 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,
including "structured" notes, convertible notes, options, forward contracts and
futures contracts, to seek income or for hedging purposes. The use of
derivatives requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a derivative instrument at the wrong time or judges market
conditions incorrectly, the use of derivatives may reduce the Fund's return.

         Although it is not obligated to do so, the Fund can use derivatives to
hedge. 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 strategies the Fund can use are described below. The Fund may
employ new hedging 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 "Structured" Notes. The Fund can invest in "structured" notes, which are
specially-designed derivative debt investments whose principal payments or
interest payments are linked to the value of an underlying asset, such as an
equity or debt security, currency, or commodity, or non-asset reference, such as
an interest rate or index. The terms of the instrument may be "structured" by
the purchaser (the Fund) and the borrower issuing the note.

     The values of these  notes will fall or rise in  response to changes in the
values of the  underlying  asset or  reference  and the Fund might  receive less
principal or interest if the  underlying  asset or reference does not perform as
anticipated. In some cases, these notes may pay an amount based on a multiple of
the relative change in value of the asset or reference. This type of note 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.

     The  values of these  notes are also  subject to both  credit  risk (if the
counterparty fails to meet its obligations) and interest rate risk and therefore
the Fund could  receive  more or less than it  originally  invested  when a note
matures.  The  prices of these  notes may be very  volatile  and they may have a
limited trading  market,  making it difficult for the Fund to value them or sell
them at an acceptable price.

o Swaps. The Fund may enter into swap agreements, including interest rate, total
return, credit default and volatility swaps. Swap agreements are two-party
contracts entered into primarily by institutional investors for a specified
period of time typically ranging from a few weeks to more than one year. In a
standard swap transaction, two parties agree to exchange the returns (or the
difference between the returns) earned or realized on a particular asset, such
as an equity or debt security, commodity or currency, or non-asset reference,
such as an interest rate or index. The swapped returns are generally calculated
with respect to a notional amount, that is, the return on a particular dollar
amount invested in the underlying asset or reference. The Fund may enter into a
swap agreement to, among other reasons, gain exposure to certain markets in the
most economical way possible, protect against currency fluctuations, or reduce
risk arising from ownership of a particular security or instrument. 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.

         The Fund may 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 more than one swap transaction, the amount payable
shall be the net amount. In addition, the master netting agreement may provide
that if one party defaults generally or on any swap, the counterparty can
terminate all outstanding swaps with that party.

         The use of swap agreements by the Fund entails certain risks. The swaps
market is generally unregulated. There is no central exchange or market for swap
transactions and therefore they are less liquid investments than exchange-traded
instruments and may be considered illiquid by the Fund. Swap agreements entail
credit risk arising from the possibility that the counterparty will default. If
the counterparty defaults, the Fund's loss will consist of the net amount of
contractual payments that the Fund has not yet received. The Manager will
monitor the creditworthiness of counterparties to the Fund's swap transactions
on an ongoing basis. The Fund's successful use of swap agreements is dependent
upon the Manager's ability to predict correctly whether certain types of
investments are likely to produce greater returns than other investments. Swap
agreements may effectively add leverage to the Fund's portfolio because the Fund
would be subject to investment exposure on the notional amount of the swap.

o Interest Rate Swaps. The Fund may enter into interest rate swaps. 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. There is a
risk that, based on movements of interest rates, the payments made by the Fund
under a swap agreement will be greater than the payments it receives.

o Total Return Swaps. The Fund may enter into total return swaps, under which
one party agrees to pay the other the total return of a defined underlying
asset, such as a security or basket of securities, or non-asset reference, such
as a securities index, during the specified period in return for periodic
payments based on a fixed or variable interest rate or the total return from
different underlying assets or references. Total return swaps could result in
losses if the underlying asset or reference does not perform as anticipated by
the Manager.

o Credit Default Swaps. The Fund may enter into credit default swaps. A credit
default swap enables an investor to buy or sell protection against a credit
event, such as an issuer's failure to make timely payments of interest or
principal, bankruptcy or restructuring. The Fund may seek to enhance returns by
selling protection or attempt to mitigate credit risk by buying protection
against the occurrence of a credit event by a specified issuer. The Fund may
enter into credit default swaps, both directly ("unfunded swaps") and indirectly
("funded swaps") in the form of a swap embedded within a structured security.
Unfunded and funded credit default swaps may refer to a single security or on a
basket of securities.

         If the Fund buys credit protection using a credit default swap and a
credit event occurs, the Fund will deliver the defaulted bonds underlying the
swap and the swap counterparty will pay the par amount of the bonds. If the Fund
sells credit protection using a credit default swap and a credit event occurs,
the Fund will pay the par amount of the defaulted bonds underlying the swap 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 bonds, and the fixed payments are then made on the reduced notional
amount.

         Risks of credit default swaps include counterparty credit risk (if the
counterparty fails to meet its obligations) and the risk that the Fund will not
properly assess the cost of the instrument based on the lack of transparency in
the market. If the Fund is selling credit protection, there is a risk that a
credit event will occur and that the Fund will have to pay par value on
defaulted bonds. If the Fund is buying credit protection, there is a risk that
no credit event will occur and the Fund will receive no benefit for the premium
paid. In addition, if the Fund is buying credit protection and a credit event
does occur, there is a risk when the Fund does not own the underlying security,
that the Fund will have difficulty acquiring the bond on the open market and may
receive adverse pricing.

o Volatility Swap Contracts. The Fund may enter into a volatility swaps to hedge
the direction of volatility in a particular asset or non-asset reference, or for
other non-speculative purposes. For volatility swaps, counterparties agree to
buy or sell volatility at a specific level over a fixed period. Volatility swaps
are subject to credit risks (if the counterparty fails to meet its obligations),
and the risk that the Manager is incorrect in forecasts of volatility of the
underlying asset or reference.

o Swap Options and Swap Forwards. The Fund also may enter into options on swaps
as well as forwards on swaps. A swap option is a contract that gives a
counterparty the right (but not the obligation) to enter into a new swap
agreement or to shorten, extend, cancel, or otherwise modify an existing swap
agreement on pre-designated terms. The Fund may write (sell) and purchase put
and call swap options. A swap forward is an agreement to enter into a swap
agreement at some point in the future, usually three to six months from the date
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 swap. The Fund
generally will incur a greater risk when it writes a swap option than when it
purchases a swap option. When the Fund purchases a swap option it risks losing
only the amount of the premium they have paid if the Fund lets the option expire
unexercised. When the Fund writes a swap option it will become obligated, upon
exercise of the option by the counterparty, according to the terms of the
underlying agreement.

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 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.

         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 the underlying security, unless the
option is subject to a buy-back agreement with 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.

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

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

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

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

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

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.

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 strategies
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 strategy 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 derivative
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 derivative 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 derivative 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 derivative 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 derivative 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 hedge position 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 for investment purposes or for hedging purposes, 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 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 for investment purposes, for example
to create synthetic positions in foreign debt securities. The Fund may also 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 a 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 Regulatory Aspects of Certain Derivative 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 Certain Derivative 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.

|X| 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.

|X| Event-Linked Bonds. The Fund may invest in "event-linked" bonds.
Event-linked bonds, which are sometimes referred to as "catastrophe" bonds, are
fixed income securities for which the return of principal and payment of
interest is contingent on the non-occurrence of a specific trigger event, such
as a hurricane, earthquake, or other occurrence that leads to physical or
economic loss. In some cases, the trigger event will not be deemed to have
occurred unless the event is of a certain magnitude (based on scientific
readings) or causes a certain measurable amount of loss to the issuer, a
particular industry group or a reference index. If the trigger event occurs
prior to maturity, the Fund may lose all or a portion of its principal and
additional interest. The Fund may also invest in similar bonds where the Fund
may lose all or a portion of its principal and additional interest if the
mortality rate in a geographic area exceeds a stated threshold prior to maturity
whether or not a particular catastrophic event has occurred.

Event-linked bonds may be issued by government agencies, insurance companies,
reinsurers, and financial institutions, among other issuers, or special purpose
vehicles associated with the foregoing. Often event-linked bonds provide for
extensions of maturity in order to process and audit loss claims in those cases
when a trigger event has occurred or is likely to have occurred. An extension of
maturity may increase a bond's volatility.

Event-linked bonds may expose the Fund to certain other risks, including issuer
default, adverse regulatory or jurisdictional interpretations, liquidity risk
and adverse tax consequences. Lack of a liquid market may result in higher
transaction costs and the possibility that the Fund may be forced to liquidate
positions when it would not be advantageous to do so. Event-linked bonds are
typically rated by one or more nationally recognized statistical rating
organization and the Fund will only invest in event-linked bonds that meet the
credit quality requirements for the Fund.

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 country 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.

|X| 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 may be able to 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.

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 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), and
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), and
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  (the  "CCO")  of the Fund and the  Manager,
Distributor,  and Transfer  Agent 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 LLC               Nomura Securities
               -------------------------------------------- -------------------------------------
               -------------------------------------------- -------------------------------------
               Credit Agricole Cheuvreux N.A. Inc.          Pacific Crest
               -------------------------------------------- -------------------------------------
               -------------------------------------------- -------------------------------------
               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 Wasserstein               Plexus
               -------------------------------------------- -------------------------------------
               -------------------------------------------- -------------------------------------
               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
               -------------------------------------------- -------------------------------------
               -------------------------------------------- -------------------------------------
               JPMorgan                                     Wescott Financial
               -------------------------------------------- -------------------------------------
               -------------------------------------------- -------------------------------------
               JPMorgan 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 a vote of shareholders. Each share of the Fund represents
an interest in the Fund proportionately equal to the interest of each other
share of the same class.

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.

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 6 meetings during the Fund's fiscal year ended September 30,
2006. 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, 2006. 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,
2006. 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 III
Oppenheimer Capital Income Fund                                Oppenheimer Real Asset Fund
Oppenheimer Champion Income Fund                               Oppenheimer Senior Floating Rate Fund
Oppenheimer Equity Fund, Inc.                                  Oppenheimer Strategic Income Fund
Oppenheimer Integrity Funds                                    Oppenheimer Variable Account Funds
Oppenheimer International Bond Fund                            Panorama Series Fund, Inc.
Oppenheimer Limited-Term Government Fund
Oppenheimer Main Street Funds, Inc.
Oppenheimer Main Street Opportunity Fund                       Centennial California Tax Exempt Trust
Oppenheimer Main Street Small Cap Fund                         Centennial Government Trust
Oppenheimer Municipal Fund                                     Centennial Money Market Trust
Oppenheimer Principal Protected Trust                          Centennial New York Tax Exempt Trust
Oppenheimer Principal Protected Trust II                       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) with the     Principal Occupation(s) During the Past 5 Years; Other                Dollar Range of      Aggregate
                                                                                                                        Dollar Range
                                                                                                                          of Shares
                                                                                                                        Beneficially
                                                                                                         Shares         Owned in All
                               Trusteeships/Directorships Held; Number of Portfolios in the Fund      Beneficially       Supervised
Fund, Length of Service, Age   Complex Currently Overseen                                           Owned in the Fund       Funds
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
------------------------------ -------------------------------------------------------------------- -----------------------------------
                                                                                                         As of December 31, 2005
------------------------------ -------------------------------------------------------------------- -----------------------------------
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
William L. Armstrong,          President, Colorado Christian University (since 2006);Chairman of          None         Over $100,000
Chairman of the Board of       the following private mortgage banking companies: Cherry Creek
Trustees since 2003, Trustee   Mortgage Company (since 1991), Centennial State Mortgage Company
since 1999                     (since 1994), and The El Paso Mortgage Company (since 1993);
Age: 69                        Chairman of the following private companies: Ambassador Media
                               Corporation (since 1984) and Broadway Ventures
                               (since 1984); Director of the following:
                               Helmerich & Payne, Inc. (oil and gas
                               drilling/production company) (since 1992), Campus
                               Crusade for Christ (since 1991) and The Lynde and
                               Harry Bradley Foundation, Inc. (non-profit
                               organization) (since 2002); former Chairman of
                               the following: Transland Financial Services, Inc.
                               (private mortgage banking company) (1997-2003),
                               Great Frontier Insurance (insurance agency)
                               (1995-2000), Frontier Real Estate, Inc.
                               (residential real estate brokerage) (1994-2000)
                               and Frontier Title (title insurance agency)
                               (1995-2000); former Director of the following:
                               UNUMProvident (insurance company) (1991-2004),
                               Storage Technology Corporation (computer
                               equipment company) (1991-2003) and International
                               Family Entertainment (television channel)
                               (1992-1997); U.S. Senator (January 1979-January
                               1991). Oversees 37 portfolios in the
                               OppenheimerFunds complex.
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
Robert G. Avis,                Director and President of A.G. Edwards Capital, Inc. (General              None         Over $100,000
Trustee since 1993             Partner of private equity funds) (until February 2001); Chairman,
Age: 75                        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
                               37 portfolios in the OppenheimerFunds complex.
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
George C. Bowen,               Assistant Secretary and Director of Centennial Asset Management       $10,001-$50,000   Over $100,000
Trustee since 1998             Corporation (December 1991-April 1999); President, Treasurer and
Age: 70                        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 37 portfolios in the
                               OppenheimerFunds complex.
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
Edward L. Cameron,             Member of The Life Guard of Mount Vernon (George Washington                None         Over $100,000
Trustee since 1999             historical site) (since June 2000); Director of Genetic ID, Inc.
Age: 68                        (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 (accounting firm) (July
                               1994-June 1998). Oversees 37 portfolios in the
                               OppenheimerFunds complex.
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
Jon S. Fossel,                 Director of UNUMProvident (insurance company) (since June 2002);      $10,001-$50,000   Over $100,000
Trustee since 1990             Director of Northwestern Energy Corp. (public utility corporation)
Age: 64                        (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 and since
                               February 2005); 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 37 portfolios in the OppenheimerFunds complex.
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
Sam Freedman,                  Director of Colorado Uplift (charitable organization) (since          $10,001-$50,000   Over $100,000
Trustee since 1996             September 1984). Mr. Freedman held several positions with the
Age: 66                        Manager and with subsidiary or affiliated companies of the Manager
                               (until October 1994). Oversees 37 portfolios in the
                               OppenheimerFunds complex.
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
Beverly L. Hamilton,           Trustee of Monterey Institute for International Studies                    None         Over $100,000
Trustee since 2002             (educational organization) (since February 2000); Board Member of
Age: 60                        Middlebury College (educational organization) (since December
                               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 (since 2001) and The
                               University of Michigan (since 2000); 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 37 portfolios in the
                               OppenheimerFunds complex.
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
Robert J. Malone,              Director of Jones International University (educational               $10,001-$50,000   Over $100,000
Trustee since 2002             organization) (since August 2005); Chairman, Chief Executive
Age: 62                        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 37 portfolios in
                               the OppenheimerFunds complex.
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
------------------------------ -------------------------------------------------------------------- ------------------ ----------------
F. William Marshall, Jr.,      Trustee of MassMutual Select Funds (formerly MassMutual                    None         Over $100,000
Trustee since 2000             Institutional Funds) (investment company) (since 1996) and MML
Age: 64                        Series Investment Fund (investment company) (since 1996); Trustee
                               (since 1987) 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 39 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) Held with    Principal Occupation(s) During the Past 5 Years; Other               Dollar Range of      Aggregate
                                                                                                                       Dollar Range
                                                                                                                         Of Shares
                                                                                                         Shares        Beneficially
                                                                                                      Beneficially     Owned in All
the Fund, Length of Service,   Trusteeships/Directorships Held; Number of Portfolios in the Fund      Owned in the      Supervised
Age                            Complex Currently Overseen                                                 Fund             Funds
------------------------------ -------------------------------------------------------------------- ----------------- ----------------
------------------------------ -------------------------------------------------------------------- ----------------------------------
                                                                                                         As of December 31, 2005
------------------------------ -------------------------------------------------------------------- ----------------------------------
------------------------------ -------------------------------------------------------------------- ----------------- ----------------
John V. Murphy,                Chairman, Chief Executive Officer and Director (since June 2001)     $10,001-$50,000   Over $100,000
President, Principal           and President (since September 2000) of the Manager; President and
Executive Officer and          director or trustee of other Oppenheimer funds; President and
Trustee since 2001             Director of OAC and of Oppenheimer Partnership Holdings, Inc.
Age: 57                        (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 91 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) Held with the    Principal Occupation(s) During Past 5 Years
Fund, Length of Service, Age
---------------------------------- ----------------------------------------------------------------------------------------------
---------------------------------- ----------------------------------------------------------------------------------------------
Arthur P. Steinmetz, Senior Vice President of the Manager (since March 1993) and
of HarbourView Asset Management Vice President and Portfolio Corporation (since
March 2000); an officer of 10 portfolios in the OppenheimerFunds complex.
Manager since 2004
Age: 48
---------------------------------- ----------------------------------------------------------------------------------------------
---------------------------------- ----------------------------------------------------------------------------------------------
Mark S. Vandehey,                  Senior Vice President and Chief Compliance Officer of the Manager (since March 2004); Vice
Vice President and Chief           President of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation and
Compliance Officer since 2004      Shareholder Services, Inc. (since June 1983); Vice President and Director of Internal Audit
Age: 56                            of the Manager (1997-February 2004). An officer of 91 portfolios in the OppenheimerFunds
                                   complex.
---------------------------------- ----------------------------------------------------------------------------------------------
---------------------------------- ----------------------------------------------------------------------------------------------
Brian W. Wixted,                   Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer since 1999               following: HarbourView Asset Management Corporation, Shareholder Financial Services, Inc.,
Age: 47                            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 91 portfolios
                                   in the OppenheimerFunds complex.
---------------------------------- ----------------------------------------------------------------------------------------------
---------------------------------- ----------------------------------------------------------------------------------------------
Brian Petersen,                    Assistant Vice President of the Manager (since August 2002); Manager/Financial Product
Assistant Treasurer since 2004     Accounting of the Manager (November 1998-July 2002). An officer of 91 portfolios in the
Age:36                             OppenheimerFunds complex.
---------------------------------- ----------------------------------------------------------------------------------------------
---------------------------------- ----------------------------------------------------------------------------------------------
Brian C. Szilagyi,                 Assistant Vice President of the Manager (since July 2004); Director of Financial Reporting
Assistant Treasurer since 2005     and Compliance of First Data Corporation (April 2003-July 2004); Manager of Compliance of
Age: 36                            Berger Financial Group LLC (May 2001-March 2003). An officer of 91 portfolios in the
                                   OppenheimerFunds complex.
---------------------------------- ----------------------------------------------------------------------------------------------
---------------------------------- ----------------------------------------------------------------------------------------------
Robert G. Zack,                    Executive Vice President (since January 2004) and General Counsel (since March 2002) of the
Vice President and Secretary       Manager; General Counsel and Director of the Distributor (since December 2001); General
since 2001                         Counsel of Centennial Asset Management Corporation (since December 2001); Senior Vice
Age: 58                            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 91 portfolios in the
                                   OppenheimerFunds complex.
---------------------------------- ----------------------------------------------------------------------------------------------
---------------------------------- ----------------------------------------------------------------------------------------------
Lisa I. Bloomberg,                 Vice President and Associate Counsel of the Manager (since May 2004); First Vice President
Assistant Secretary since 2004     (April 2001-April 2004), Associate General Counsel (December 2000-April 2004), Corporate
Age: 38                            Vice President (May 1999-April 2001) and Assistant General Counsel (May 1999-December 2000)
                                   of UBS Financial Services Inc. (formerly, PaineWebber Incorporated). An officer of 91
                                   portfolios in the OppenheimerFunds complex.
---------------------------------- ----------------------------------------------------------------------------------------------
---------------------------------- ----------------------------------------------------------------------------------------------
Kathleen T. Ives,                  Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since October
Assistant Secretary since 2001     2003) of the Manager; Vice President (since 1999) and Assistant Secretary (since October
Age: 41                            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 91 portfolios in the OppenheimerFunds complex.
---------------------------------- ----------------------------------------------------------------------------------------------
---------------------------------- ----------------------------------------------------------------------------------------------
Phillip S. Gillespie,              Senior Vice President and Deputy General Counsel of the Manager (since September 2004);
Assistant Secretary since 2004     First Vice President (2000-September 2004), Director (2000-September 2004) and Vice
Age: 42                            President (1998-2000) of Merrill Lynch Investment Management. An officer of 91 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, 2006.
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 Position(s) (as    Aggregate Compensation From the      Total Compensation From the
applicable)                                                   Fund(1)                    Fund and Fund Complex(2)
------------------------------------------------ ----------------------------------- ---------------------------------
------------------------------------------------ ----------------------------------- ---------------------------------
William L. Armstrong                                          $10,522                            $178,000
Chairman of the Board and
Governance Committee Member
------------------------------------------------ ----------------------------------- ---------------------------------
------------------------------------------------ ----------------------------------- ---------------------------------
Robert G. Avis                                                 $7,013                            $118,500
Review Committee Member
------------------------------------------------ ----------------------------------- ---------------------------------
------------------------------------------------ ----------------------------------- ---------------------------------
George C. Bowen                                                $7,013                            $118,500
Audit Committee Member
------------------------------------------------ ----------------------------------- ---------------------------------
------------------------------------------------ ----------------------------------- ---------------------------------
Edward L. Cameron                                              $8/348                            $136,000
Audit Committee Chairman
------------------------------------------------ ----------------------------------- ---------------------------------
------------------------------------------------ ----------------------------------- ---------------------------------
Jon S. Fossel                                                  $7,545                            $124,100
Review Committee Chairman
------------------------------------------------ ----------------------------------- ---------------------------------
------------------------------------------------ ----------------------------------- ---------------------------------
Sam Freedman                                                   $7,013                            $118,500
Review Committee Member
------------------------------------------------ ----------------------------------- ---------------------------------
------------------------------------------------ ----------------------------------- ---------------------------------
Beverly Hamilton
Review Committee Member and                                  $6,563(3)                           $107,175
Governance Committee Member
------------------------------------------------ ----------------------------------- ---------------------------------
------------------------------------------------ ----------------------------------- ---------------------------------
Robert J. Malone
Governance Committee Chairman and                            $8,062(4)                           $134,868
Audit Committee Member
------------------------------------------------ ----------------------------------- ---------------------------------
------------------------------------------------ ----------------------------------- ---------------------------------
F. William Marshall, Jr.
Audit Committee Member and Governance                          $7,013                         $169,500((5))
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 $6,563 deferred by Ms. Hamilton under the "Deferred Compensation
     Plan" described below.
4.   Includes $1,476 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.

Compensation Deferral Plan For Trustees. The Board of Trustees has adopted a
Compensation Deferral 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.

Major Shareholders. As of November 3, 2006, 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 137,521,474.580, Class A shares (19.32% 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 85,508,003.015 Class A shares (12.01% of the
         Class A shares then outstanding).

         Citigroup Global Markets, Inc., 333 West 34th Street, 7th Floor, New
         York, NY 10001-2483, which owned 2,820,906.235 Class B shares (7.14% 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 2,212,137.206 Class B shares (5.60% 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 41,995,931.598 Class C shares (27.28% of the
         Class C shares then outstanding).

         Citigroup Global Markets, Inc., 333 West 34th Street, 7th Floor, New
         York, NY 10001-2483, which owned 25,499,189.695 Class C shares (16.56%
         of the Class C shares then outstanding).

         Oppenheimer International Diversified Fund, 6803 South Tucson Way,
         Centennial, CO 80112-3924, which owned 10,323,770.985 Class Y shares
         (31.76% of the Class Y shares then outstanding).

         Wells Fargo Bank NA, FBO WF Wealthbuilder Growth Balanced Portfolio; PO
         Box 1533, Minneapolis, MN 55480-1533, which owned 4,252,045.209 Class Y
         shares (13.08% 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 2,686,826.212 Class Y shares (8.26% of the Class Y
         shares then outstanding).

         Oppenheimer Portfolio Series Moderate Investor, Moderate Investor, 6803
         South Tucson Way, Centennial, CO 80112-3924, which owned 4,232,816.340
         Class Y shares (13.02% of the Class Y shares then outstanding).

         Oppenheimer Portfolio Series Active Allocation Fund, 6803 South Tucson
         Way, Centennial, CO 80112-3924, which owned 2,328,492.260 Class Y
         shares (7.16% of the Class Y shares then outstanding).

         Oppenheimer Portfolio Series Conservative Investor, 6803 South Tucson
         Way, Centennial, CO 80112-3924, which owned 1,644,079.159 Class Y
         shares (5.05% of the Class Y shares then outstanding).

         UMB Bank NA Cust., AMFO & Co., 1010 Grand Blvd, Kansas City, MO
         64106-2202, which owned 3,955,767.652 Class N shares (27.38% of the
         Class N shares then outstanding).

         Hartford Life Insurance Co, PO Box 2999, Hartford, CT 06104-2999, which
         owned 1,584,591.035 Class N shares (10.96% 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.

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.

Portfolio Proxy Voting. The Fund has adopted Portfolio Proxy Voting Policies
and Procedures, which include Proxy Voting Guidelines, 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 following two procedures: (1) if the proposal that gives rise to the
conflict is specifically addressed in the Proxy Voting Guidelines, the Manager
will vote the portfolio proxy in accordance with the Proxy Voting 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 Proxy
Voting Guidelines or the Proxy Voting 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 Proxy Voting 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 ratification of the
              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
              the 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.

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.
         ----------------------------------- --------------------------------------------------------------
         ----------------------------------- --------------------------------------------------------------
                        2004                                          $7,484,558
         ----------------------------------- --------------------------------------------------------------
         ----------------------------------- --------------------------------------------------------------
                        2005                                          $14,728,663
         ----------------------------------- --------------------------------------------------------------
         ----------------------------------- --------------------------------------------------------------
                        2006                                          $24,458,289
         ----------------------------------- --------------------------------------------------------------

         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.

o 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, 2006. No portfolio or account has an advisory fee
based on performance:

                                                 Registered Investment      Other Pooled       Other Accounts**
                                                       Companies         Investment Vehicles
         --------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------
         Accounts Managed                                  6                      3                  None
         --------------------------------------------------------------------------------------------------------
         --------------------------------------------------------------------------------------------------------
         Total Assets Managed*                         $9,675.3                  $56.7               None

*    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, 2006, 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, 2006, 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 commission or concession paid by the issuer to the
underwriter in the price of the security. Portfolio securities purchased from
dealers include a spread between the bid and asked 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, 2006, the Fund did not
execute any transactions through or pay any commissions to firms that provide
research services.

------------------------------------------- ---------------------------------------------------------------
      Fiscal Year Ended September 30                Total Brokerage Commissions Paid by the Fund*
------------------------------------------- ---------------------------------------------------------------
------------------------------------------- ---------------------------------------------------------------
                   2004                                                $250,091
------------------------------------------- ---------------------------------------------------------------
------------------------------------------- ---------------------------------------------------------------
                   2005                                                $125,717
------------------------------------------- ---------------------------------------------------------------
------------------------------------------- ---------------------------------------------------------------
                   2006                                               $ 433,022
------------------------------------------- ---------------------------------------------------------------
   * 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 Year     Aggregate Front-End     Class A Front-End
                                        Sales Charges
Ended 9/30:     Sales Charges on        Retained by
                Class A Shares          Distributor
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
     2004             $3,965,257             $822,275(1)
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
     2005             $7,989,659            $1,626,798(1)
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
     2006             $7,342,600            $1,530,031(1)
--------------- ----------------------- -----------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent
of the Distributor.

--------------- ----------------------- ----------------------- ------------------------ -----------------------
Fiscal Year     Concessions on Class    Concessions on Class    Concessions on Class C   Concessions on Class
Ended 9/30:     A Shares Advanced by    B Shares Advanced by    Shares Advanced by       N Shares Advanced by
                Distributor(1)          Distributor(1)          Distributor(1)           Distributor(1)
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
     2004              $778,522               $1,640,329              $1,505,179                $62,270
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
     2005             $1,569,603              $1,974,193              $3,149,011                $103,181
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
     2006             $1,717,405              $1,739,331              $3,874,087                $79,611
--------------- ----------------------- ----------------------- ------------------------ -----------------------
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    Year  Class A Contingent      Class B Contingent      Class C Contingent       Class N Contingent
                Deferred Sales          Deferred Sales                                   Deferred Sales
Ended 9/30      Charges Retained by     Charges Retained by     Deferred Sales Charges   Charges Retained by
                Distributor             Distributor             Retained by Distributor  Distributor
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
     2004              $27,674                 $353,364                $116,729                  $1,248
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
     2005              $54,701                 $368,223                $143,287                 $73,709
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
     2006              $177,034                $439,235                $230,872                 $75,772
--------------- ----------------------- ----------------------- ------------------------ -----------------------

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 period in which the aggregate net asset value of all Fund shares of that
class held by the recipient for itself and its customers does not exceed a
minimum amount, if any, that may be set from time to time by a majority of the
Independent Trustees.

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

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

         For the fiscal year ended September 30, 2006 payments under the Class A
plan totaled $8,524,862, of which $97,451 was retained by the Distributor under
the arrangement described above, regarding grandfathered retirement accounts,
and included $71,161 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 a new investor
directly from the Distributor without the investor designating another
registered broker-dealer. If a current investor no longer has another
broker-dealer of record for an existing account, the Distributor is
automatically designated as the broker-dealer of record, but solely for the
purpose of acting as the investor's agent to purchase the shares. In those
cases, the Distributor retains the asset-based sales charge paid on Class B,
Class C and Class N shares, but does not retain any service fees as to the
assets represented by that account.

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

         The Distributor retains the asset-based sales charge on Class B and
Class N shares. The Distributor retains the asset-based sales charge on Class C
shares during the first year the shares are outstanding. It pays the asset-based
sales charge as an ongoing concession to the recipient on Class C shares
outstanding for a year or more. If a dealer has a special agreement with the
Distributor, the Distributor will pay the Class B, Class C or Class N service
fee and the asset-based sales charge to the dealer periodically in lieu of
paying the sales concession and service fee in advance at the time of purchase.

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

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

 --------------------------------------------------------------------------------------------------------------------
               Distribution and Service Fees Paid to the Distributor in the Fiscal Year Ended 9/30/06
 --------------------------------------------------------------------------------------------------------------------
 ------------------- --------------------- ------------------------ ------------------------ ------------------------
 Class:              Total Payments        Amount Retained by       Distributor's            Distributor's
                                                                                             Unreimbursed Expenses
                                                                    Aggregate Unreimbursed   as a % of Net Assets
                     Under Plan            Distributor              Expenses Under Plan      of Class
 ------------------- --------------------- ------------------------ ------------------------ ------------------------
 ------------------- --------------------- ------------------------ ------------------------ ------------------------
 Class B Plan           $2,295,635(1)             $439,235                $7,821,417                  3.33%
 ------------------- --------------------- ------------------------ ------------------------ ------------------------
 ------------------- --------------------- ------------------------ ------------------------ ------------------------
 Class C Plan           $7,164,664(2)             $230,872                $11,863,557                 1.36%
 ------------------- --------------------- ------------------------ ------------------------ ------------------------
 ------------------- --------------------- ------------------------ ------------------------ ------------------------
 Class N Plan            $275,556(3)               $75,772                 $710,233                   1.12%
 ------------------- --------------------- ------------------------ ------------------------ ------------------------
1. Includes $13,906 paid to an affiliate of the Distributor's parent company.
2. Includes $30,818 paid to an affiliate of the Distributor's parent company.
3. Includes $6,492 paid to an affiliate of the Distributor's parent company.

All payments under the plans are subject to the limitations imposed by the
Conduct Rules of the NASD 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 SAI. 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 SAI 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); and
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 SAI. 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; and
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, 2005, 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:

Advantage Capital Corp./Financial Services Corp.           Advest, Inc.
Aegon USA                                                  Aetna Retirement Services, Inc.
A.G. Edwards & Sons, Inc.                                  AIG Life
Allianz Life Insurance Company                             Allmerica Financial Life Insurance and Annuity Co.
Allstate Financial Advisors                                American Enterprise Life Insurance
American General Securities, Inc.                          American General Annuity
Ameriprise Financial Services, Inc.                        American Portfolio Financial Services, Inc.
Ameritas Life Insurance Corporation                        Annuity Investors Life
Associated Securities                                      AXA Advisors
Banc One Securities Corp.                                  BNY Investment Center, Inc.
Cadaret Grant & Co. Inc.                                   Charles Schwab - Great West Life
Chase Investment Services Corp.                            CitiCorp Investment Services, Inc.
Citigroup Global Markets, Inc. (SSB)                       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 Life Assurance Company                      Financial Network (ING)
First Global Capital                                       GE Financial Assurance - GE Life & Annuity
Glenbrook Life and Annuity Co.                             Hartford
HD Vest                                                    HSBC Brokerage (USA) Inc.
ING Financial Advisers                                     ING Financial Partners
Jefferson Pilot Life Insurance Company                     Jefferson Pilot Securities Corp.
John Hancock Life Insurance Co.                            Kemper Investors Life Insurance Co.
Legend Equities Corp.                                      Legg Mason
Lincoln Benefit Life                                       Lincoln Financial
Lincoln Investment Planning, Inc.                          Lincoln National Life
Linsco Private Ledger                                      MassMutual Financial Group and affiliates
McDonald Investments, Inc.                                 Merrill Lynch & Co. and affiliates
MetLife and affiliates                                     Minnesota Life Insurance Company
Mony Life Insurance Co.                                    Morgan Stanley Dean Witter, Inc.
Multi-Financial (ING)                                      Mutual Service Corporation
National Planning Holdings, Inc.                           Nationwide and affiliates
NFP                                                        New York Life Securities, Inc.
Park Avenue Securities LLC                                 PFS Investments, Inc.
Prime Capital Services, Inc.                               Primevest Financial Services, Inc. (ING)
Protective Life Insurance Co.                              Prudential Investment Management Services LLC
Raymond James & Associates                                 Raymond James Financial Services
RBC Dain Rauscher Inc.                                     Royal Alliance
Securities America Inc.                                    Security Benefit Life Insurance Co.
Sentra Securities                                          Signator Investments
Sun Life Assurance Company of Canada                       SunAmerica Securities, Inc.
SunTrust Securities                                        Thrivent
Travelers Life & Annuity Co., Inc.                         UBS Financial Services Inc.
Union Central Life Insurance Company                       United Planners
Valic Financial Advisors, Inc.                             Wachovia Securities LLC
Walnut Street Securities (Met Life Network)                Waterstone Financial Group
Wells Fargo Investments, LLC

         For the year ended December 31, 2005, 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 Financial Services Inc.                           ACS HR Solutions LLC
Administrative Management Group                            ADP Broker/Dealer Inc.
Aetna Financial Services                                   Alliance Benefit Group
American Stock Transfer & Trust Co                         Ameriprise Financial Services, Inc.
Baden Retirement Plan Services LLC                         Banc One Securities Corp.
BCG Securities                                             Benefit Administration Company LLC
Benefit Administration Inc.                                Benefit Plans Administrative Services
Benetech Inc.                                              Bisys Retirement Services
Boston Financial Data Services Inc.                        Ceridian Retirement Plan Services
Charles Schwab & Co Inc.                                   Charles Schwab Trust Company
Circle Trust Company                                       Citigroup Global Markets Inc.
CitiStreet                                                 City National Bank
Columbia Funds Distributor Inc.                            CPI Qualified Plan Consultants Inc.
Daily Access.Com Inc.                                      Digital Retirement Solutions
DST Systems Inc.                                           Dyatech LLC
Edgewood/Federated Investments                             ERISA Administrative Services Inc.
Expert Plan Inc.                                           FASCorp
FBD Consulting Inc.                                        Fidelity Institutional Operations Co.
Fidelity Investments                                       First National Bank of Omaha
First Trust Corp.                                          First Trust-Datalynx
Franklin Templeton                                         Geller Group LTD
GoldK Inc.                                                 Great West Life & Annuity Ins Co.
Hartford Life Insurance Co                                 Hewitt Associates LLC
ICMA-RC Services LLC                                       Independent Plan Coordinators Inc.
ING                                                        Ingham Group
Interactive Retirement Systems                             Invesco Retirement Plans
Invesmart                                                  InWest Pension Management
John Hancock Life Insurance Co.                            JPMorgan Chase & Co
JPMorgan Chase Bank                                        July Business Services
Kaufman & Goble                                            Leggette & Company Inc.
Lincoln National Life                                      MassMutual Financial Group and affiliates
Matrix Settlement & Clearance Services                     Mellon HR Solutions
Mercer HR Services                                         Merrill Lynch & Co., Inc.
Metavante 401(k) Services                                  Metlife Securities Inc.
MFS Investment Management                                  Mid Atlantic Capital Corp.
Milliman Inc.                                              Morgan Stanley Dean Witter Inc.
National City Bank                                         National Financial Services Corp.
Nationwide Investment Service Corp.                        New York Life Investment Management
Northeast Retirement Services                              Northwest Plan Services Inc.
Pension Administration and Consulting                      PFPC Inc.
Plan Administrators Inc.                                   PlanMember Services Corporation
Princeton Retirement Group Inc.                            Principal Life Insurance Co
Programs for Benefit Plans Inc.                            Prudential Retirement Insurance & Annuity Co.
Prudential Retirement Services                             PSMI Group
Putnam Investments                                         Quads Trust Company
RSM McGladrey Retirement Resources                         SAFECO
Standard Insurance Co                                      Stanley Hunt DuPree Rhine
Stanton Group Inc.                                         State Street Bank & Trust
Strong Capital Management Inc.                             Symetra Investment Services Inc.
T Rowe Price Associates                                    Taylor Perky & Parker LLC
Texas Pension Consultants                                  The 401(K) Company
The Chicago Trust Company                                  The Retirement Plan Company LLC
The Vanguard Group                                         TruSource
Unified Fund Services Inc.                                 Union Bank & Trust Co. (Nebraska)
USI Consulting Group (CT)                                  Valic Retirement Services Co
Wachovia Bank NA                                           Web401k.com
Wells Fargo Bank NA                                        Wilmington Trust Company
WySTAR Global Retirement Solutions

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 9/30/06
---------------------------------------------------------------------------------------------------
----------------- --------------------------------------- -----------------------------------------
Class of Shares             Standardized Yield                         Dividend Yield
----------------- --------------------------------------- -----------------------------------------
----------------- ------------------- ------------------- --------------------- -------------------
                       Without              After               Without               After
                        Sales               Sales                Sales                Sales
                        Charge              Charge               Charge               Charge
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class A                 3.19%               3.04%                3.66%                3.49%
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class B                 2.39%                N/A                 2.86%                 N/A
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class C                 2.48%                N/A                 2.94%                 N/A
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class N                 3.67%                N/A                 3.25%                 N/A
----------------- ------------------- ------------------- --------------------- -------------------
----------------- ------------------- ------------------- --------------------- -------------------
Class Y                 2.79%                N/A                 4.09%                 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:

ATVD   l/n       - 1   = Average Annual Total Return (After Taxes on 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    l/n      - 1    = Average Annual Total Return (After Taxes on Distributions 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, 2006
----------------------------------------------------------------------------------------------------------------------
-------------- ------------------------- -----------------------------------------------------------------------------
Class of         Cumulative Total                              Average Annual Total Returns
                 Returns (10 years or
Shares              life-of-class)
-------------- ------------------------- -----------------------------------------------------------------------------
-------------- ------------------------- ------------------------- ------------------------- -------------------------
                                                  1-Year                   5-Years                   10-Years
                                                                     (or life of class if      (or life of class if
                                                                           less)                       less)
-------------- ------------------------- ------------------------- ------------------------- -------------------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
                  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 A(1)         123.03%      134.16%       -1.68%        3.23%       13.39%       14.50%        8.35%        8.88%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class B(2)         123.72%      123.72%       -2.48%        2.35%       13.30%       13.55%        8.39%        8.39%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class C(3)         117.16%      117.16%        1.50%        2.46%       13.61%       13.61%        8.06%        8.06%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class N(4)          87.48%       87.48%        1.82%        2.78%       14.06%       14.06%       11.92%       11.92%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class Y(5)          21.29%       21.29%        3.64%        3.64%       10.09%       10.09%          N/A          N/A
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1. Inception of Class A: 6/15/95
2. Inception of Class B: 6/15/95
3. Inception of Class C: 6/15/95
4. Inception of Class N: 3/01/01
5. Inception of Class Y: 9/27/04

----------------------------------------------------------------------------------------------------------------
                    Average Annual Total Returns for Class A(1) Shares (After Sales Charge)
                                   For the Periods Ended September 30, 2006
----------------------------------------------------------------------------------------------------------------
------------------------------------------ --------------------- ------------------------ ----------------------
                                                  1-Year

                                                                         5-Years                10-Years
------------------------------------------ --------------------- ------------------------ ----------------------
------------------------------------------ --------------------- ------------------------ ----------------------
After Taxes on Distributions                      -3.88%                 11.19%                   5.59%

------------------------------------------ --------------------- ------------------------ ----------------------
------------------------------------------ --------------------- ------------------------ ----------------------
After Taxes on Distributions and                  -1.05%                 10.33%                   5.38%

Redemption of Fund Shares
------------------------------------------ --------------------- ------------------------ ----------------------
     1. Inception 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 SAI. 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.
("Morningstar"), an independent mutual fund monitoring service. Morningstar
rates mutual funds in their specialized market sector. The Fund is rated 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, or 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
SAI because the Distributor or dealer or broker incurs little or no selling
expenses.

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 New Jersey Municipal Fund
Oppenheimer AMT-Free New York Municipals                      Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Balanced Fund                                     Oppenheimer Portfolio Series:
Oppenheimer Core Bond Fund                                        Active Allocation Fund
Oppenheimer California Municipal Fund                             Aggressive Investor Fund
Oppenheimer Capital Appreciation Fund                             Conservative Investor Fund
Oppenheimer Capital Income Fund                                   Moderate Investor Fund
Oppenheimer Champion Income Fund                              Oppenheimer Principal Protected Main Street Fund
Oppenheimer Convertible Securities Fund                       Oppenheimer Principal Protected Main Street Fund II
Oppenheimer Developing Markets Fund                           Oppenheimer Principal Protected Main Street Fund III
Oppenheimer Discovery Fund                                    Oppenheimer Quest Balanced Fund
Oppenheimer Dividend Growth Fund                              Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Emerging Growth Fund                              Oppenheimer Quest International Value Fund, Inc.
Oppenheimer Emerging Technologies Fund                        Oppenheimer Quest Opportunity Value Fund
Oppenheimer Enterprise Fund                                   Oppenheimer Quest Value Fund, Inc.
Oppenheimer Equity Fund, Inc.                                 Oppenheimer Real Asset Fund
Oppenheimer Global Fund                                       Oppenheimer Real Estate Fund
Oppenheimer Global Opportunities Fund                         Oppenheimer Rochester Massachusetts Municipal Fund
Oppenheimer Gold & Special Minerals Fund                      Oppenheimer Rochester Michigan Municipal Fund
Oppenheimer Growth Fund                                       Oppenheimer Rochester Minnesota Municipal Fund
Oppenheimer International Bond Fund                           Oppenheimer Rochester National Municipals
Oppenheimer International Diversified Fund                    Oppenheimer Rochester Ohio Municipal Fund
Oppenheimer International Growth Fund                         Oppenheimer Rochester Virginia Municipal Fund
Oppenheimer International Small Company Fund                  Oppenheimer Rochester Arizona Municipal Fund
Oppenheimer International Value Fund                          Oppenheimer Rochester North Carolina Municipal Fund
Oppenheimer Limited Term California Municipal Fund            Oppenheimer Select Value Fund
Oppenheimer Limited-Term Government Fund                      Oppenheimer Senior Floating Rate Fund
Oppenheimer Limited Term Municipal Fund                       Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer Main Street Fund                                  Oppenheimer Strategic Income Fund
Oppenheimer Main Street Opportunity Fund                      Oppenheimer U.S. Government Trust
Oppenheimer Main Street Small Cap Fund                        Oppenheimer Value Fund
Oppenheimer MidCap Fund                                       Limited-Term New York Municipal Fund
                                                              Rochester Fund Municipals
And the following money market funds:
Oppenheimer Cash Reserves                                     Centennial Government Trust
Oppenheimer Money Market Fund, Inc.                           Centennial Money Market Trust
Oppenheimer Institutional Money Market Fund                   Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust                        Centennial Tax Exempt Trust

         There is an initial sales charge on the purchase of Class A shares of
each of the Oppenheimer funds described above except the money market funds.
Under certain circumstances described in this SAI, 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 SAI
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 SAI. Certain special sales charge arrangements
described in that Appendix apply to retirement plans whose records are
maintained on a daily valuation basis by Merrill Lynch Pierce Fenner & Smith,
Inc. ("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 a 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 a new
investor directly from the Distributor without the investor designating another
registered broker-dealer.

|X| Class A Shares Subject to a Contingent Deferred Sales Charge. For purchases
of Class A shares at net asset value whether or not subject to a contingent
deferred sales charge as described in the Prospectus, no sales concessions will
be paid to the broker-dealer of record, as described in the Prospectus, on sales
of Class A shares purchased with the redemption proceeds of shares of another
mutual fund offered as an investment option in a retirement plan in which
Oppenheimer funds are also offered as investment options under a special
arrangement with the Distributor, if the purchase occurs more than 30 days after
the Oppenheimer funds are added as an investment option under that plan.
Additionally, that concession will not be paid on purchases of Class A shares by
a retirement plan made with the redemption proceeds of Class N shares of one or
more Oppenheimer funds held by the plan for more than 18 months.

         |X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares 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 SAI) 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                 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 SAI mean "Eastern time." The NYSE's most recent
annual announcement (which is subject to change) states that it will close on
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
It may also close on other days.

         Dealers other than NYSE members may conduct trading in certain
securities on days on which the NYSE is closed (including weekends and holidays)
or after 4:00 p.m. on a regular business day. Because the Fund's net asset
values will not be calculated on those days, the Fund's net asset values per
share may be significantly affected on such days when shareholders may not
purchase or redeem shares. Additionally, trading on many foreign 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 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, as applicable, on that
                      day, or
(2)                   if last sale information is not available on a valuation
                      date, they are valued at the last reported sale price
                      preceding the valuation date if it is within the spread of
                      the closing "bid" and "asked" prices on the valuation date
                      or, if not, at the closing "bid" price on the valuation
                      date.
o Equity securities traded on a foreign securities exchange generally are valued
in one of the following ways: (1) at the last sale price available to the
pricing service approved by the Board of Trustees, or (2) at the last sale price
obtained by the Manager from the report of the principal exchange on which the
security is traded at its last trading session on or immediately before the
valuation date, or (3) at the mean between the "bid" and "asked" prices obtained
from the principal exchange on which the security is traded or, on the basis of
reasonable inquiry, from two market makers in the security.
o Long-term debt securities having a remaining maturity in excess of 60 days are
valued based on the mean between the "bid" and "asked" prices determined by a
portfolio pricing service approved by the Fund's Board of Trustees or obtained
by the Manager from two active market makers in the security on the basis of
reasonable inquiry.
o The following securities are valued at the mean between the "bid" and "asked"
prices determined by a pricing service approved by the Fund's Board of Trustees
or obtained by the Manager from two active market makers in the security on the
basis of reasonable inquiry:
(1)      debt instruments that have a maturity of more than 397 days when issued,
(2) debt instruments that had a maturity of 397 days or less when issued and
have a remaining maturity of more than 60 days, and (3) non-money market debt
instruments that had a maturity of 397 days or less when issued and which have a
remaining maturity of 60 days or less.
o The following securities are valued at cost, adjusted for amortization of
premiums and accretion of discounts: (1) money market debt securities held by a
non-money market fund that had a maturity of less than 397 days when issued that
have a remaining maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining maturity
of 397 days or less. o Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).

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

          The closing prices in the 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, 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 on the valuation date. If not, the
value shall be the closing bid price on the principal exchange on the valuation
date. If the put, call or future is not traded on an exchange, 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 SAI. 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.

         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 SAI.

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

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

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

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

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

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

         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 Rochester National Municipals
     Oppenheimer AMT-Free Municipals                              Oppenheimer Senior Floating Rate Fund
     Oppenheimer AMT-Free New York Municipals                     Rochester Fund Municipals
     Oppenheimer California Municipal Fund                        Oppenheimer Rochester Arizona Municipal Fund
     Oppenheimer International Value Fund                         Oppenheimer Rochester Maryland Municipal Fund
     Oppenheimer Institutional Money Market Fund                  Oppenheimer Rochester Massachusetts Municipal Fund
     Oppenheimer Limited Term California Municipal Fund           Oppenheimer Rochester Michigan Municipal Fund
     Oppenheimer Limited Term Municipal Fund                      Oppenheimer Rochester Minnesota Municipal Fund
     Oppenheimer Money Market Fund, Inc.                          Oppenheimer Rochester North Carolina Municipal Fund
     Oppenheimer New Jersey Municipal Fund                        Oppenheimer Rochester Ohio Municipal Fund
     Oppenheimer Principal Protected Main Street Fund II          Oppenheimer Rochester Virginia Municipal Fund
     Oppenheimer Pennsylvania Municipal Fund

     The following funds do not offer Class Y shares:
     Limited Term New York Municipal Fund                        Oppenheimer Principal Protected Main Street Fund
     Oppenheimer AMT-Free Municipals                             Oppenheimer Principal Protected Main Street Fund II
     Oppenheimer AMT-Free New York Municipals                    Oppenheimer Principal Protected Main Street Fund III
     Oppenheimer Balanced Fund                                   Oppenheimer Quest Capital Value Fund, Inc.
     Oppenheimer California Municipal Fund                       Oppenheimer Quest International Value Fund, Inc.
     Oppenheimer Capital Income Fund                             Oppenheimer Rochester National Municipals
     Oppenheimer Cash Reserves                                   Oppenheimer Rochester Arizona Municipal Fund
     Oppenheimer Convertible Securities Fund                     Oppenheimer Rochester Maryland Municipal Fund
     Oppenheimer Dividend Growth Fund                            Oppenheimer Rochester Massachusetts Municipal Fund
     Oppenheimer Gold & Special Minerals Fund                    Oppenheimer Rochester Michigan Municipal Fund
     Oppenheimer Institutional Money Market Fund                 Oppenheimer Rochester Minnesota Municipal Fund
     Oppenheimer Limited Term California Municipal Fund          Oppenheimer Rochester North Carolina Municipal Fund
     Oppenheimer Limited Term Municipal Fund                     Oppenheimer Rochester Ohio Municipal Fund
     Oppenheimer New Jersey Municipal Fund                       Oppenheimer Rochester Virginia Municipal Fund
     Oppenheimer Pennsylvania Municipal Fund

o        Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y
         shares.
o        Oppenheimer Institutional Money Market Fund only offers Class E and
         Class L 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 certain money market funds 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.
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
         the same class of any of the other Oppenheimer funds into which you may
         exchange shares.
o        Shares of Oppenheimer Principal Protected Main Street Fund may be
         exchanged at net asset value for shares of the same class of any of the
         other Oppenheimer funds into which you may exchange shares. 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 the same class of any of the
         other Oppenheimer funds into which you may exchange shares. 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 the same class of any of the
         other Oppenheimer funds into which you may exchange shares. 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).
o        Class A, Class B, Class C and Class N shares of each of Oppenheimer
         Developing Markets Fund and Oppenheimer International Small Company
         Fund may be acquired by exchange only with a minimum initial investment
         of $50,000. An existing shareholder of each fund may make additional
         exchanges into that fund with as little as $50.

         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, 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.

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

         When you exchange some or all of your shares from one fund to another,
any special account features that are available in the new fund (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.

         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
SAI, 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 SAI is based on tax law
in effect on the date of the Prospectus and this SAI. 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 out 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 withheld is identified
in reports mailed to shareholders in January of each year with a copy sent to
the IRS.

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

Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds 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. JPMorgan Chase Bank is the custodian of the Fund's assets. The
custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It is the practice of the Fund to deal with the custodian in a manner
uninfluenced by any banking relationship the custodian may have with the Manager
and its affiliates. The Fund's cash balances with the custodian in excess of
$100,000 are not protected by federal deposit insurance. Those uninsured
balances at times may be substantial.

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





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, 2006, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

      We conducted our audits in accordance with 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, 2006, 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, 2006, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.


/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP

Denver, Colorado
November 15, 2006


                    68 | OPPENHEIMER INTERNATIONAL BOND FUND



STATEMENT OF INVESTMENTS  September 30, 2006
--------------------------------------------------------------------------------



                                                                            PRINCIPAL             VALUE
                                                                               AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------

U.S. GOVERNMENT OBLIGATIONS--17.8%
--------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 5.02%, 11/9/06 1,2,3                             $   671,270,000   $   667,712,741
--------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.25%, 2/15/29 1                                      90,110,000        95,312,501
--------------------------------------------------------------------------------------------------------
U.S. Treasury Nts., 5.125%, 5/15/16 1,4                                   197,180,000       204,605,207
                                                                                        ----------------
Total U.S. Government Obligations (Cost $960,250,934)                                       967,630,449

--------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--45.2%
--------------------------------------------------------------------------------------------------------
ARGENTINA--1.3%
Argentina (Republic of) Bonds:
2%, 9/30/14 5 [ARP]                                                        21,270,000         6,975,498
5.589%, 8/3/12 6                                                           20,544,000        18,972,309
Series V, 7%, 3/28/11                                                      35,185,000        33,277,187
--------------------------------------------------------------------------------------------------------
Buenos Aires (Province of) Bonds, Bonos de Consolidacion
de Deudas, Series PBA1, 4/1/07 5,7 [ARP]                                      321,874           139,328
--------------------------------------------------------------------------------------------------------
Central Bank of Argentina Bonds, 2%, 2/4/18 5 [ARP]                        23,543,518        11,363,090
                                                                                        ----------------
                                                                                             70,727,412

--------------------------------------------------------------------------------------------------------
AUSTRALIA--2.3%
New South Wales Treasury Corp. Gtd. Bonds, 8%, 3/1/08 [AUD]               162,190,000       124,022,392
--------------------------------------------------------------------------------------------------------
BELGIUM--1.8%
Belgium (Kingdom of) Bonds, Series 44, 5%, 3/28/35 [EUR]                   21,695,000        32,418,290
--------------------------------------------------------------------------------------------------------
Belgium (Kingdom of) Treasury Bills, 3.192%, 12/14/06 8 [EUR]              53,700,000        67,664,751
                                                                                        ----------------
                                                                                            100,083,041

--------------------------------------------------------------------------------------------------------
BRAZIL--1.3%
Brazil (Federal Republic of) Bonds:
8%, 1/15/18                                                                14,015,000        15,430,515
8.75%, 2/4/25                                                               1,990,000         2,375,065
8.875%, 10/14/19                                                           17,724,000        21,064,974
10.50%, 7/14/14                                                            18,700,000        23,543,300
--------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Nts., 7.875%, 3/7/15                           4,000,000         4,394,000
--------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Unsec. Bonds, 4.75%, 4/10/07 5 [JPY]         500,000,000         4,380,952
                                                                                        ----------------
                                                                                             71,188,806

--------------------------------------------------------------------------------------------------------
BULGARIA--0.1%
Bulgaria (Republic of) Bonds:
8.25%, 1/15/15                                                              1,500,000         1,771,875
8.25%, 1/15/15 9                                                            1,440,000         1,701,000
                                                                                        ----------------
                                                                                              3,472,875

--------------------------------------------------------------------------------------------------------
CANADA--2.5%
Canada (Government of) Nts., 4%, 9/1/10 [CAD]                             148,885,000       133,757,405



                    21 | OPPENHEIMER INTERNATIONAL BOND FUND


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



                                                                            PRINCIPAL             VALUE
                                                                               AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------

COLOMBIA--1.7%
Colombia (Republic of) Bonds:
7.375%, 9/18/37                                                       $    12,096,000   $    12,277,440
10.75%, 1/15/13                                                            10,000,000        12,260,000
12%, 10/22/15 [COP]                                                    75,961,000,000        36,208,987
--------------------------------------------------------------------------------------------------------
Colombia (Republic of) Nts.:
8.25%, 12/22/14                                                             6,655,000         7,380,395
11.75%, 3/1/10 [COP]                                                   35,992,780,000        16,044,844
--------------------------------------------------------------------------------------------------------
Colombia (Republic of) Unsec. Bonds, 8.125%, 5/21/24                        8,290,000         9,160,450
                                                                                        ----------------
                                                                                             93,332,116

--------------------------------------------------------------------------------------------------------
DENMARK--0.5%
Denmark (Kingdom of) Bonds:
4%, 11/15/10 [DKK]                                                         48,215,000         8,319,760
4%, 11/15/15 [DKK]                                                         35,520,000         6,179,913
7%, 11/10/24 [DKK]                                                         12,960,000         3,085,352
--------------------------------------------------------------------------------------------------------
Denmark (Kingdom of) Nts., 4%, 8/15/08 [DKK]                               51,660,000         8,843,486
                                                                                        ----------------
                                                                                             26,428,511

--------------------------------------------------------------------------------------------------------
EL SALVADOR--0.1%
El Salvador (Republic of) Bonds:
7.625%, 9/21/34 9                                                           1,185,000         1,300,538
7.65%, 6/15/35 9                                                            3,025,000         3,259,438
                                                                                        ----------------
                                                                                              4,559,976

--------------------------------------------------------------------------------------------------------
FRANCE--5.5%
France (Government of) Bonds, 3.25%, 4/25/16 [EUR]                        138,875,000       169,510,408
--------------------------------------------------------------------------------------------------------
France (Government of) Obligations Assimilables
du Tresor Bonds, 4%, 4/25/55 [EUR]                                         58,980,000        76,382,095
--------------------------------------------------------------------------------------------------------
France (Government of) Treasury Bills, 3.195%, 12/14/06 8 [EUR]            43,410,000        54,693,925
                                                                                        ----------------
                                                                                            300,586,428

--------------------------------------------------------------------------------------------------------
GERMANY--5.4%
Germany (Federal Republic of) Bonds, Series 05, 4%, 1/4/37 [EUR]           83,645,000       108,696,816
--------------------------------------------------------------------------------------------------------
Germany (Federal Republic of) Treasury Bills, Series 0906,
3.359%, 3/14/07 8 [EUR]                                                   146,820,000       183,410,967
                                                                                        ----------------
                                                                                            292,107,783

--------------------------------------------------------------------------------------------------------
GREECE--1.2%
Greece (Republic of) Bonds, 4.60%, 5/20/13 [EUR]                           50,600,000        66,963,304
--------------------------------------------------------------------------------------------------------
GUATEMALA--0.0%
Guatemala (Republic of) Nts.:
10.25%, 11/8/11 9                                                             160,000           189,200
10.25%, 11/8/11                                                               525,000           620,813
                                                                                        ----------------
                                                                                                810,013



                    22 | OPPENHEIMER INTERNATIONAL BOND FUND




                                                                            PRINCIPAL             VALUE
                                                                               AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------

INDONESIA--0.2%
Indonesia (Republic of) Nts.:
6.75%, 3/10/14 9                                                      $       120,000   $       122,700
7.25%, 4/20/15 9                                                              200,000           210,750
--------------------------------------------------------------------------------------------------------
Indonesia (Republic of) Unsec. Nts., 8.50%, 10/12/35 1,9                    6,540,000         7,676,325
                                                                                        ----------------
                                                                                              8,009,775

--------------------------------------------------------------------------------------------------------
ISRAEL--0.8%
Israel (State of) Bonds, Series 2682, 7.50%, 3/31/14 [ILS]                167,800,000        41,815,848
--------------------------------------------------------------------------------------------------------
ITALY--6.1%
Italy (Republic of) Nts., Certificati di Credito del Tesoro,
3.40%, 7/1/09 6 [EUR]                                                     162,505,000       206,971,788
--------------------------------------------------------------------------------------------------------
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali,
4.25%, 2/1/19 [EUR]                                                        97,545,000       126,512,504
                                                                                        ----------------
                                                                                            333,484,292

--------------------------------------------------------------------------------------------------------
JAPAN--2.8%
Japan (Government of) Bonds:
10 yr., Series 268, 1.50%, 3/20/15 [JPY]                                5,766,000,000        48,669,921
Series 7, 0.80%, 3/10/16 [JPY]                                         12,502,395,000       103,570,105
                                                                                        ----------------
                                                                                            152,240,026

--------------------------------------------------------------------------------------------------------
MALAYSIA--0.8%
Johor Corp. Malaysia (Government of) Bonds, Series P3,
1%, 7/31/12 5 [MYR]                                                       107,980,000        32,499,403
--------------------------------------------------------------------------------------------------------
Malaysia (Government of) Bonds, Series 2/05, 4.72%, 9/30/15 [MYR]          39,730,000        10,821,254
                                                                                        ----------------
                                                                                             43,320,657

--------------------------------------------------------------------------------------------------------
MEXICO--0.4%
Mexican Williams Sr. Nts., 6.03%, 11/15/08 5,6                                500,000           515,313
--------------------------------------------------------------------------------------------------------
United Mexican States Bonds:
7.50%, 4/8/33                                                              17,025,000        19,680,900
8.30%, 8/15/31                                                              2,000,000         2,499,000
                                                                                        ----------------
                                                                                             22,695,213

--------------------------------------------------------------------------------------------------------
NIGERIA--0.0%
Central Bank of Nigeria Gtd. Bonds, Series WW, 6.25%, 11/15/20 5            1,375,000         1,372,422
--------------------------------------------------------------------------------------------------------
Nigeria (Federal Republic of) Promissory Nts.,
Series RC, 5.092%, 1/5/10                                                     437,317           412,788
                                                                                        ----------------
                                                                                              1,785,210

--------------------------------------------------------------------------------------------------------
PANAMA--0.4%
Panama (Republic of) Bonds:
6.70%, 1/26/36 1                                                           20,295,000        20,193,525
9.375%, 4/1/29                                                              1,650,000         2,136,750
                                                                                        ----------------
                                                                                             22,330,275



                    23 | OPPENHEIMER INTERNATIONAL BOND FUND


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



                                                                            PRINCIPAL             VALUE
                                                                               AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------

PERU--2.7%
Peru (Republic of) Bonds:
7.84%, 8/12/20 [PEN]                                                      168,460,000   $    55,018,865
8.20%, 8/12/26 5 [PEN]                                                     14,410,000         4,800,230
8.375%, 5/3/16                                                              1,380,000         1,597,350
9.91%, 5/5/15 [PEN]                                                       128,732,000        47,514,405
Series 7, 8.60%, 8/12/17 [PEN]                                             56,965,000        19,647,361
Series 8-1, 12.25%, 8/10/11 [PEN]                                          18,633,000         7,148,354
--------------------------------------------------------------------------------------------------------
Peru (Republic of) Sr. Nts., 4.533%, 2/28/16 8                              2,470,409         1,385,529
--------------------------------------------------------------------------------------------------------
Peru (Republic of) Unsec. Unsub. Bonds, 8.75%, 11/21/33                     7,075,000         8,702,250
                                                                                        ----------------
                                                                                            145,814,344

--------------------------------------------------------------------------------------------------------
PHILIPPINES--0.8%
Philippines (Republic of the) Bonds:
8%, 1/15/16                                                                 6,990,000         7,706,475
9.50%, 2/2/30                                                               6,260,000         7,731,100
--------------------------------------------------------------------------------------------------------
Philippines (Republic of the) Unsec. Bonds, 7.75%, 1/14/31                 27,044,000        28,362,395
                                                                                        ----------------
                                                                                             43,799,970

--------------------------------------------------------------------------------------------------------
POLAND--1.7%
Poland (Republic of) Bonds:
Series 0K0807, 4.191%, 8/12/07 8 [PLZ]                                     43,990,000        13,520,851
Series DS1013, 5%, 10/24/13 [PLZ]                                          55,940,000        17,660,938
Series WS0922, 5.75%, 9/23/22 [PLZ]                                        10,000,000         3,213,322
Series 0511, 4.25%, 5/24/11 [PLZ]                                         183,220,000        55,817,553
                                                                                        ----------------
                                                                                             90,212,664

--------------------------------------------------------------------------------------------------------
RUSSIA--0.1%
Russian Ministry of Finance Debs., Series VII, 3%, 5/14/11                  4,180,000         3,754,978
--------------------------------------------------------------------------------------------------------
TURKEY--0.2%
Turkey (Republic of) Bonds, 7%, 9/26/16                                     4,060,000         3,999,100
--------------------------------------------------------------------------------------------------------
Turkey (Republic of) Nts.:
7.25%, 3/15/15                                                              2,515,000         2,540,150
9.50%, 1/15/14                                                              1,610,000         1,839,425
11%, 1/14/13                                                                3,850,000         4,651,185
                                                                                        ----------------
                                                                                             13,029,860

--------------------------------------------------------------------------------------------------------
UNITED KINGDOM--3.9%
United Kingdom Treasury Bonds:
5%, 3/7/08 [GBP]                                                           31,040,000        58,175,663
6%, 12/7/28 [GBP]                                                          39,950,000        93,328,119
--------------------------------------------------------------------------------------------------------
United Kingdom Treasury Nts., 4%, 3/7/09 [GBP]                             31,695,000        58,245,475
                                                                                        ----------------
                                                                                            209,749,257



                    24 | OPPENHEIMER INTERNATIONAL BOND FUND




                                                                            PRINCIPAL             VALUE
                                                                               AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------

URUGUAY--0.6%
Uruguay (Oriental Republic of) Bonds, 7.625%, 3/21/36                 $     3,210,000   $     3,218,025
--------------------------------------------------------------------------------------------------------
Uruguay (Oriental Republic of) Unsec. Bonds:
5%, 9/14/18 [UYU]                                                         403,060,000        17,306,689
8%, 11/18/22                                                               11,375,000        12,057,500
                                                                                        ----------------
                                                                                             32,582,214
                                                                                        ----------------
Total Foreign Government Obligations (Cost $2,410,658,258)                                2,452,664,645

--------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--4.5%
--------------------------------------------------------------------------------------------------------
Aes Dominicana Energia Finance SA, 11% Sr. Nts., 12/13/15 5                 7,923,000         8,200,305
--------------------------------------------------------------------------------------------------------
Alrosa Finance SA:
8.875% Nts., 11/17/14                                                       6,900,000         7,866,000
8.875% Nts., 11/17/14 9                                                     4,675,000         5,329,500
--------------------------------------------------------------------------------------------------------
Autopistas del Nordeste Cayman Ltd., 9.39% Nts., 1/15/26 5                  7,186,287         7,006,630
--------------------------------------------------------------------------------------------------------
Banco BMG SA, 9.15% Nts., 1/15/16 9                                         9,710,000         9,758,550
--------------------------------------------------------------------------------------------------------
Banco Hipotecario SA, 9.75% Sr. Unsec. Nts., 4/27/16 5                      4,325,000         4,422,313
--------------------------------------------------------------------------------------------------------
Cloverie plc, 9.64% Sec. Nts., Series 2005-93, 12/20/10 5,6                 3,600,000         3,605,040
--------------------------------------------------------------------------------------------------------
Credit Suisse First Boston International, Export-Import Bank
of Ukraine Loan Participation Nts., 8.40%, 2/9/16                           5,890,000         5,745,695
--------------------------------------------------------------------------------------------------------
Eletropaulo Metropolitana SA, 19.125% Nts., 6/28/10 5 [BRR]                13,295,000         6,802,505
--------------------------------------------------------------------------------------------------------
Gaz Capital SA, 8.625% Sr. Unsec. Nts., 4/28/34 9                           7,650,000         9,543,375
--------------------------------------------------------------------------------------------------------
Halyk Savings Bank Kazakhstan Europe BV, 7.75% Nts., 5/13/13 9              4,400,000         4,499,000
--------------------------------------------------------------------------------------------------------
HSBC Bank plc:
9.751% Sr. Unsec. Nts., 7/8/09 8                                           30,220,000        18,132,000
11.601% Sr. Unsec. Nts., 1/12/10 8                                         42,800,000        21,742,400
12.278% Sr. Unsec. Nts., 3/9/09 8                                          30,220,000        17,195,180
--------------------------------------------------------------------------------------------------------
IIRSA Norte Finance Ltd., 8.75% Sr. Nts., 5/30/24 5                         8,685,000         9,010,688
--------------------------------------------------------------------------------------------------------
Inter-American Development Bank:
6.26% Nts., 12/8/09 6 [BRR]                                                11,200,000         4,878,488
7.889% Nts., 1/25/12 6 [COP]                                           13,280,142,929         5,912,213
--------------------------------------------------------------------------------------------------------
International Bank for Reconstruction & Development (The),
15% Nts., 1/7/10 5 [TRY]                                                    3,000,000         1,852,096
--------------------------------------------------------------------------------------------------------
Itabo Finance SA, 10.875% Nts., 10/5/13 9,10                                1,351,000         1,375,453
--------------------------------------------------------------------------------------------------------
Kuznetski Capital SA/Bank of Moscow, 7.375% Nts., 11/26/10 5                5,560,000         5,699,000
--------------------------------------------------------------------------------------------------------
National Gas Co., 6.05% Nts., 1/15/36 9                                     4,945,000         4,762,866
--------------------------------------------------------------------------------------------------------
National Power Corp., 9.625% Unsec. Bonds, 5/15/28                          5,095,000         5,894,844
--------------------------------------------------------------------------------------------------------
Nordic Investment Bank, 12.50% Sr. Unsec. Nts., 2/15/09 5 [TRY]             5,000,000         2,954,771
--------------------------------------------------------------------------------------------------------
Ongko International Finance Co. BV,
10.50% Sec. Nts., 3/29/10 5,7,12                                              550,000                --
--------------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust,
9.125% Unsec. Unsub. Nts., 10/13/10                                         4,570,000         5,127,540
--------------------------------------------------------------------------------------------------------
Petroleum Export Ltd. Cayman SPV,
5.265% Sr. Nts., Cl. A3, 6/15/11 9                                         12,427,510        12,251,027



                    25 | OPPENHEIMER INTERNATIONAL BOND FUND


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



                                                                            PRINCIPAL             VALUE
                                                                               AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------

CORPORATE BONDS AND NOTES Continued
--------------------------------------------------------------------------------------------------------
Reachcom Public Ltd., Renaissance Consumer Finance Bank
of Russia Loan Participation Nts., 10.50%, 7/27/07 5 [RUR]                131,000,000   $     4,896,179
--------------------------------------------------------------------------------------------------------
RSHB Capital SA/OJSC Russian Agricultural Bank,
7.175% Nts., 5/16/13 9                                                     10,520,000        10,967,100
--------------------------------------------------------------------------------------------------------
Salisbury International Investments Ltd., 9.657% Sec. Nts.,
Series 2006-003, Tranche E, 7/20/11 5,6                                     2,400,000         2,400,000
--------------------------------------------------------------------------------------------------------
Telefonica del Peru SA, 8% Sr. Unsec. Bonds, 4/11/16 5 [PEN]               26,033,700         8,479,033
--------------------------------------------------------------------------------------------------------
Tengizchevroil LLP, 6.124% Nts., 11/15/14 9                                 5,840,000         5,810,800
--------------------------------------------------------------------------------------------------------
Tiers-BSP, 0%/8.60% Collateralized Trust, Cl. A, 6/15/97 5,11               6,065,000         2,122,750
--------------------------------------------------------------------------------------------------------
UBS Luxembourg SA, 6.23% Sub. Nts., 2/11/15 6                               8,020,000         8,093,463
--------------------------------------------------------------------------------------------------------
VTB Capital SA, 6.25% Sr. Nts., 6/30/35 9                                   9,490,000         9,561,175
                                                                                        ----------------
Total Corporate Bonds and Notes (Cost $257,999,834)                                         241,897,979




                                                                               SHARES
--------------------------------------------------------------------------------------------------------

COMMON STOCKS--1.9%
--------------------------------------------------------------------------------------------------------
3i Group plc                                                                  115,759         2,027,609
--------------------------------------------------------------------------------------------------------
Anglo American plc                                                             47,250         1,989,269
--------------------------------------------------------------------------------------------------------
BASF AG                                                                        25,274         2,029,330
--------------------------------------------------------------------------------------------------------
Bayer AG                                                                       42,333         2,152,589
--------------------------------------------------------------------------------------------------------
BNP Paribas SA                                                                 19,660         2,115,305
--------------------------------------------------------------------------------------------------------
British Airways plc 12                                                        268,160         2,143,914
--------------------------------------------------------------------------------------------------------
British Land Co. plc                                                           80,690         2,060,723
--------------------------------------------------------------------------------------------------------
Brixton plc                                                                   209,210         2,072,162
--------------------------------------------------------------------------------------------------------
Charter plc 12                                                                143,610         2,293,608
--------------------------------------------------------------------------------------------------------
Commerzbank AG                                                                 60,008         2,033,215
--------------------------------------------------------------------------------------------------------
Corus Group plc                                                               280,810         2,039,999
--------------------------------------------------------------------------------------------------------
Credit Agricole SA                                                             51,620         2,267,429
--------------------------------------------------------------------------------------------------------
Daiwa Securities Group, Inc. 1                                                177,600         2,081,972
--------------------------------------------------------------------------------------------------------
Deutsche Boerse AG                                                             13,766         2,068,540
--------------------------------------------------------------------------------------------------------
Deutsche Lufthansa AG                                                         105,957         2,243,798
--------------------------------------------------------------------------------------------------------
Deutsche Telekom AG                                                           143,473         2,279,602
--------------------------------------------------------------------------------------------------------
Etablissements Economiques du Casino Guichard-Perrachon SA                     24,450         1,970,299
--------------------------------------------------------------------------------------------------------
Euronext NV                                                                    23,310         2,265,647
--------------------------------------------------------------------------------------------------------
France Telecom SA                                                              98,790         2,267,406
--------------------------------------------------------------------------------------------------------
Fujikura Ltd. 1                                                               177,430         1,950,121
--------------------------------------------------------------------------------------------------------
Furukawa Electric Co., Ltd. (The)                                             305,491         2,027,375
--------------------------------------------------------------------------------------------------------
Great Portland Estates plc 12                                                 194,950         2,208,331
--------------------------------------------------------------------------------------------------------
Hammerson plc                                                                  86,590         2,127,096
--------------------------------------------------------------------------------------------------------
Investec plc                                                                  163,840         1,608,981
--------------------------------------------------------------------------------------------------------
Ishikawajima-Harima Heavy Industries Co. Ltd.                                 726,000         2,230,202



                    26 | OPPENHEIMER INTERNATIONAL BOND FUND




                                                                                                  VALUE
                                                                               SHARES        SEE NOTE 1
--------------------------------------------------------------------------------------------------------

COMMON STOCKS Continued
--------------------------------------------------------------------------------------------------------
JFE Holdings, Inc. 1                                                           51,750   $     2,028,381
--------------------------------------------------------------------------------------------------------
Legal & General Group plc                                                       8,130            21,692
--------------------------------------------------------------------------------------------------------
London Stock Exchange Group plc                                                95,530         2,210,771
--------------------------------------------------------------------------------------------------------
Mitchells & Butlers plc                                                         1,920            21,192
--------------------------------------------------------------------------------------------------------
Mitsubishi Heavy Industries Ltd.                                              502,854         2,088,307
--------------------------------------------------------------------------------------------------------
Mitsubishi Materials Corp. 1                                                  485,320         2,009,297
--------------------------------------------------------------------------------------------------------
Mittal Steel Co. NV                                                            86,790         3,030,898
--------------------------------------------------------------------------------------------------------
Muenchener Rueckversicherungs-Gesellschaft AG                                  13,840         2,189,346
--------------------------------------------------------------------------------------------------------
Nippon Kayaku Co. Ltd.                                                        243,000         2,059,200
--------------------------------------------------------------------------------------------------------
Nippon Mining Holdings, Inc. 1                                                286,260         2,031,223
--------------------------------------------------------------------------------------------------------
Nomura Securities Co. Ltd.                                                    109,140         1,921,788
--------------------------------------------------------------------------------------------------------
Odakyu Electric Railway Co. Ltd.                                              329,370         2,094,026
--------------------------------------------------------------------------------------------------------
PagesJaunes Groupe SA                                                          73,110         2,076,646
--------------------------------------------------------------------------------------------------------
Pioneer Corp.                                                                 110,218         1,946,806
--------------------------------------------------------------------------------------------------------
ProSieben Sat.1 Media AG                                                       77,843         2,161,730
--------------------------------------------------------------------------------------------------------
Resolution plc                                                                185,120         2,140,306
--------------------------------------------------------------------------------------------------------
Royal & Sun Alliance Insurance Group plc                                      795,300         2,218,722
--------------------------------------------------------------------------------------------------------
Salzgitter AG                                                                  23,403         2,201,979
--------------------------------------------------------------------------------------------------------
Shinko Securities Co. Ltd.                                                    522,000         2,074,515
--------------------------------------------------------------------------------------------------------
Showa Shell Sekiyu K.K.                                                       186,000         2,072,178
--------------------------------------------------------------------------------------------------------
Societe Generale, Cl. A                                                        12,990         2,067,239
--------------------------------------------------------------------------------------------------------
Sumitomo Metal Industries 1                                                   512,450         1,972,083
--------------------------------------------------------------------------------------------------------
Vallourec SA                                                                    9,350         2,173,541
--------------------------------------------------------------------------------------------------------
Vivendi SA                                                                     60,650         2,186,479
--------------------------------------------------------------------------------------------------------
Volkswagen AG, Preference                                                      37,112         2,189,703
--------------------------------------------------------------------------------------------------------
Xstrata plc                                                                    46,710         1,930,180
                                                                                        ----------------
Total Common Stocks (Cost $100,194,395)                                                     103,672,750

                                                                                UNITS
--------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
--------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Oil Linked Payment Obligation Wts.,
Exp. 4/15/20 5,12 (Cost $0)                                                       500            18,250

                                                                            PRINCIPAL
                                                                               AMOUNT
--------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--24.0%
--------------------------------------------------------------------------------------------------------
Citigroup Global Markets Holdings, Inc.:
Argentina (Republic of) Credit Linked Nts., 4%, 5/22/08 13 [ARP]           11,655,000         9,987,532
Argentina (Republic of) Unsec. Credit Linked Nts.,
4%, 4/16/10 13 [ARP]                                                       10,903,383         6,224,984



                    27 | OPPENHEIMER INTERNATIONAL BOND FUND


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



                                                                                              PRINCIPAL             VALUE
                                                                                                 AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
--------------------------------------------------------------------------------------------------------------------------

Citigroup Global Markets Holdings, Inc.: Continued
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR]                    38,356,000   $    16,276,471
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR]                    59,878,000        25,409,389
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 10%, 1/5/10 [BRR]                   100,000,000        42,435,267
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 14.809%,
1/5/10 8 [BRR]                                                                               32,035,902         9,581,008
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 15.427%,
1/2/09 8 [BRR]                                                                               28,074,132         9,625,878
Brazil (Federal Republic of) Unsec. Credit Linked Nts., 15.728%,
1/3/08 8 [BRR]                                                                               24,719,335         9,694,008
Colombia (Republic of) Credit Linked Bonds, 11%, 7/24/20 [COP]                           12,570,000,000         5,799,301
Colombia (Republic of) Credit Linked Nts., Series II, 15%, 4/27/12 [COP]                  6,942,469,928         3,539,375
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP]                     31,110,000,000        15,860,343
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP]                     12,430,000,000         6,337,000
Colombia (Republic of) Unsec. Credit Linked Nts., 15%, 4/27/12 [COP]                     11,705,100,000         5,967,435
Dominican Republic Unsec. Credit Linked Nts., 11.648%, 9/24/07
(linked to Dominican Republic Treasury Bills) 8,10 [DOP]                                     57,500,000         1,508,360
Dominican Republic Credit Linked Nts., 10.705%, 3/5/07
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                       161,260,000         4,548,298
Dominican Republic Credit Linked Nts., 11.242%, 1/2/7
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                        92,100,000         2,652,480
Dominican Republic Credit Linked Nts., 14.608%, 5/14/07
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                       189,200,000         5,206,200
Dominican Republic Credit Linked Nts., 16.50%, 3/12/07
(linked to Dominican Republic Treasury Bills) [DOP]                                         205,500,000         5,782,599
Dominican Republic Credit Linked Nts., 17%, 3/12/07 [DOP]                                   256,400,000         7,752,410
Dominican Republic Credit Linked Nts., Series II, 15.603%, 4/23/07
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                       118,210,000         3,278,030
Dominican Republic Unsec. Credit Linked Nts., 15.638%, 4/30/07
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                       108,450,000         2,999,688
Dominican Republic Unsec. Credit Linked Nts., Series II, 15.736%, 4/30/07
(linked to Dominican Republic Treasury Bills) 8 [DOP]                                       237,770,000         6,576,634
Egypt (The Arab Republic of) Credit Linked Nts., 8.70%, 7/12/07
(linked to Egyptian Treasury Bills) 5,8 [EGP]                                                51,690,000         8,385,908
Egypt (The Arab Republic of) Credit Linked Nts., 9.079%, 3/22/07
(linked to Egyptian Treasury Bills) 5,8 [EGP]                                                43,000,000         7,178,816
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.50%, 2/16/08
(linked to Egyptian Treasury Bills) [EGP]                                                    34,150,000         5,886,474
Egypt (The Arab Republic of) Unsec. Credit Linked Nts., 8.775%, 2/22/07
(linked to Egyptian Treasury Bills) 5,8 [EGP]                                                49,620,000         8,340,732
Nigeria (Federal Republic of) Credit Linked Nts., 12.474%, 7/22/07 8 [NGN]                1,606,440,000        11,577,382
Nigeria (Federal Republic of) Credit Linked Nts., 14.50%, 3/1/11 [NGN]                    2,672,000,000        21,484,670
Nigeria (Federal Republic of) Credit Linked Nts., Series II,
14.50%, 4/4/11 [NGN]                                                                      2,032,000,000        16,353,048
Ukraine Hryvnia Unsec. Credit Linked Nts., 11.94%, 1/4/10 [UAH]                              13,799,000         2,990,517
Zambia (Republic of) Credit Linked Nts., 11%, 2/21/07
(linked to Zambian Treasury Bills) [ZMK]                                                 24,420,000,000         5,561,911
Zambia (Republic of) Credit Linked Nts., Series II, 11%, 2/21/07
(linked to Zambian Treasury Bills) [ZMK]                                                  9,980,000,000         2,273,050



                    28 | OPPENHEIMER INTERNATIONAL BOND FUND




                                                                                              PRINCIPAL             VALUE
                                                                                                 AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
--------------------------------------------------------------------------------------------------------------------------

Credit Suisse First Boston International:
Indonesia (Republic of) Total Return Linked Nts., 12%, 9/16/11 [IDR]                    116,800,000,000   $    13,312,035
Lukoil Credit Linked Nts., Series Fbi 105, 7.25%, 11/17/09 [RUR]                            321,528,000        12,194,276
Moscow (City of) Credit Linked Nts., Series Fbi 101, 10%, 12/31/10 5 [RUR]                  277,800,000        11,756,387
Moscow (City of) Credit Linked Nts., Series Fbi 98, 11%, 4/23/09 [RUR]                      280,840,000        11,776,955
OAO Gazprom Credit Linked Nts., 8.11%, 1/21/07 [RUR]                                        289,282,000        11,061,265
South African Rand Interest Bearing Linked Nts., Series FBi 43,
5.175%, 5/23/22 6                                                                             2,100,000         2,115,750
Ukraine (Republic of) Credit Linked Nts., Series EMG 13, 11.94%,
12/30/09 [UAH]                                                                               30,400,000         6,746,866
--------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc. (Nassau Branch):
Turkey (Republic of) Credit Linked Nts., Series 2, 20.853%, 7/16/08 8,10 [TRY]               39,420,000        18,216,855
Turkey (Republic of) Credit Linked Nts., Series EM 880, 20%, 10/18/07                        12,320,000        11,867,037
Turkey (Republic of) Credit Linked Nts., Series II I, 20.547%, 7/16/08 8,10 [TRY]            21,500,000         9,846,191
Ukraine (Republic of) Credit Linked Nts., Series EMG 11, 11.94%,
12/30/09 [UAH]                                                                                9,163,000         2,033,603
Ukraine (Republic of) Credit Linked Nts., Series NPC 12, 11.94%,
12/30/09 [UAH]                                                                               65,490,000        14,534,613
--------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
Argentina (Republic of) Credit Linked Nts., 4%, 12/21/11 [ARP]                               35,580,000        28,544,245
Arrendadora Capita Corp. SA de CV/Capita Corp. (The) de Mexico SA
de CV Credit Linked Nts., 9.09%, 1/5/11 5 [MXN]                                             130,466,254        11,867,041
Arrendadora Capita Corp. SA de CV/Capita Corp. (The) de Mexico SA
de CV Credit Linked Nts., 9.65%, 1/5/11 5 [MXN]                                              85,964,902         7,848,578
Brazil Real Credit Linked Nts., 13.882%, 3/3/10 8 [BRR]                                      61,128,560        21,349,873
Brazil Real Credit Linked Nts., 6%, 8/18/10 [BRR]                                            15,895,000        10,487,990
Campania Total Return Linked Nts., 3.804%, 7/30/10 5,6 [EUR]                                 34,900,000        44,020,530
Campania Total Return Linked Nts., 3.846%, 7/30/10 5,6 [EUR]                                 40,150,000        50,713,807
Colombia (Republic of) Credit Linked Nts., 13.50%, 9/15/14 [COP]                         13,259,000,000         6,674,491
Egypt (The Arab Republic of) Total Return Linked Nts., 8.328%,
12/12/06 (linked to Egyptian Treasury Bills) 8 [EGP]                                         62,500,000        10,673,560
Egypt (The Arab Republic of) Total Return Linked Nts., 9.170%, 1/30/07
(linked to Egyptian Treasury Bills) 5,8 [EGP]                                                37,750,000         6,419,207
European Investment Bank, Russian Federation Credit Linked Nts.,
5.502%, 1/19/10 8                                                                             8,475,000         7,217,734
Grupo TMM SA Credit Linked Nts., 6%, 9/7/12 5                                                 5,395,000         5,402,472
Halyk Bank of Kazakhstan Total Return Linked Nts., Series I,
7.25%, 3/24/09 [KZT]                                                                      2,003,690,000        16,179,024
Indonesia (Republic of) Credit Linked Nts., 9.50%, 6/22/15                                   10,300,162         9,857,255
Indonesia (Republic of) Credit Linked Nts., Series III, 14.25%, 6/15/13                      12,412,800        14,998,386
Indonesia (Republic of) Total Return Nts., 12.50%, 3/22/13 [IDR]                         84,850,000,000         9,956,653
Nigeria (Federal Republic of) Credit Linked Nts., 12.50%, 2/24/09 [NGN]                     525,300,000         4,149,604
Nigeria (Federal Republic of) Credit Linked Nts., 15%, 1/27/09 [NGN]                        704,900,000         5,912,153
OAO Gazprom I Credit Nts., 8.36%, 10/20/07                                                    1,435,000         1,547,466
OAO Gazprom II Credit Nts., 8.11%, 4/20/07                                                    1,435,000         1,519,612
Peru (Republic of) Credit Linked Nts., 6.73%, 2/20/11 6                                       3,255,000         3,262,217
Romania (Republic of) 3 yr. Linked Nts., 12.25%, 10/15/07 [RON]                              22,740,000         9,396,950
Romania (Republic of) 3 yr. Linked Nts., 12.89%, 9/24/07 [RON]                                3,320,000         1,392,289



                    29 | OPPENHEIMER INTERNATIONAL BOND FUND


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



                                                                                              PRINCIPAL             VALUE
                                                                                                 AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
--------------------------------------------------------------------------------------------------------------------------

Deutsche Bank AG: Continued
Romania (Republic of) 3 yr. Linked Nts., 12.89%, 9/24/07 [RON]                               10,000,000   $     4,193,641
Romania (Republic of) 3 yr. Linked Nts., 12.89%, 9/24/07 [RON]                                5,640,000         2,365,213
Romania (Republic of) Credit Linked Nts., 11.49%, 12/7/06 [RON]                               9,118,650         3,603,071
Russian Federation Credit Linked Nts., 0.00%, 12/2/09 8 [RUR]                               233,573,000         9,325,918
Russian Federation Total Return Linked Nts., Series II, 9%, 4/22/11 [RUR]                   288,935,000        11,909,549
Ukraine (Republic of) 5 yr. Credit Linked Nts., 4.05%, 8/25/10                                2,505,000         2,515,847
Ukraine (Republic of) 5.5 yr. Credit Linked Nts., 4.05%, 2/25/11                              2,505,000         2,508,206
Ukraine (Republic of) 6 yr. Credit Linked Nts., 4.05%, 8/25/11                                2,505,000         2,503,722
Ukraine (Republic of) 6.5 yr. Credit Linked Nts., 4.05%, 2/27/12                              2,505,000         2,494,980
Ukraine (Republic of) 7 yr. Credit Linked Nts., 4.05%, 8/28/12                                2,505,000         2,486,488
Ukraine (Republic of) Credit Linked Nts., 10.208%, 7/1/09 [UAH]                              27,763,200         5,672,504
Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH]                              3,228,000           699,812
Ukraine (Republic of) Credit Linked Nts., 11.94%, 12/30/09 [UAH]                             11,438,000         2,479,692
Ukraine (Republic of) Credit Linked Nts., 5.592%, 5/16/07 [UAH]                              27,990,000         5,533,566
Ukraine (Republic of) Credit Linked Nts., 9.60%, 7/1/09 [UAH]                                 7,953,600         1,625,059
Ukraine (Republic of) Credit Linked Nts., Series A, 5.592%, 5/16/07 [UAH]                    27,980,000         5,531,589
United Mexican States BORHIS Total Return Linked Nts.,
6.10%, 9/27/35 [MXN]                                                                         26,330,000         9,150,118
United Mexican States Credit Linked Nts., 9.52%, 1/5/11 5 [MXN]                              86,081,449         7,839,644
Videocon International Ltd. Credit Linked Nts., 7.75%, 12/29/09 5                             7,300,000         7,299,270
--------------------------------------------------------------------------------------------------------------------------
Goldman Sachs International, Russian Federation Total Return
Linked Nts., 8%, 5/13/09 [RUR]                                                              573,900,000        23,433,207
--------------------------------------------------------------------------------------------------------------------------
ING Bank NV, Ukraine (Republic of) Credit Linked Nts., Series 725,
11.89%, 12/30/09 5 [UAH]                                                                     64,285,000        13,990,500
--------------------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank:
Argentina (Republic of) Credit Linked Nts., 4%, 12/19/11 5 [ARP]                             36,445,000        29,563,456
Brazil (Federal Republic of) Credit Linked Nts., 12.08%, 1/2/15 8 [BRR]                      51,226,300         7,946,685
Brazil (Federal Republic of) Credit Linked Nts., 12.683%, 6/1/13 8 [BRR]                     75,340,000        14,285,078
Brazil (Federal Republic of) Credit Linked Nts., 13.847%, 4/1/10 8 [BRR]                    129,150,391        37,159,768
Brazil (Federal Republic of) Credit Linked Nts., 15.326%, 1/2/15 8 [BRR]                    138,200,796        21,438,952
Brazil (Federal Republic of) Credit Linked Nts., 2.731%, 11/30/12 8 [ARP]                    35,605,000         8,633,531
Brazil (Federal Republic of) Credit Linked Nts., 6%, 5/16/45 5 [BRR]                         45,170,000        26,073,039
Brazil (Federal Republic of) Credit Linked Nts., Series II,
13.553%, 1/2/15 8 [BRR]                                                                     114,770,000        17,804,156
Colombia (Republic of) Credit Linked Bonds, 10.19%, 1/5/16 8 [COP]                      153,800,000,000        23,517,732
Colombia (Republic of) Credit Linked Bonds, 11.198%, 8/3/20 8 [COP]                     132,560,000,000        13,685,637
Peru (Republic of) Credit Linked Nts., 8.115%, 9/2/15 8 [PEN]                                40,860,000         6,134,342
Russian Federation Railways Credit Linked Nts., 6.59%, 6/15/07 [RUR]                        297,950,000        11,972,006
Swaziland (Kingdom of) Credit Linked Nts., 7.25%, 6/20/10                                     3,850,000         3,990,525
--------------------------------------------------------------------------------------------------------------------------
Lehman Brothers International:
Romania (Republic of) Total Return Linked Nts., 7.90%, 2/9/10
(linked to Romanian Treasury Bills) [RON]                                                    10,726,400         4,357,382
Turkey (Republic of) Total Return Linked Nts., 20%, 10/17/07
(linked to Turkish Treasury Bills)                                                            4,252,888         4,518,694



                    30 | OPPENHEIMER INTERNATIONAL BOND FUND




                                                                                              PRINCIPAL             VALUE
                                                                                                 AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES Continued
--------------------------------------------------------------------------------------------------------------------------

Lehman Brothers Special Financing, Inc.:
Argentina (Republic of) Credit Linked Nts., 9.655%, 12/20/15                            $    20,000,000   $    21,974,000
Romania ( Republic of) Total Return Linked Nts., 6.50%, 3/10/10
(linked to Romanian Treasury Bills) [RON]                                                    30,904,100        11,793,307
Romania ( Republic of) Total Return Linked Nts., 6.75%, 3/11/08
(linked to Romanian Treasury Bills) [RON]                                                    36,650,000        14,283,566
Romania ( Republic of) Total Return Linked Nts., 7.25%, 4/18/10
(linked to Romanian Treasury Bills) [RON]                                                     3,105,000         1,212,512
Romania ( Republic of) Total Return Linked Nts., 7.50%, 3/6/07
(linked to Romanian Treasury Bills) [RON]                                                     5,155,000         2,056,214
Romania ( Republic of) Total Return Linked Nts., 7.75%, 4/18/08
(linked to Romanian Treasury Bills) [RON]                                                     3,101,000         1,231,718
Romania ( Republic of) Total Return Linked Nts., 7.75%, 4/18/08
(linked to Romanian Treasury Bills) [RON]                                                     7,453,000         2,960,334
Romania (Republic of) Total Return Linked Nts., 7.90%, 2/12/08
(linked to Romanian Treasury Bills) [RON]                                                    24,895,500        10,050,029
--------------------------------------------------------------------------------------------------------------------------
Morgan Stanley & Co. International Ltd./Red Arrow
International Leasing plc:
Total Return Linked Nts., Series A, 8.375%, 6/30/12 5 [RUR]                                 277,994,119        10,740,375
Total Return Linked Nts., Series B, 11%, 6/30/12 5 [RUR]                                    220,610,000         8,447,644
--------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital Services, Inc.:
Bank Center Credit Total Return Linked Nts., 7.52%, 6/6/08 [KZT]                          3,273,000,000        25,964,247
Brazil (Federal Republic of) Sr. Linked Nts., 14.40%, 8/4/16 [BRR]                           56,967,568        27,412,187
Philippines (Republic of the) Credit Linked Nts., 10.264%, 9/20/15 5                         30,000,000        34,158,000
Philippines (Republic of the) Credit Linked Nts., 8.619%, 9/20/15 9                             980,000         1,068,690
Philippines (Republic of the) Credit Linked Nts., 8.38%, 6/20/16 5,6                          2,640,000         2,643,168
United Mexican States Credit Linked Nts., 5.64%, 11/20/15                                    11,760,000        11,808,216
Venezuela ( Republic of) 10 yr. Credit Linked Nts., 7.85%, 11/20/15                           4,415,000         4,691,379
Venezuela ( Republic of) Credit Linked Nts., 6.49%, 5/20/10                                   8,435,000         8,644,188
Venezuela ( Republic of) Credit Linked Nts., 7.382%, 5/20/10                                  3,850,000         4,219,600
--------------------------------------------------------------------------------------------------------------------------
UBS AG:
Indonesia (Republic of) Credit Linked Nts., 12.80%, 6/15/21 10 [IDR]                     80,000,000,000         9,665,041
Israel (State of) Credit Linked Nts., 7.50%, 4/5/14 [ILS]                                    56,205,300        14,562,116
                                                                                                          ----------------
Total Structured Notes (Cost $1,230,497,699)                                                                1,299,757,278




                                                       EXPIRATION         STRIKE
                                                            DATES          PRICE              CONTRACTS
--------------------------------------------------------------------------------------------------------------------------

OPTIONS PURCHASED--0.0%
--------------------------------------------------------------------------------------------------------------------------
Mexican Nuevo Peso (MXN) Call 12                         10/12/06         $11.40            176,016,000             1,774
--------------------------------------------------------------------------------------------------------------------------
Mexican Nuevo Peso (MXN) Put 12                          10/12/06          11.40            176,016,000           580,603
--------------------------------------------------------------------------------------------------------------------------
New Turkish Lira (TRY)/Japanese
Yen (JPY) Put 12                                          1/30/07          77.00TRY          32,820,000           376,071
                                                                                                          ----------------
Total Options Purchased (Cost $1,570,481)                                                                         958,448



                    31 | OPPENHEIMER INTERNATIONAL BOND FUND


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



                                                                                              PRINCIPAL             VALUE
                                                                                                 AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--6.2%
--------------------------------------------------------------------------------------------------------------------------

Undivided interest of 22.73% in joint repurchase agreement (Principal
Amount/Value $1,469,294,000, with a maturity value of $1,469,936,816) with UBS
Warburg LLC, 5.25%, dated 9/29/06, to be repurchased at $334,176,138 on 10/2/06,
collateralized by Federal National Mortgage
Assn., 5%, 2/1/36, with a value of $1,502,659,342 (Cost $334,030,000)                   $   334,030,000   $   334,030,000
--------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased
with Cash Collateral from Securities Loaned) (Cost $5,295,201,601)                                          5,400,629,799

--------------------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--15.1% 14
--------------------------------------------------------------------------------------------------------------------------
ASSET-BACKED FLOATING NOTES--0.1%
Citigroup Mortgage Loan Trust, Inc., Series 2006-HE1, Cl. A1,
5.39%, 10/25/06                                                                               3,226,203         3,226,203
--------------------------------------------------------------------------------------------------------------------------
Countrywide Asset-Backed Certificates, Series 2005-17,
Cl. 4AV1, 5.44%, 10/25/06                                                                     1,659,768         1,659,768
--------------------------------------------------------------------------------------------------------------------------
Whitehawk CDO Funding Corp., 5.44%, 12/15/06                                                  2,000,000         2,000,000
                                                                                                          ----------------
                                                                                                                6,885,971

--------------------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--13.4%
Undivided interest of 12% in joint repurchase agreement (Principal
Amount/Value $250,000,000, with a maturity value of $250,112,500)
with Cantor Fitzgerald & Co., 5.40%, dated 9/29/06, to be repurchased
at $30,013,500 on 10/2/06, collateralized by U.S. Agency Mortgages,
0.0001%-6.50%, 8/1/12-9/1/36, with a value of $255,002,127                                   30,000,000        30,000,000
--------------------------------------------------------------------------------------------------------------------------
Undivided interest of 20.87% in joint repurchase agreement (Principal
Amount/Value $2,500,000,000 with a maturity value of $2,501,131,250)
with ING Financial Markets LLC, 5.43%, dated 9/29/06, to be repurchased
at $522,021,108 on 10/2/06, collateralized by U.S. Agency Mortgages,
0.00%-7%, 9/1/18-8/1/36, with a value of $2,550,003,623                                     521,785,000       521,785,000
--------------------------------------------------------------------------------------------------------------------------
Undivided interest of 4.44% in joint repurchase agreement (Principal
Amount/Value $3,950,000,000, with a maturity value of $3,951,787,375)
with Nomura Securities, 5.43%, dated 9/29/06, to be repurchased at
$175,611,383 on 10/2/06, collateralized by U.S. Agency Mortgages,
0.00%-22.12%, 3/15/14-6/25/43, with a value of $4,029,000,000                               175,531,955       175,531,955
                                                                                                          ----------------
                                                                                                              727,316,955

--------------------------------------------------------------------------------------------------------------------------
MASTER FLOATING NOTE--0.1%
CDC Financial Products, Inc., 5.43%, 10/2/06                                                  1,000,000         1,000,000
--------------------------------------------------------------------------------------------------------------------------
Citigroup Global Markets, Inc., 5.45%, 10/2/06                                                4,000,000         4,000,000
                                                                                                          ----------------
                                                                                                                5,000,000

--------------------------------------------------------------------------------------------------------------------------
MEDIUM-TERM FLOATING NOTE--0.3%
American Express Credit Corp., 5.34%, 10/16/06                                                2,000,000         2,000,000
--------------------------------------------------------------------------------------------------------------------------
Bear Stearns, 5.37%, 10/2/06                                                                  3,000,000         3,000,000
--------------------------------------------------------------------------------------------------------------------------
CC USA, Inc., 5.37%, 10/2/06                                                                  2,000,000         2,000,000
--------------------------------------------------------------------------------------------------------------------------
CC USA, Inc., 5.37%, 10/2/06                                                                  3,000,000         3,000,000



                    32 | OPPENHEIMER INTERNATIONAL BOND FUND




                                                                                              PRINCIPAL             VALUE
                                                                                                 AMOUNT        SEE NOTE 1
--------------------------------------------------------------------------------------------------------------------------

MEDIUM-TERM FLOATING NOTE Continued
Dorada Finance, Inc., 5.37%, 10/2/06                                                    $     3,000,000   $     3,000,000
--------------------------------------------------------------------------------------------------------------------------
LINKS Finance LLC, 5.37%, 10/2/06                                                             2,000,050         2,000,050
--------------------------------------------------------------------------------------------------------------------------
MBIA Global Funding LLC, 5.33%, 10/30/06                                                      2,000,000         2,000,000
                                                                                                          ----------------
                                                                                                               17,000,050

--------------------------------------------------------------------------------------------------------------------------
YANKEE FIXED CERTIFICATE OF DEPOSIT--0.7%
Bank of Tokyo/UFJ Ltd. NY, 5.30%, 10/13/06                                                   35,000,000        35,000,000
--------------------------------------------------------------------------------------------------------------------------
YANKEE FLOATING CERTIFICATE OF DEPOSIT--0.5%
Natexis Banques Populaires NY, 5.37%, 10/2/06                                                 2,000,000         2,000,000
--------------------------------------------------------------------------------------------------------------------------
Natexis Banques Populaires NY, 5.39%, 10/2/06                                                 1,999,709         1,999,709
--------------------------------------------------------------------------------------------------------------------------
Societe Generale NY, 5.33%, 10/2/06                                                          25,000,000        25,000,000
                                                                                                          ----------------
                                                                                                               28,999,709
                                                                                                          ----------------

Total Investments Purchased with Cash Collateral
from Securities Loaned (Cost $820,202,685)                                                                    820,202,685

--------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $6,115,404,286)                                                 114.7%    6,220,832,484
--------------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS                                                             (14.7)     (795,620,144)
                                                                                        ----------------------------------
NET ASSETS                                                                                        100.0%  $ 5,425,212,340
                                                                                        ==================================


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
CAD    Canadian Dollar
COP    Colombian Peso
DKK    Danish Krone
DOP    Dominican Republic Peso
EGP    Egyptian Pounds
EUR    Euro
GBP    British Pound Sterling
IDR    Indonesia Rupiah
ILS    Israeli Shekel
JPY    Japanese Yen
KZT    Kazakhstan Tenge
MXN    Mexican Nuevo Peso
MYR    Malaysian Ringgit
NGN    Nigeria Naira
PEN    Peruvian New Sol
PLZ    Polish Zloty
RON    New Romanian Leu
RUR    Russian Ruble
TRY    New Turkish Lira
UAH    Ukraine Hryvnia
UYU    Uruguay Peso
ZMK    Zambian Kwacha


                    33 | OPPENHEIMER INTERNATIONAL BOND FUND


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

FOOTNOTES TO STATEMENT OF INVESTMENTS Continued

1. Partial or fully-loaned security. See Note 13 of accompanying Notes.

2. A sufficient amount of securities has been designated to cover outstanding
written put options, as follows:



                                                 CONTRACTS     EXPIRATION       EXERCISE        PREMIUM           VALUE
                                            SUBJECT TO PUT           DATE          PRICE       RECEIVED      SEE NOTE 7
------------------------------------------------------------------------------------------------------------------------

New Turkish Lira (TRY)/Japanese Yen (JPY)       32,820,000        1/30/07          65.00TRY    $556,532        $285,577


3. A sufficient amount of securities has been designated to cover outstanding
foreign currency contracts. See Note 5 of accompanying Notes.

4. 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 $31,067,451. See Note 6 of accompanying
Notes.

5. Illiquid security. The aggregate value of illiquid securities as of September
30, 2006 was $432,204,370, which represents 7.97% of the Fund's net assets. In
addition, the Fund has restricted currency of $2,736,749, which represents 0.05%
of the Fund's net assets. See Note 12 of accompanying Notes.

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

7. Issue is in default. See Note 1 of accompanying Notes.

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

9. 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 $89,387,487 or 1.65% of the Fund's net
assets as of September 30, 2006.

10. When-issued security or forward commitment to be delivered and settled after
September 30, 2006. See Note 1 of accompanying Notes.

11. Denotes a step bond: a zero coupon bond that converts to a fixed or variable
interest rate at a designated future date.

12. Non-income producing security.

13. Denotes an inflation-indexed security: coupon and principal are indexed to
the consumer price index.

14. The security/securities have 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 13 of
accompanying Notes.


                    34 | OPPENHEIMER INTERNATIONAL BOND FUND


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

GEOGRAPHIC HOLDINGS/UNAUDITED                                VALUE      PERCENT
--------------------------------------------------------------------------------
United States                                      $ 2,122,445,511         34.1%
Italy                                                  428,218,629          6.9
Brazil                                                 393,363,141          6.3
France                                                 317,710,772          5.1
Germany                                                313,657,615          5.0
United Kingdom                                         236,933,632          3.8
Russia                                                 198,613,164          3.2
Japan                                                  182,827,500          2.9
Colombia                                               174,713,430          2.8
Peru                                                   172,700,624          2.8
Argentina                                              171,443,942          2.8
Canada                                                 133,757,405          2.1
Australia                                              124,022,392          2.0
Turkey                                                 114,548,217          1.8
Belgium                                                100,083,041          1.6
Poland                                                  90,212,664          1.5
Philippines                                             89,687,422          1.4
Mexico                                                  81,738,822          1.3
Ukraine                                                 80,093,259          1.3
Romania                                                 68,896,226          1.1
Greece                                                  66,963,304          1.1
Indonesia                                               65,799,145          1.1
Nigeria                                                 61,262,067          1.0
Egypt                                                   59,135,724          1.0
Dominican Republic                                      56,887,087          0.9
Israel                                                  56,377,964          0.9
Kazakhstan                                              52,453,071          0.8
Malaysia                                                43,320,657          0.7
Uruguay                                                 32,582,214          0.5
Denmark                                                 26,428,511          0.4
Panama                                                  22,330,275          0.4
Supranational                                           21,978,679          0.4
Venezuela                                               17,573,417          0.3
Zambia                                                   7,834,961          0.1
India                                                    7,299,270          0.1
The Netherlands                                          5,296,545          0.1
Trinidad & Tobago                                        4,762,866          0.1
El Salvador                                              4,559,976          0.1
Swaziland                                                3,990,525          0.1
Bulgaria                                                 3,472,875          0.1
South Africa                                             2,115,750          0.0
Switzerland                                              1,930,180          0.0
Guatemala                                                  810,013          0.0
                                                   -----------------------------

Total                                              $ 6,220,832,484        100.0%
                                                   =============================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    35 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF ASSETS AND LIABILITIES  September 30, 2006
--------------------------------------------------------------------------------



-------------------------------------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------------------------------------

Investments, at value (cost $6,115,404,286)--see accompanying statement of investments       $ 6,220,832,484
-------------------------------------------------------------------------------------------------------------
Cash                                                                                              32,578,702
-------------------------------------------------------------------------------------------------------------
Cash--foreign currencies (cost $3,577,638)                                                         3,565,070
-------------------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts                                             36,404,481
-------------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts                                                         27,854,854
-------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest, dividends and principal paydowns                                                        49,351,404
Shares of beneficial interest sold                                                                27,869,308
Investments sold (including $1,379,388 sold on a when-issued basis or forward commitment)         16,112,809
Other                                                                                                192,055
                                                                                             ----------------
Total assets                                                                                   6,414,761,167

-------------------------------------------------------------------------------------------------------------
LIABILITIES
-------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $556,532)--
see accompanying statement of investments                                                            285,577
-------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned                                                       820,202,685
-------------------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts                                             24,712,326
-------------------------------------------------------------------------------------------------------------
Unrealized depreciation on swap contracts                                                          5,762,991
-------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $42,628,839 purchased on a when-issued
basis or forward commitment)                                                                      84,662,120
Closed foreign currency contracts                                                                 32,943,432
Shares of beneficial interest redeemed                                                            11,748,772
Dividends                                                                                          3,423,011
Distribution and service plan fees                                                                 3,186,906
Futures margins                                                                                    1,318,799
Transfer and shareholder servicing agent fees                                                        756,505
Shareholder communications                                                                           335,545
Trustees' compensation                                                                                37,387
Other                                                                                                172,771
                                                                                             ----------------
Total liabilities                                                                                989,548,827

-------------------------------------------------------------------------------------------------------------
NET ASSETS                                                                                   $ 5,425,212,340
                                                                                             ================

-------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
-------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest                                                   $       935,691
-------------------------------------------------------------------------------------------------------------
Additional paid-in capital                                                                     5,331,926,923
-------------------------------------------------------------------------------------------------------------
Accumulated net investment income                                                                 36,828,546
-------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions                   (98,164,938)
-------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies                                      153,686,118
                                                                                             ----------------

NET ASSETS                                                                                   $ 5,425,212,340
                                                                                             ================



                    36 | OPPENHEIMER INTERNATIONAL BOND FUND




-------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
-------------------------------------------------------------------------------------------------------------

Class A Shares:
Net asset value and redemption price per share (based on net assets
of $4,075,172,484 and 702,353,618 shares of beneficial interest outstanding)                          $ 5.80
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price)                                                                           $ 6.09
-------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $234,847,660
and 40,612,456 shares of beneficial interest outstanding)                                             $ 5.78
-------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $875,032,587
and 151,304,013 shares of beneficial interest outstanding)                                            $ 5.78
-------------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $63,431,907
and 10,959,822 shares of beneficial interest outstanding)                                             $ 5.79
-------------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share
(based on net assets of $176,727,702 and 30,460,796 shares of beneficial interest outstanding)        $ 5.80


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    37 | OPPENHEIMER INTERNATIONAL BOND FUND


STATEMENT OF OPERATIONS  For the Year Ended September 30, 2006
--------------------------------------------------------------------------------



-------------------------------------------------------------------------------------------
INVESTMENT INCOME
-------------------------------------------------------------------------------------------

Interest                                                                     $ 208,861,131
-------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $180,646)                         2,627,909
-------------------------------------------------------------------------------------------
Portfolio lending fees                                                           1,112,433
-------------------------------------------------------------------------------------------
Other income                                                                        16,573
                                                                             --------------
Total investment income                                                        212,618,046

-------------------------------------------------------------------------------------------
EXPENSES
-------------------------------------------------------------------------------------------
Management fees                                                                 24,458,289
-------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                                          8,524,862
Class B                                                                          2,295,635
Class C                                                                          7,164,664
Class N                                                                            275,556
-------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                          5,323,336
Class B                                                                            573,142
Class C                                                                          1,010,789
Class N                                                                            285,176
Class Y                                                                             10,821
-------------------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                            580,791
Class B                                                                             62,898
Class C                                                                            105,719
Class N                                                                              5,625
-------------------------------------------------------------------------------------------
Custodian fees and expenses                                                        467,415
-------------------------------------------------------------------------------------------
Trustees' compensation                                                              59,074
-------------------------------------------------------------------------------------------
Administration service fees                                                          1,500
-------------------------------------------------------------------------------------------
Other                                                                              175,565
                                                                             --------------
Total expenses                                                                  51,380,857
Less reduction to custodian expenses                                               (48,473)
Less waivers and reimbursements of expenses                                        (91,774)
                                                                             --------------
Net expenses                                                                    51,240,610

-------------------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                          161,377,436



                    38 | OPPENHEIMER INTERNATIONAL BOND FUND




-------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
-------------------------------------------------------------------------------------------

Net realized gain (loss) on:
Investments                                                                  $  42,005,945
Closing and expiration of option contracts written                               1,648,055
Closing and expiration of swaption contracts                                       389,255
Closing and expiration of futures contracts                                     10,032,947
Foreign currency transactions                                                  (80,955,986)
Swap contracts                                                                   1,145,100
                                                                             --------------
Net realized loss                                                              (25,734,684)
-------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments                                                                    (20,007,804)
Translation of assets and liabilities denominated in foreign currencies          2,349,413
Futures contracts                                                               16,336,628
Option contracts                                                                   270,955
Swaption contracts                                                                  82,251
Swap contracts                                                                  (7,620,507)
                                                                             --------------
Net change in unrealized appreciation                                           (8,589,064)

-------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                         $ 127,053,688
                                                                             ==============


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    39 | OPPENHEIMER INTERNATIONAL BOND FUND


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



YEAR ENDED SEPTEMBER 30,                                                               2006             2005
-------------------------------------------------------------------------------------------------------------

OPERATIONS
-------------------------------------------------------------------------------------------------------------
Net investment income                                                        $  161,377,436   $   94,722,247
-------------------------------------------------------------------------------------------------------------
Net realized gain (loss)                                                        (25,734,684)     101,469,820
-------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation                                            (8,589,064)     125,469,766
                                                                             --------------------------------
Net increase in net assets resulting from operations                            127,053,688      321,661,833

-------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
-------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                                        (200,784,108)    (119,863,500)
Class B                                                                         (12,370,619)     (11,853,673)
Class C                                                                         (36,714,329)     (21,678,102)
Class N                                                                          (3,110,737)      (1,754,272)
Class Y                                                                          (5,420,742)      (1,726,774)
-------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A                                                                         (11,599,099)     (15,265,136)
Class B                                                                            (891,798)      (1,931,153)
Class C                                                                          (2,435,648)      (3,155,872)
Class N                                                                            (203,177)        (225,580)
Class Y                                                                            (253,487)        (218,918)

-------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
-------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A                                                                       1,502,920,202    1,399,327,451
Class B                                                                          18,514,548       44,672,998
Class C                                                                         338,152,983      305,107,070
Class N                                                                          18,829,709       26,099,719
Class Y                                                                         141,286,624       21,571,837

-------------------------------------------------------------------------------------------------------------
NET ASSETS
-------------------------------------------------------------------------------------------------------------
Total increase                                                                1,872,974,010    1,940,767,928
-------------------------------------------------------------------------------------------------------------
Beginning of period                                                           3,552,238,330    1,611,470,402
                                                                             --------------------------------
End of period (including accumulated net investment income
of $36,828,546 and $63,991,108, respectively)                                $5,425,212,340   $3,552,238,330
                                                                             ================================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    40 | OPPENHEIMER INTERNATIONAL BOND FUND


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



CLASS A          YEAR ENDED SEPTEMBER 30,               2006           2005           2004             2003           2002
---------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     6.01     $     5.63     $     5.33       $     4.38     $     3.95
---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .22 1          .23 1          .13              .20            .24
Net realized and unrealized gain (loss)                 (.04)           .62            .47              .95            .41
                                                  -------------------------------------------------------------------------
Total from investment operations                         .18            .85            .60             1.15            .65
---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.37)          (.41)          (.30)            (.20)          (.19)
Distributions from net realized gain                    (.02)          (.06)            --               --             --
Tax return of capital distribution                        --             --             --               --           (.03)
                                                  -------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                         (.39)          (.47)          (.30)            (.20)          (.22)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     5.80     $     6.01     $     5.63       $     5.33     $     4.38
                                                  =========================================================================

---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      3.23%         15.53%         11.56%           26.67%         16.78%
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $4,075,172     $2,683,900     $1,177,628       $  429,283     $  181,456
---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $3,430,374     $1,925,344     $  811,608       $  285,391     $  134,912
---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   3.72%          3.85%          2.19%            3.94%          5.16%
Total expenses                                          0.98%          1.03%          1.13%            1.22%          1.37%
Expenses after payments and waivers
and reduction to custodian expenses                     0.97%          1.02%          1.13%            1.22%          1.37%
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  144%            90%           133%             341%           372%


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.


                    41 | OPPENHEIMER INTERNATIONAL BOND FUND


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



CLASS B          YEAR ENDED SEPTEMBER 30,               2006           2005           2004             2003           2002
-----------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     5.99     $     5.61     $     5.31       $     4.37     $     3.94
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .17 1          .17 1          .08              .16            .21
Net realized and unrealized gain (loss)                 (.04)           .63            .47              .94            .40
                                                  ---------------------------------------------------------------------------
Total from investment operations                         .13            .80            .55             1.10            .61
-----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.32)          (.36)          (.25)            (.16)          (.15)
Distributions from net realized gain                    (.02)          (.06)            --               --             --
Tax return of capital distribution                        --             --             --               --           (.03)
                                                  ---------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                         (.34)          (.42)          (.25)            (.16)          (.18)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     5.78     $     5.99     $     5.61       $     5.31     $     4.37
                                                  ===========================================================================

-----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      2.35%         14.58%         10.66%           25.48%         15.90%
-----------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $  234,848     $  224,381     $  167,621       $  134,661     $  100,049
-----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $  229,871     $  201,541     $  153,117       $  119,232     $   85,244
-----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   2.88%          2.95%          1.40%            3.20%          4.41%
Total expenses                                          1.83% 4        1.89% 4        1.98% 4,5        2.03% 4        2.14% 4
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  144%            90%           133%             341%           372%


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 C          YEAR ENDED SEPTEMBER 30,               2006           2005           2004             2003           2002
-----------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     5.99     $     5.61     $     5.31       $     4.37     $     3.94
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .17 1          .18 1          .09              .16            .21
Net realized and unrealized gain (loss)                 (.03)           .63            .46              .94            .40
                                                  ---------------------------------------------------------------------------
Total from investment operations                         .14            .81            .55             1.10            .61
-----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.33)          (.37)          (.25)            (.16)          (.15)
Distributions from net realized gain                    (.02)          (.06)            --               --             --
Tax return of capital distribution                        --             --             --               --           (.03)
                                                  ---------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                         (.35)          (.43)          (.25)            (.16)          (.18)
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     5.78     $     5.99     $     5.61       $     5.31     $     4.37
                                                  ===========================================================================

-----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      2.46%         14.70%         10.75%           25.48%         15.90%
-----------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $  875,032     $  560,138     $  233,311       $   90,248     $   38,865
-----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $  717,977     $  401,401     $  170,796       $   63,198     $   28,635
-----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   2.98%          3.10%          1.46%            3.15%          4.37%
Total expenses                                          1.71% 4        1.77% 4        1.88% 4,5        2.02% 4        2.14% 4
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  144%            90%           133%             341%           372%


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.


                    43 | OPPENHEIMER INTERNATIONAL BOND FUND


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



CLASS N          YEAR ENDED SEPTEMBER 30,               2006           2005           2004             2003           2002
---------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     6.00     $     5.61     $     5.32       $     4.37     $     3.95
---------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .19 1          .20 1          .12              .18            .21
Net realized and unrealized gain (loss)                 (.04)           .64            .45              .95            .42
                                                  -------------------------------------------------------------------------
Total from investment operations                         .15            .84            .57             1.13            .63
---------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    (.34)          (.39)          (.28)            (.18)          (.18)
Distributions from net realized gain                    (.02)          (.06)            --               --             --
Tax return of capital distribution                        --             --             --               --           (.03)
                                                  -------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                         (.36)          (.45)          (.28)            (.18)          (.21)
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     5.79     $     6.00     $     5.61       $     5.32     $     4.37
                                                  =========================================================================

---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                      2.78%         15.27%         11.00%           26.31%         16.23%
---------------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $   63,432     $   46,533     $   18,641       $    4,640     $    1,280
---------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $   55,216     $   30,696     $   10,769       $    2,653     $      297
---------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                   3.29%          3.45%          1.83%            3.56%          4.87%
Total expenses                                          1.58%          1.47%          1.49%            1.57%          1.57%
Expenses after payments and waivers
and reduction to custodian expenses                     1.42%          1.46%          1.49%            1.57%          1.57%
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  144%            90%           133%             341%           372%


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.


                    44 | OPPENHEIMER INTERNATIONAL BOND FUND




CLASS Y          YEAR ENDED SEPTEMBER 30,                                             2006             2005         2004 1
----------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                                            $     6.01       $     5.63     $     5.58
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                                                  .24 2            .25  2          -- 3
Net realized and unrealized gain (loss)                                               (.04)             .63            .05
                                                                                --------------------------------------------
Total from investment operations                                                       .20              .88            .05
----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                                                  (.39)            (.44)            --
Distributions from net realized gain                                                  (.02)            (.06)            --
Tax return of capital distribution                                                      --               --             --
                                                                                --------------------------------------------
Total dividends and/or distributions
to shareholders                                                                       (.41)            (.50)            --
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                                  $     5.80       $     6.01     $     5.63
                                                                                ============================================

----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4                                                    3.64%           15.96%          0.92%
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)                                        $  176,728       $   37,286     $   14,268
----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                                               $   97,992       $   25,559     $    7,086
----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income                                                                 4.11%            4.23%          4.84%
Total expenses                                                                        0.56%            0.67%          1.17%
Expenses after payments and waivers
and reduction to custodian expenses                                                   0.56%            0.66%          1.17%
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                                                144%              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.


                    45 | 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(R) 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, as 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. Futures
contracts traded


                    46 | OPPENHEIMER INTERNATIONAL BOND FUND


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, 2006, the market
value of these securities comprised 24.0% of the Fund's net assets and resulted
in unrealized cumulative gains of $69,259,579.

--------------------------------------------------------------------------------
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, 2006, the Fund had purchased
$42,628,839 of securities issued on a when-issued basis or forward commitment
and sold $1,379,388 of securities issued on a when-issued basis or forward
commitment.

--------------------------------------------------------------------------------
SECURITY CREDIT RISK. The Fund invests in high-yield securities, which may be
subject to a greater degree of credit risk, market fluctuations and loss of
income and principal, and


                    47 | OPPENHEIMER INTERNATIONAL BOND FUND


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

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

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, 2006, securities with an aggregate market value of $139,328,
representing less than 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 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.

--------------------------------------------------------------------------------
INVESTMENTS WITH OFF BALANCE SHEET RISK. The Fund enters into financial
instrument transactions (such as swaps, futures and other derivatives) that may
have off-balance sheet market risk. Off-balance sheet market risk exists when
the maximum potential loss on a particular financial instrument is greater than
the value of such financial instrument, as reflected in the Fund's Statement of
Assets and Liabilities.

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


                    48 | OPPENHEIMER INTERNATIONAL BOND FUND


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 1,2,3,4         TAX PURPOSES
      --------------------------------------------------------------------------
      $ 72,760,781      $ 12,461,839           $ 95,753,190        $ 104,859,064

1. The Fund had $91,897,279 of post-October foreign currency losses which were
deferred.

2. The Fund had $3,855,911 of straddle losses which were deferred.

3. During the fiscal year ended September 30, 2006, the Fund did not utilize any
capital loss carryforward.

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

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, 2006. Net assets of
the Fund were unaffected by the reclassifications.

                            REDUCTION TO           INCREASE TO
                             ACCUMULATED       ACCUMULATED NET
      INCREASE TO         NET INVESTMENT         REALIZED LOSS
      PAID-IN CAPITAL               LOSS      ON INVESTMENTS 5
      --------------------------------------------------------
      $ 1,777,768           $ 69,860,537          $ 71,638,305

5. $1,777,768, all of which was long-term capital gain, was distributed in
connection with Fund share redemptions.


                    49 | OPPENHEIMER INTERNATIONAL BOND FUND


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

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

The tax character of distributions paid during the years ended September 30,
2006 and September 30, 2005 was as follows:

                                                   YEAR ENDED         YEAR ENDED
                                               SEPT. 30, 2006     SEPT. 30, 2005
      --------------------------------------------------------------------------
      Distributions paid from:
      Ordinary income                           $ 258,400,535      $ 177,672,980
      Long-term capital gain                       15,383,209                 --
                                                --------------------------------
      Total                                     $ 273,783,744      $ 177,672,980
                                                ================================

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, 2006 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            $ 6,114,112,005
      Federal tax cost of other investments       2,946,559,180
                                                ---------------
      Total federal tax cost                    $ 9,060,671,185
                                                ===============

      Gross unrealized appreciation             $   170,534,968
      Gross unrealized depreciation                 (65,675,904)
                                                ---------------
      Net unrealized appreciation               $   104,859,064
                                                ===============

--------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Board of Trustees has adopted a deferred
compensation plan for independent trustees that enables trustees to elect to
defer receipt of all or a portion of the annual compensation they are entitled
to receive from the Fund. For purposes of determining the amount owed to the
Trustee under the plan, deferred amounts are treated as though equal dollar
amounts had been invested in shares of the Fund or in other Oppenheimer funds
selected by the Trustee. The Fund purchases shares of the funds selected for
deferral by the Trustee in amounts equal to his or her deemed investment,
resulting in a Fund asset equal to the deferred compensation liability. Such
assets are included as a component of "Other" within the asset section of the
Statement of Assets and Liabilities. Deferral of trustees' fees under the plan
will not affect the net assets of the Fund, and will not materially affect the
Fund's assets, liabilities or net investment income per share. Amounts will be
deferred until distributed in accordance to the Plan.

--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income distributions, if any, are declared
daily and paid monthly. Capital gain distributions, if any, are declared and
paid annually.

--------------------------------------------------------------------------------
INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
ex-dividend notification in the case of certain foreign dividends where the
ex-dividend date may have passed. Non-cash dividends included in dividend
income, if any, are recorded at


                    50 | OPPENHEIMER INTERNATIONAL BOND FUND


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, to the extent they are not
offset by positive cash balances maintained by the Fund, 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.

--------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.

--------------------------------------------------------------------------------
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, 2006     YEAR ENDED SEPTEMBER 30, 2005
                                 SHARES            AMOUNT          SHARES            AMOUNT
--------------------------------------------------------------------------------------------

CLASS A
Sold                        401,071,813   $ 2,346,328,470     290,795,021   $ 1,714,084,347
Dividends and/or
distributions reinvested     28,014,878       162,673,081      17,749,603       105,430,621
Redeemed                   (173,146,915)   (1,006,081,349)    (71,447,967)     (420,187,517)
                           -----------------------------------------------------------------
Net increase                255,939,776   $ 1,502,920,202     237,096,657   $ 1,399,327,451
                           =================================================================



                    51 | OPPENHEIMER INTERNATIONAL BOND FUND


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

--------------------------------------------------------------------------------
2. SHARES OF BENEFICIAL INTEREST Continued



                            YEAR ENDED SEPTEMBER 30, 2006     YEAR ENDED SEPTEMBER 30, 2005
                                 SHARES            AMOUNT          SHARES            AMOUNT
--------------------------------------------------------------------------------------------

CLASS B
Sold                         13,953,510   $    81,256,556      15,275,934   $    89,714,849
Dividends and/or
distributions reinvested      1,823,352        10,550,724       1,842,516        10,920,892
Redeemed                    (12,609,581)      (73,292,732)     (9,559,054)      (55,962,743)
                           -----------------------------------------------------------------
Net increase                  3,167,281   $    18,514,548       7,559,396   $    44,672,998
                           =================================================================

--------------------------------------------------------------------------------------------
CLASS C
Sold                         76,001,789   $   443,443,673      59,355,223   $   348,932,998
Dividends and/or
distributions reinvested      4,461,718        25,813,712       2,925,804        17,330,636
Redeemed                    (22,632,214)     (131,104,402)    (10,417,683)      (61,156,564)
                           -----------------------------------------------------------------
Net increase                 57,831,293   $   338,152,983      51,863,344   $   305,107,070
                           =================================================================

--------------------------------------------------------------------------------------------
CLASS N
Sold                          7,063,532   $    41,194,742       5,802,889   $    34,052,865
Dividends and/or
distributions reinvested        531,451         3,078,829         310,916         1,843,537
Redeemed                     (4,393,527)      (25,443,862)     (1,676,293)       (9,796,683)
                           -----------------------------------------------------------------
Net increase                  3,201,456   $    18,829,709       4,437,512   $    26,099,719
                           =================================================================

--------------------------------------------------------------------------------------------
CLASS Y
Sold                         24,796,488   $   144,435,008       4,755,499   $    27,879,481
Dividends and/or
distributions reinvested        973,953         5,648,766         328,793         1,945,692
Redeemed                     (1,513,656)       (8,797,150)     (1,416,856)       (8,253,336)
                           -----------------------------------------------------------------
Net increase                 24,256,785   $   141,286,624       3,667,436   $    21,571,837
                           =================================================================


--------------------------------------------------------------------------------
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, 2006, were as
follows:

                                       PURCHASES              SALES
-------------------------------------------------------------------
Investment securities             $4,995,489,139     $4,563,963,982
U.S. government and government
agency obligations                   292,567,597         26,867,033

--------------------------------------------------------------------------------
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
average annual rate as shown in the following table:


                    52 | OPPENHEIMER INTERNATIONAL BOND FUND


            FEE SCHEDULE
            -------------------------------------------------
            Up to $200 million of net assets            0.75%
            Next $200 million of net assets             0.72
            Next $200 million of net assets             0.69
            Next $200 million of net assets             0.66
            Next $200 million of net assets             0.60
            Next $4 billion of net assets               0.50
            Over $5 billion of net assets               0.48

--------------------------------------------------------------------------------
ADMINISTRATION SERVICE FEES. The Fund pays the Manager a fee of $1,500 per year
for preparing and filing the Fund's tax returns.

--------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended September 30, 2006, the Fund paid
$6,829,412 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
periodically 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 periodically 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
periods. 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


                    53 | OPPENHEIMER INTERNATIONAL BOND FUND


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

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

such termination. The Distributor's aggregate uncompensated expenses under the
plan at September 30, 2006 for Class B, Class C and Class N shares were
$7,821,417, $11,863,557 and $710,233, respectively. Fees incurred by the Fund
under the plans are detailed in the Statement of Operations.

--------------------------------------------------------------------------------
SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the following table 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, 2006    $ 1,530,031      $ 177,034      $ 439,235      $ 230,872        $ 75,772


--------------------------------------------------------------------------------
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, 2006,
OFS waived $91,774 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.


                    54 | OPPENHEIMER INTERNATIONAL BOND FUND


As of September 30, 2006, the Fund had outstanding foreign currency contracts as
follows:



                                                    CONTRACT          VALUATION
                                     EXPIRATION       AMOUNT              AS OF     UNREALIZED      UNREALIZED
CONTRACT DESCRIPTION                      DATES       (000S)     SEPT. 30, 2006   APPRECIATION    DEPRECIATION
---------------------------------------------------------------------------------------------------------------

CONTRACTS TO PURCHASE
Argentine Peso (ARP)                   10/25/06      160,000ARP  $   51,378,226  $          --   $     204,726
Australian Dollar (AUD)                10/13/06        1,780AUD       1,326,250             --          12,256
Brazilian Real (BRR)           10/31/06-1/13/10      472,979BRR     192,308,713     26,984,996         306,869
British Pound
Sterling (GBP)                 10/13/06-1/10/07       15,865GBP      29,729,670             --         310,768
Canadian Dollar (CAD)                  10/13/06        6,005CAD       5,374,485         10,579              --
Chilean Peso (CLP)            11/21/06-12/28/06   23,557,000CLP      43,998,440        306,931          52,317
Dominican Republic
Peso (DOP)                             10/10/06       51,604DOP       1,531,274             --          32,482
Euro (EUR)                      10/13/06-3/6/07      216,690EUR     276,452,640         10,431       2,142,821
Indian Rupee (INR)             10/3/06-10/11/06    2,309,500INR      50,265,521        134,683              --
Indonesia Rupiah (IDR)          10/3/06-10/5/06  184,671,060IDR      20,018,543         10,843          10,857
Japanese Yen (JPY)             10/13/06-1/10/07   87,522,000JPY     751,074,335             --       5,019,486
Malaysian Ringgit (MYR)       11/10/06-11/17/06      133,730MYR      36,342,276             --       1,559,610
Mexican Nuevo
Peso (MXN)                    10/24/06-11/29/06    1,402,690MXN     127,250,899             --       1,389,731
New Turkish Lira (TRY)        10/10/06-10/26/06      122,993TRY      80,552,397         17,973       1,538,955
New Zealand Dollar (NZD)                 3/5/07      166,275NZD     107,525,700        169,582         354,098
Norwegian Krone (NOK)                   1/10/07      250,500NOK      38,598,733             --         178,357
South African Rand (ZAR)       10/5/06-11/27/06      788,080ZAR     100,908,391             --       8,750,360
South Korean Won (KRW)         10/10/06-11/2/06   51,918,000KRW      54,898,918        633,927              --
Swiss Franc (CHF)               10/13/06-3/6/07      243,405CHF     197,047,542         85,187       1,812,688
Thailand Baht (THB)                    10/17/06    1,348,000THB      35,790,175        199,416              --
                                                                                 ------------------------------
                                                                                    28,564,548      23,676,381
                                                                                 ------------------------------
CONTRACTS TO SELL
Australian Dollar (AUD)          1/10/07-3/5/07      217,720AUD     161,797,313      2,906,595              --
British Pound Sterling (GBP)             2/7/07       16,000GBP      29,990,317        269,683              --
Canadian Dollar (CAD)                   1/10/07      139,005CAD     124,749,271          7,283              --
Chinese Renminbi (CNY)                 10/23/06      400,000CNY      50,735,188             --         214,190
Czech Koruna (CZK)                     10/23/06    1,100,000CZK      49,374,331             --         141,909
Euro (EUR)                       11/8/06-2/7/06       37,180EUR      47,437,956        616,017              --
Iceland Krona (ISK)                    10/23/06    1,896,300ISK      26,903,709             --         679,846
Japanese Yen (JPY)              10/23/06-3/5/07   19,260,000JPY     165,545,770      2,383,176              --
Swedish Krone (SEK)              10/5/06-3/5/07    1,017,260SEK     139,703,059      1,636,485              --
Swiss Franc (CHF)                      10/23/06       62,000CHF      49,698,632         20,694              --
                                                                                 ------------------------------
                                                                                     7,839,933       1,035,945
                                                                                 ------------------------------
Total unrealized appreciation and depreciation                                   $  36,404,481   $  24,712,326
                                                                                 ==============================


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


                    55 | OPPENHEIMER INTERNATIONAL BOND FUND


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

--------------------------------------------------------------------------------
6. FUTURES CONTRACTS Continued

rate futures) in order to gain exposure to or protection from changes in market
value of stocks and bonds or interest rates. The Fund may also buy or write put
or call options on these futures contracts.

      The Fund generally sells futures contracts as a hedge against increases in
interest rates and decreases in market value of portfolio securities. The Fund
may also purchase futures 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 at 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, 2006, the Fund had outstanding futures contracts as follows:



                                                            VALUATION AS OF     UNREALIZED
                                     EXPIRATION  NUMBER OF    SEPTEMBER 30,   APPRECIATION
CONTRACT DESCRIPTION                      DATES  CONTRACTS             2006  (DEPRECIATION)
--------------------------------------------------------------------------------------------

CONTRACTS TO PURCHASE
Euro-Bundesobligation, 5 yr.            12/7/06        926   $  129,105,261    $    425,480
Euro-Bundesobligation, 10 yr.           12/7/06         20        2,995,143          30,695
Euro-Schatz                             12/7/06      1,458      192,296,040         101,354
IBEX 35 Index                          10/20/06         34        5,582,810         317,911
Japan (Government of) Bonds, 10 yr.    12/11/06        376      429,077,672       2,092,210
MSCI Taiwan Stock Index                10/30/06        197        5,651,930         (71,321)
Standard & Poor's ASX 200 Index        12/21/06        191       18,434,645         283,300
Standard & Poor's 500 E-Mini           12/15/06        349       23,477,230         586,617
Standard & Poor's/MIB Index, 10 yr.    12/15/06         22        5,367,279          71,495
U.S. Long Bonds                        12/19/06      2,600      292,256,250       5,968,342
U.S. Treasury Nts. 10 yr.              12/19/06      6,255      675,930,938       6,889,008
United Kingdom Long Gilt               12/27/06        211       43,472,898         355,394
                                                                               -------------
                                                                                 17,050,485
                                                                               -------------



                    56 | OPPENHEIMER INTERNATIONAL BOND FUND




                                                            VALUATION AS OF     UNREALIZED
                                     EXPIRATION  NUMBER OF    SEPTEMBER 30,   APPRECIATION
CONTRACT DESCRIPTION                      DATES  CONTRACTS             2006  (DEPRECIATION)
--------------------------------------------------------------------------------------------

CONTRACTS TO SELL
Australia (Commonwealth of)
Bonds, 10 yr.                          12/15/06        303   $   23,433,981    $     25,562
CAC-40 10 Index                        10/20/06        291       19,418,819        (466,453)
Canadian Bonds, 10 yr.                 12/18/06        543       55,934,708        (797,819)
DAX Index                              12/15/06        111       21,271,446        (437,006)
FTSE 100 Index                         12/15/06        391       43,826,349        (442,493)
Nikkei 225 Index                        12/7/06        403       54,927,407        (271,514)
Standard & Poor's 500 E-Mini           12/15/06         81        5,448,870        (136,416)
Standard & Poor's/Toronto Stock
Exchange
60 Index                               12/14/06        153       18,522,890        (341,714)
U.S. Treasury Nts., 5 yr.              12/29/06        161       16,988,016        (109,593)
                                                                               -------------
                                                                                 (2,977,446)
                                                                               -------------
                                                                               $ 14,073,039
                                                                               =============


--------------------------------------------------------------------------------
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 or put options are noted
in the Statement of Investments where applicable. Contracts subject to call or
put, 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 [or commodity]
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 [or commodity]
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.


                    57 | OPPENHEIMER INTERNATIONAL BOND FUND


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

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

Written option activity for the year ended September 30, 2006 was as follows:

                                                         PUT OPTIONS
                                      -------------------------------
                                            NUMBER OF      AMOUNT OF
                                            CONTRACTS       PREMIUMS
---------------------------------------------------------------------
Options outstanding as of
September 30, 2005                                 --    $        --
Options written                        53,496,170,000      2,348,537
Options closed or expired             (53,463,350,000)    (1,792,005)
                                      -------------------------------
Options outstanding as of
September 30, 2006                         32,820,000    $   556,532
                                      ===============================

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

A total return swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. One cash flow stream will typically be
based on a reference interest rate or index and the other on the total return of
a reference asset such as a security, a basket of securities, or an index. The
total return includes appreciation or depreciation on the reference asset, plus
any interest or dividend payments. Payments under the swap are based on an
agreed upon principal amount but since this principal amount is not exchanged,
it represents neither an asset nor a liability to either counterparty, and is
referred to as notional. Total return swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations. The Fund also records any
periodic payments received from (paid to) the counterparty, including at
termination, under such contracts as realized gain (loss) on the Statement of
Operations. The primary risks associated with total return swaps are credit
risks (if the counterparty fails to meet its obligations) and market risk (if
there is no liquid market for the agreement or unfavorable changes occur in the
reference asset).

As of September 30, 2006, the Fund had entered into the following total return
swap agreements:


                    58 | OPPENHEIMER INTERNATIONAL BOND FUND




                                                                                                        UNREALIZED
SWAP                         NOTIONAL                 PAID BY           RECEIVED BY    TERMINATION    APPRECIATION
COUNTERPARTY                   AMOUNT                THE FUND              THE FUND          DATES   (DEPRECIATION)
--------------------------------------------------------------------------------------------------------------------

                                                    Six-Month
Deutsche Bank AG         $ 16,760,000               BBA LIBOR                  5.46%       5/13/15     $  2,265,057
--------------------------------------------------------------------------------------------------------------------
Goldman Sachs
Group, Inc. (The):
                                                    Six-Month
                           11,580,000               BBA LIBOR                  5.10        1/14/15        1,487,217
                                                    Six-Month
                           11,580,000               BBA LIBOR                  5.08        1/20/15        1,546,807
--------------------------------------------------------------------------------------------------------------------
Goldman Sachs
International:
                                           Price Depreciation    Price Appreciation
                                                 of Sao Paulo          of Sao Paulo
                                               Stock Exchange        Stock Exchange
                            3,775,895BRR       Index Futures.        Index Futures.       10/18/06          (48,884)

                                           Price Depreciation    Price Appreciation
                                                 of Sao Paulo          of Sao Paulo
                                               Stock Exchange        Stock Exchange
                            8,017,514BRR       Index Futures.        Index Futures.       10/18/06         (109,437)

                                           Price Depreciation    Price Appreciation
                                                of Standard &         of Standard &
                                             Poor's CNX Nifty      Poor's CNX Nifty
                          248,229,300INR       Index Futures.        Index Futures.       10/26/06          (87,177)

                                           Price Depreciation    Price Appreciation
                                              of Swiss Market       of Swiss Market
                            6,596,597CHF       Index Futures.        Index Futures.       12/15/06         (135,681)
                                                                                                       -------------
                                                                                                       $  4,917,902
                                                                                                       =============


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

BRR     Brazilian Real
CHF     Swiss Franc
INR     Indian Rupee

Abbreviation is as follows:

BBA LIBOR British Bankers' Association London-Interbank Offered Rate

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

An interest rate swap is an agreement under which a set of future cash flows is
exchanged between two counterparties. Interest rate swaps involve the exchange
of rights to receive or commitments to pay interest. One cash flow stream will
typically be a floating rate payment based upon a specified index while the
other is typically a fixed rate. Payments under the swap are based on an agreed
upon principal amount but since this principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. Interest rate swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is


                    59 | OPPENHEIMER INTERNATIONAL BOND FUND


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

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

included on the Statement of Operations. The Fund also records any periodic
payments received from (paid to) the counterparty, including at termination,
under such contracts as realized gain (loss) on the Statement of Operations.

      Swap agreements entail both interest rate risk and credit risk. There is a
risk, 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.

As of September 30, 2006, the Fund had entered into the following interest rate
swap agreements:



                                                                                                        UNREALIZED
SWAP                         NOTIONAL                 PAID BY        RECEIVED BY       TERMINATION    APPRECIATION
COUNTERPARTY                   AMOUNT                THE FUND           THE FUND             DATES   (DEPRECIATION)
--------------------------------------------------------------------------------------------------------------------

Barclays
Bank plc                  114,700,000MXN             MXN TIIE             9.2700%          7/17/26     $     85,119
--------------------------------------------------------------------------------------------------------------------
Citigroup Global
Markets Holdings,Inc.:
                                                    Six-Month
                           16,830,000PLZ                 WIBO             5.5200           3/24/10          187,395
                                                    Six-Month
                           26,928,000PLZ                 WIBO             5.5500           3/25/10          305,428
                          489,400,000TWD               2.3200%      TWD-Telerate           6/27/11         (206,249)
--------------------------------------------------------------------------------------------------------------------
Credit Suisse
First Boston, Inc.                                  Six-Month
(Nassau Branch)            46,785,000PLZ                 WIBO             4.4800            7/1/10         (423,665)
--------------------------------------------------------------------------------------------------------------------
Credit Suisse
First Boston                                           28-Day
International             112,580,000MXN             MXN TIIE            10.0000            7/9/15          818,622
--------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
                           11,050,000         Six-Month LIBOR             5.2500           6/23/15        1,104,466
                        2,387,000,000HUF               8.4400    Six-Month BUBOR            7/4/11             (832)
--------------------------------------------------------------------------------------------------------------------
Deutsche Bank                                                         INR MIBOR-
AG, 5 yr.                 490,200,000INR               7.1750       OIS-Compound           6/27/11          (84,280)
--------------------------------------------------------------------------------------------------------------------
Goldman Sachs
Capital Markets LP:
                           21,965,083BRR                 BZDI            17.7200            1/2/07          126,168
                           38,987,000BRR                 BZDI            18.1600            1/2/08        1,327,539
                          187,935,994BRR                 BZDI            17.1800            1/2/08        4,095,559
                           94,500,000MXN             MXN TIIE            10.2900           6/14/15          843,703
                           93,375,000MXN             MXN TIIE            10.4300           5/29/15          892,279
                           93,375,000MXN             MXN TIIE            10.3000            6/1/15          821,204
                           55,700,000MXN             MXN TIIE            10.0000           6/24/15          397,009
                          120,050,000MXN             MXN TIIE            10.2200           1/30/15        1,000,890



                    60 | OPPENHEIMER INTERNATIONAL BOND FUND




                                                                                                        UNREALIZED
SWAP                         NOTIONAL                 PAID BY        RECEIVED BY       TERMINATION    APPRECIATION
COUNTERPARTY                   AMOUNT                THE FUND           THE FUND             DATES   (DEPRECIATION)
--------------------------------------------------------------------------------------------------------------------

Goldman Sachs
Group, Inc. (The):
                           17,037,427BRR                 BZDI            17.1700%           1/2/08     $    328,476
                           20,823,527BRR                 BZDI            17.1700            1/2/08          401,471
                           27,880,000BRR                 BZDI            14.0500            1/2/12          (21,011)
                           46,968,000BRR                 BZDI            18.0000            1/2/07          404,744
                           38,800,000MXN             MXN TIIE             8.7000            2/5/16          (23,576)
                           48,030,000MXN             MXN TIIE             9.4100           8/31/20          145,362
                           61,200,000MXN             MXN TIIE            10.8500            3/5/15          724,727
                           91,750,000MXN             MXN TIIE             9.2900           7/17/26           10,401
                           96,930,000MXN             MXN TIIE             9.5000           8/28/25          303,423
                          100,000,000MXN             MXN TIIE            10.7500            5/8/15        1,153,478
                          109,710,000MXN             MXN TIIE            10.7000            5/8/15        1,234,058
                          140,720,000MxN             MXN TIIE             9.1500           8/27/26          (11,239)
                          144,000,000MXN             MXN TIIE             9.5100           8/26/25          465,140
                          289,270,000MXN             MXN TIIE             9.8400          12/31/09        1,417,389
--------------------------------------------------------------------------------------------------------------------
JPMorgan
Chase Bank:
                           55,370,000BRR                 BZDI            13.9100            1/2/12         (156,922)
                          114,500,000MXN             MXN TIIE             9.7600           8/17/15          653,781
                          264,090,000ZAR               8.2900%  Three-Month JIBA           6/23/08          396,788
--------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing. Inc.:
                          102,585,000GBP               5.2500    Six-Month LIBOR           5/21/09         (487,726)
                                                       28-Day
                          111,440,000MXN             MXN TIIE             9.9900            7/9/15          784,058
                                                    Six-Month
                           55,540,000PLZ                 WIBO             4.5300            7/5/10         (497,496)
--------------------------------------------------------------------------------------------------------------------
Merrill Lynch                                     Three-Month
& Co., Inc.               574,160,000SEK          STIBOR-SIDE             4.0325           6/19/12          373,765
--------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
                           24,054,685BRR                 BZDI            16.8800            1/2/08          359,739
                           41,775,000BRR                 BZDI            17.5900            1/2/07          310,244
--------------------------------------------------------------------------------------------------------------------
Santander
Central Hispano            27,880,000BRR                 BZDI            14.0000            1/2/12          (35,778)
--------------------------------------------------------------------------------------------------------------------
UBS AG                    505,750,000NOK               4.2200    Six-Month NIBOR            2/6/12          863,012
--------------------------------------------------------------------------------------------------------------------
WestPac
Banking Corp.              68,660,000NZD               6.7500      Six-Month BBR           6/29/16         (413,616)
                                                                                                       -------------
                                                                                                       $ 19,973,047
                                                                                                       =============



                    61 | OPPENHEIMER INTERNATIONAL BOND FUND


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

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

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

BRR         Brazilian Real
GBP         British Pound Sterling
HUF         Hungarian Forint
INR         Indian Rupee
MXN         Mexican Nuevo Peso
NOK         Norwegian Krone
NZD         New Zealand Dollar
PLZ         Polish Zloty
SEK         Swedish Krone
TWD         New Taiwan Dollar
ZAR         South African Rand

Index abbreviations are as follows:

BBR         Bank Bill Rate
BUBOR       Budapest Interbank Offered Rate
BZDI        Brazil Cetip Interbank Deposit Rate
FRAS        French Franc/Austrian Schilling
IRS         India Swap Composites
JIBA        South Africa Johannesburg Interbank Agreed Rate
LIBOR       London-Interbank Offered Rate
MIBOR-OIS   Mid Market Interest Rate for FRAS and IRS-Overnight Indexed Swap
MXN TIIE    Mexican Peso-Interbank Equilibrium Interest Rate
NIBOR       Norwegian Interbank Offered Rate
STIBOR      Stockholm Interbank Offered Rate
WIBO        Poland Warsaw Interbank Offer Bid Rate

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

Credit default swaps are designed to transfer the credit exposure of fixed
income products between counterparties. 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 a basket of securities. The Fund may take a short position
(purchaser of credit protection) or a long position (seller of credit
protection) in the credit default swap. Risks of credit default swaps include,
but are not limited to, 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 defaulted bonds depending on whether the Fund is long or short the swap,
respectively).

      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. As a purchaser of credit protection under a 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


                    62 | OPPENHEIMER INTERNATIONAL BOND FUND


underlying referenced debt obligation, the Fund is obligated to deliver that
security to the counterparty 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 and is included on the
Statement of Operations. Credit default swaps are marked to market daily using
different sources, including quotations from counterparties, pricing services,
brokers or market makers. The unrealized appreciation (depreciation) related to
the change in the valuation of the notional amount of the swap is combined with
the amount due to (owed by) the Fund at termination or settlement and disclosed
separately on the Statement of Assets and Liabilities. The net change in this
amount is included on the Statement of Operations.

Information regarding such credit default swaps as of September 30, 2006 is as
follows:



                                                                            ANNUAL
                                                    NOTIONAL AMOUNT       INTEREST
                          REFERENCED                RECEIVED BY THE      RATE PAID                     UNREALIZED
                          DEBT                            FUND UPON         BY THE      EXPIRATION   APPRECIATION
COUNTERPARTY              OBLIGATION                   CREDIT EVENT           FUND           DATES  (DEPRECIATION)
-------------------------------------------------------------------------------------------------------------------

Citigroup Global
Markets Holdings,
Inc.:
                          Hungary (Republic of)       $   7,535,000         0.4000%       12/20/15    $    107,231
                          Mexico (Government of)          7,770,000         0.6475         1/20/11         (58,962)
-------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG:
                          Philippines
                          (Republic of the)              14,000,000         3.6900         9/20/15        (705,880)
                          Ukraine (Republic of)           4,075,000         1.8800         3/20/11          (4,490)
-------------------------------------------------------------------------------------------------------------------
JPMorgan
Chase Bank                Russian Federation                550,000         2.4000         10/9/13         (60,934)
-------------------------------------------------------------------------------------------------------------------
Merrill Lynch
& Co., Inc.:
                          Argentina
                          (Republic of)                  10,000,000         2.6000         8/20/11         (36,775)
                          Philippines
                          (Republic of the)              18,720,000         1.7250        12/20/11         (18,000)
-------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services,
Inc.:
                          Colombia (Republic of)          1,980,000         3.7000         8/20/15        (212,844)
                          Dominican Republic              7,970,000         3.2500         6/20/11        (498,645)
                          Indonesia (Republic of)         4,900,000         1.6800         3/20/11         (61,017)
                          Venezuela (Republic of)         8,435,000         2.2000         5/20/10        (326,114)
                          Venezuela (Republic of)         4,415,000         3.4800        11/20/15        (354,220)
                                                                                                      -------------
                                                                                                      $ (2,230,650)
                                                                                                      =============


The Fund would take a long position in the credit default swap note (the "funded
swap") to increase the exposure to specific high yield corporate issuers. As a
seller of credit protection under a swap contract, the Fund receives a periodic
interest fee on the notional


                    63 | OPPENHEIMER INTERNATIONAL BOND FUND


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

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

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 and is included on the Statement of
Operations. Credit default swaps are marked to market daily using different
sources, including quotations from counterparties, pricing services, brokers or
market makers. The unrealized appreciation (depreciation) related to the change
in the valuation of the notional amount of the swap is combined with the amount
due to (owed by) the Fund at termination or settlement and disclosed separately
on the Statement of Assets and Liabilities. The net change in this amount is
included on the Statement of Operations.

Information regarding such credit default swaps as of September 30, 2006 is as
follows:



                                                                            ANNUAL
                                                    NOTIONAL AMOUNT       INTEREST
                          REFERENCED                    PAID BY THE  RATE RECEIVED                     UNREALIZED
                          DEBT                            FUND UPON         BY THE      EXPIRATION   APPRECIATION
COUNTERPARTY              OBLIGATION                   CREDIT EVENT           FUND           DATES  (DEPRECIATION)
-------------------------------------------------------------------------------------------------------------------

Citigroup Global
Markets Holdings,
Inc.                      Russian Federation            $ 7,770,000        0.6475%         1/20/11     $    47,497
-------------------------------------------------------------------------------------------------------------------
JPMorgan
Chase Bank                Ukraine (Republic of)           1,056,000        1.9200          8/20/11           3,988
-------------------------------------------------------------------------------------------------------------------
Morgan Stanley
Capital Services, Inc.:
                          Indonesia (Republic of)         4,900,000        1.6700          6/20/11          45,062
                          Istanbul Bond Co. SA
                          for Finansbank                 17,390,000        1.3000          3/24/13        (580,734)
-------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Special Financing, Inc.:
                          Argentina (Republic of)         5,000,000        2.5500          9/20/11         (21,381)
                          Brazil
                          (Federal Republic of)           5,000,000        2.0000          9/20/16         (27,308)
                          Colombia (Republic of)          5,000,000        2.1100          9/20/16         (37,423)
                          Panama (Republic of)            5,000,000        1.7800          9/20/16         (14,695)
                          Philippines
                          (Republic of the)               5,000,000        2.4700          9/20/16          16,558
                                                                                                       ------------
                                                                                                       $  (568,436)
                                                                                                       ============


--------------------------------------------------------------------------------
11. 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


                    64 | OPPENHEIMER INTERNATIONAL BOND FUND


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. The Fund generally will incur a greater risk when it
writes a swaption than when it purchases a swaption. When the Fund purchases a
swaption it risks losing only the amount of the premium they have paid should
the Manager decide to let the option expire unexercised. When the Fund writes a
swaption it will become obligated, upon exercise of the option, according to the
terms of the underlying agreement. Swaptions written are reported as a liability
in the Statement of Assets and Liabilities.

Written swaption activity for the year ended September 30, 2006 was as follows:

                                                                CALL SWAPTIONS
                                            -----------------------------------
                                                  NOTIONAL           AMOUNT OF
                                                    AMOUNT            PREMIUMS
-------------------------------------------------------------------------------
Swaptions outstanding as of
September 30, 2005                          $   61,360,000          $  251,576
Swaptions written                              124,200,000             138,106
Swaptions closed or expired                   (185,560,000)           (389,682)
                                            -----------------------------------
Swaptions outstanding as of
September 30, 2006                          $           --          $       --
                                            ===================================

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

As of September 30, 2006, 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 restricted
currency is as follows:



                           ACQUISITION                 VALUATION AS OF     UNREALIZED
CURRENCY                         DATES          COST    SEPT. 30, 2006   DEPRECIATION
--------------------------------------------------------------------------------------

Argentine Peso (ARP)   6/21/06-9/30/06   $ 2,749,057       $ 2,736,749      $  12,308


--------------------------------------------------------------------------------
13. 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
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of


                    65 | OPPENHEIMER INTERNATIONAL BOND FUND


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

--------------------------------------------------------------------------------
13. SECURITIES LENDING Continued

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
each day. If the Fund is undercollateralized at the close of business due to an
increase in market value of securities on loan, additional collateral is
requested from the borrowing counterparty and is delivered to the Fund on the
next business day. Cash collateral may be invested in approved investments and
the Fund bears the risk of any loss in value of these investments. The Fund
retains a portion of the interest earned from the collateral. 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. 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, 2006, the Fund had on loan securities valued at $946,481,870,
which are included in the Statement of Assets and Liabilities as "Investments,
at value" and, when applicable, as "Receivable for Investments sold." Collateral
of $957,213,764 was received for the loans, of which $820,202,685 was received
in cash and subsequently invested in approved investments or held as cash.

--------------------------------------------------------------------------------
14. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
September 30, 2006, the Manager is evaluating the implications of FIN 48. Its
impact in the Fund's financial statements has not yet been determined.

      In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007 and interim periods within those fiscal years. As of September
30, 2006, the Manager does not believe the adoption of SFAS No. 157 will
materially impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.


                    66 | OPPENHEIMER INTERNATIONAL BOND FUND


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

A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York on January 10, 2005 and was amended on March 4,
2005. The complaint alleged, among other things, that the Manager charged
excessive fees for distribution and other costs, and that by permitting and/or
participating in those actions, the Directors/Trustees and the Officers of the
funds breached their fiduciary duties to fund shareholders under the Investment
Company Act of 1940 and at common law. The plaintiffs sought unspecified
damages, an accounting of all fees paid, and an award of attorneys' fees and
litigation expenses.

      In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.

      The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.


                    67 | OPPENHEIMER INTERNATIONAL BOND FUND




                                   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.




                                   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 Services                Road & Rail
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





                                   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. Not all waivers apply to all funds.

For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans:
              1) plans created or qualified under Sections 401(a) or 401(k) of
              the Internal Revenue Code, 2) non-qualified deferred compensation
              plans, 3) employee benefit plans(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.

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 $5 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).


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

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

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

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

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

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

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

The Class A contingent deferred sales charge is also waived if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed in the
following cases:
|_|           To make Automatic Withdrawal Plan payments that are limited
              annually to no more than 12% of the account value adjusted
              annually.
|_|           Involuntary redemptions of shares by operation of law or
              involuntary redemptions of small accounts (please refer to
              "Shareholder Account Rules and Policies," in the applicable fund
              Prospectus).
|_|           For distributions from Retirement Plans, deferred compensation
              plans or other employee benefit plans for any of the following
              purposes:
              1)  Following the death or disability (as defined in the Internal
                  Revenue Code) of the participant or beneficiary. The death or
                  disability must occur after the participant's account was
                  established.
              2)  To return excess contributions.
              3)  To return contributions made due to a mistake of fact.
              4)  Hardship withdrawals, as defined in the plan.(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.
|_|           At the sole discretion of the Distributor, the contingent deferred
              sales charge may be waived for redemptions of shares requested by
              the shareholder of record within 60 days following the termination
              by the Distributor of the selling agreement between the
              Distributor and the shareholder of record's broker-dealer of
              record for the account.

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.
|_|           At the sole discretion of the Distributor, the contingent deferred
              sales charge may be waived for redemptions of shares requested by
              the shareholder of record within 60 days following the termination
              by the Distributor of the selling agreement between the
              Distributor and the shareholder of record's broker-dealer of
              record for the account.
|_|           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.


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

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

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

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

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


A. Reductions or Waivers of Class A Sales Charges.

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

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

-------------------------------- ---------------------------- --------------------------------- ---------------------
Number of Eligible Employees     Initial Sales Charge as a    Initial Sales Charge as a % of    Concession as % of
or Members                       % of Offering Price          Net Amount Invested               Offering Price
-------------------------------- ---------------------------- --------------------------------- ---------------------
-------------------------------- ---------------------------- --------------------------------- ---------------------
9 or Fewer                       2.50%                        2.56%                             2.00%
-------------------------------- ---------------------------- --------------------------------- ---------------------
-------------------------------- ---------------------------- --------------------------------- ---------------------
At least 10 but not more than    2.00%                        2.04%                             1.60%
49
-------------------------------- ---------------------------- --------------------------------- ---------------------

---------------------------------------------------------------------------------------------------------------------------------------
         For purchases by Associations having 50 or more eligible employees or
members, there is no initial sales charge on purchases of Class A shares, but
those shares are subject to the Class A contingent deferred sales charge
described in the applicable fund's Prospectus.

         Purchases made under this arrangement qualify for the lower of either
the sales charge rate in the table based on the number of members of an
Association, or the sales charge rate that applies under the Right of
Accumulation described in the applicable fund's Prospectus and Statement of
Additional Information. Individuals who qualify under this arrangement for
reduced sales charge rates as members of Associations also may purchase shares
for their individual or custodial accounts at these reduced sales charge rates,
upon request to the Distributor.

     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.

         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.

         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.

         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.

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
are modified as described below for those Fund shareholders who were
shareholders of the following funds (referred to as the "Former Connecticut
Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the
investment adviser to the Former Connecticut Mutual Funds:
     Connecticut Mutual Liquid Account                            Connecticut Mutual Total Return Account
     Connecticut Mutual Government Securities Account             CMIA LifeSpan Capital Appreciation Account
     Connecticut Mutual Income Account                            CMIA LifeSpan Balanced Account
     Connecticut Mutual Growth Account                            CMIA Diversified Income Account


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

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

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

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

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

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

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

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

In addition to the waivers set forth in the Prospectus and in this Appendix,
above, the contingent deferred sales charge will be waived for redemptions of
Class A and Class B shares of a Fund and exchanges of Class A or Class B shares
of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund
provided that the Class A or Class B shares of the Fund to be redeemed or
exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by
exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund.
Additionally, the shares of such Former Connecticut Mutual Fund must have been
purchased prior to March 18, 1996:
     1)  by the estate of a deceased shareholder;
     2)  upon the disability of a shareholder, as defined in Section 72(m)(7) of
         the Internal Revenue Code;
     3)  for retirement distributions (or loans) to participants or
         beneficiaries from retirement plans qualified under Sections 401(a) or
         403(b)(7)of the Code, or from IRAs, deferred compensation plans created
         under Section 457 of the Code, or other employee benefit plans;
     4)  as tax-free returns of excess contributions to such retirement or
         employee benefit plans;
     5)  in whole or in part, in connection with shares sold to any state,
         county, or city, or any instrumentality, department, authority, or
         agency thereof, that is prohibited by applicable investment laws from
         paying a sales charge or 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.

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%.

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, New York 10281-1008

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

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

Custodian Bank
         JPMorgan Chase Bank
         4 Chase 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


PX0880.001.0507


-----------------------
(1) In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund and who do not have
any direct or indirect financial interest in the operation of the distribution
plan or any agreement under the plan.
(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.