OPPENHEIMER INTERNATIONAL BOND FUND

497 1 sai.htm SAI WITH FINANCIALS OPPENHEIMER INTERNATIONAL BOND FUND

Oppenheimer International Bond Fund
6803 S. Tucson Way, Englewood, CO 80112
1.800.525.7048

Statement of Additional Information dated January 28, 2002 revised July 1, 2002

This Statement of Additional Information is not a Prospectus. This document contains additional information about the Fund
and supplements information in the Prospectus dated January 28, 2002. It should be read together with the Prospectus. You can obtain
the Prospectus by writing to the Fund's Transfer Agent, OppenheimerFunds Services, at 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......................................................... 6
Investment Restrictions............................................................................ 28

How the Fund is Managed ................................................................................ 30
Organization and History........................................................................... 30
Trustees and Officers.............................................................................. 31
The Manager........................................................................................ 38
Brokerage Policies of the Fund.......................................................................... 39
Distribution and Service Plans.......................................................................... 41
Performance of the Fund................................................................................. 46

About Your Account

How To Buy Shares....................................................................................... 51
How To Sell Shares...................................................................................... 61
How To Exchange Shares.................................................................................. 67
Dividends, Capital Gains and Taxes...................................................................... 70
Additional Information About the Fund................................................................... 75

Financial Information About the Fund

Independent Auditors' Report............................................................................ 76
Financial Statements.................................................................................... 77

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

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ABOUT THE FUND
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Additional Information About the Fund's Investment Policies and Risks

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

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

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

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

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

Because the Fund may purchase securities denominated in foreign currencies, a change in the value of such foreign currency
against the U.S. dollar will result in a change in the amount of income the Fund has available for distribution. Because a portion
of the Fund's investment income may be received in foreign currencies, the Fund will be required to compute its income in U.S.
dollars for distribution to shareholders, and therefore the Fund will absorb the cost of

currency fluctuations. After the Fund has distributed income, subsequent foreign currency losses may result in the Fund's having
distributed more income in a particular fiscal period than was available from investment income, which could result in a return of
capital to shareholders.

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

|_| 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.

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Risks of Foreign Investing. Investments in foreign securities may offer special opportunities for investing but
also present special additional risks and considerations not typically associated with investments in domestic securities. Some of
these additional risks are:

o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency rates or currency control regulations (for example,
currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in foreign countries comparable to those applicable
to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, stock exchanges and brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or loss of certificates for portfolio securities;
o possibilities in some countries of expropriation, confiscatory taxation, political, financial or social instability or
adverse diplomatic developments; and
o unfavorable differences between the U.S. economy and foreign economies.

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

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

|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.

|_| 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., at least "BBB" by Standard &
Poor's Ratings Group or Fitch, Inc., 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.

|_| 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.

|_| 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 and delayed interest securities, 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.

|_| 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 below, and Treasury Inflation-Protection Securities ("TIPS").

|_| 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").

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

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

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

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

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

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

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

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

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

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

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

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

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

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

the Fund chooses to dispose of the right to acquire a when-issued security prior to its acquisition or to dispose of its right to
delivery or receive against a forward commitment, it may incur a gain or loss.

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

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

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

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

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

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

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

Repurchase agreements, considered "loans" under the Investment Company Act, 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.

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, and 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. 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 35% of its assets in
securities other than debt securities, including equity securities of both foreign and U.S. companies. However, it does not
anticipate investing significant amounts of its assets in these securities as part of its normal investment strategy. Equity
securities include common stocks, preferred stocks, rights and warrants, and securities convertible into common stock. The Fund's
investments can include stocks of companies in any market capitalization range, if the Manager believes the investment is consistent
with the Fund's objectives of total return and income. Certain equity securities may be selected not only for their appreciation
possibilities but because they may provide dividend income.

|_| 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.

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

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

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

(1) whether, at the option of the investor, the convertible security can be exchanged for a fixed number of shares of common
stock of the issuer,
(2) whether the issuer of the convertible securities has restated its earnings per share of common stock on a fully diluted
basis (considering the effect of conversion of the convertible securities), and
(3) the extent to which the convertible security may be a defensive "equity substitute," providing the ability to participate in
any appreciation in the price of the issuer's common stock.

|_| Rights and Warrants. The Fund may invest up to 5% of its total assets in warrants or rights. That limit does
not apply to warrants and rights the Fund has acquired as part of units of securities or that are attached to other securities that
the Fund buys. The Fund does not expect that it will have significant investments in warrants and rights.

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

|X| Loans of Portfolio Securities. To raise cash for liquidity purposes or income, the Fund can lend its portfolio
securities to brokers, dealers and other types of financial institutions approved by the Fund's Board of Trustees. These loans are
limited to not more than 25% of the value of the Fund's net assets. The Fund currently does not intend to engage in loans of
securities in the coming year, but if it does so, such loans will not likely exceed 5% of the Fund's total assets.

There are some risks in connection with securities lending. The Fund might experience a delay in receiving additional
collateral to secure a loan, or a delay in recovery of the loaned securities if the borrower defaults. The Fund must receive
collateral for a loan. Under current applicable regulatory requirements (which are subject to change), on each business day the loan
collateral must be at least equal to the value of the loaned securities. It must consist of cash, bank letters of credit, securities
of the U.S. government or its agencies or instrumentalities, or other cash equivalents in which the Fund is permitted to invest. To
be acceptable as collateral, letters of credit must obligate a bank to pay amounts demanded by the Fund if the demand meets the terms
of the letter. The terms of the letter of credit and the issuing bank both must be satisfactory to the Fund.

When it lends securities, the Fund receives amounts equal to the dividends or interest on loaned securities. It also
receives one or more of (a) negotiated loan fees, (b) interest on securities used as collateral, and (c) interest on any short-term
debt securities purchased with such loan collateral. Either type of interest may be shared with the borrower. The Fund may also pay
reasonable finder's, custodian and administrative fees in connection with these loans. The terms of the Fund's loans must meet
applicable tests under the Internal Revenue Code and must permit the Fund to reacquire loaned securities on five days' notice or in
time to vote on any important matter.

|X| Borrowing for Leverage. The fund may borrow for leverage as described below under "Investment Restrictions." The Fund
will pay interest on these loans, and that interest expense will raise the overall expenses of the Fund and reduce its returns. If it
does borrow, its expenses will be greater than comparable funds that do not borrow for leverage. Additionally, the Fund's net asset
values per share might fluctuate more than that of funds that do not borrow. Currently, the Fund does not contemplate using this
technique in the next year but if it does so, it will not likely be to a substantial degree.

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

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

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

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

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

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

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

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

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

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

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

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

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

The Fund will invest no more than 25 % of its total assets in "unfunded" credit default swaps.

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

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

|X| Hedging. Although the Fund does not anticipate the extensive use of hedging instruments, the Fund can use hedging
instruments. It is not obligated to use them in seeking its objectives. To attempt to protect against declines in the market value of
the Fund's portfolio, to permit the Fund to retain unrealized gains in the value of portfolio securities which have appreciated, or
to facilitate selling securities for investment reasons, the Fund could:

o sell futures contracts,
o buy puts on such futures or on securities, or
o write covered calls on securities or futures. Covered calls may also be used to increase the Fund's income, but the Manager
does not expect to engage extensively in that practice.

The Fund can use hedging to establish a position in the securities market as a temporary substitute for purchasing
particular securities. In that case the Fund would normally seek to purchase the securities and then terminate that hedging position.
The Fund might also use this

type of hedge to attempt to protect against the possibility that its portfolio securities would not be fully included in a rise in
value of the market. To do so the Fund could:

o buy futures, or
o buy calls on such futures or on securities.

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

|_| 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 money is paid or received by the Fund on the purchase or sale of a future. Upon entering into a futures transaction, the
Fund will be required to deposit an initial margin payment with the futures commission merchant (the "futures broker"). Initial
margin payments will be deposited with the Fund's custodian bank in an account registered in the futures broker's name. However, the
futures broker can gain access to that account only under specified conditions. As the future is marked to market (that is, its
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.

|_| 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

|_| Purchasing Calls and Puts. The Fund can purchase calls 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 and futures, whether or not
it owns the underlying investment. When the Fund purchases a put, it pays a premium and, except as to puts on indices, has the right
to sell the underlying investment to a seller of a put on a corresponding investment during the put period at a fixed exercise
price.

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

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

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

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

|_| 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.

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

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

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

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

An option position may be closed out only on a market that provides secondary trading for options of the same series, and
there is no assurance that a liquid secondary market will exist for any particular option. The Fund might experience losses if it
could not close out a position because of an illiquid market for the future or option.

There is a risk in using short hedging by selling futures or purchasing puts on broadly-based indices or futures to attempt
to protect against declines in the value of the Fund's portfolio securities. The risk is that the prices of the futures or the
applicable index will correlate imperfectly with the behavior of the cash prices of the Fund's securities. For example, it is
possible that while the Fund has used hedging instruments in a short hedge, the market might advance and the value of the securities
held in the Fund's portfolio might decline. If that occurred, the Fund would lose money on the hedging instruments and also
experience a decline in the value of its portfolio securities. However, while this could occur for a very brief period or to a very
small degree, over time the value of a diversified portfolio of securities will tend to move in the same direction as the indices
upon which the hedging instruments are based.

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

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

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

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

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

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

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

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

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

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

The precise matching of the amounts under forward contracts and the value of the securities involved generally will not be
possible because the future value of securities denominated in foreign currencies will change as a consequence of market movements
between the date the forward contract is entered into and the date it is sold. In some cases the Manager might decide to sell the
security and deliver foreign currency to settle the original purchase obligation. If the market value of the security is less than
the amount of foreign currency the Fund is obligated to deliver, the Fund might have to purchase additional foreign currency on the
"spot" (that is, cash) market to settle the security trade. If the market value of the security instead exceeds the amount of foreign
currency the Fund is obligated to deliver to settle the trade, the Fund might have to sell on the spot market some of the foreign
currency received upon the sale of the security. There will be additional transaction costs on the spot market in those cases.

The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. Forward contracts involve the risk that anticipated currency movements will not be accurately
predicted, causing the Fund to sustain losses on these contracts and to pay additional transactions costs. The use of forward
contracts in this manner might reduce the Fund's performance if there are unanticipated changes in currency prices to a greater
degree than if the Fund had not entered into such contracts.

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

The costs to the Fund of engaging in forward contracts 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.

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

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

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

|_| Regulatory Aspects of Hedging Instruments. When using futures and options on futures, the Fund is required to
operate within certain guidelines and restrictions with respect to the use of futures as established by the Commodities Futures
Trading Commission (the "CFTC"). In particular, the Fund is exempted from registration with the CFTC as a "commodity pool operator"
if the Fund complies with the requirements of Rule 4.5 adopted by the CFTC. The Rule does not limit the percentage of the Fund's
assets that may be used for futures margin and related options premiums for a bona fide hedging position. However, under the Rule,
the Fund must limit its aggregate initial futures margin and related options premiums to not more than 5% of the Fund's net assets
for hedging strategies that are not considered bona fide hedging strategies under the Rule. Under the Rule, the Fund must also use
short futures and options on futures solely for bona fide hedging purposes within the meaning and intent of the applicable provisions
of the Commodity Exchange Act.

Transactions in options by the Fund are subject to limitations established by the option exchanges. The exchanges limit the
maximum number of options that may be written or held by a single investor or group of investors acting in concert. Those limits
apply regardless of whether the options were written or purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more brokers. Thus, the number of options that the Fund may
write or hold may be affected by options written or held by other entities, including other investment companies having the same
adviser as the Fund (or an adviser that is an affiliate of the Fund's adviser). 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.

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

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

Under the Internal Revenue Code, the following gains or losses are treated as ordinary income or loss:

(1) gains or losses attributable to fluctuations in exchange rates that occur between the time the Fund accrues interest or
other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund
actually collects such receivables or pays such liabilities, and
(2) gains or losses attributable to fluctuations in the value of a foreign currency between the date of acquisition of a debt
security denominated in a foreign currency or foreign currency forward contracts and the date of disposition.

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

|X| Temporary Defensive Investments. When market conditions are unstable, or the Manager believes it is otherwise appropriate
to reduce holdings in stocks, the Fund can invest in a variety of debt securities for defensive purposes. The Fund can also purchase
these securities for liquidity purposes to meet cash needs due to the redemption of Fund shares, or to hold while waiting to 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 Investors Service,
Inc. or at least BBB by Standard & Poor's Corporation, or a comparable rating by another rating organization), or
unrated securities judged by the Manager to have a comparable quality to rated securities in those categories,
o certificates of deposit and bankers' acceptances of domestic and foreign banks and savings and loan associations, having
total assets in excess of $1 billion, and
o repurchase agreements.

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

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

|X| 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 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 or 1940.
o The Fund cannot concentrate investments. That means it cannot invest 25% or more of its total assets in any one industry.
The Fund will not invest 25% or more of its total assets in government securities of any one foreign company or in debt
and equity securities issued by companies organized under the laws of any one foreign country. Obligations of the U.S.
government, its agencies and instrumentalities are not considered to be part of an "industry" for the purposes of this
policy.

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

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

Non-Diversification of the Fund's Investments. The Fund is "non-diversified," as defined in the Investment Company Act of 1940.
Funds that are diversified have restrictions against investing too much of their assets in the securities of any one "issuer." That
means that the Fund can invest more of its assets in the securities of a single issuer than a fund that is diversified.

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

How the Fund is Managed

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

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

The Board of Trustees has an Audit Committee and a Review Committee. Effective June 25, the members of the Audit
Committee are Edward L. Cameron (Chairman), William L. Armstrong, George C. Bowen and Robert J. Malone. The Audit Committee held six
meetings during the Fund's fiscal year ended September 30, 2001. The Audit Committee provides the Board with recommendations
regarding the selection of the Fund's independent auditor. The Audit Committee also reviews the scope and results of audits and the
audit fees charged, reviews reports from the Fund's independent auditor concerning the Fund's internal accounting procedures and
controls and selects and nominates for approval by the Board the independent Trustees, among other duties as set forth in the
Committee's charter.

Effective June 25, the members of the Review Committee are Jon S. Fossel (Chairman), Robert G. Avis, Sam Freedman, Beverly
L. Hamilton, and F. William Marshall, Jr. The Review Committee held six meetings during the fiscal year ended September 30, 2001.
The Review Committee reviews reports and makes recommendations to the Board concerning the fees paid to the Fund's Transfer Agent and
the services provided to the Fund by the Transfer Agent. The Review Committee also reviews policies and procedures adopted by the
Fund to comply with the Investment Company Act of 1940 and other applicable law, among other duties as set forth in the Committee's
charter.

|X| Classes of Shares. The Board of Trustees has the power, without shareholder approval, to divide unissued shares of the
Fund into two or more classes. The Board has done so, and the Fund currently has four classes of shares: Class A, Class B, Class C,
and Class N. All classes invest in the same investment portfolio. Only retirement plans may purchase Class N shares. Each class of
shares:

o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one class are different from interests of another class,
and
o votes as a class on matters that affect that class alone.

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

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

|X| Meetings of Shareholders. As a Massachusetts business trust, the Fund is not required to hold, and does not plan to
hold, regular annual meetings of shareholders. The Fund will hold meetings when required to do so by the Investment Company Act or
other applicable law. It will also do so when a shareholder meeting is called by the Trustees or upon proper request of the
shareholders.

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

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

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

Trustees and Officers of the Fund. The Fund's Trustees and officers and their principal occupations and business affiliations during
the past five years are listed below. Trustees denoted with an asterisk (*) below are deemed to be "interested persons" of the Fund
under the Investment Company Act. All of the Trustees are also trustees, directors or managing general partners of the following
Board II Oppenheimer funds1:

Oppenheimer Cash Reserves Oppenheimer Select Managers
Oppenheimer Champion Income Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Capital Income Fund Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer International Bond Fund Oppenheimer Variable Account Funds
Oppenheimer Integrity Funds Panorama Series Fund, Inc.
Oppenheimer Limited-Term Government Fund Centennial America Fund, L. P.
Oppenheimer Main(R)Street Funds, Inc. Centennial California Tax Exempt Trust
Oppenheimer Main Street(R)Opportunity Fund Centennial Government Trust
Oppenheimer Main Street(R)Small Cap Fund Centennial Money Market Trust
Oppenheimer Municipal Fund Centennial New York Tax Exempt Trust
Oppenheimer Real Asset Fund(R) Centennial Tax Exempt Trust

Messrs. Murphy, Molleur, Wixted and Zack and Mses. Feld and Ives who are officers of the Fund, respectively hold the same
offices with the other Board II Oppenheimer funds. As of January 3, 2002, the Trustees and officers of the Fund as a group owned less
than 1% of the outstanding shares of the Fund. The foregoing statement does not reflect shares held of record by an employee benefit
plan for employees of the Manager other than shares beneficially owned under that plan by the officers of the Fund listed below. Mr.
Murphy is a trustee of that plan.

James C. Swain, Chairman, Chief Executive Officer and Trustee, Age: 68.
6803 South Tucson Way, Englewood, Colorado 80112

Formerly Vice Chairman of the Manager (until January 2, 2002) and President and a director of Centennial Asset Management Corporation
(the Fund's Distributor) (until 1997). Oversees 41 portfolios in the OppenheimerFunds complex.

John V. Murphy*, President and Trustee, Age: 52.
498 Seventh Avenue, New York, New York 10018

Chairman, Chief Executive Officer and director (since PartnershipJune30, 2001) and President (since September 2000) of the Manager;
President and a director or trustee of other Oppenheimer funds; President and a director (since July 2001) of Oppenheimer Acquisition
Corp., the Manager's parent holding company, and of Oppenheimer advisor.Partnership Holdings, Inc.; a director (since Inc. (since
July 2001), a holding company subsidiary of the Manager;November 2001) of OppenheimerFunds Distributor, Inc.; Chairman and a director
(since July 2001) of Shareholder Services, Inc. and of Shareholder Financial Services, Inc., transfer agent subsidiaries of the
Manager; Inc.;President (since November 1, 2001) and a director (since July 2001) of Oppenheimer Real Asset Management, Inc., an
investment advisor subsidiary of the Manager; President and a director (since July 2001) of OppenheimerFunds Legacy Program, a
charitable trust program established by the Manager; a director of the (since November 2001) of Trinity Investment Management Corp.
and Tremont Advisers, Inc., investment advisory affiliates of the Manager, and of OAM Institutional, Inc.anfollowing investment
advisory subsidiary of the Manager, and ofsubsidiaries of OFI: OAM Institutional, Inc. and Centennial Asset Management Corporation
(since November 2001), HarbourView Asset Management Corporation and OFI Private Investments, Inc. (since July 2001), investment
advisor subsidiaries of the Manager; formerly2001); President (since November 1, 2001) and a director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; a director (since November 2001) of Trinity Investment Management Corp. and Tremont
Advisers, Inc., investment advisory affiliates of the Manager; Executive Vice President (since February 1997) of Massachusetts Mutual
Life Insurance Company, the Manager's parent company; a director (since June 1995) of DBL Acquisition Corporation; formerly, Chief
Operating Officer (from September 2000 to June 2001) of the Manager; President and trustee (from November 1999 to November 2001) of
MML Series Investment Fund and MassMutual Institutional Funds, open-end investment companies; a director (from September 1999 to
August 2000) of C.M. Life Insurance Company; President, Chief Executive Officer and director (from September 1999 to August 2000) of
MML Bay State Life Insurance Company; a director (from June 1989 to June 1998) of Emerald Isle Bancorp and Hibernia Savings Bank, a
wholly-owned subsidiary of Emerald Isle Bancorp. Oversees 67 portfolios in the OppenheimerFunds complex.

William L. Armstrong, Trustee, Age: 65.
6803 South Tucson Way, Englewood, Colorado 80112
Chairman of the following private mortgage banking companies: Cherry Creek Mortgage Company (since 1991), Centennial State Mortgage
Company (since 1994), The El Paso Mortgage Company (since 1993), Transland Financial Services, Inc. (since 1997); Chairman of the
following private companies: Great Frontier Insurance (insurance agency) (since 1995) and Ambassador Media Corporation (since 1984);
a director of the following public companies: Storage Technology Corporation (computer equipment company) (since 1991), Helmerich &
Payne, Inc. (oil and gas drilling/production company) (since 1992), UNUMProvident (insurance company) (since 1991). Formerly Director
of International Family Entertainment (television channel) (1992 - 1997) and Natec Resources, Inc. (air pollution control equipment
and services company) (1991-1995), Frontier Real Estate, Inc. (residential real estate brokerage) (1994-1999), and Frontier Title
(title insurance agency) (1995-June 1999); a U.S. Senator (January 1979-January 1991). Oversees 41 portfolios in the OppenheimerFunds
complex.

Robert G. Avis, Trustee, Age: 70.
6803 South Tucson Way, Englewood, Colorado 80112

Formerly Mr. Avis held the following positions: Director and President of A.G. Edwards Capital, Inc. (General Partner of private
equity funds) (until February 2001); Chairman, President and Chief Executive Officer of A.G. Edwards Capital, Inc. (until March
2000); Vice Chairman and Director of A.G. Edwards, Inc. and Vice Chairman of A.G. Edwards & Sons, Inc. (its brokerage company
subsidiary) (until - March 1999); Chairman of A.G. Edwards Trust Company and A.G.E. Asset Management (investment advisor) (until -
March 1999); and a Director of A.G. Edwards & Sons and A.G. Edwards Trust Company (until - March 2000). Oversees 41 portfolios in the
OppenheimerFunds complex.

George C. Bowen, Trustee, Age: 65.
6803 South Tucson Way, Englewood, Colorado 80112

Formerly (until April 1999) Mr. Bowen held the following positions: Senior Vice President (from September 1987) and Treasurer (from
March 1985) of the Manager; Vice President (from June 1983) and Treasurer (since March 1985) of OppenheimerFunds Distributor, Inc.,
the Fund's Sub-Distributor; Senior Vice President (since February 1992), Treasurer (since July 1991) Assistant Secretary and a
director (since December 1991) of the Manager; Vice President (since October 1989) and Treasurer (since April 1986) of HarbourView
Asset Management Corporation an investment advisory subsidiary of the Manager; President, Treasurer and a director of Centennial
Capital Corporation (June 1989 - January 1990), an investment advisory subsidiary of the Manager; Vice President and Treasurer (since
August 1978) and Secretary (since April 1981) of Shareholder Services, Inc., a transfer agent subsidiary of the Manager; Vice
President, Treasurer and Secretary of Shareholder Financial Services, Inc. (since November 1989), a transfer agent subsidiary of the
Manager; Assistant Treasurer of Oppenheimer Acquisition Corp. (since March 1998), the Manager's parent corporation; Treasurer of
Oppenheimer Partnership Holdings, Inc. (since November 1989), a holding company subsidiary of 1989);the Manager; Vice President and
Treasurer of Oppenheimer Real Asset Management, Inc. (since July 1996), an investment advisory subsidiary of the Manager; Chief
Executive Officer and director of MultiSource Services, Inc., a broker-dealer subsidiary of the Manager (since March 1996); Treasurer
of OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc (since October 1997), offshore fund management
subsidiaries of the Manager. Oversees 41 portfolios in the OppenheimerFunds complex.

Edward L. Cameron, Trustee, Age: 63.
6803 South Tucson Way, Englewood, Colorado 80112

Director of Genetic ID, Inc. and its subsidiaries, a privately held biotech company (since March 2001); a member of The Life Guard of
Mount Vernon, George Washington's home (since June 2000). Formerly(from a partner with PricewaterhouseCoopers LLP (an accounting
firm) (from 1974-1999) and Chairman, Price Waterhouse LLP Global Investment Management Industry Services Group (from 1994-1998).
Oversees 41 portfolios in the OppenheimerFunds complex.

Jon S. Fossel, Trustee, Age: 60.
6803 South Tucson Way, Englewood, Colorado 80112
Chairman and Director of Rocky Mountain Elk Foundation, a not-for-profit foundation (since 1998); and a director of P.R.
Pharmaceuticals, a privately held company (since October 1999) and UNUMProvident (insurance company) (since June 1, 2002). Formerly
Mr. Fossel held the following positions: Chairman and a director (until October 1996) and President and Chief Executive Officer
(until October 1995) of the Manager; President, Chief Executive Officer and a director of Oppenheimer Acquisition Corp., Shareholder
Services, Inc. and Shareholder Financial Services, Inc. (until October 1995). Oversees 41 portfolios in the OppenheimerFunds complex.

Sam Freedman, Trustee, Age: 61.
6803 South Tucson Way, Englewood, Colorado 80112

Formerly (until October 1994) Mr. Freedman held the following positions: Chairman and Chief Executive Officer of OppenheimerFunds
Services (from August 1980); Chairman, Chief Executive Officer and a director of Shareholder Services, Inc. (from August 1980);
Chairman, Chief Executive Officer and director of Shareholder Financial Services, Inc. (from November 1989); Vice President and
director of Oppenheimer Acquisition Corp. (from October 1990) and a director of the Manager (from October 1990). Oversees 41
portfolios in the OppenheimerFunds complex.

Beverly L. Hamilton, Trustee, Age: 55.
6803 South Tucson Way, Englewood, Colorado 80112
Trustee (since 1996) of MassMutual Institutional Funds and of MML Series Investment Fund (open-end investment companies); Director of
MML Services, an investment company (since April 1987), America Funds Emerging Markets Growth Fund, an investment company (since
October 1991), The California Endowment, a philanthropy organization (since April 2002), and Community Hospital of Monterey
Peninsula, (since February 2002), a Trustee of Monterey International Studies, an educational organization (since February 2000), and
an advisor to Unilever (Holland)'s pension fund and to Credit Suisse First Boston's Sprout venture capital unit. Mrs. Hamilton also
is a member of the investment committees of the Rockefeller Foundation, the University of Michigan and Hartford Hospital. Formerly,
Mrs. Hamilton held the following position: President ARCO Investment Management Company, (from February 1991 until April 2000).
Oversees 40 portfolios in the OppenheimerFunds complex.

Robert J. Malone, Trustee, Age: 57.
6803 South Tucson Way, Englewood, Colorado 80112
Director of Jones Knowledge, Inc., a privately held company (since 2001), director of U.S. Exploration, Inc., (since 1997), director
of Colorado UpLIFT, a non-profit organization (since 1986) and a Trustee of the Gallagher Family Foundation, (since 2000). Formerly,
Mr. Malone held the following positions: Chairman of U.S. Bank (formerly Colorado National Bank) a subsidiary of U.S. Bancorp (from
July 1, 1996 until April 1, 1999); Chairman of the Board and Chief Executive Officer of Colorado National Bank (from December 18,
1992 until July 1, 1996); director of Commercial Assets, Inc. (from 1993 to 2000). Oversees 40 portfolios in the OppenheimerFunds
complex.

F. William Marshall, Jr., Trustee, Age: 59.
6803 South Tucson Way, Englewood, Colorado 80112

Trustee (since 1996) of MassMutual Institutional Funds and of MML Series Investment Fund (open-end investment companies). Formerly
Chairman of SIS & Family Bank, F.S.B. (formerly SIS Bank) (January 1999 - July 1999); President, Chief Executive Officer and Director
of SIS Bankcorp., Inc. and SIS Bank (formerly Springfield Institution for Savings) (May 1993 - December 1998); Executive Vice
President of Peoples Heritage Financial Group, Inc. (January 1999 - July 1999); Chairman and Chief Executive Office of Bank of
Ireland First Holdings, Inc. and First New Hampshire Banks (June 1990 - May 1993). Oversees 41 portfolios in the OppenheimerFunds
complex.

Ruggero de'Rossi, Vice President and Portfolio Manager, Age: 38.
498 Seventh Avenue, New York, New York 10018
Vice President of the Manager (since March 2000); an officer and portfolio manager of another Oppenheimer fund. Prior to joining the
manager he was a Senior Vice President and Chief Emerging Markets Debt and Currency Strategist of ING Barings, a global investment
bank (July 1998 - March 2000); before that he was a Vice President, head of emerging markets trading strategies at Citicorp
Securities, after having run the bank's proprietary trading activity on international fixed income and foreign exchange derivatives
(May 1995 - July 1998).

Arthur P. Steinmetz, Vice President and Portfolio Manager, Age: 43.
498 Seventh Avenue, New York, New York 10018
Senior Vice President of the Manager (since March 1993) and of HarbourView Asset Management Corporation (since March 2000); an
officer and portfolio manager of other Oppenheimer funds.

Robert G. Zack, Vice President and Secretary, Age: 53.
498 Seventh Avenue, New York, New York 10018

Senior Vice President (since May 1985) and General Counsel (since February 2002) of the Manager; Assistant Secretary of Shareholder
Services, Inc. (since May 1985), Shareholder Financial Services, Inc. (since November 1989); OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October 1997); an officer of other Oppenheimer funds; formerly, Acting General Counsel
(November 2001-February 2002) and Associate General Counsel (1984 - October 2001).

Brian W. Wixted, Treasurer, Age: 42.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer (since March 1999) of HarbourView Asset Management
Corporation, Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, Shareholder Financial Services, Inc. and
Oppenheimer Partnership Holdings, Inc., of OFI Private Investments, Inc. (since March 2000) and of OppenheimerFunds International
Ltd. and Oppenheimer Millennium Funds plc (since May 2000); Treasurer and Chief Financial Officer (since May 2000) of Oppenheimer
Trust Company; Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp. and of Centennial Asset Management
Corporation; an officer of other Oppenheimer funds; formerly Principal and Chief Operating Officer, Bankers Trust Company - Mutual
Fund Services Division (March 1995 - March 1999).

Denis R. Molleur, Assistant Secretary, Age: 44.
498 Seventh Avenue, New York, New York 10018
Vice President and Senior Counsel of the Manager (since July 1999); an officer of other Oppenheimer funds; formerly a Vice President
and Associate Counsel of the Manager (September 1991 - July 1999).

Katherine P. Feld, Assistant Secretary, Age: 43.
498 Seventh Avenue, New York, New York 10018
Vice President and Senior Counsel of the Manager (since July 1999); Vice President of OppenheimerFunds Distributor, Inc. (since June
1990); an officer of other Oppenheimer funds; formerly a Vice President and Associate Counsel of the Manager (June 1990 - July 1999).

Kathleen T. Ives, Assistant Secretary, Age: 36.
6803 South Tucson Way, Englewood, CO 80112
Vice President and Assistant Counsel of the Manager (since June 1998); an officer of other Oppenheimer funds; formerly an Assistant
Vice President and Assistant Counsel of the Manager (August 1997 - June 1998); and Assistant Counsel of the Manager (August 1994 -
August 1997).

|X| Remuneration of Trustees. The officers of the Fund and one Trustee of the Fund (Mr. Murphy) are affiliated with the
Manager and receive no salary or fee from the Fund. The remaining Trustees of the Fund received the compensation shown below. The
compensation from the Fund was paid during its fiscal year ended September 30, 2001. Mr. Swain was affiliated with the Manager until
January 2, 2002.

The compensation from all of the Board II Oppenheimer funds includes the compensation from the Fund and represents compensation
received as a director, trustee, managing general partner or member of a committee of the Board during the calendar year 2001.

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

Total Compensation
From all Board II
Trustee's Name and Other Positions1 Aggregate Compensation Oppenheimer Funds
from Fund2 (41 Funds) 3

William L. Armstrong
Audit Committee Member $550 $78,865

Robert G. Avis $594 $79,452
Review Committee Member
-------------------------------------- -------------------------------------- --------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------

George C. Bowen $540 $75,936
Audit Committee Member

-------------------------------------- -------------------------------------- --------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------
Edward L. Cameron
Audit Committee Chairman $477 $75,794
-------------------------------------- -------------------------------------- --------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------
Jon S. Fossel
Review Committee Chairman $639 $84,177
-------------------------------------- -------------------------------------- --------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------
Sam Freedman
Review Committee Member $660 $83,402
-------------------------------------- -------------------------------------- --------------------------------------
-------------------------------------- -------------------------------------- --------------------------------------

Beverly L. Hamilton4 None None
Review Committee Member

C. Howard Kast5
$691 $87,452

Robert M. Kirchner5
$630 $79,452

Robert J. Malone4 None None
Audit Committee Member

F. William Marshall, Jr. $392 $69,922
Audit Committee Member
-------------------------------------- -------------------------------------- --------------------------------------
1. Effective July 1, 2000, William A. Baker and Ned M. Steel resigned as Trustees of the Fund and subsequently became Trustees
Emeritus of the Fund. For the fiscal year ended September 30, 2001, Messrs. Baker and Steel each received $462 aggregate
compensation from the Fund and for the calendar year ended December 31, 2001, they each received $60,000 total compensation from
all Board II Oppenheimer funds. Effective April 5, 2001 Raymond Kalinowski resigned as Trustee of the Fund. For the fiscal year
ended September 30, 2001, Mr. Kalinowski received $325 aggregate compensation from the Fund and for the calendar year ended
December 31, 2001, he received $20,901 total compensation from all Board II Oppenheimer funds.
2. For the Fund's fiscal year ended September 30, 2001.
3. For the 2001 calendar year.

4. Mrs. Hamilton and Mr. Malone were elected as Directors/Trustees of the Board II Funds effective June 1, 2002 and therefore
did not receive compensation from any of the Board II Funds during the Fund's fiscal year ended September 31, 2001 or calendar
year 2001.
5. Effective July 1, 2002, Messrs. Kast and Kirchner retired as Directors/Trustees from the Board II funds.

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

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

|X| Major Shareholders. As of January 3, 2002, the only persons who owned of record or were known by the Fund to own
beneficially 5% or more of the Fund's outstanding securities of any class were the following: Charles Schwab & Co., Inc., 101
Montgomery Street, San Francisco, CA 94104, which owned 3,613,378.465 Class A shares (12.06% of the Class A shares then outstanding)
for the benefit of its customers; Merrill Lynch, Pierce, Fenner & Smith, 4800 Deer Lake Drive, E., Floor 3, Jacksonville, Florida
32246, which owned 512,621.833 Class C shares (8.17% of the Class C shares then outstanding) for the benefit of its customers and R
Sandrow & D Keyes Trustees, Sandrow & Keyes MDPA 401K PSP, FBO Richard Sandrow, 8940 N Kendall Dr Ste 1003E, Miami, Florida 33176,
which owned 27,002.571 Class N shares (92.70% 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.

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

The Code of Ethics is an exhibit to the Fund's registration statement filed with the Securities and Exchange Commission and can
be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. You can obtain information about the hours of
operation of the Public Reference Room by calling the SEC at 1.202.942.8090. The Code of Ethics can also be viewed as part of the
Fund's registration statement on the SEC's EDGAR database at the SEC's Internet website at WWW.SEC.GOV. Copies may be obtained,
after paying a duplicating fee, by electronic request at the following e-mail address: PUBLICINFO@SEC.GOV., or by writing to the
SEC's Public Reference Section, Washington, D.C. 20549-0102.

|X| 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.

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

Fiscal Year ended 9/30: Management Fees Paid to OppenheimerFunds, Inc.
---------------------------------------- ----------------------------------------------------------------------------
---------------------------------------- ----------------------------------------------------------------------------
1999 $1,886,864
---------------------------------------- ----------------------------------------------------------------------------
---------------------------------------- ----------------------------------------------------------------------------
2000 $1,910,655
---------------------------------------- ----------------------------------------------------------------------------
---------------------------------------- ----------------------------------------------------------------------------
2001 $1,769,586
---------------------------------------- ----------------------------------------------------------------------------

The investment advisory agreement states that in the absence of willful misfeasance, bad faith, gross negligence in the
performance of its duties or reckless disregard of its obligations and duties under the investment advisory agreement, the Manager is
not liable for any loss resulting from a good faith error or omission on its part with respect to any of its duties under the
agreement.

The agreement permits the Manager to act as investment advisor for any other person, firm or corporation and to use the name
"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.

Brokerage Policies of the Fund

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

Under the investment advisory agreement, the Manager may select brokers (other than affiliates) that provide brokerage
and/or research services for the Fund and/or the other accounts over which the Manager or its affiliates have investment discretion.
The commissions paid to such brokers may be higher than another qualified broker would charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the services provided. Subject to those considerations, as a
factor in selecting brokers for the Fund's portfolio transactions, the Manager may also consider sales of shares of the Fund and
other investment companies for which the Manager or an affiliate serves as investment advisor.

Brokerage Practices Followed by the Manager. The Manager allocates brokerage for the Fund subject to the provisions of the
investment advisory agreement and the procedures and rules described above. Generally, the Manager's portfolio traders allocate
brokerage based upon recommendations from the Manager's portfolio managers. In certain instances, portfolio managers may directly
place trades and allocate brokerage. In either case, the Manager's executive officers supervise the allocation of brokerage.

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

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

Most purchases of debt obligations are principal transactions at net prices. Instead of using a broker for those transactions,
the Fund normally deals directly with the selling or purchasing principal or market maker unless the Manager determines that a better
price or execution can be obtained by using the services of a broker. Purchases of portfolio securities from underwriters include a
commission or concession paid by the issuer to the underwriter. Purchases from dealers include a spread between the bid and asked
prices. The Fund seeks to obtain prompt execution of these orders at the most favorable net price.

The investment advisory agreement permits the Manager to allocate brokerage for research services. The research services
provided by a particular broker may be useful only to one or more of the advisory accounts of the Manager and its affiliates. The
investment research received for the commissions of those other accounts may be useful both to the Fun d and one or more of the
Manager's other accounts. Investment research may be supplied to the Manager by a third party at the instance of a broker through
which trades are placed.

Investment research services include information and analysis on particular companies and industries as well as market or
economic trends and portfolio strategy, market quotations for portfolio evaluations, information systems, computer hardware and
similar products and services. If a research service also assists the Manager in a non-research capacity (such as bookkeeping or
other administrative functions), then only the percentage or component that provides assistance to the Manager in the investment
decision-making process may be paid in commission dollars.

The Board of Trustees permits the Manager to use stated commissions on secondary fixed-income agency trades to obtain research
if the broker represents to the Manager that: (i) the trade is not from or for the broker's own inventory, (ii) the trade was
executed by the broker on an agency basis at the stated commission, and (iii) the trade is not a riskless principal transaction. The
Board of Trustees permits the Manager to use concessions on fixed-price offerings to obtain research, in the same manner as is
permitted for agency transactions.

The research services provided by brokers broadens the scope and supplements the research activities of the Manager. That
research provides additional views and comparisons for consideration, and helps the Manager to obtain market information for the
valuation of securities that are either held in the Fund's portfolio or are being considered for purchase. The Manager provides
information to the Board about the commissions paid to brokers furnishing such services, together with the Manager's representation
that the amount of such commissions was reasonably related to the value or benefit of such services.

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

Fiscal Year Ended 9/30: Total Brokerage Commissions Paid by the Fund1
---------------------------------------- -----------------------------------------------------------------------------
---------------------------------------- -----------------------------------------------------------------------------
1999 $71,090
---------------------------------------- -----------------------------------------------------------------------------
---------------------------------------- -----------------------------------------------------------------------------
2000 $166,755
---------------------------------------- -----------------------------------------------------------------------------
---------------------------------------- -----------------------------------------------------------------------------
2001 $23,8552
---------------------------------------- -----------------------------------------------------------------------------
1. Amounts do not include spreads or commissions on principal transactions on a net trade basis.
2. In the fiscal year ended 9/30/01, the amount of transactions directed to brokers for research services was $12,630,295 and
the amount of the commissions paid to broker-dealers for those services was $2,134.

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 different classes of shares. The Distributor bears the expenses normally attributable
to sales, including advertising and the cost of printing and mailing prospectuses, other than those furnished to existing
shareholders. The Distributor is not obligated to sell a specific number of shares.

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

--------------- ----------------------- -----------------------
Fiscal Year Aggregate Front-End Class A Front-End
Sales Charges
Ended 9/30: Sales Charges on Retained by
Class A Shares Distributor
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
1999 $427,421 $118,394
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2000 $255,294 $70,759
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
2001 $228,525 $50,5661
--------------- ----------------------- -----------------------
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
Distributor1 Distributor1 Distributor1 Distributor1
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
1999 $41,586 $887,632 $ 83,883 N/A
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
2000 $32,659 $551,662 $95,774 N/A
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
2001 $61,374 $263,637 $48,250 $282
--------------- ----------------------- ----------------------- ------------------------ -----------------------
1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for sales of Class B, Class
C and Class N shares from its own resources at the time of sale.
2. The inception date of Class N shares was March 1, 2001.

--------------- ----------------------- ----------------------- ------------------------ -----------------------
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
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
2001 $18,318 $342,548 $7,490 None
--------------- ----------------------- ----------------------- ------------------------ -----------------------

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 Trustees2, cast in
person at a meeting called for the purpose of voting on that plan. The shareholder votes for the plans were cast by the Manager as
the sole initial holder of each class of shares of the Fund.

Under the plans, the Manager and the Distributor may make payments to affiliates and in their sole discretion, from time to
time, may use their own resources (at no direct cost to the Fund) to make payments to brokers, dealers or other financial
institutions for distribution and administrative services they perform. The Manager may use its profits from the advisory fee it
receives from the Fund. In their sole discretion, the Distributor and the Manager may increase or decrease the amount of payments
they make from their own resources to plan recipients.

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

The Board of Trustees and the Independent Trustees must approve all material amendments to a plan. An amendment to increase
materially the amount of payments to be made under a plan must be approved by shareholders of the class affected by the amendment.
Because Class B shares of the Fund automatically convert into Class A shares after six years, the Fund must obtain the approval of
both Class A and Class B shareholders for a proposed material amendment to the Class A Plan that would materially increase payments
under the Plan. That approval must be by a "majority" (as defined in the Investment Company Act) of the shares of each Class, voting
separately by class.

While the plans are in effect, the Treasurer of the Fund shall provide separate written reports on the plans to the Board of
Trustees at least quarterly for its review. The Reports shall detail the amount of all payments made under a plan, and the purpose
for which the payments were made. Those reports are subject to the review and approval of the Independent Trustees.

Each Plan states that while it is in effect, the selection and nomination of those Trustees of the Fund who are not "interested
persons" of the Fund is committed to the discretion of the Independent Trustees. This does not prevent the involvement of others in
the selection and nomination process as long as the final decision as to selection or nomination is approved by a majority of the
Independent Trustees.

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

|X| Class A Service Plan 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. While the plan permits the Board to authorize
payments to the Distributor to reimburse itself for services under the plan, the Board has not yet done so. The Distributor makes
payments to plan recipients quarterly at an annual rate not to exceed 0.25% of the average annual net assets consisting of Class A
shares held in the accounts of the recipients or their customers. 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. After the first year shares are outstanding, the Distributor makes service fee payments to Recipients quarterly on those
shares. The advance payment is based on the net asset value of shares sold. Shares purchased by exchange do not qualify for the
advance service fee payment. If Class A shares purchased by grandfathered retirement accounts are redeemed during the first year
after their purchase, the Recipient of the service fees on those shares will be obligated to repay the Distributor a pro rata portion
of the advance payment of the service fee made on those shares.

For the fiscal period ended September 30, 2001, payments under the Class A Plan totaled $275,972, all of which was paid by the
Distributor to recipients. That included $13,503 paid to an affiliate of the Distributor's parent company. Any unreimbursed expenses
the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. The Distributor may
not use payments received under the Class A Plan to pay any of its interest expenses, carrying charges, or other financial costs, or
allocation of overhead.

|X| Class B, Class C and Class N Service and Distribution Plan Fees. Under each plan service fees and distribution fees are
computed on the average of the net asset value of shares in the respective class, determined as of the close of each regular business
day during the period. 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 quarterly basis, without payment in advance. However, the Distributor currently intends to pay the service fee paid
under the Class B Class C and Class N plans to recipients in advance for the first year after the shares are purchased. After the
first year shares are outstanding, the Distributor makes service fee payments quarterly on those shares under the Class B, Class C
and Class N plans. 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. In cases where the Distributor is the broker of record for Class B, Class C and
Class N shares, the Distributor will retain the asset-based sales charge and service fee for Class B, Class C and Class N shares.

The asset-based sales charge and service fees increase Class B and Class C expenses by 1.00% and effective November 1, 2001 the
asset-based sales charge and service fees increases Class N expenses by 0.50% of the net assets per year of the respective class.

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

The asset-based sales charges on Class B, Class C and Class N shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those shares. The Fund pays the asset-based sales charges to
the Distributor for its services rendered in distributing Class B, Class C and Class N shares. The payments are made to the
Distributor in recognition that the Distributor:

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

When Class B, Class C or Class N shares are sold without the designation of a broker-dealer, the Distributor is automatically
designated as the broker-dealer of record. In those cases, the Distributor retains the service fee and asset-based sales charge paid
on Class B, Class C and Class N shares.

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

--------------------------------------------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended 9/30/01
--------------------------------------------------------------------------------------------------------------------
------------------- --------------------- ------------------------ ------------------------ ------------------------
Class: Total Payments Amount Retained by Distributor's Distributor's
Unreimbursed Expenses
Aggregate Unreimbursed as % of Net Assets of
Under Plan Distributor Expenses Under Plan Class
------------------- --------------------- ------------------------ ------------------------ ------------------------
------------------- --------------------- ------------------------ ------------------------ ------------------------
Class B Plan $934,279 $722,8061 $4,955,971 5.87%

------------------- --------------------- ------------------------ ------------------------ ------------------------
1. Includes $4,923 paid to an affiliate of the Distributor's parent company.
2. Includes $3,342 paid to an affiliate of the Distributor's parent company.

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

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to illustrate its performance. These terms include
"standardized yield," "dividend yield," "average annual total return," "cumulative total return," "average annual total return at net
asset value" and "total return at net asset value." An explanation of how yields and 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 1.800.525.7048 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 Securities and Exchange
Commission. Those rules describe the types of performance data that may be used and how it is to be calculated. In general, any
advertisement by the Fund of its performance data must include the average annual total returns for the advertised class of shares of
the Fund. Those returns must be shown for the 1, 5 and 10-year periods (or the life of the class, if less) ending as of the most
recently ended calendar quarter prior to the publication of the advertisement (or its submission for publication). Certain types of
yields may also be shown, provided that they are accompanied by standardized average annual total returns.

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 do not reflect the effect of taxes on dividends and capital gains distributions.

o An investment in the Fund is not insured by the FDIC or any other government agency.

o The principal value of the Fund's shares, and 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 those 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.

|_| 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 Securities and Exchange
Commission, designed to assure uniformity in the way that all funds calculate their yields:

(a-b) 6
Standardized Yield = 2 ((--- + 1) - 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.

|_| 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 and Class C shares is the net asset value per share, without considering the effect of contingent deferred sales charges.
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 9/30/01
-----------------------------------------------------------------------------------------------------------------
---------------- ------------------------------------------ -----------------------------------------------------

Standardized Yield Dividend Yield

Class of Shares
---------------- ------------------------------------------ -----------------------------------------------------
---------------- ------------------- ---------------------- ---------------------- ------------------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
---------------- ------------------- ---------------------- ---------------------- ------------------------------
---------------- ------------------- ---------------------- ---------------------- ------------------------------
Class A 5.57% 5.30% 7.31% 6.96%
---------------- ------------------- ---------------------- ---------------------- ------------------------------
---------------- ------------------- ---------------------- ---------------------- ------------------------------
Class B 4.80% N/A 6.53% N/A
---------------- ------------------- ---------------------- ---------------------- ------------------------------
---------------- ------------------- ---------------------- ---------------------- ------------------------------
Class C 4.79% N/A 6.53% N/A
---------------- ------------------- ---------------------- ---------------------- ------------------------------
---------------- ------------------- ---------------------- ---------------------- ------------------------------
Class N 5.55% N/A 7.34% 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, 10 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") (unless the return is shown without sales charge, as described below). For
Class B shares, payment of the applicable contingent deferred sales charge is applied, depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and fourth years, 2.0% in the fifth year, 1.0% in the
sixth year and none thereafter. For Class C shares, the 1.0% contingent deferred sales charge is deducted for returns for the
one-year period. For Class N shares, the 1.0% contingent deferred sales charge is deducted for returns for the one-year and
life-of-class periods as applicable.

|_| Average Annual Total Return. The "average annual total return" of each class is an average annual compounded
rate of return for each year in a specified number of years. It is the rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a number of years ("n" in the formula) to achieve an Ending
Redeemable Value ("ERV" in the formula) of that investment, according to the following formula:

1/n
(ERV)
(---) -1 = Average Annual Total Return
( P )

|_| Cumulative Total Return. The "cumulative total return" calculation measures the change in value of a
hypothetical investment of $1,000 over an entire period of years. Its calculation uses some of the same factors as average annual
total return, but it does not average the rate of return on an annual basis. Cumulative total return is determined as follows:

ERV - P
------- = Total Return
P

|_| Total Returns at Net Asset Value. From time to time the Fund may also quote a cumulative or an average annual
total return "at net asset value" (without deducting sales charges) for Class A, Class B, Class C or Class N shares. Each is based
on the difference in net asset value per share at the beginning and the end of the period for a hypothetical investment in that class
of shares (without considering front-end or contingent deferred sales charges) and takes into consideration the reinvestment of
dividends and capital gains distributions.

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

The Fund's Total Returns for the Periods Ended 9/30/014
---------------------------------------------------------------------------------------------------------------------
------------- --------------------------- ---------------------------------------------------------------------------
Cumulative Total Returns Average Annual Total Returns
Class of (Life of Class)
Shares
------------- --------------------------- ---------------------------------------------------------------------------
------------- --------------------------- ------------------------ ------------------------ -------------------------

1-Year 5-Year Life of Class
------------- --------------------------- ------------------------ ------------------------ -------------------------
------------- ------------ -------------- ------------ ----------- ------------ ----------- ------------ ------------
After Without After Without After Without After Without
Sales Sales Charge Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge
------------- ------------ -------------- ------------ ----------- ------------ ----------- ------------ ------------
------------- ------------ -------------- ------------ ----------- ------------ ----------- ------------ ------------
Class A 41.57%1 48.63%1 -3.42% 1.40% 2.53%1 3.54%1 5.68%1 6.50%1
------------- ------------ -------------- ------------ ----------- ------------ ----------- ------------ ------------
------------- ------------ -------------- ------------ ----------- ------------ ----------- ------------ ------------
Class B 42.03%2 42.03%2 -3.87% 0.85% 2.52%2 2.78%2 5.73%2 5.73%2
------------- ------------ -------------- ------------ ----------- ------------ ----------- ------------ ------------
------------- ------------ -------------- ------------ ----------- ------------ ----------- ------------ ------------
Class C 41.69%3 41.69%3 -0.09% 0.85% 2.79%3 2.79%3 5.69%3 5.69%3
------------- ------------ -------------- ------------ ----------- ------------ ----------- ------------ ------------
------------- ------------ -------------- ------------ ----------- ------------ ----------- ------------ ------------
Class N -3.82%4 -2.88%4 N/A N/A N/A N/A N/A N/A
------------- ------------ -------------- ------------ ----------- ------------ ----------- ------------ ------------
1. Inception of Class A: 6/15/95
2. Inception of Class B: 6/15/95
3. Inception of Class C: 6/15/95
4. Inception of Class N: 3/1/01. Total returns for Class N shares are cumulative and are not annualized.

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

|X| Lipper Rankings. From time to time the Fund may publish the ranking of the performance of its classes of shares by
Lipper Inc. ("Lipper"). Lipper is a widely-recognized independent mutual fund monitoring service. Lipper monitors the performance of
regulated investment companies, including the Fund, and ranks their performance for various periods in categories based on investment
styles. The Lipper performance rankings are based on total returns that include the reinvestment of capital gain distributions and
income dividends but do not take sales charges or taxes into consideration. Lipper also publishes "peer-group" indices of the
performance of all mutual funds in a category that it monitors and averages of the performance of the funds in particular categories.

|X| Morningstar Rankings. From time to time the Fund may publish the ranking and/or star rating of the performance of its
classes of shares by Morningstar, Inc., an independent mutual fund monitoring service. Morningstar rates and ranks mutual funds in
broad investment categories: domestic stock funds, international stock funds, taxable bond funds and municipal bond funds. The Fund
is included in the taxable bond funds category.

Morningstar proprietary star rankings reflect historical risk-adjusted total investment return. For each fund with at least
a three-year history, Morningstar calculates a Morningstar RatingTM metric each month by subtracting the return on a 90-day U.S.
Treasury Bill from the fund's load-adjusted return for the same period, and then adjusting this excess return for risk. The top 10%
of funds in each broad asset class receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5%
receive 2 stars and the bottom 10% receive 1 star. The Overall Morningstar Rating for a fund is derived from a weighted average of
the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Ratings metrics.

The Fund may also compare its total return ranking to that of other funds in its Morningstar category, in addition to its
star rankings. Those total return rankings are percentages from one percent to one hundred percent and are not risk adjusted. For
example, if a fund is in the 94th percentile, that means that 94% of the funds in the same category performed better than it did.

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

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

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

From time to time, the Fund may include in its advertisements and sales literature the total return performance of a
hypothetical investment account that includes shares of the fund and other Oppenheimer funds. The combined account may be part of an
illustration of an asset allocation model or similar presentation. The account performance may combine total return performance of
the fund and the total return performance of other Oppenheimer funds included in the account. Additionally, from time to time, the
Fund's advertisements and sales literature may include, for illustrative or comparative purposes, statistical data or other
information about general or specific market and economic conditions. That may include, for example,

o information about the performance of certain securities or commodities markets or segments of those markets,
o information about the performance of the economies of particular countries or regions,
o the earnings of companies included in segments of particular industries, sectors, securities markets, countries or regions,
o the availability of different types of securities or offerings of securities,
o information relating to the gross national or gross domestic product of the United States or other countries or regions,
o comparisons of various market sectors or indices to demonstrate performance, risk, or other characteristics of the Fund.

---------------------------------------------------------------------------------------------------------------------------------------
A B O U T Y O U R A C C O U N T
---------------------------------------------------------------------------------------------------------------------------------------

How to Buy Shares

Additional information is presented below about the methods that can be used to buy shares of the Fund. Appendix 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.

AccountLink. When shares are purchased through AccountLink, each purchase must be at least $25. Shares will be purchased on the
regular business day you instruct the Distributor 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 Distributor is
instructed to initiate the ACH transfer before the close of The New York Stock Exchange. The Exchange normally closes at 4:00 P.M.,
but may close earlier on certain days. The proceeds of ACH transfers are normally received by the Fund three days after the
transfers are initiated. If the proceeds of the ACH transfer are not received on a timely basis, the Distributor reserves the right
to cancel the purchase order. The Distributor and the Fund are not responsible for any delays in purchasing shares resulting from
delays in ACH transmissions.

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

|X| Right of Accumulation. To qualify for the lower sales charge rates that apply to larger purchases of Class A shares, you
and your spouse can add together:

o Class A and Class B shares you purchase for your individual accounts (including IRAs and 403(b) plans), or for your joint
accounts, or for trust or custodial accounts on behalf of your children who are minors, and
o Current purchases of Class A and Class B shares of the Fund and other Oppenheimer funds to reduce the sales charge rate that
-
applies to current purchases of Class A shares, and
o Class A and Class B shares of Oppenheimer funds you previously purchased subject to an initial or contingent deferred sales
charge to reduce the sales charge rate for current purchases of Class A shares, provided that you still hold your
investment in one of the Oppenheimer funds.

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

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

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

Oppenheimer Bond Fund Oppenheimer Municipal Bond Fund
Oppenheimer California Municipal Fund Oppenheimer New York Municipal Fund
Oppenheimer Capital Appreciation Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Preservation Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer Quest Balanced Value Fund
Oppenheimer Champion Income Fund Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Concentrated Growth Fund Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Convertible Securities Fund Oppenheimer Quest Opportunity Value Fund
Oppenheimer Developing Markets Fund Oppenheimer Quest Value Fund, Inc.
Oppenheimer Disciplined Allocation Fund Oppenheimer Real Asset Fund(R)
Oppenheimer Discovery Fund Oppenheimer Real Estate Fund
Oppenheimer Emerging Growth Fund Oppenheimer Rochester National Municipals Fund
Oppenheimer Emerging Technologies Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Enterprise Fund Oppenheimer Small Cap Value Fund
Oppenheimer Europe Fund Oppenheimer Special Value Fund
Oppenheimer Global Fund Oppenheimer Strategic Income Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer Gold & Special Minerals Fund Oppenheimer Trinity Core Fund
Oppenheimer Growth Fund Oppenheimer Trinity Large Cap Growth Fund
Oppenheimer High Yield Fund Oppenheimer Trinity Value Fund
Oppenheimer Intermediate Municipal Fund Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund Oppenheimer Value Fund
Oppenheimer International Growth Fund Limited-Term New York Municipal Fund
Oppenheimer International Small Company Fund Rochester Fund Municipals
Oppenheimer Limited-Term Government Fund OSM1- Gartmore Millennium Growth Fund II
Oppenheimer Main Street(R)Growth & Income Fund OSM1 - Jennison Growth Fund
Oppenheimer Main Street(R)Opportunity Fund OSM1 - Mercury Advisors S&P 500 Index
Oppenheimer Main Street(R)Small Cap Fund OSM1 - Mercury Advisors Focus Growth Fund
Oppenheimer MidCap Fund OSM1 - QM Active Balanced Fund
Oppenheimer Multiple Strategies Fund OSM1 - Salomon Brothers All Cap Fund
and the following money market funds:

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

1 - "OSM" stands for Oppenheimer Select Managers

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

Letters of Intent. Under a Letter of Intent, if you purchase Class A shares or Class A and Class B shares of the Fund and other
Oppenheimer funds during a 13-month period, you can reduce the sales charge rate that applies to your purchases of Class A shares.
The total amount of your intended purchases of both Class A and Class B shares will determine the reduced sales charge rate for the
Class A shares purchased during that period. You can include purchases made up to 90 days before the date of the Letter.

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

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

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

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

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

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

|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 thirteen-month Letter of Intent
period, the escrowed shares will be promptly released to the investor.

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

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

5. The shares eligible for purchase under the Letter (or the holding of which may be counted toward completion of a
Letter) include:

(a) Class A shares sold with a front-end sales charge or subject to a Class A contingent deferred sales charge,
(b) Class B shares of other Oppenheimer funds acquired subject to a contingent deferred sales charge, and
(c) Class A or Class B shares acquired by exchange of either (1) Class A shares of one of the other Oppenheimer funds that were
acquired subject to a Class A initial or contingent deferred sales charge or (2) Class B shares of one of the
other Oppenheimer funds that were acquired subject to a contingent deferred sales charge.

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

Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly from a bank account, you must enclose a check (the
minimum is $25) for the initial purchase with your application. Shares purchased by Asset Builder Plan payments from bank accounts
are subject to the redemption restrictions for recent purchases described in the Prospectus. Asset Builder Plans are available only
if your bank is an ACH member. Asset Builder Plans may not be used to buy shares for OppenheimerFunds employer-sponsored qualified
retirement accounts. Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use their fund account to make
monthly automatic purchases of shares of up to four other Oppenheimer funds.

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

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

Retirement Plans. Certain types of retirement plans are entitled to purchase shares of the Fund without sales charge or at reduced
sales charge rates, as described in Appendix C to this Statement of Additional Information. Certain special sales charge arrangements
described in that Appendix apply to retirement plans whose records are maintained on a daily valuation basis by 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 $3 million in assets
(other than assets invested in money market funds) invested in applicable investments, then the retirement plan may purchase only
Class B shares of the Oppenheimer funds. Any retirement plans in that category that currently invest in Class B shares of the Fund
will have their Class B shares converted to Class A shares of the Fund when the plan's applicable investments reach $5 million.

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

Classes of Shares. Each class of shares of the Fund represents an interest in the same portfolio of investments of the Fund.
However, each class has different shareholder privileges and features. The net income attributable to Class B, Class C of 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 any order in the amount of $500,000 or more for Class B shares or $1 million or more for
Class C shares on behalf of a single investor (not including dealer "street name" or omnibus accounts). That is because generally it
will be more advantageous for that investor to purchase Class A shares of the Fund.

|X| Class A Shares Subject to a Contingent Deferred Sales Charge. For purchases of Class A shares subject to a contingent
deferred sales charge as described in the Prospectus, no sales concessions will be paid to the broker-dealer of record, as described
in the Prospectus, on sales of Class A shares purchased with the redemption proceeds of shares of another mutual fund offered as an
investment option in a retirement plan in which 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 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 after six years is not treated as a taxable event for the shareholder. If those
laws or the IRS interpretation of those laws should change, the automatic conversion feature may be suspended. In the event, no
further conversions of Class B shares would occur while that suspension remained in effect. Although Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the two classes, without the imposition of a sales charge or
fee, such exchange could constitute a taxable event for the shareholder, and absent such exchange, Class B shares might continue to
be subject to the asset-based sales charge for longer than six years.

|X| Availability of Class N Shares. In addition to the description of the types of retirement plans which may purchase
Class N shares contained in the prospectus, Class N shares also are offered to the following:

o to all rollover IRAs,
o to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and Ascender retirement plans,
o to all trustee-to-trustee IRA transfers,
o to all 90-24 type 403(b) transfers,
o to Group Retirement Plans (as defined in Appendix C to this Statement of Additional Information) which have entered into a
special agreement with the Distributor for that purpose,
o to Retirement Plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, the recordkeeper or the plan
sponsor for which has entered into a special agreement with the Distributor,
o to Retirement Plans of a plan sponsor where the aggregate assets of all such plans invested in the Oppenheimer funds is
$500,000 or more,
o to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the purchase with the redemption proceeds of Class A shares
of one or more Oppenheimer funds,
o to certain customers of broker-dealers and financial advisors that are identified in a special agreement between the
broker-dealer or financial advisor and the Distributor for that purpose.

The sales concession and the advance of the service fee, as described in the Prospectus, will not be paid to dealers of
record on sales of Class N shares on:

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

|X| Allocation of Expenses. The Fund pays expenses related to its daily operations, such as custodian fees, Trustees' fees,
transfer agency fees, legal fees and auditing costs. Those expenses are paid out of the Fund's assets and are not paid directly by
shareholders. However, those expenses reduce the net asset value of shares, and therefore are indirectly borne by shareholders
through their investment.

The methodology for calculating the net asset value, dividends and distributions of the Fund's share classes recognizes two
types of expenses. General expenses that do not pertain specifically to any one class are allocated pro rata to the shares of all
classes. The allocation is based on the percentage of the Fund's total assets that is represented by the assets of each class, and
then equally to each outstanding share within a given class. Such general expenses include management fees, legal, bookkeeping and
audit fees, printing and mailing costs of shareholder reports, Prospectuses, Statements of Additional Information and other materials
for current shareholders, fees to unaffiliated Trustees, custodian expenses, share issuance costs, organization and start-up costs,
interest, taxes and brokerage commissions, and non-recurring expenses, such as litigation costs.

Other expenses that are directly attributable to a particular class are allocated equally to each outstanding share within
that class. Examples of such expenses include distribution and service plan (12b-1) fees, transfer and shareholder servicing agent
fees and expenses, and shareholder meeting expenses (to the extent that such expenses pertain only to a specific class).

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

Dealers other than Exchange members may conduct trading in certain securities on days on which the Exchange is closed
(including weekends and U.S. holidays) or after 4:00 P.M. on a regular business day. Because the Fund's net asset values will not be
calculated on those days, the Fund's net asset values per share may be significantly affected on such days when shareholders may not
purchase or redeem shares. Additionally, trading on European and Asian stock exchanges and over-the-counter markets normally is
completed before the close of The New York Stock Exchange.

Changes in the values of securities traded on foreign exchanges or markets as a result of events that occur after the prices
of those securities are determined, but before the close of The New York Stock Exchange, will not be reflected in the Fund's
calculation of its net asset values that day unless the Manager determines that the event is likely to effect a material change in
the value of the security. If such determination is made, the Manager acting through an internal valuation committee, will establish
a valuation for such security subject to the approval, ratification and confirmation by the Board at its next ensuing meeting.

|X| Securities Valuation. The Fund's Board of Trustees has established procedures for the valuation of the Fund's
securities. In general those procedures are as follows:

o Equity securities traded on a U.S. securities exchange or on NASDAQ are valued as follows:

(1) if last sale information is regularly reported, they are valued at the last reported sale price on the principal exchange on
which they are traded or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they are valued at the last reported sale price preceding the
valuation date if it is within the spread of the closing "bid" and "asked" prices on the valuation date or, if not,
at the closing "bid" price on the valuation date.

o Equity securities traded on a foreign securities exchange generally are valued in one of the following ways:

(1) at the last sale price available to the pricing service approved by the Board of Trustees, or
(2) at the last sale price obtained by the Manager from the report of the principal exchange on which the security is traded at
its last trading session on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained from the principal exchange on which the security is traded or, on
the basis of reasonable inquiry, from two market makers in the security.

o Long-term debt securities having a remaining maturity in excess of 60 days are valued based on the mean between the "bid"
and "asked" prices determined by a portfolio pricing service approved by the Fund's Board of Trustees or obtained by the
Manager from two active market makers in the security on the basis of reasonable inquiry.

o The following securities are valued at the mean between the "bid" and "asked" prices determined by a pricing service
approved by the Fund's Board of Trustees or obtained by the Manager from two active market makers in the security on the
basis of reasonable inquiry:

(1) debt instruments that have a maturity of more than 397 days when issued,
(2) debt instruments that had a maturity of 397 days or less when issued and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or less when issued and which have a remaining maturity of
60 days or less.

o The following securities are valued at cost, adjusted for amortization of premiums and accretion of discounts:

(1) money market debt securities held by a non-money market fund that had a maturity of less than 397 days when issued that have
a remaining maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining maturity of 397 days or less.

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

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

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

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

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

How to Sell Shares

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

Checkwriting. When a check is presented to 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. 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 or Class N shares. The Fund may amend, suspend or
cease offering this reinvestment privilege at any time as to shares redeemed after the date of such amendment, suspension or
cessation.

Any capital gain that was realized when the shares were redeemed is taxable, and reinvestment will not alter any capital
gains tax payable on that gain. If there has been a capital loss on the redemption, some or all of the loss may not be tax
deductible, depending on the timing and amount of the reinvestment. Under the Internal Revenue Code, if the redemption proceeds of
Fund shares on which a sales charge was paid are reinvested in shares of the Fund or another of the 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 or Class N contingent deferred sales charge will be followed in determining the
order in which shares are transferred.

Distributions From Retirement Plans. Requests for distributions from OppenheimerFunds-sponsored IRAs, 403(b)(7) custodial plans,
401(k) plans or pension or profit-sharing plans should be addressed to "Trustee, OppenheimerFunds Retirement Plans," c/o the Transfer
Agent at its address listed in "How To Sell Shares" in the Prospectus or on the back cover of this Statement of Additional
Information. The request must:

(1) state the reason for the distribution;
(2) state the owner's awareness of tax penalties if the distribution is premature; and
(3) conform to the requirements of the plan and the Fund's other redemption requirements.

Participants (other than self-employed persons) in OppenheimerFunds-sponsored pension or profit-sharing plans with shares of
the Fund held in the name of the plan or its fiduciary may not directly request redemption of their accounts. The plan administrator
or fiduciary must sign the request.

Distributions from pension and profit sharing plans are subject to special requirements under the Internal Revenue Code and
certain documents (available from the Transfer Agent) must be completed and submitted to the Transfer Agent before the distribution
may be made. Distributions from retirement plans are subject to withholding requirements under the Internal Revenue Code, and IRS
Form W-4P (available from the Transfer Agent) must be submitted to the Transfer Agent with the distribution request, or the
distribution may be delayed. Unless the shareholder has provided the Transfer Agent with a certified tax identification number, the
Internal Revenue Code requires that tax be withheld from any distribution even if the shareholder elects not to have tax withheld.
The Fund, the Manager, the Distributor, and the Transfer Agent assume no responsibility to determine whether a distribution satisfies
the conditions of applicable tax laws and will not be responsible for any tax penalties assessed in connection with a distribution.

Special Arrangements for Repurchase of Shares from Dealers and Brokers. The Distributor is the Fund's agent to repurchase its shares
from authorized dealers or brokers on behalf of their customers. Shareholders should contact their broker or dealer to arrange this
type of redemption. The repurchase price per share will be the net asset value next computed after the Distributor receives an order
placed by the dealer or broker. However, if the Distributor receives a repurchase order from a dealer or broker after the close of
The New York Stock Exchange on a regular business day, it will be processed at that day's net asset value if the order was received
by the dealer or broker from its customers prior to the time the Exchange closes. Normally, the Exchange closes at 4:00 P.M., but may
do so earlier on some days. Additionally, the order must have been transmitted to and received by the Distributor prior to its close
of business that day (normally 5:00 P.M.).

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

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

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

The Fund cannot guarantee receipt of a payment on the date requested. The Fund reserves the right to amend, suspend or
discontinue offering these plans at any time without prior notice. Because of the sales charge assessed on Class A share purchases,
shareholders should not make regular additional Class A share purchases while participating in an Automatic Withdrawal Plan. Class B,
Class C and Class N shareholders should not establish automatic withdrawal plans, because of the potential imposition of the
contingent deferred sales charge on such withdrawals (except where the Class B, Class C or Class N contingent deferred sales charge
is waived as described in Appendix 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 $25. Instructions
should be provided on the OppenheimerFunds application or signature-guaranteed instructions. Exchanges made under these plans are
subject to the restrictions that apply to exchanges as set forth in "How to Exchange Shares" in the Prospectus and below in this
Statement of Additional Information.

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

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

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

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

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

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

To use shares held under the Plan as collateral for a debt, the Planholder may request issuance of a portion of the shares
in certificated form. Upon written request from the Planholder, the Transfer Agent will determine the number of shares for which a
certificate may be issued without causing the withdrawal checks to stop. However, should such uncertificated shares become exhausted,
Plan withdrawals will terminate.

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

How to Exchange Shares

As stated in the Prospectus, shares of a particular class of 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 by calling the Distributor at 1.800.525.7048.

o All of the Oppenheimer funds currently offer Class A, B and C shares except Oppenheimer Money Market Fund, Inc., Centennial
Money Market Trust, Centennial Tax Exempt Trust, Centennial Government Trust, Centennial New York Tax Exempt Trust, Centennial
California Tax Exempt Trust, and Centennial America Fund, L.P., which only offer Class A shares.
o Class B, Class C and Class N shares of 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 Only certain Oppenheimer funds currently offer Class Y shares. Class Y shares of Oppenheimer Real Asset Fund may not be
exchanged for shares of any other fund.
o Only certain Oppenheimer funds currently offer Class N shares, which are only offered to retirement plans as described in
the Prospectus. Class N shares can be exchanged only for Class N shares of other Oppenheimer funds.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged only for Class A shares of other Oppenheimer
funds. They may not be acquired by exchange of shares of any class of any other Oppenheimer funds except Class A shares of
Oppenheimer Money Market Fund or Oppenheimer Cash Reserves acquired by exchange of Class M shares.
o Class X shares of Limited Term New York Municipal Fund can be exchanged only for Class B shares of other Oppenheimer funds
and no exchanges may be made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for shares of Oppenheimer Money Market Fund, Inc.,
Oppenheimer Cash Reserves or Oppenheimer Limited-Term Government Fund. Only participants in certain retirement plans may
purchase shares of Oppenheimer Capital Preservation Fund, and only those participants may exchange shares of other Oppenheimer
funds for shares of Oppenheimer Capital Preservation Fund.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not available by exchange of shares of Oppenheimer Money Market
Fund or Class A shares of Oppenheimer Cash Reserves. 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 Class A, Class B, Class C and Class Y Shares of Oppenheimer Select Managers Mercury Advisors S&P Index Fund and Oppenheimer
Select Managers QM Active Balanced Fund are only available to retirement plans and are available only by exchange from the same
class of shares of other Oppenheimer funds held by retirement plans.

Class A shares of Oppenheimer funds may be exchanged at net asset value for shares of any money market fund offered by the
Distributor. Shares of any money market fund purchased without a sales charge may be exchanged for shares of Oppenheimer funds
offered with a sales charge upon payment of the sales charge. They may also be used to purchase shares of Oppenheimer funds subject
to an early withdrawal charge or contingent deferred sales charge.

Shares of Oppenheimer Money Market Fund, Inc. purchased with the redemption proceeds of shares of other mutual funds (other
than funds managed by the Manager or its subsidiaries) redeemed within the 30 days prior to that purchase may subsequently be
exchanged for shares of other Oppenheimer funds without being subject to an initial sales charge or contingent deferred sales charge.
To qualify for that privilege, the investor or the investor's dealer must notify the Distributor of eligibility for this privilege at
the time the shares of Oppenheimer Money Market Fund, Inc. are purchased. If requested, they must supply proof of entitlement to
this privilege.

Shares of the Fund acquired by reinvestment of dividends or distributions from any of the other Oppenheimer funds or from
any unit investment trust for which reinvestment arrangements have been made with the Distributor may be exchanged at net asset value
for shares of any of the Oppenheimer funds.

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.

How Exchanges Affect Contingent Deferred Sales Charges. No contingent deferred sales charge is imposed on exchanges of shares of any
class purchased subject to a contingent deferred sales charge. However, when Class A shares acquired by exchange of Class A shares
of other Oppenheimer funds purchased subject to a Class A contingent deferred sales charge are redeemed within 18 months of the end
of the calendar month of the initial purchase of the exchanged Class A shares, the Class A contingent deferred sales charge is
imposed on the redeemed shares. The Class B contingent deferred sales charge is imposed on Class B shares acquired by exchange if
they are redeemed within six years of the initial purchase of the exchanged Class B shares. The Class C contingent deferred sales
charge is imposed on Class C shares acquired by exchange if they are redeemed within 12 months of the initial purchase of the
exchanged Class C shares. With respect to Class N shares, a 1.0% 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.

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 the 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.

Limits on Multiple Exchange Orders. The Fund reserves the right to reject telephone or written exchange requests submitted in bulk by
anyone on behalf of more than one account. The Fund may accept requests for exchanges of up to 50 accounts per day from
representatives of authorized dealers that qualify for this privilege.

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

Processing Exchange Requests. Shares to be exchanged are redeemed on the regular business day the Transfer Agent receives an exchange
request in proper form (the "Redemption Date"). Normally, shares of the fund to be acquired are purchased on the Redemption Date,
but such purchases may be delayed by either fund up to five business days if it determines that it would be disadvantaged by an
immediate transfer of the redemption proceeds. The Fund reserves the right, in its discretion, to refuse any exchange request that
may disadvantage it. For example, if the receipt of multiple exchange requests from a dealer might require the disposition of
portfolio securities at a time or at a price that might be disadvantageous to the Fund, the Fund may refuse the request. When you
exchange some or all of your shares from one fund to another, any special account feature such as an Asset Builder Plan or Automatic
Withdrawal Plan, will be switched to the new fund account unless you tell the Transfer Agent not to do so. However, special
redemption and exchange features such as Automatic Exchange Plans and Automatic Withdrawal Plans cannot be switched to an account in
Oppenheimer Senior Floating Rate Fund.

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

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

Dividends, Capital Gains and Taxes

Dividends and Distributions. Dividends will be payable on shares held of record at the time of the previous determination of net
asset value, or as otherwise described in "How to Buy Shares." Daily dividends will not be declared or paid on newly purchased
shares until such time as Federal Funds (funds credited to a member bank's account at the Federal Reserve Bank) are available from
the purchase payment for such shares. Normally, purchase checks received from investors are converted to Federal Funds on the next
business day. Shares purchased through dealers or brokers normally are paid for by the third business day following the placement of
the purchase order.

Shares redeemed through the regular redemption procedure will be paid dividends through and including the day on which the
redemption request is received by the Transfer Agent in proper form. Dividends will be declared on shares repurchased by a dealer or
broker for three business days following the trade date (that is, up to and including the day prior to settlement of the repurchase).
If all shares in an account are redeemed, all dividends accrued on shares of the same class in the account will be paid together with
the redemption proceeds.

The Fund has no fixed dividend rate. There can be no assurance as to the payment of any dividends or the realization of any
capital gains. The dividends and distributions paid by a class of shares will vary from time to time depending on market conditions,
the composition of the Fund's portfolio, and expenses borne by the Fund or borne separately by a class. Dividends are calculated in
the same manner, at the same time, and on the same day for each class of shares. However, dividends on Class B, Class C and Class N
shares are expected to be lower than dividends on Class A shares. That is because of the effect of the asset-based sales charge on
Class B, Class C and Class N shares. Those dividends will also differ in amount as a consequence of any difference in the net asset
values of the different classes of shares.

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

Tax Status of the Fund's Dividends, Distributions and Redemptions of Shares. The Federal tax treatment of the Fund's dividends and
capital gains distributions is briefly highlighted in the Prospectus. The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders.

The tax discussion in the Prospectus and this Statement of Additional Information is based on tax law in effect on the date
of the Prospectus and this Statement of Additional Information. Those laws and regulations may be changed by legislative, judicial,
or administrative action, sometimes with retroactive effect. State and local tax treatment of ordinary income dividends and capital
gain dividends from regulated investment companies may differ from the treatment under the Internal Revenue Code described below.
Potential purchasers of shares of the Fund are urged to consult their tax advisers with specific reference to their own tax
circumstances as well as the consequences of federal, state and local tax rules affecting an investment in the Fund.

|X| Qualification as a Regulated Investment Company. The Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended. As a regulated investment company, the Fund is not subject to
federal income tax on the portion of its net investment income (that is, taxable interest, dividends, and other taxable ordinary
income, net of expenses) and capital gain net income (that is, the excess of capital gains over capital losses) that it distributes
to shareholders. That qualification enables the Fund to "pass through" its income and realized capital gains to shareholders without
having to pay tax on them. This avoids a "double tax" on that income and capital gains, since shareholders normally will be taxed on
the dividends and capital gains they receive from the Fund (unless their Fund shares are held in a retirement account or the
shareholder is otherwise exempt from tax). The Internal Revenue Code contains a number of complex tests relating to qualification
that the Fund might not meet in a particular year. If it did not qualify as a regulated investment company, the Fund would be treated
for tax purposes as an ordinary corporation and would receive no tax deduction for payments made to shareholders.

To qualify as a regulated investment company, the Fund must distribute at least 90% of its investment company taxable income
(in brief, net investment income and the excess of net short-term capital gain over net long-term capital loss) for the taxable year.
The Fund must also satisfy certain other requirements of the Internal Revenue Code, some of which are described below. Distributions
by the Fund made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year,
will be considered distributions of income and gains for the taxable year and will therefore count toward satisfaction of the
above-mentioned requirement.

To qualify as a regulated investment company, the Fund must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock or securities or
foreign currencies (to the extent such currency gains are directly related to the regulated investment company's principal business
of investing in stock or securities) and certain other income.

In addition to satisfying the requirements described above, the Fund must satisfy an asset diversification test in order to
qualify as a regulated investment company. Under that test, at the close of each quarter of the Fund's taxable year, at least 50% of
the value of the Fund's assets must consist of cash and cash items, U.S. government securities, securities of other regulated
investment companies, and securities of other issuers. As to each of those issuers, the Fund must not have invested more than 5% of
the value of the Fund's total assets in securities of each such issuer and the Fund must not hold more than 10% of the outstanding
voting securities of each such issuer. No more than 25% of the value of its total assets may be invested in the securities of any one
issuer (other than U.S. Government securities and securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are engaged in the same or similar trades or businesses. For purposes of this test, obligations
issued or guaranteed by certain agencies or instrumentalities of the U.S. government are treated as U.S. government securities.

|X| Excise Tax on Regulated Investment Companies. Under the Internal Revenue Code, by December 31 each year, the Fund
must distribute 98% of its taxable investment income earned from January 1 through December 31 of that year and 98% of its capital
gains realized in the period from November 1 of the prior year through October 31 of the current year. If it does not, the Fund must
pay an excise tax on the amounts not distributed. It is presently anticipated that the Fund will meet those requirements. To meet
this requirement, in certain circumstances the Fund might be required to liquidate portfolio investments to make sufficient
distributions to avoid excise tax liability. However, the Board of Trustees and the Manager might determine in a particular year that
it would be in the best interests of shareholders for the Fund not to make such distributions at the required levels and to pay the
excise tax on the undistributed amounts. That would reduce the amount of income or capital gains available for distribution to
shareholders.

|X| Taxation of Fund Distributions. The Fund anticipates distributing substantially all of its investment company taxable
income for each taxable year. Those distributions will be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes.

Special provisions of the Internal Revenue Code govern the eligibility of the Fund's dividends for the dividends-received
deduction for corporate shareholders. Long-term capital gains distributions are not eligible for the deduction. The amount of
dividends paid by the Fund that may qualify for the deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from portfolio investments that the Fund has held for a minimum period, usually 46 days. A corporate shareholder will
not be eligible for the deduction on dividends paid on Fund shares held for 45 days or less. To the extent the Fund's dividends are
derived from gross income from option premiums, interest income or short-term gains from the sale of securities or dividends from
foreign corporations, those dividends will not qualify for the deduction. Since it is anticipated that most of the Fund's income will
be derived from interest it receives on its investments, the Fund does not anticipate that its distributions will qualify for this
deduction.

The Fund may either retain or distribute to shareholders its net capital gain for each taxable year. The Fund currently
intends to distribute any such amounts. If net long term capital gains are distributed and designated as a capital gain
distribution, it will be taxable to shareholders as long-term capital gain. It does not matter how long the shareholder has held his
or her shares or whether that gain was recognized by the Fund before the shareholder acquired his or her shares.

If the Fund elects to retain its net capital gain, the Fund will be subject to tax on it at the 35% corporate tax rate. If
the Fund elects to retain its net capital gain, it is expected that the Fund also will elect to have shareholders of record on the
last day of its taxable year treated as if each received a distribution of their pro rata share of such gain. As a result, each
shareholder will be required to report his or her pro rata share of such gain on their tax return as long-term capital gain, will
receive a refundable tax credit for his/her pro rata share of tax paid by the Fund on the gain, and will increase the tax basis for
his/her shares by an amount equal to the deemed distribution less the tax credit.

Investment income that may be received by the Fund from sources within foreign countries may be subject to foreign taxes
withheld at the source. The United States has entered into tax treaties with many foreign countries which entitle the Fund to a
reduced rate of, or exemption from, taxes on such income.
Distributions by the Fund that do not constitute ordinary income dividends or capital gain distributions will be treated as
a return of capital to the extent of the shareholder's tax basis in their shares. Any excess will be treated as gain from the sale of
those shares, as discussed below. Shareholders will be advised annually as to the U.S. federal income tax consequences of
distributions made (or deemed made) during the year. If prior distributions made by the Fund must be re-characterized as a
non-taxable return of capital at the end of the fiscal year as a result of the effect of the Fund's investment policies, they will be
identified as such in notices sent to shareholders.

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

The Fund will be required in certain cases to withhold and remit to the U.S. Treasury 31% of ordinary income dividends and
capital gains distributions and the proceeds of the redemption of shares, paid to any shareholder (1) who has failed to provide a
correct, certified taxpayer identification number, (2) who is subject to backup withholding for failure to report the receipt of
interest or dividend income properly, or (3) who has failed to certify to the Fund that the shareholder is not subject to backup
withholding or is an "exempt recipient" (such as a corporation).

|X| Tax Effects of Redemptions of Shares. If a shareholder redeems all of his/her shares and as a result the shareholder is
not considered to own any shares of the Fund under the attribution rules under the Internal Revenue Code, the shareholder will
recognize gain or loss on the redeemed shares in an amount equal to the difference between the proceeds of the redeemed shares and
the shareholder's adjusted tax basis in the shares. All or a portion of any loss recognized in that manner may be disallowed if the
shareholder purchases other shares of the Fund within 30 days before or after the redemption.

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

|X| Foreign Shareholders. Taxation of a shareholder who under United States law is a nonresident alien individual, foreign
trust or estate, foreign corporation, or foreign partnership depends on whether the shareholder's income from the Fund is effectively
connected with a U.S. trade or business carried on by such shareholder.

If the income from the Fund is not effectively connected with a U.S. trade or business carried on by a foreign shareholder,
ordinary income dividends paid to such foreign shareholder will be subject to U.S. withholding tax. The rate of the tax depends on a
number of factors. If the income from the Fund is effectively connected with a U.S. trade or business carried on by a foreign
shareholder, then ordinary income dividends, capital gain dividends, and any gains realized upon the sale of shares of the Fund will
be subject to U.S. federal income tax at the rates applicable to U.S. citizens or domestic corporations.

In the case of a foreign non-corporate shareholder, the Fund may be required to withhold U.S. federal income tax at a rate
of 31% on distributions that are otherwise exempt from withholding tax (or taxable at a reduced treaty rate) unless the shareholder
furnishes the Fund with proper notification of their foreign status.

The tax consequences to a foreign shareholder entitled to claim the benefits of an applicable tax treaty may be different
from those described herein. Foreign shareholders are urged to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Fund, including the applicability of foreign taxes.

Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to reinvest all dividends and/or capital gains
distributions in shares of the same class of any of the other Oppenheimer funds listed above. Reinvestment will be made without sales
charge at the net asset value per share in effect at the close of business on the payable date of the dividend or distribution. To
elect this option, the shareholder must notify the Transfer Agent in writing and must have an existing account in the fund selected
for reinvestment. Otherwise the shareholder first must obtain a prospectus for that fund and an application from the Distributor to
establish an account. Dividends and/or distributions from shares of certain other Oppenheimer funds (other than Oppenheimer Cash
Reserves) may be invested in shares of this Fund on the same basis.

Additional Information About the Fund

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

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

The Custodian. The Bank of New York is the custodian of the Fund's assets. The custodian's responsibilities include safeguarding
and controlling the Fund's portfolio securities and handling the delivery of such securities to and from the Fund. It will be the
practice of the Fund to deal with the custodian in a manner uninfluenced by any banking relationship the custodian may have with the
Manager and its affiliates. The Fund's cash balances with the custodian in excess of $100,000 are not protected by federal deposit
insurance. Those uninsured balances at times may be substantial.

Independent Auditors. Deloitte & Touche LLP are the independent auditors of the Fund. They audit the Fund's financial statements and
perform other related audit services. They also act as auditors for the Manager and for certain other funds advised by the Manager
and its affiliates.

--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

================================================================================
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, 2001, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the periods indicated. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
   We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2001, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
   In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Oppenheimer International Bond Fund, as of September 30, 2001, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for the
periods indicated, in conformity with accounting principles generally accepted
in the United States of America.

Deloitte & Touche LLP

Denver, Colorado
October 19, 2001

41 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS September 30, 2001 --------------------------------------------------------------------------------


                                                                                         Principal           Market Value
                                                                                            Amount             See Note 1
====================================================================================================================================

Mortgage-Backed Obligations--0.0%

Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg. Participation
Certificates, 11.50%, 1/1/18 (Cost $9,727)                                            $      9,678           $     10,917

====================================================================================================================================
Foreign Government Obligations--51.1%

Argentina--0.6%
Buenos Aires (Province of) Bonds, Bonos de Consolidacion de Deudas,
Series PBA1, 3.824%, 4/1/07/1/ [ARP]                                                     3,515,278              1,267,511
---------------------------------------------------------------------------------------------------------------------------
Austria--3.9%
Austria (Republic of) Bonds, 4.625%, 9/12/02 [EUR]                                       9,680,000              8,908,140
---------------------------------------------------------------------------------------------------------------------------
Belgium--2.9%
Belgium (Kingdom of) Bonds, Series 10, 8.75%, 6/25/02 [EUR]                              7,000,000              6,613,321
---------------------------------------------------------------------------------------------------------------------------
Brazil--5.0%
Brazil (Federal Republic of) Bonds:
8.875%, 4/15/24                                                                            125,000                 70,312
9.625%, 7/15/05                                                                          1,220,000              1,052,250
---------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Bonds, Series 15 yr., 5.50%, 4/15/09/1/                       470,588                345,882
---------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Debt Capitalization Bonds, Series 20 yr.,
8%, 4/15/14                                                                              4,968,739              3,360,110
---------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Debt Conversion Bonds:
Series 18 yr., 5.50%, 4/15/12/1/                                                         6,405,000              3,794,962
Series D, 5.687%, 4/15/12/1/                                                             1,460,000                865,050
---------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Eligible Interest Bonds, 5.438%, 4/15/06/1/                 2,272,000              1,897,120
---------------------------------------------------------------------------------------------------------------------------
Brazil (Federal Republic of) Unsec. Unsub. Bonds, 11%, 8/17/40                                 200                    131
                                                                                                            ---------------
                                                                                                               11,385,817

---------------------------------------------------------------------------------------------------------------------------
Bulgaria--1.4%
Bulgaria (Republic of) Disc. Bonds, Tranche A, 4.562%, 7/28/24/1/                          995,000                766,150
---------------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of) Front-Loaded Interest Reduction Bearer Bonds,
Tranche A, 4.562%, 7/28/12/1/                                                            1,085,000                868,000
---------------------------------------------------------------------------------------------------------------------------
Bulgaria (Republic of) Interest Arrears Debs., Series PDI, 4.562%, 7/28/11/1/            1,871,100              1,454,780
                                                                                                            ---------------
                                                                                                                3,088,930

---------------------------------------------------------------------------------------------------------------------------
Canada--2.7%
Canada (Government of) Bonds, Series WB60, 7.25%, 6/1/07 [CAD]                           2,135,000              1,517,084
---------------------------------------------------------------------------------------------------------------------------
Canada (Government of) Nts., 0.70%, 3/20/06 [JPY]                                      253,000,000              2,158,135
---------------------------------------------------------------------------------------------------------------------------
Ontario (Province of) Unsec. Unsub. Nts., 1.875%, 1/25/10 [JPY]                        284,000,000              2,525,080
                                                                                                            ---------------
                                                                                                                6,200,299

---------------------------------------------------------------------------------------------------------------------------
Colombia--1.0%
Colombia (Republic of) Unsec. Unsub. Bonds, 8.375%, 2/15/27                                425,000                294,313
---------------------------------------------------------------------------------------------------------------------------
Colombia (Republic of) Unsec. Unsub. Nts., 11.375%, 1/31/08 [EUR]                        2,280,000              2,037,464
                                                                                                            ---------------
                                                                                                                2,331,777

---------------------------------------------------------------------------------------------------------------------------
Dominican Republic--0.6%
Dominican Republic Unsec. Unsub. Bonds, 9.50%, 9/27/06/2/                                1,415,000              1,390,237

14 | OPPENHEIMER INTERNATIONAL BOND FUND


                                                                                         Principal           Market Value
                                                                                            Amount             See Note 1
---------------------------------------------------------------------------------------------------------------------------

Ecuador--0.9%
Ecuador (Republic of) Unsec. Bonds, 5%, 8/15/30/1/                                  $    5,285,000         $    2,140,425
---------------------------------------------------------------------------------------------------------------------------
Egypt--0.4%
Egypt (Arab Republic of) Unsec. Unsub. Bonds, 8.75%, 7/11/11                               975,000                877,500
---------------------------------------------------------------------------------------------------------------------------
Finland--1.3%
Finland (Republic of) Bonds:
5.75%, 2/23/11 [EUR]                                                                     3,030,000              2,907,878
Series RG, 9.50%, 3/15/04 [FIM]                                                             30,000                 30,875
                                                                                                            ---------------
                                                                                                                2,938,753

---------------------------------------------------------------------------------------------------------------------------
France--3.2%
France (Government of) Bonds, Obligations Assimilables du Tresor,
5.50%, 4/25/07 [EUR]                                                                       250,000                240,926
---------------------------------------------------------------------------------------------------------------------------
France (Government of) Treasury Nts.:
4.50%, 7/12/03 [EUR]                                                                     2,800,000              2,591,269
4.50%, 7/12/06 [EUR]                                                                     4,960,000              4,583,021
                                                                                                            ---------------
                                                                                                                7,415,216

---------------------------------------------------------------------------------------------------------------------------
Germany--3.2%
Germany (Republic of) Bonds, 4.50%, 3/15/02 [EUR]                                        7,935,000              7,256,394
---------------------------------------------------------------------------------------------------------------------------
Great Britain--1.5%
United Kingdom Treasury Bonds, 7.75%, 9/8/06 [GBP]                                       2,115,000              3,495,413
---------------------------------------------------------------------------------------------------------------------------
Hungary--2.0%
Hungary (Government of) Bonds:
Series 04/J, 8.50%, 10/12/04 [HUF]                                                   1,163,890,000              4,072,826
Series 05/E, 9.25%, 5/12/05 [HUF]                                                      159,380,000                575,957
                                                                                                            ---------------
                                                                                                                4,648,783

---------------------------------------------------------------------------------------------------------------------------
Italy--1.7%
Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali,
4.75%, 4/15/03 [EUR]                                                                     4,280,000              3,969,515
---------------------------------------------------------------------------------------------------------------------------
Ivory Coast--0.2%
Ivory Coast (Government of) Past Due Interest Bonds,
Series F, 3/29/18/3,4/ [FRF]                                                            16,919,500                352,354
---------------------------------------------------------------------------------------------------------------------------
Mexico--3.3%
United Mexican States Bonds, 5.01%, 12/31/19 [DEM]                                       6,785,000              2,630,137
---------------------------------------------------------------------------------------------------------------------------
United Mexican States Nts., 8.375%, 1/14/11                                              4,998,000              4,948,020
                                                                                                            ---------------
                                                                                                                7,578,157

---------------------------------------------------------------------------------------------------------------------------
Norway--1.7%
Norway (Government of) Bonds:
6%, 5/16/11 [NOK]                                                                       16,210,000              1,789,211
9.50%, 10/31/02 [NOK]                                                                   18,740,000              2,177,699
                                                                                                            ---------------
                                                                                                                3,966,910

15 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------


                                                                                         Principal           Market Value
                                                                                            Amount             See Note 1
---------------------------------------------------------------------------------------------------------------------------

Panama--0.9%
Panama (Republic of) Bonds:
9.375%, 4/1/29                                                                        $  1,310,000           $  1,339,475
9.625%, 2/8/11                                                                             140,000                139,650
10.75%, 5/15/20                                                                            145,000                148,263
---------------------------------------------------------------------------------------------------------------------------
Panama (Republic of) Interest Reduction Bonds, 4.75%, 7/17/14/1/                           572,962                482,721
                                                                                                            ---------------
                                                                                                                2,110,109

---------------------------------------------------------------------------------------------------------------------------
Peru--2.0%
Peru (Republic of) Sr. Nts., Zero Coupon, 4.53%, 2/28/16/5/                             10,882,863              4,630,658
---------------------------------------------------------------------------------------------------------------------------
Philippines--0.7%
Philippines (Republic of) Bonds, 9.50%, 10/21/24                                         1,325,000              1,306,781
---------------------------------------------------------------------------------------------------------------------------
Philippines (Republic of) Nts., 10.625%, 3/16/25                                           300,000                247,500
---------------------------------------------------------------------------------------------------------------------------
Philippines (Republic of) Unsec. Bonds, 9.875%, 1/15/19                                     90,000                 71,775
                                                                                                            ---------------
                                                                                                                1,626,056

---------------------------------------------------------------------------------------------------------------------------
Portugal--0.3%
Portugal (Republic of) Obrig Do Tes Medio Prazo Unsec. Unsub. Nts.,
5.85%, 5/20/10 [EUR]                                                                       655,000                630,265
---------------------------------------------------------------------------------------------------------------------------
Russia--3.5%
Russian Federation Unsec. Unsub. Nts.:
8.25%, 3/31/10                                                                           2,037,020              1,543,043
8.75%, 7/24/05                                                                           1,720,000              1,591,000
10%, 6/26/07                                                                               250,000                222,188
---------------------------------------------------------------------------------------------------------------------------
Russian Federation Unsub. Bonds, 8.25%, 3/31/10                                          3,805,001              2,894,084
---------------------------------------------------------------------------------------------------------------------------
Russian Federation Unsub. Nts., 5%, 3/31/30/1/                                           3,556,000              1,621,358
                                                                                                            ---------------
                                                                                                                7,871,673

---------------------------------------------------------------------------------------------------------------------------
South Africa--0.8%
South Africa (Republic of) Unsec. Nts., 9.125%, 5/19/09                                  1,550,000              1,705,000
---------------------------------------------------------------------------------------------------------------------------
The Netherlands--1.9%
Netherlands (Government of) Bonds, Series 1, 5.75%, 2/15/07 [EUR]                        4,520,000              4,392,160
---------------------------------------------------------------------------------------------------------------------------
Turkey--0.7%
Turkey (Republic of) Bonds, 11.75%, 6/15/10                                                515,000                449,338
---------------------------------------------------------------------------------------------------------------------------
Turkey (Republic of) Sr. Unsec. Unsub. Nts., 11.875%, 1/15/30                            1,065,000                865,313
---------------------------------------------------------------------------------------------------------------------------
Turkey (Republic of) Sr. Unsub. Bonds, 12.375%, 6/15/09                                    263,000                238,673
                                                                                                            ---------------
                                                                                                                1,553,324

---------------------------------------------------------------------------------------------------------------------------
Ukraine--0.4%
Ukraine (Republic of) Sr. Unsec. Nts., 11%, 3/15/07                                      1,202,800              1,008,247
---------------------------------------------------------------------------------------------------------------------------
Venezuela--2.4%
Venezuela (Republic of) Bonds, 9.25%, 9/15/27                                            1,545,000              1,036,695
---------------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Collateralized Par Bonds:
Series W-A, 6.75%, 3/31/20                                                                 905,000                694,588
Series W-B, 6.75%, 3/31/20                                                                 400,000                307,000
---------------------------------------------------------------------------------------------------------------------------
Venezuela (Republic of) Debs., Series DL, 4.75%, 12/18/07/1/                             4,296,137              3,420,800
                                                                                                            ---------------
                                                                                                                5,459,083
                                                                                                            ---------------
Total Foreign Government Obligations (Cost $118,777,113)                                                      116,812,027

16 | OPPENHEIMER INTERNATIONAL BOND FUND


                                                                                         Principal           Market Value
                                                                                            Amount             See Note 1
===========================================================================================================================

Loan Participations--1.4%

Algeria (Republic of) Reprofiled Debt Loan Participation Nts.,
Tranche 1, 0.938%, 9/4/06/1,2/ [JPY]                                                    43,804,209            $   278,534
---------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, Bank Mandiri Loan:
Series 3C, 6.375%, 6/1/03/1,2/                                                              80,000                 76,400
Series 4C, 6.50%, 6/1/04/1,2/                                                              140,000                129,500
---------------------------------------------------------------------------------------------------------------------------
Morocco (Kingdom of) Loan Participation Agreement, Tranche A,
5.094%, 1/1/09/1,2/                                                                      3,183,928              2,746,138
                                                                                                              -------------
Total Loan Participations (Cost $3,409,943)                                                                     3,230,572

===========================================================================================================================
Corporate Bonds and Notes--35.5%

Energy--0.4%
Moran Energy, Inc., 8.75% Cv. Sub. Debs., 1/15/08                                          200,000                179,750
---------------------------------------------------------------------------------------------------------------------------
Petroleos Mexicanos, 9.50% Sr. Sub. Nts., 9/15/27                                          765,000                745,875
                                                                                                              -------------
                                                                                                                  925,625

---------------------------------------------------------------------------------------------------------------------------
Financial--34.4%
DePfa Pfandbriefbank AG (DePfa-Bank), 5.50% Sec. Unsub
Nts., 1/15/10 [EUR]                                                                     10,505,000              9,849,127
---------------------------------------------------------------------------------------------------------------------------
Development Bank of Japan (The), 1.75% Unsec. Nts., 6/21/10 [JPY]                      281,000,000              2,463,261
---------------------------------------------------------------------------------------------------------------------------
European Investment Bank, 3% Eligible Interest Nts., 9/20/06 [JPY]                     239,000,000              2,261,402
---------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.75% Sr. Unsec. Reference Nts.,
9/15/10 [EUR]                                                                           17,120,000             16,264,723
---------------------------------------------------------------------------------------------------------------------------
Fuji JGB Investment LLC:
9.87% Non-Cum. Bonds, Series A, 12/31/49                                                 1,140,000              1,032,047
9.87% Non-Cum. Bonds, Series A, 12/31/49/6/                                             13,005,000             11,773,479
---------------------------------------------------------------------------------------------------------------------------
Hanvit Bank, 12.75% Unsec. Sub. Nts., 3/1/10/1,6/                                         135,000                141,891
---------------------------------------------------------------------------------------------------------------------------
IBJ Preferred Capital Co. (The) LLC, 8.79% Non-Cum. Bonds,
Series A, 12/29/49/1/                                                                      680,000                590,745
---------------------------------------------------------------------------------------------------------------------------
Inter-American Development Bank, 1.90% Unsec. Bonds, 7/8/09 [JPY]                      200,000,000              1,804,919
---------------------------------------------------------------------------------------------------------------------------
KFW International Finance, Inc., 1.75% Bonds, 3/23/10 [JPY]                             38,000,000                337,735
---------------------------------------------------------------------------------------------------------------------------
Korea Exchange Bank:
13.75% Unsec. Sub. Bonds, 6/30/10/1/                                                     2,140,000              2,249,675
13.75% Unsec. Unsub. Bonds, 6/30/10/1,6/                                                   115,000                119,992
---------------------------------------------------------------------------------------------------------------------------
Mexican Williams Sr. Nts., 4.81%, 11/15/08/1,2/                                            500,000                495,000
---------------------------------------------------------------------------------------------------------------------------
Oesterreichische Kontrollbank AG, 1.80% Unsec. Nts., 3/22/10 [JPY]                      29,000,000                258,719
---------------------------------------------------------------------------------------------------------------------------
Ongko International Finance Co. BV, 10.50% Sec. Nts., 3/29/04/2,3,4/                       550,000                 11,000
---------------------------------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust:
9.125% Unsec. Unsub. Medium-Term Nts., 10/13/10                                          1,990,000              2,024,825
9.125% Unsec. Unsub. Medium-Term Nts., 10/13/10/6/                                       2,600,000              2,645,500
---------------------------------------------------------------------------------------------------------------------------
Rheinische Hypothekenbank AG, 5.75% Sec. Bonds, 7/5/10 [EUR]                            21,015,000             19,921,119
---------------------------------------------------------------------------------------------------------------------------
Tokai Preferred Capital Co. LLC, 9.98% Non-Cum. Bonds,
Series A, 12/29/49/6,7/                                                                  4,695,000              4,355,152
                                                                                                              -------------
                                                                                                               78,600,311

---------------------------------------------------------------------------------------------------------------------------
Gaming/Leisure--0.0%
Capital Gaming International, Inc., 11.50% Promissory Nts., 8/1/1995/2,3,4/                  2,000                     --

17 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------


                                                                                         Principal           Market Value
                                                                                            Amount             See Note 1
---------------------------------------------------------------------------------------------------------------------------

Healthcare--0.7%
Pfizer, Inc., 0.80% Bonds, Series INTL, 3/18/08 [JPY]                                  199,000,000            $ 1,669,074
                                                                                                              -------------
Total Corporate Bonds and Notes (Cost $82,838,069)                                                             81,195,010
                                                                                            Shares
===========================================================================================================================
Common Stocks--0.0%
Op Tel, Inc., Non-Vtg./2,4/                                                                     45                     --
---------------------------------------------------------------------------------------------------------------------------
Price Communications Corp./4/                                                                1,105                 18,730
                                                                                                              -------------
Total Common Stocks (Cost $11)                                                                                     18,730
                                                                                             Units
===========================================================================================================================
Rights, Warrants and Certificates--1.7%
Chesapeake Energy Corp. Wts.:
Exp. 1/23/03/2,4/                                                                              206                     --
Exp. 1/23/03/2,4/                                                                              119                     --
Exp. 9/1/04/2,4/                                                                               350                     --
---------------------------------------------------------------------------------------------------------------------------
ICG Communications, Inc. Wts., Exp. 9/15/05                                                    495                      5
---------------------------------------------------------------------------------------------------------------------------
Loral Space & Communications Ltd. Wts., Exp. 1/15/07/2,4/                                       50                     --
---------------------------------------------------------------------------------------------------------------------------
Mexico Value Rts., Exp. 6/30/03/4/                                                          70,000                    459
---------------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp. 6/1/06/4,6/                                      100                    751
---------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. Wts., Exp. 6/5/03/4/                                      502,545              3,794,768
---------------------------------------------------------------------------------------------------------------------------
Protection One, Inc. Wts., Exp. 6/30/05/2,4/                                                   640                     32
                                                                                                              -------------
Total Rights, Warrants and Certificates (Cost $4,984,465)                                                       3,796,015

                                                                                         Principal
                                                                                            Amount
===========================================================================================================================

Structured Instruments--8.0%
Deutsche Bank AG, South African Rand Linked Nts., 3.377%, 8/21/02/1/                $    2,415,000              2,414,831
---------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, South Korean Won Linked Nts., 5.60%, 5/9/02 [KRW]                  1,341,360,000              1,031,398
---------------------------------------------------------------------------------------------------------------------------
Deutsche Bank AG, South Korean Won Linked Nts., 5.60%, 5/9/02 [KRW]                  5,245,500,000              4,033,647
---------------------------------------------------------------------------------------------------------------------------
ING Barings LLC, Zero Coupon Russian Equity Linked Nts., 4/19/02                             4,050                244,742
---------------------------------------------------------------------------------------------------------------------------
Salomon Smith Barney, Inc., TurkishLira Linked Nts., 16%, 3/13/01/2/,/3/,/4/               190,000                 36,090
---------------------------------------------------------------------------------------------------------------------------
Standard Chartered Bank, Philippines Peso/New Taiwan Dollar Linked Nts.,
9.28%, 1/14/02                                                                           1,245,000              1,232,550
---------------------------------------------------------------------------------------------------------------------------
Standard Chartered Bank, Philippines Peso/Thailand Baht Linked Nts.,
8.40%, 10/5/01                                                                           1,250,000              1,193,750
---------------------------------------------------------------------------------------------------------------------------
Standard Chartered Bank, South Korean Won Linked Nts.,
5.48%, 5/28/02 [KRW]                                                                 6,479,150,000              4,885,957
---------------------------------------------------------------------------------------------------------------------------
UBS AG Australian Dollar Property Index Linked Nts., 7%, 7/30/02 [AUD]                   6,300,000              3,187,660
                                                                                                              -------------
Total Structured Instruments (Cost $18,642,545)                                                                18,260,625

                                                                    Date      Strike     Contracts
===========================================================================================================================

Options Purchased--0.0%

South Africa (Republic of) Unsec. Nts.,
8.50%, 6/23/17 Put                                               8/30/06        100%       750,000                  5,169
---------------------------------------------------------------------------------------------------------------------------
South Korean Won/Japanese Yen Put/2/                            12/21/01   JPY 0.60    280,535,000                 14,027
                                                                                                              -------------
Total Options Purchased (Cost $9,781)                                                                              19,196

18 | OPPENHEIMER INTERNATIONAL BOND FUND


                                                                                         Principal           Market Value
                                                                                            Amount             See Note 1
===========================================================================================================================

Repurchase Agreements--1.1%

Repurchase agreement with Banc One Capital Markets, Inc., 3.15%, dated
9/28/01, to be repurchased at $2,309,606 on 10/1/01, collateralized by
U.S. Treasury Bonds, 5.25%-11.25%, 8/15/08-2/15/29, with a value of
$507,878 and U.S. Treasury Nts., 5.50%-7.875%, 7/31/02-5/15/07,
with a value of $1,849,080 (Cost $2,309,000)                                            $2,309,000           $  2,309,000
---------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $230,980,654)                                               98.8%           225,652,092
---------------------------------------------------------------------------------------------------------------------------
Other Assets Net of Liabilities                                                                1.2              2,838,215
                                                                                        -----------------------------------
Net Assets                                                                                   100.0%          $228,490,307
                                                                                        ===================================

Footnotes to Statement of Investments Principal amount is reported in U.S. Dollars, except for those denoted in the following currencies: ARP Argentine Peso FRF French Franc AUD Australian Dollar GBP British Pound Sterling CAD Canadian Dollar HUF Hungarian Forint DEM German Mark JPY Japanese Yen EUR Euro KRW South Korean Won FIM Finnish Markka NOK Norwegian Krone 1. Represents the current interest rate for a variable or increasing rate security. 2. Identifies issues considered to be illiquid - See Note 8 of Notes to Financial Statements. 3. Issuer is in default. 4. Non-income-producing security.

5. Zero coupon bond reflects the effective yield on the date of purchase. 6. Represents securities sold under Rule 144A, which are exempt from registration under the Securities Act of 1933, as amended.These securities have been determined to be liquid under guidelines established by the Board of Trustees.These securities amount to $19,036,765 or 8.33% of the Funds net assets as of September 30, 2001.

7. A sufficient amount of securities has been designated to cover outstanding foreign currency contracts. See Note 5 of Notes to Financial Statements. A sufficient amount of liquid assets has been designated to cover outstanding written put options, as follows:


                                     Principal
                                        (000s) Expiration     Exercise     Premium   Market Value
                                Subject to Put       Date        Price    Received     See Note 1
-------------------------------------------------------------------------------------------------

Russian Federation Unsub. Nts.,
5%, 3/31/30                         $    2,595   10/10/01         0.04%   $ 98,610         $  519

                                     Contracts
                                    Subject to
                                           Put
-------------------------------------------------------------------------------------------------

South Korean Won/Japanese Yen      280,535,000   12/21/01    JPY 11.22      48,668         38,153
                                                                          -----------------------
                                                                          $147,278        $38,672
                                                                          =======================

19 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- Footnotes to Statement of Investments Continued

Distribution of investments representing geographic diversification, as a percentage of total investments at value, is as follows:

Geographic Diversification Market Value Percent -------------------------------------------------------------------------------- United States $ 47,025,681 20.8% Germany 37,026,641 16.4 Korea, Republic of (South) 12,462,559 5.5 Brazil 11,385,818 5.1 Austria 9,166,859 4.1 Mexico 8,819,490 3.9 Russia 8,116,414 3.6 France 7,415,216 3.3 Belgium 6,613,321 2.9 Canada 6,201,050 2.8 Venezuela 5,459,082 2.4 Hungary 4,648,784 2.1 Peru 4,630,658 2.1 The Netherlands 4,392,160 1.9 South Africa 4,119,831 1.8 Supranational 4,066,321 1.8 Philippines 4,052,356 1.8 Italy 3,969,515 1.8 Norway 3,966,910 1.8 Great Britain 3,495,413 1.5 Australia 3,187,660 1.4 Bulgaria 3,088,930 1.4 Finland 2,938,753 1.3 Morocco 2,746,138 1.2 Japan 2,463,261 1.1 Colombia 2,331,776 1.0 Ecuador 2,140,425 0.9 Panama 2,110,109 0.9 Turkey 1,589,413 0.7 Dominican Republic 1,390,238 0.6 Argentina 1,267,511 0.6 Ukraine 1,008,247 0.4 Egypt 877,500 0.4 Portugal 630,265 0.3 Ivory Coast 352,354 0.2 Algeria 278,533 0.1 Indonesia 216,900 0.1 -------------------------- Total $225,652,092 100.0% ========================== See accompanying Notes to Financial Statements. 20 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES September 30, 2001 --------------------------------------------------------------------------------


====================================================================================================

Assets

Investments, at value (cost $230,980,654)--see accompanying statement                   $225,652,092
----------------------------------------------------------------------------------------------------
Cash                                                                                          55,899
----------------------------------------------------------------------------------------------------
Cash used for collateral on futures, forwards and put options                              1,041,100
----------------------------------------------------------------------------------------------------
Unrealized appreciation on foreign currency contracts                                        394,414
----------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $462,490 sold on a when-issued basis)                          8,460,607
Interest, dividends and principal paydowns                                                 4,591,274
Shares of beneficial interest sold                                                           167,924
Daily variation on futures contracts                                                          42,674
Other                                                                                          1,578
                                                                                        ------------
Total assets                                                                             240,407,562

====================================================================================================
Liabilities
Unrealized depreciation on foreign currency contracts                                        351,750
----------------------------------------------------------------------------------------------------
Options written, at value (premiums received $147,278)--
see accompanying statement                                                                    38,672
----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased                                                                     10,222,124
Shares of beneficial interest redeemed                                                       525,406
Dividends                                                                                    463,853
Distribution and service plan fees                                                           144,747
Closed foreign currency contracts                                                            104,316
Shareholder reports                                                                           22,631
Transfer and shareholder servicing agent fees                                                  2,272
Trustees' compensation                                                                            52
Other                                                                                         41,432
                                                                                        ------------
Total liabilities                                                                         11,917,255

====================================================================================================
Net Assets                                                                              $228,490,307
                                                                                        ============
====================================================================================================
Composition of Net Assets

Paid-in capital                                                                         $286,479,212
----------------------------------------------------------------------------------------------------
Undistributed (overdistributed) net investment income                                       (436,204)
----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments and
foreign currency transactions                                                            (52,360,314)
----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments and
translation of assets and liabilities denominated in foreign currencies                   (5,192,387)
                                                                                        ------------
Net Assets                                                                              $228,490,307
                                                                                        ============

21 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES Continued --------------------------------------------------------------------------------


====================================================================================================
Net Asset Value Per Share

Class A Shares:
Net asset value and redemption price per share (based on net assets of
$118,733,480 and 30,060,852 shares of beneficial interest outstanding)                         $3.95
Maximum offering price per share (net asset value plus sales charge
of 4.75% of offering price)                                                                    $4.15
----------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $84,427,424
and 21,450,106 shares of beneficial interest outstanding)                                      $3.94
----------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $25,220,618
and 6,408,927 shares of beneficial interest outstanding)                                       $3.94
----------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of $108,785
and 27,562 shares of beneficial interest outstanding)                                          $3.95

See accompanying Notes to Financial Statements. 22 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the Year Ended September 30, 2001 --------------------------------------------------------------------------------


====================================================================================================

Investment Income
Interest                                                                                 $20,187,314
----------------------------------------------------------------------------------------------------
Dividends                                                                                         95
                                                                                         -----------
Total income                                                                              20,187,409

====================================================================================================
Expenses

Management fees                                                                            1,769,586
----------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                                                      275,972
Class B                                                                                      934,279
Class C                                                                                      271,136
Class N                                                                                           49
----------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees                                                574,998
----------------------------------------------------------------------------------------------------
Custodian fees and expenses                                                                  140,677
----------------------------------------------------------------------------------------------------
Shareholder reports                                                                           87,452
----------------------------------------------------------------------------------------------------
Trustees' compensation                                                                         6,422
----------------------------------------------------------------------------------------------------
Other                                                                                        120,978
                                                                                         -----------
Total expenses                                                                             4,181,549
Less reduction to custodian expenses                                                         (18,241)
                                                                                         -----------
Net expenses                                                                               4,163,308

====================================================================================================
Net Investment Income                                                                     16,024,101

====================================================================================================
Realized and Unrealized Gain (Loss)

Net realized gain (loss) on:

Investments (including premiums on options exercised)                                     (7,124,387)
Closing of futures contracts                                                                 165,057
Closing and expiration of option contracts written                                           382,724
Foreign currency transactions                                                            (11,922,665)
                                                                                         -----------
Net realized gain (loss)                                                                 (18,499,271)

----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments                                                                               (3,635,649)
Translation of assets and liabilities denominated in foreign currencies                    6,358,359
                                                                                         -----------
Net change                                                                                 2,722,710
                                                                                         -----------
Net realized and unrealized gain (loss)                                                  (15,776,561)

====================================================================================================
Net Increase in Net Assets Resulting from Operations                                    $    247,540
                                                                                        ============

See accompanying Notes to Financial Statements. 23 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------


Year Ended September 30,                                                                      2001                  2000
========================================================================================================================

Operations

Net investment income (loss)                                                          $ 16,024,101          $ 25,367,320
------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss)                                                               (18,499,271)          (11,294,479)
------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)                                     2,722,710             6,674,642
                                                                                      ----------------------------------
Net increase (decrease) in net assets resulting from operations                            247,540            20,747,483

========================================================================================================================
Dividends and/or Distributions to Shareholders

Dividends from net investment income:
Class A                                                                                         --            (5,798,494)
Class B                                                                                         --            (5,737,841)
Class C                                                                                         --            (1,454,587)
Class N                                                                                         --                    --
------------------------------------------------------------------------------------------------------------------------
Tax return of capital distribution:
Class A                                                                                 (8,487,688)           (4,694,873)
Class B                                                                                 (6,076,453)           (4,486,212)
Class C                                                                                 (1,760,643)           (1,251,966)
Class N                                                                                     (1,308)                   --

========================================================================================================================
Beneficial Interest Transactions

Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A                                                                                 26,717,450                16,710
Class B                                                                                 (8,296,328)          (19,365,519)
Class C                                                                                   (825,212)           (1,436,387)
Class N                                                                                    110,344                    --

========================================================================================================================
Net Assets

Total increase (decrease)                                                                1,627,702           (23,461,686)
------------------------------------------------------------------------------------------------------------------------
Beginning of period                                                                    226,862,605           250,324,291
                                                                                      ----------------------------------
End of period [including undistributed (overdistributed) net investment
income of $(436,204) and $(565,330), respectively]                                    $228,490,307          $226,862,605
                                                                                      ==================================

See accompanying Notes to Financial Statements. 24 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------


Class A         Year Ended September 30,                2001          2000          1999          1998          1997
====================================================================================================================

Per Share Operating Data

Net asset value, beginning of period                   $4.19         $4.23         $4.32         $5.51         $5.49
--------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                    .30/1/        .45           .58           .56           .52
                                                       -------------------------------------------------------------
Net realized and unrealized gain (loss)                 (.24)/1/      (.08)         (.14)        (1.20)          .08
--------------------------------------------------------------------------------------------------------------------
Total income (loss) from investment operations           .06           .37           .44          (.64)          .60
--------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                      --          (.21)         (.53)         (.53)         (.53)
Tax return of capital distribution                      (.30)         (.20)           --            --            --
Distributions from net realized gain                      --            --            --          (.02)         (.05)
                                                       -------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                         (.30)         (.41)         (.53)         (.55)         (.58)
--------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                         $3.95         $4.19         $4.23         $4.32         $5.51
                                                       =============================================================

====================================================================================================================
Total Return, at Net Asset Value/2/                     1.40%         8.93%        10.58%       (12.50)%       11.33%

====================================================================================================================
Ratios/Supplemental Data

Net assets, end of period (in thousands)            $118,733      $100,928      $102,236       $97,404      $114,847
--------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                   $117,000      $110,968      $101,948      $108,264       $89,112
--------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/3/
Net investment income                                   7.10%/1/     10.23%        13.47%        11.09%         9.24%
Expenses                                                1.38%         1.31%         1.26%         1.24%/4/      1.28%/4/
Expenses, net of reduction to
custodian and excess expenses                            N/A/5/       1.29%         1.25%          N/A/5/        N/A/5/
--------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  377%          288%          285%          446%          280%

1. Without the adoption of the change in amortization method as discussed in Note 1 in the Notes to Financial Statements, these amounts would have been:

Net investment income $.32 Net realized and unrealized gain (loss) (.26) Net investment income ratio 7.46%

2. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns.Total returns are not annualized for periods of less than one full year.


Class B      Year Ended September 30,                        2001          2000        1999       1998         1997
========================================================================================================================
Per Share Operating Data

Net asset value, beginning of period                        $4.17        $ 4.22       $4.31      $5.50        $5.48
------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                         .26/1/        .42         .55        .52          .48
Net realized and unrealized gain (loss)                      (.22)/1/      (.09)       (.14)     (1.20)         .07
                                                          --------------------------------------------------------------
Total income (loss) from investment operations                .04           .33         .41       (.68)         .55
------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income                           --           (.20)      (.50)      (.49)        (.48)
Tax return of capital distribution                           (.27)          (.18)        --         --           --
Distributions from net realized gain                           --             --         --       (.02)        (.05)
                                                          --------------------------------------------------------------
Total dividends and/or distributions to shareholders         (.27)          (.38)      (.50)      (.51)        (.53)
                                                          ==============================================================
Net asset value, end of period                              $3.94          $4.17      $4.22      $4.31        $5.50
                                                          ==============================================================

========================================================================================================================
Total Return, at Net Asset Value/2/                          0.85%          7.94%      9.79%    (13.16)%      10.52%

========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands)                  $84,427       $ 98,272   $118,632   $119,998     $122,874
------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                         $93,455       $115,116   $122,878   $128,789     $ 87,557
------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/3/
Net investment income                                        6.40%/1/       9.63%     12.70%     10.33%        8.57%
Expenses                                                     2.14%          2.05%      2.02%      2.00%/4/     2.04%/4/
Expenses, net of reduction to
custodian and excess expenses                                 N/A/5/        2.03%      2.01%       N/A/5/       N/A/5/
------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                       377%           288%       285%       446%         280%

1. Without the adoption of the change in amortization method as discussed in Note 1 in the Notes to Financial Statements, these amounts would have been:

Net investment income $ .28 Net realized and unrealized gain (loss) (.24) Net investment income ratio 6.76%

2. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year.


Class C      Year Ended September 30,                 2001           2000          1999         1998           1997
========================================================================================================================
Per Share Operating Data

Net asset value, beginning of period                 $4.17          $4.22         $4.31        $5.50          $5.48
------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment
operations:
Net investment income                                  .26/1/         .41           .55          .52            .48
Net realized and unrealized gain (loss)               (.22)/1/       (.08)         (.14)       (1.20)           .07
                                                 -----------------------------------------------------------------------
Total income (loss) from investment
operations                                             .04            .33           .41         (.68)           .55
------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:

Dividends from net investment income                    --           (.19)         (.50)        (.49)          (.48)
Tax return of capital distribution                    (.27)          (.19)           --           --             --
Distributions from net realized gain                    --             --            --         (.02)          (.05)
                                                 -----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                       (.27)          (.38)         (.50)        (.51)          (.53)
------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                       $3.94          $4.17         $4.22        $4.31          $5.50
                                                 =======================================================================

========================================================================================================================
Total Return, at Net Asset Value/2/                   0.85%          7.95%         9.80%      (13.16)%        10.52%

========================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands)           $25,221        $27,663       $29,456      $27,636        $28,684
------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                  $27,125        $30,710       $28,918      $29,336        $19,883
------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/3/
Net investment income                                 6.39%/1/       9.55%        12.76%       10.33%          8.62%
Expenses                                              2.14%          2.05%         2.02%        2.00%/4/       2.04%/4/
Expenses, net of reduction to
custodian and excess expenses                          N/A/5/        2.03%         2.01%         N/A/5/         N/A/5/
------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                377%           288%          285%         446%           280%

1. Without the adoption of the change in amortization method as discussed in Note 1 in the Notes to Financial Statements, these amounts would have been:

Net investment income $ .28 Net realized and unrealized gain (loss) (.24) Net investment income ratio 6.75%

2. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year.

3. Annualized for periods of less than one full year. 4. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. 5. Beginning 2001, the net effect of reduction to custodian and excess expenses was less than 0.01%. Noted previous periods reflect a net effect of less than 0.02%. See accompanying Notes to Financial Statements. 27 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Continued -------------------------------------------------------------------------------- Class N Period Ended September 30, 2001/1/ ================================================================================ Per Share Operating Data Net asset value, beginning of period $ 4.23 -------------------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .16/2/ Net realized and unrealized gain (loss) (.28)/2/ ---------- Total income (loss) from investment operations (.12) -------------------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income -- Tax return of capital distribution (.16) Distributions from net realized gain -- ---------- Total dividends and/or distributions to shareholders (.16) -------------------------------------------------------------------------------- Net asset value, end of period $ 3.95 ========== ================================================================================ Total Return, at Net Asset Value/3/ (2.88)% ================================================================================ Ratios/Supplemental Data Net assets, end of period (in thousands) $ 109 -------------------------------------------------------------------------------- Average net assets (in thousands) $ 34 -------------------------------------------------------------------------------- Ratios to average net assets:/4/ Net investment income 6.56% Expenses 1.39% Expenses, net of reduction to custodian and excess expenses N/A/5/ -------------------------------------------------------------------------------- Portfolio turnover rate 377% 1. For the period from March 1, 2001 (inception of offering) to September 30, 2001.

2. Without the adoption of the change in amortization method as discussed in Note 1 in the Notes to Financial Statements, these amounts would have been:

Net investment income $ .17 Net realized and unrealized gain (loss) (.29) Net investment income ratio 6.92%

3. Assumes a $1,000 hypothetical initial investment on the business day before the first day of the fiscal period (or inception of offering), 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.

4. Annualized for periods of less than one full year. 5. The net effect of reduction to custodian and excess expenses was less than 0.01%. See accompanying Notes to Financial Statements. 28 | 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 an open-end management investment company under the Investment Company Act of 1940, as amended. The Funds investment objective is to seek total return. The Funds investment advisor is OppenheimerFunds, Inc. (the Manager).

        The Fund offers Class A, Class B, Class C and Class N shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. All classes of shares have identical rights to earnings, assets and voting privileges, except that each class has its own expenses directly attributable to that class and exclusive voting rights with respect to matters affecting that class. Classes A, B, C and N have separate distribution and/or service plans. Class B shares will automatically convert to Class A shares six years after the date of purchase. The following is a summary of significant accounting policies consistently followed by the Fund.

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

Securities Valuation. Securities listed or traded on National Stock Exchanges or other domestic or foreign exchanges are valued based on the last sale price of the security traded on that exchange prior to the time when the Funds assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Securities (including restricted securities) for which quotations are not readily available are valued primarily using dealer-supplied valuations, a portfolio pricing service authorized by the Board of Trustees, or at their fair value. Fair value is determined in good faith under consistently applied procedures under the supervision of the Board of Trustees. Short-term money market type debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value).

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

Structured Notes. The Fund invests in foreign currency-linked structured notes whose market values and redemption prices are linked to foreign currency exchange rates. The structured notes are leveraged, which increases the volatility of each notes market value relative to the change in the underlying foreign currency exchange rate. Fluctuations in value of these securities are recorded as unrealized gains and losses in the accompanying financial statements. The Fund records a realized gain or loss when a structured note is sold or matures. As of September 30, 2001, the market value of these securities comprised 8% of the Funds net assets and resulted in unrealized losses in the current period of $381,920. The Fund also hedges a portion of the foreign currency exposure generated by these securities, as discussed in Note 5.

29 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- ================================================================================ 1.Significant Accounting Policies Continued

Securities Purchased on a When-Issued Basis. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis can take place a month 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 beyond 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 segregated assets with a market value equal to or greater than the amount of its commitments. These transactions of securities on a when-issued basis may increase the volatility of the Funds net asset value to the extent the Fund makes such transactions while remaining substantially fully invested. As of September 30, 2001, the Fund had entered into outstanding net when-issued transactions of $462,490.

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

Security Credit Risk. The Fund invests in high yield securities, which may be subject to a greater degree of credit risk, greater market fluctuations and risk of loss of income and principal, and may be more sensitive to economic conditions than lower yielding, higher rated fixed income securities. The Fund may acquire securities in default, and is not obligated to dispose of securities whose issuers subsequently default. As of September 30, 2001, securities with an aggregate market value of $399,444, representing 0.17% of the Funds net assets, were in default.

-------------------------------------------------------------------------------- Foreign Currency Translation. The accounting records of the Fund are maintained in U.S. dollars. Prices of securities denominated in foreign currencies are translated into U.S. dollars at the closing rates of exchange. Amounts related to the purchase and sale of foreign securities and investment income are translated at the rates of exchange prevailing on the respective dates of such transactions.

        The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and reported with all other foreign currency gains and losses in the Funds Statement of Operations.

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

Repurchase Agreements. The Fund requires its custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodians vault, all securities held as collateral for repurchase agreements. The market value of the underlying securities is required to be at least 102% of the resale price at the time of purchase. If the seller of the agreement defaults and the value of the collateral declines, or if the seller enters an insolvency proceeding, realization of the value of the collateral by the Fund may be delayed or limited.

30 | OPPENHEIMER INTERNATIONAL BOND FUND --------------------------------------------------------------------------------

Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class.

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

Federal Taxes. The Fund intends to continue to comply with provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to shareholders. Therefore, no federal income or excise tax provision is required.

As of September 30, 2001, the Fund had available for federal income tax purposes unused capital loss carryovers as follows:

Expiring ------------------------------ 2002/1/ $ 1,592,328 2006 3,413,515 2007 24,055,190 2008 4,438,059 2009 1,299,082 -------------- Total $ 34,798,174 ============== 1. The capital loss carryover was acquired in connection with the Oppenheimer World Bond Fund merger.

As of September 30, 2001, the Fund had approximately $9,101,000 of post-October losses available to offset future capital gains, if any. Such losses, if unutilized, will expire in 2010. Additionally, the Fund had approximately $9,362,000 of post-October foreign currency losses which were deferred. If unutilized by the Fund in the following fiscal year, such losses will expire.

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

Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date.

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

Classification of Dividends and Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes primarily because of the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by the Fund.

31 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- ================================================================================ 1.Significant Accounting Policies Continued

        The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended September 30, 2001, amounts have been reclassified to reflect a decrease in paid-in capital of $17,514,910, a decrease in overdistributed net investment income of $431,117, and a decrease in accumulated net realized loss on investments of $17,083,793. As noted in the Statement of Changes in Net Assets, for federal income tax purposes, the Fund realized a return of capital of $16,326,092. Net assets of the Fund were unaffected by the reclassifications.

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

Investment Income. Dividend income is recorded on the ex-dividend date or upon ex-dividend notification in the case of certain foreign dividends where the ex-dividend date may have passed. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income, which includes accretion of discount and amortization of premium, is accrued as earned.

-------------------------------------------------------------------------------- Security Transactions. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. --------------------------------------------------------------------------------

Other. The Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies, as revised, effective for fiscal years beginning after December 15, 2000. The Fund elected to begin amortizing premiums on debt securities effective January 1, 2001. Prior to this date, the Fund did not amortize premiums on debt securities. The cumulative effect of this accounting change had no impact on the total net assets of the Fund, but resulted in a $308,105 decrease to cost of securities and a corresponding $308,105 increase in net unrealized appreciation based on securities held as of December 31, 2000. For the year ended September 30, 2001, interest income decreased by $852,028, net realized loss on investments increased by $930,908, and the change in net unrealized appreciation on investments increased by $1,782,936.

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

32 | OPPENHEIMER INTERNATIONAL BOND FUND ================================================================================ 2.Shares of Beneficial Interest

The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:


                                 Year Ended September 30, 2001/1/     Year Ended September 30, 2000
                                      Shares            Amount           Shares              Amount
----------------------------------------------------------------------------------------------------
Class A

Sold                              11,475,782    $   47,469,618       17,212,754     $    74,398,275
Dividends and/or
distributions reinvested           1,365,106         5,584,489        1,563,403           6,713,788
Acquisition--Note 10               9,099,764        38,855,992               --                  --
Redeemed                         (15,986,371)      (65,192,649)     (18,821,217)        (81,095,353)
                                 -------------------------------------------------------------------
Net increase (decrease)            5,954,281    $   26,717,450          (45,060)    $        16,710
                                 ===================================================================
----------------------------------------------------------------------------------------------------
Class B
Sold                               2,577,998    $   10,449,838        6,037,848     $    25,959,092
Dividends and/or
distributions reinvested             765,041         3,126,381        1,114,634           4,770,337
Acquisition--Note 10               2,119,613         9,008,355               --                  --
Redeemed                          (7,563,989)      (30,880,902)     (11,704,016)        (50,094,948)
                                 -------------------------------------------------------------------
Net increase (decrease)           (2,101,337)   $   (8,296,328)      (4,551,534)    $   (19,365,519)
                                 ===================================================================
----------------------------------------------------------------------------------------------------
Class C
Sold                               2,442,689    $   10,125,425        3,016,468     $    12,968,071
Dividends and/or
distributions reinvested             228,472           933,199          343,343           1,468,887
Acquisition--Note 10                 389,518         1,655,452               --                  --
Redeemed                          (3,283,543)      (13,539,288)      (3,708,122)        (15,873,345)
                                 -------------------------------------------------------------------
Net increase (decrease)             (222,864)   $     (825,212)        (348,311)    $    (1,436,387)
                                 ===================================================================
----------------------------------------------------------------------------------------------------
Class N
Sold                                  27,136    $      109,074               --     $            --
Dividends and/or
distributions reinvested                 426             1,270               --                  --
Acquisition--Note 10                      --                --               --                  --
Redeemed                                  --                --               --                  --
                                 -------------------------------------------------------------------
Net increase (decrease)               27,562    $      110,344               --     $            --
                                 ===================================================================

1. For the year ended September 30, 2001, for Class A, B and C shares and for the period from March 1, 2001 (inception of offering) to September 30, 2001, for Class N shares.

33 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- ================================================================================ 3.Purchases and Sales of Securities

The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended September 30, 2001, were $781,964,656 and $806,007,235, respectively.

As of September 30, 2001, unrealized appreciation (depreciation) based on cost of securities for federal income tax purposes of $231,768,765 was:

Gross unrealized appreciation $ 3,703,196 Gross unrealized depreciation (9,819,869) --------------- Net unrealized appreciation $ (6,116,673) =============== (depreciation) ================================================================================ 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 an annual fee of 0.75% of the first $200 million of average annual net assets of the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $200 million and 0.50% of average annual net assets in excess of $1 billion. The Funds management fee for the year ended September 30, 2001, was an annualized rate of 0.74%.

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

Transfer Agent Fees. Oppenheimer Funds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS an agreed upon per account fee.

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

Distribution and Service Plan Fees. Under its General Distributors Agreement with the Manager, the Distributor acts as the Funds principal underwriter in the continuous public offering of the different classes of shares of the Fund.

The compensation paid to (or retained by) the Distributor from the sale of shares or on the redemption of shares is shown in the table below for the period indicated.


                    Aggregate             Class A         Commissions         Commissions        Commissions         Commissions
                    Front-End           Front-End          on Class A          on Class B         on Class C          on Class N
                Sales Charges       Sales Charges              Shares              Shares             Shares              Shares
                   on Class A         Retained by         Advanced by         Advanced by        Advanced by         Advanced by
Year Ended             Shares         Distributor         Distributor/1/      Distributor/1/     Distributor/1/      Distributor/1/
------------------------------------------------------------------------------------------------------------------------------------

September
30, 2001             $228,525             $50,566             $61,374            $263,637            $48,250                 $28

1. The Distributor advances commission payments to dealers for certain sales of Class A shares and for sales of Class B, Class C and Class N shares from its own resources at the time of sale.


                              Class A                     Class B                      Class C                     Class N
                  Contingent Deferred         Contingent Deferred          Contingent Deferred         Contingent Deferred
                        Sales Charges               Sales Charges                Sales Charges               Sales Charges
Year Ended    Retained by Distributor     Retained by Distributor      Retained by Distributor     Retained by Distributor
------------------------------------------------------------------------------------------------------------------------------------

September
30, 2001                      $18,318                    $342,548                       $7,490                         $--


34 | OPPENHEIMER INTERNATIONAL BOND FUND

The Fund has adopted a Service Plan for Class A shares and Distribution and
Service Plans for Class B, Class C and Class N shares under Rule 12b-1 of the
Investment Company Act. Under those plans the Fund pays the Distributor for all
or a portion of its costs incurred in connection with the distribution and/or
servicing of the shares of the particular class.
--------------------------------------------------------------------------------
Class A Service Plan Fees. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to a specified percent of average annual net
assets of Class A shares purchased. The Distributor makes payments to plan
recipients quarterly at an annual rate not to exceed a specified percent of the
average annual net assets consisting of Class A shares of the Fund. For the year
ended September 30, 2001, payments under the Class A plan totaled $275,972, all
of which were paid by the Distributor to recipients, and included $13,503 paid
to an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs
with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years.
--------------------------------------------------------------------------------
Class B, Class C and Class N Distribution and Service Plan Fees. Under each
plan, service fees and distribution fees are computed on the average of the net
asset value of shares in the respective class, determined as of the close of
each regular business day during the period. The Class B, Class C and Class N
plans provide for the Distributor to be compensated at a flat rate, whether the
Distributor's distribution expenses are more or less than the amounts paid by
the Fund under the plan during the period for which the fee is paid.
   The Distributor retains the asset-based sales charge on Class B shares. The
Distributor retains the asset-based sales charge on Class C shares during the
first year the shares are outstanding. The Distributor retains the asset-based
sales charge on Class N shares. The asset-based sales charges on Class B, Class
C and Class N shares allow investors to buy shares without a front-end sales
charge while allowing the Distributor to compensate dealers that sell those
shares.
   The Distributor's actual expenses in selling Class B, Class C and Class N
shares may be more than the payments it receives from the contingent deferred
sales charges collected on redeemed shares and asset-based sales charges from
the Fund under the plans. If any plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales charge
to the Distributor for distributing shares before the plan was terminated. The
plans allow for the carryforward of distribution expenses, to be recovered from
asset-based sales charges in subsequent fiscal periods.


35 | OPPENHEIMER INTERNATIONAL BOND FUND

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

================================================================================
4.Fees and Other Transactions with Affiliates Continued
Distribution fees paid to the Distributor for the year ended September 30, 2001,
were as follows:


                                                                                 Distributor's
                                                            Distributor's            Aggregate
                                                                Aggregate         Unreimbursed
                                                             Unreimbursed        Expenses as %
                  Total Payments      Amount Retained            Expenses        of Net Assets
                      Under Plan       by Distributor          Under Plan             of Class
----------------------------------------------------------------------------------------------------

Class B Plan            $934,279             $722,806          $4,955,971                 5.87%
Class C Plan             271,136               57,533             777,404                 3.08
Class N Plan                  49                   48                  19                 0.02

================================================================================ 5.Foreign Currency Contracts

A foreign currency contract is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. The Fund may enter into foreign currency contracts for operational purposes and to seek to protect against adverse exchange rate fluctuations. Risks to the Fund include the potential inability of the counterparty to meet the terms of the contract.

        The net U.S. dollar value of foreign currency underlying all contractual commitments held by the Fund and the resulting unrealized appreciation or depreciation are determined using foreign currency exchange rates as provided by a reliable bank, dealer or pricing service. Unrealized appreciation and depreciation on foreign currency contracts are reported in the Statement of Assets and Liabilities as a receivable or payable and in the Statement of Operations with the change in unrealized appreciation or depreciation.

        The Fund may realize a gain or loss upon the closing or settlement of the foreign currency transactions. Such realized gains and losses are reported with all other foreign currency gains and losses in the Statement of Operations.

36 | OPPENHEIMER INTERNATIONAL BOND FUND

As of September 30, 2001, the Fund had outstanding foreign currency contracts as follows:


                                  Expiration       Contract       Valuation as of       Unrealized       Unrealized
Contract Description                   Dates    Amount(000s)   September 30, 2001     Appreciation     Depreciation
----------------------------------------------------------------------------------------------------------------------
Contracts to Purchase

British Pound Sterling (GBP)        11/21/01       GBP1,710           $ 2,505,982         $108,793         $     --
Canadian Dollar (CAD)                11/6/01       CAD2,310             1,461,141               --           18,111
Euro (EUR)                           10/5/01       EUR2,375             2,162,576          155,701               --
Japanese Yen (JPY)                  11/20/01     JPY697,825             5,879,625               --           46,200
                                                                                        ------------------------------
                                                                                           264,494           64,311
                                                                                        ------------------------------
Contracts to Sell                    11/6/01-
Australian Dollar (AUD)             12/31/01       AUD4,615             2,271,020           73,826            6,132
Euro (EUR)                          11/21/01      EUR31,700            28,822,718           52,031          133,760
                                     10/4/01-
Japanese Yen (JPY)                  11/19/01      JPY51,731               435,026            4,063               --
Norwegian Krone (NOK)                10/5/01      NOK34,130             3,845,519               --          147,547
                                                                                        ------------------------------
                                                                                           129,920          287,439
                                                                                        ------------------------------
Total Unrealized Appreciation and Depreciation                                            $394,414         $351,750
                                                                                        ==============================

================================================================================ 6. Futures Contracts

A futures contract is a commitment to buy or sell a specific amount of a commodity or financial instrument at a particular price on a stipulated future date at a negotiated price. Futures contracts are traded on a commodity exchange. The Fund may buy and sell futures contracts that relate to broadly based securities indices financial futures or debt securities interest rate futures in order to gain exposure to or to seek to protect against changes in market value of stock 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 to 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 fixed income 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 expires.

37 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- ================================================================================ 6. Futures Contracts Continued

        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 on the Statement of Operations as closing and expiration of futures contracts.

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, 2001, the Fund had outstanding futures contracts as follows:


                                                                 Valuation as of         Unrealized
                                  Expiration      Number of        September 30,       Appreciation
Contract Description                   Dates      Contracts                 2001      (Depreciation)
----------------------------------------------------------------------------------------------------

Contracts to Purchase
Crude Oil                           11/19/01             60      $     1,420,800        $    58,700
Euro-Bundesobligation                12/6/01             70            6,926,329             51,637
U.S. Long Bond                      12/19/01             25            2,637,500             15,820
                                                                                      --------------
                                                                                            126,157
                                                                                      --------------
Contracts to Sell
U.S. Treasury Nts., 10 yr.          12/19/01             70            7,614,688           (164,063)
                                                                                      --------------

                                                                                        $   (37,906)
                                                                                      ==============

================================================================================ 7.Option Activity

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

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

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

        Securities designated to cover outstanding call options are noted in the Statement of Investments where applicable. Shares subject to call, expiration date, exercise price, premium received and market value are detailed in a note to the Statement of Investments. Options written are reported as a liability in the Statement of Assets and Liabilities. Realized gains and losses are reported in the Statement of Operations.

38 | OPPENHEIMER INTERNATIONAL BOND FUND

        The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases and the option is exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Written option activity for the year ended September 30, 2001, was as follows:


                                               Call Options                    Put Options
                               --------------------------------------------------------------
                                    Number of                      Number of
                                   Principal/     Amount of       Principal/     Amount of
                                    Contracts      Premiums        Contracts      Premiums
---------------------------------------------------------------------------------------------

Options outstanding as of
September 30, 2000                     5,620     $   45,762       11,033,815    $   262,365
Options written                    6,929,160        171,872      897,494,796        446,789
Options closed or expired             (7,475)       (88,417)    (621,551,236)      (347,289)
Options exercised                 (6,927,305)      (129,217)      (6,439,780)      (214,587)
                                -------------------------------------------------------------
Options outstanding as of
September 30, 2001                        --     $       --      280,537,595    $   147,278
                                =============================================================

================================================================================ 8.Illiquid Securities

As of September 30, 2001, investments in securities included issues that are illiquid. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid securities. The aggregate value of illiquid securities subject to this limitation as of September 30, 2001, was $5,176,963, which represents 2.27% of the Funds net assets.

================================================================================ 9.Bank Borrowings

The Fund may borrow from a bank for temporary or emergency purposes including, without limitation, funding of shareholder redemptions provided asset coverage for borrowings exceeds 300%. The Fund has entered into an agreement which enables it to participate with other Oppenheimer funds in an unsecured line of credit with a bank, which permits borrowings up to $400 million, collectively. Interest is charged to each fund, based on its borrowings, at a rate equal to the Federal Funds Rate plus 0.45%. Borrowings are payable 30 days after such loan is executed. The Fund also pays a commitment fee equal to its pro rata share of the average unutilized amount of the credit facility at a rate of 0.08% per annum.

The Fund had no borrowings outstanding during the year ended or at September 30, 2001. 39 | OPPENHEIMER INTERNATIONAL BOND FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued --------------------------------------------------------------------------------


================================================================================
10. Acquisition of Oppenheimer World Bond Fund
On February 16, 2001, the
Fund acquired all of the net assets of Oppenheimer World Bond Fund, pursuant to
an Agreement and Plan of Reorganization approved by the Oppenheimer World Bond
Fund shareholders on February 9, 2001. The Fund issued (at an exchange ratio of
1.663545 for Class A, 1.671579 for Class B and 1.668707 for Class C of the Fund
to one share of Oppenheimer International Bond Fund) 9,099,764; 2,119,613; and
389,518 shares of beneficial interest for Class A, Class B and Class C,
respectively, valued at $38,855,992, $9,008,355 and $1,655,452 in exchange for
the net assets, resulting in combined Class A net assets of $141,638,099, Class
B net assets of $103,839,460 and Class C net assets of $29,637,104 on February
16, 2001. The net assets acquired included net unrealized appreciation of
$432,989 and unused capital loss carryover of $8,187,009. The exchange qualified
as a tax-free reorganization for federal income tax purposes.

40 | OPPENHEIMER INTERNATIONAL BOND FUND

A-5 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 (TAXABLE) BOND RATINGS Aaa: Bonds 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 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 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 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 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 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 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 rated "Ca" represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C: Bonds 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. Con. (...): Bonds for which the security depends on the completion of some act or the fulfillment of some condition are rated conditionally. These bonds are secured by (a) earnings of projects under construction, (b) earnings of projects unseasoned in operating experience, (c) rentals that begin when facilities are completed, or (d) payments to which some other limiting condition attaches. The parenthetical rating denotes probable credit stature upon completion of construction or elimination of the basis of the condition. 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. Short-Term Ratings - Taxable Debt These ratings apply to the ability of issuers to honor senior debt obligations having an original maturity not exceeding one year: 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, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's") LONG-TERM CREDIT RATINGS AAA: Bonds 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: Bonds rated "AA" differ from the highest rated bonds only in small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong. A: Bonds 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: Bonds 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 Obligations 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: Bonds 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: Bonds rated "B" are more vulnerable to nonpayment than bonds 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: Bonds 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: Bonds 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: Bonds 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. The "r" symbol is attached to the ratings of instruments with significant noncredit risks. SHORT-TERM ISSUE CREDIT RATINGS A-1: A short-term bond 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 bond 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 bond 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 bond 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 bond 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 bond 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. Fitch, Inc. INTERNATIONAL LONG-TERM CREDIT 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 F1: Highest credit quality. Strongest capacity for timely payment of financial commitments. May have an added "+" to denote any exceptionally strong credit feature. F2: Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of higher ratings. F3: Fair credit quality. Capacity for timely payment of financial commitments is adequate. However, near-term adverse changes could result in a reduction to non-investment grade. B: Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions. C: High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment. D: Default. Denotes actual or imminent payment default. B-1 Appendix B --------------------------------------------------------------------------------------------------------------------------------------- Industry Classifications --------------------------------------------------------------------------------------------------------------------------------------- Aerospace & Defense Household Durables Air Freight & Couriers Household Products Airlines Industrial Conglomerates Auto Components Insurance Automobiles Internet & Catalog Retail Banks Internet Software & Services Beverages Information Technology Consulting & Services Biotechnology Leisure Equipment & Products Building Products Machinery Chemicals Marine Commercial Services & Supplies Media Communications Equipment Metals & Mining Computers & Peripherals Multiline Retail Construction & Engineering Multi-Utilities Construction Materials Office Electronics Containers & Packaging Oil & Gas Distributors Paper & Forest Products Diversified Financials Personal Products Diversified Telecommunication Services Pharmaceuticals Electric Utilities Real Estate Electrical Equipment Road & Rail Electronic Equipment & Instruments Semiconductor Equipment & Products Energy Equipment & Services Software Food & Drug Retailing Specialty Retail Food Products Textiles & Apparel Gas Utilities Tobacco Health Care Equipment & Supplies Trading Companies & Distributors Health Care Providers & Services Transportation Infrastructure Hotels Restaurants & Leisure Water Utilities Wireless Telecommunication Services C-11 Appendix C OppenheimerFunds Special Sales Charge Arrangements and Waivers -------------------------------------------------------------- In certain cases, the initial sales charge that applies to purchases of Class A shares1 of the Oppenheimer funds or the contingent deferred sales charge that may apply to Class A, Class B or Class C shares may be waived.2 That is because of the economies of sales efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this document as the "Distributor"), or by dealers or other financial institutions that offer those shares to certain classes of investors. Not all waivers apply to all funds. For example, waivers relating to Retirement Plans do not apply to Oppenheimer municipal funds, because shares of those funds are not available for purchase by or on behalf of retirement plans. Other waivers apply only to shareholders of certain funds. For the purposes of some of the waivers described below and in the Prospectus and Statement of Additional Information of the applicable Oppenheimer funds, the term "Retirement Plan" refers to the following types of plans: 1) plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code, 2) non-qualified deferred compensation plans, 3) employee benefit plans3 4) Group Retirement Plans4 5) 403(b)(7) custodial plan accounts 6) Individual Retirement Accounts ("IRAs"), including traditional IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans The interpretation of these provisions as to the applicability of a special arrangement or waiver in a particular case is in the sole discretion of the Distributor or the transfer agent (referred to in this document as the "Transfer Agent") of the particular Oppenheimer fund. These waivers and special arrangements may be amended or terminated at any time by a particular fund, the Distributor, and/or OppenheimerFunds, Inc. (referred to in this document as the "Manager"). Waivers that apply at the time shares are redeemed must be requested by the shareholder and/or dealer in the redemption request. I. Applicability of Class A Contingent Deferred Sales Charges in Certain Cases --------------------------------------------------------------------------------------------------------------------------------------- Purchases of Class A Shares of Oppenheimer Funds That Are Not Subject to Initial Sales Charge but May Be Subject to the Class A Contingent Deferred Sales Charge (unless a waiver applies). There is no initial sales charge on purchases of Class A shares of any of the Oppenheimer funds in the cases listed below. However, these purchases may be subject to the Class A contingent deferred sales charge if redeemed within 18 months (24 months in the case of Oppenheimer Rochester National Municipals and Rochester Fund Municipals) of the beginning of the calendar month of their purchase, as described in the Prospectus (unless a waiver described elsewhere in this Appendix applies to the redemption). Additionally, on shares purchased under these waivers that are subject to the Class A contingent deferred sales charge, the Distributor will pay the applicable concession described in the Prospectus under "Class A Contingent Deferred Sales Charge."5 This waiver provision applies to: |_| Purchases of Class A shares aggregating $1 million or more. |_| Purchases of Class A shares by a Retirement Plan that was permitted to purchase such shares at net asset value but subject to a contingent deferred sales charge prior to March 1, 2001. That included plans (other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares costing $500,000 or more, 2) had at the time of purchase 100 or more eligible employees or total plan assets of $500,000 or more, or 3) certified to the Distributor that it projects to have annual plan purchases of $200,000 or more. |_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases are made: 1) through a broker, dealer, bank or registered investment adviser that has made special arrangements with the Distributor for those purchases, or 2) by a direct rollover of a distribution from a qualified Retirement Plan if the administrator of that Plan has made special arrangements with the Distributor for those purchases. |_| Purchases of Class A shares by Retirement Plans that have any of the following record-keeping arrangements: 1) The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the Retirement Plan. On the date the plan sponsor signs the record-keeping service agreement with Merrill Lynch, the Plan must have $3 million or more of its assets invested in (a) mutual funds, other than those advised or managed by Merrill Lynch Investment Management, L.P. ("MLIM"), that are made available under a Service Agreement between Merrill Lynch and the mutual fund's principal underwriter or distributor, and (b) funds advised or managed by MLIM (the funds described in (a) and (b) are referred to as "Applicable Investments"). 2) The record keeping for the Retirement Plan is performed on a daily valuation basis by a record keeper whose services are provided under a contract or arrangement between the Retirement Plan and Merrill Lynch. On the date the plan sponsor signs the record keeping service agreement with Merrill Lynch, the Plan must have $3 million or more of its assets (excluding assets invested in money market funds) invested in Applicable Investments. 3) The record keeping for a Retirement Plan is handled under a service agreement with Merrill Lynch and on the date the plan sponsor signs that agreement, the Plan has 500 or more eligible employees (as determined by the Merrill Lynch plan conversion manager). |_| Purchases by a Retirement Plan whose record keeper had a cost-allocation agreement with the Transfer Agent on or before March 1, 2001. II. Waivers of Class A Sales Charges of Oppenheimer Funds --------------------------------------------------------------------------------------------------------------------------------------- A. Waivers of Initial and Contingent Deferred Sales Charges for Certain Purchasers. Class A shares purchased by the following investors are not subject to any Class A sales charges (and no concessions are paid by the Distributor on such purchases): |_| The Manager or its affiliates. |_| Present or former officers, directors, trustees and employees (and their "immediate families") of the Fund, the Manager and its affiliates, and retirement plans established by them for their employees. The term "immediate family" refers to one's spouse, children, grandchildren, grandparents, parents, parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse, a spouse's siblings, aunts, uncles, nieces and nephews; relatives by virtue of a remarriage (step-children, step-parents, etc.) are included. |_| Registered management investment companies, or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose. |_| Dealers or brokers that have a sales agreement with the Distributor, if they purchase shares for their own accounts or for retirement plans for their employees. |_| Employees and registered representatives (and their spouses) of dealers or brokers described above or financial institutions that have entered into sales arrangements with such dealers or brokers (and which are identified as such to the Distributor) or with the Distributor. The purchaser must certify to the Distributor at the time of purchase that the purchase is for the purchaser's own account (or for the benefit of such employee's spouse or minor children). |_| Dealers, brokers, banks or registered investment advisors that have entered into an agreement with the Distributor providing specifically for the use of shares of the Fund in particular investment products made available to their clients. Those clients may be charged a transaction fee by their dealer, broker, bank or advisor for the purchase or sale of Fund shares. |_| Investment advisors and financial planners who have entered into an agreement for this purpose with the Distributor and who charge an advisory, consulting or other fee for their services and buy shares for their own accounts or the accounts of their clients. |_| "Rabbi trusts" that buy shares for their own accounts, if the purchases are made through a broker or agent or other financial intermediary that has made special arrangements with the Distributor for those purchases. |_| Clients of investment advisors or financial planners (that have entered into an agreement for this purpose with the Distributor) who buy shares for their own accounts may also purchase shares without sales charge but only if their accounts are linked to a master account of their investment advisor or financial planner on the books and records of the broker, agent or financial intermediary with which the Distributor has made such special arrangements . Each of these investors may be charged a fee by the broker, agent or financial intermediary for purchasing shares. |_| Directors, trustees, officers or full-time employees of OpCap Advisors or its affiliates, their relatives or any trust, pension, profit sharing or other benefit plan which beneficially owns shares for those persons. |_| Accounts for which Oppenheimer Capital (or its successor) is the investment advisor (the Distributor must be advised of this arrangement) and persons who are directors or trustees of the company or trust which is the beneficial owner of such accounts. |_| A unit investment trust that has entered into an appropriate agreement with the Distributor. |_| Dealers, brokers, banks, or registered investment advisers that have entered into an agreement with the Distributor to sell shares to defined contribution employee retirement plans for which the dealer, broker or investment adviser provides administration services. |-| Retirement Plans and deferred compensation plans and trusts used to fund those plans (including, for example, plans qualified or created under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code), in each case if those purchases are made through a broker, agent or other financial intermediary that has made special arrangements with the Distributor for those purchases. |_| A TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors) whose Class B or Class C shares of a Former Quest for Value Fund were exchanged for Class A shares of that Fund due to the termination of the Class B and Class C TRAC-2000 program on November 24, 1995. |_| A qualified Retirement Plan that had agreed with the former Quest for Value Advisors to purchase shares of any of the Former Quest for Value Funds at net asset value, with such shares to be held through DCXchange, a sub-transfer agency mutual fund clearinghouse, if that arrangement was consummated and share purchases commenced by December 31, 1996. B. Waivers of Initial and Contingent Deferred Sales Charges in Certain Transactions. Class A shares issued or purchased in the following transactions are not subject to sales charges (and no concessions are paid by the Distributor on such purchases): |_| Shares issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to which the Fund is a party. |_| Shares purchased by the reinvestment of dividends or other distributions reinvested from the Fund or other Oppenheimer funds (other than Oppenheimer Cash Reserves) or unit investment trusts for which reinvestment arrangements have been made with the Distributor. |_| Shares purchased through a broker-dealer that has entered into a special agreement with the Distributor to allow the broker's customers to purchase and pay for shares of Oppenheimer funds using the proceeds of shares redeemed in the prior 30 days from a mutual fund (other than a fund managed by the Manager or any of its subsidiaries) on which an initial sales charge or contingent deferred sales charge was paid. This waiver also applies to shares purchased by exchange of shares of Oppenheimer Money Market Fund, Inc. that were purchased and paid for in this manner. This waiver must be requested when the purchase order is placed for shares of the Fund, and the Distributor may require evidence of qualification for this waiver. |_| Shares purchased with the proceeds of maturing principal units of any Qualified Unit Investment Liquid Trust Series. |_| Shares purchased by the reinvestment of loan repayments by a participant in a Retirement Plan for which the Manager or an affiliate acts as sponsor. C. Waivers of the Class A Contingent Deferred Sales Charge for Certain Redemptions. The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to the contingent deferred sales charge are redeemed in the following cases: |_| To make Automatic Withdrawal Plan payments that are limited annually to no more than 12% of the account value adjusted annually. |_| Involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts (please refer to "Shareholder Account Rules and Policies," in the applicable fund Prospectus). |_| For distributions from Retirement Plans, deferred compensation plans or other employee benefit plans for any of the following purposes: 1) Following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary. The death or disability must occur after the participant's account was established. 2) To return excess contributions. 3) To return contributions made due to a mistake of fact. 4) Hardship withdrawals, as defined in the plan.6 5) Under a Qualified Domestic Relations Order, as defined in the Internal Revenue Code, or, in the case of an IRA, a divorce or separation agreement described in Section 71(b) of the Internal Revenue Code. 6) To meet the minimum distribution requirements of the Internal Revenue Code. 7) To make "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code. 8) For loans to participants or beneficiaries. 9) Separation from service.7 10) Participant-directed redemptions to purchase shares of a mutual fund (other than a fund managed by the Manager or a subsidiary of the Manager) if the plan has made special arrangements with the Distributor. 11) Plan termination or "in-service distributions," if the redemption proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA. |_| For distributions from 401(k) plans sponsored by broker-dealers that have entered into a special agreement with the Distributor allowing this waiver. |_| For distributions from retirement plans that have $10 million or more in plan assets and that have entered into a special agreement with the Distributor. |_| For distributions from retirement plans which are part of a retirement plan product or platform offered by certain banks, broker-dealers, financial advisors, insurance companies or record keepers which have entered into a special agreement with the Distributor. III. Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds --------------------------------------------------------------------------------------------------------------------------------------- The Class B, Class C and Class N contingent deferred sales charges will not be applied to shares purchased in certain types of transactions or redeemed in certain circumstances described below. A. Waivers for Redemptions in Certain Cases. The Class B, Class C and Class N contingent deferred sales charges will be waived for redemptions of shares in the following cases: |_| Shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," in the applicable Prospectus. |_| Redemptions from accounts other than Retirement Plans following the death or disability of the last surviving shareholder, including a trustee of a grantor trust or revocable living trust for which the trustee is also the sole beneficiary. The death or disability must have occurred after the account was established, and for disability you must provide evidence of a determination of disability by the Social Security Administration. |_| Distributions from accounts for which the broker-dealer of record has entered into a special agreement with the Distributor allowing this waiver. |_| Redemptions of Class B shares held by Retirement Plans whose records are maintained on a daily valuation basis by 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 requested in writing by a Retirement Plan sponsor of Class C shares of an Oppenheimer fund in amounts of $500,000 or more and made more than 12 months after the Retirement Plan's first purchase of Class C shares, if the redemption proceeds are invested in Class N shares of one or more Oppenheimer funds. |_| Distributions8 from Retirement Plans or other employee benefit plans for any of the following purposes: 1) Following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary. The death or disability must occur after the participant's account was established in an Oppenheimer fund. 2) To return excess contributions made to a participant's account. 3) To return contributions made due to a mistake of fact. 4) To make hardship withdrawals, as defined in the plan.9 5) To make distributions required under a Qualified Domestic Relations Order or, in the case of an IRA, a divorce or separation agreement described in Section 71(b) of the Internal Revenue Code. 6) To meet the minimum distribution requirements of the Internal Revenue Code. 7) To make "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code. 8) For loans to participants or beneficiaries.10 9) On account of the participant's separation from service.11 10) Participant-directed redemptions to purchase shares of a mutual fund (other than a fund managed by the Manager or a subsidiary of the Manager) offered as an investment option in a Retirement Plan if the plan has made special arrangements with the Distributor. 11) Distributions made on account of a plan termination or "in-service" distributions, if the redemption proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA. 12) For distributions from a participant's account under an Automatic Withdrawal Plan after the participant reaches age 591/2, as long as the aggregate value of the distributions does not exceed 10% of the account's value, adjusted annually. 13) Redemptions of Class B shares under an Automatic Withdrawal Plan for an account other than a Retirement Plan, if the aggregate value of the redeemed shares does not exceed 10% of the account's value, adjusted annually. 14) For distributions from 401(k) plans sponsored by broker-dealers that have entered into a special arrangement with the Distributor allowing this waiver. |_| Redemptions of Class B shares or Class C shares under an Automatic Withdrawal Plan from an account other than a Retirement Plan if the aggregate value of the redeemed shares does not exceed 10% of the account's value annually. B. Waivers for Shares Sold or Issued in Certain Transactions. The contingent deferred sales charge is also waived on Class B and Class C shares sold or issued in the following cases: |_| Shares sold to the Manager or its affiliates. |_| Shares sold to registered management investment companies or separate accounts of insurance companies having an agreement with the Manager or the Distributor for that purpose. |_| Shares issued in plans of reorganization to which the Fund is a party. |_| Shares sold to present or former officers, directors, trustees or employees (and their "immediate families" as defined above in Section I.A.) of the Fund, the Manager and its affiliates and retirement plans established by them for their employees. IV. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds Who Were Shareholders of Former Quest for Value Funds --------------------------------------------------------------------------------------------------------------------------------------- The initial and contingent deferred sales charge rates and waivers for Class A, Class B and Class C shares described in the Prospectus or Statement of Additional Information of the Oppenheimer funds are modified as described below for certain persons who were shareholders of the former Quest for Value Funds. To be eligible, those persons must have been shareholders on November 24, 1995, when OppenheimerFunds, Inc. became the investment advisor to those former Quest for Value Funds. Those funds include: Oppenheimer Quest Value Fund, Inc. Oppenheimer Small Cap Value Fund Oppenheimer Quest Balanced Value Fund Oppenheimer Quest Global Value Fund, Inc. Oppenheimer Quest Opportunity Value Fund These arrangements also apply to shareholders of the following funds when they merged (were reorganized) into various Oppenheimer funds on November 24, 1995: Quest for Value U.S. Government Income Fund Quest for Value New York Tax-Exempt Fund Quest for Value Investment Quality Income Fund Quest for Value National Tax-Exempt Fund Quest for Value Global Income Fund Quest for Value California Tax-Exempt Fund All of the funds listed above are referred to in this Appendix as the "Former Quest for Value Funds." The waivers of initial and contingent deferred sales charges described in this Appendix apply to shares of an Oppenheimer fund that are either: |_| acquired by such shareholder pursuant to an exchange of shares of an Oppenheimer fund that was one of the Former Quest for Value Funds, or |_| purchased by such shareholder by exchange of shares of another Oppenheimer fund that were acquired pursuant to the merger of any of the Former Quest for Value Funds into that other Oppenheimer fund on November 24, 1995. A. Reductions or Waivers of Class A Sales Charges. |X| Reduced Class A Initial Sales Charge Rates for Certain Former Quest for Value Funds Shareholders. Purchases by Groups and Associations. The following table sets forth the initial sales charge rates for Class A shares purchased by members of "Associations" formed for any purpose other than the purchase of securities. The rates in the table apply if that Association purchased shares of any of the Former Quest for Value Funds or received a proposal to purchase such shares from OCC Distributors prior to November 24, 1995. -------------------------------- ---------------------------- --------------------------------- --------------------- Number of Eligible Employees Initial Sales Charge as a Initial Sales Charge as a % of Concession as % of or Members % of Offering Price Net Amount Invested Offering Price -------------------------------- ---------------------------- --------------------------------- --------------------- -------------------------------- ---------------------------- --------------------------------- --------------------- 9 or Fewer 2.50% 2.56% 2.00% -------------------------------- ---------------------------- --------------------------------- --------------------- -------------------------------- ---------------------------- --------------------------------- --------------------- At least 10 but not more than 2.00% 2.04% 1.60% 49 -------------------------------- ---------------------------- --------------------------------- --------------------- --------------------------------------------------------------------------------------------------------------------------------------- For purchases by Associations having 50 or more eligible employees or members, there is no initial sales charge on purchases of Class A shares, but those shares are subject to the Class A contingent deferred sales charge described in the applicable fund's Prospectus. Purchases made under this arrangement qualify for the lower of either the sales charge rate in the table based on the number of members of an Association, or the sales charge rate that applies under the Right of Accumulation described in the applicable fund's Prospectus and Statement of Additional Information. Individuals who qualify under this arrangement for reduced sales charge rates as members of Associations also may purchase shares for their individual or custodial accounts at these reduced sales charge rates, upon request to the Distributor. |X| Waiver of Class A Sales Charges for Certain Shareholders. Class A shares purchased by the following investors are not subject to any Class A initial or contingent deferred sales charges: o Shareholders who were shareholders of the AMA Family of Funds on February 28, 1991 and who acquired shares of any of the Former Quest for Value Funds by merger of a portfolio of the AMA Family of Funds. o Shareholders who acquired shares of any Former Quest for Value Fund by merger of any of the portfolios of the Unified Funds. |X| Waiver of Class A Contingent Deferred Sales Charge in Certain Transactions. The Class A contingent deferred sales charge will not apply to redemptions of Class A shares purchased by the following investors who were shareholders of any Former Quest for Value Fund: Investors who purchased Class A shares from a dealer that is or was not permitted to receive a sales load or redemption fee imposed on a shareholder with whom that dealer has a fiduciary relationship, under the Employee Retirement Income Security Act of 1974 and regulations adopted under that law. B. Class A, Class B and Class C Contingent Deferred Sales Charge Waivers. |X| Waivers for Redemptions of Shares Purchased Prior to March 6, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The shares must have been acquired by the merger of a Former Quest for Value Fund into the fund or by exchange from an Oppenheimer fund that was a Former Quest for Value Fund or into which such fund merged. Those shares must have been purchased prior to March 6, 1995 in connection with: o withdrawals under an automatic withdrawal plan holding only either Class B or Class C shares if the annual withdrawal does not exceed 10% of the initial value of the account value, adjusted annually, and o liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum value of such accounts. |X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but Prior to November 24, 1995. In the following cases, the contingent deferred sales charge will be waived for redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The shares must have been acquired by the merger of a Former Quest for Value Fund into the fund or by exchange from an Oppenheimer fund that was a Former Quest For Value Fund or into which such Former Quest for Value Fund merged. Those shares must have been purchased on or after March 6, 1995, but prior to November 24, 1995: o redemptions following the death or disability of the shareholder(s) (as evidenced by a determination of total disability by the U.S. Social Security Administration); o withdrawals under an automatic withdrawal plan (but only for Class B or Class C shares) where the annual withdrawals do not exceed 10% of the initial value of the account value; adjusted annually, and o liquidation of a shareholder's account if the aggregate net asset value of shares held in the account is less than the required minimum account value. A shareholder's account will be credited with the amount of any contingent deferred sales charge paid on the redemption of any Class A, Class B or Class C shares of the Oppenheimer fund described in this section if the proceeds are invested in the same Class of shares in that fund or another Oppenheimer fund within 90 days after redemption. V. Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds Who Were Shareholders of Connecticut Mutual Investment Accounts, Inc. ----------------------------------------------------------------------------------------------------------------------------------- The initial and contingent deferred sale charge rates and waivers for Class A and Class B shares described in the respective Prospectus (or this Appendix) of the following Oppenheimer funds (each is referred to as a "Fund" in this section): Oppenheimer U. S. Government Trust, Oppenheimer Bond Fund, Oppenheimer Value Fund and Oppenheimer Disciplined Allocation Fund are modified as described below for those Fund shareholders who were shareholders of the following funds (referred to as the "Former Connecticut Mutual Funds") on March 1, 1996, when OppenheimerFunds, Inc. became the investment adviser to the Former Connecticut Mutual Funds: Connecticut Mutual Liquid Account Connecticut Mutual Total Return Account Connecticut Mutual Government Securities Account CMIA LifeSpan Capital Appreciation Account Connecticut Mutual Income Account CMIA LifeSpan Balanced Account Connecticut Mutual Growth Account CMIA Diversified Income Account A. Prior Class A CDSC and Class A Sales Charge Waivers. |X| Class A Contingent Deferred Sales Charge. Certain shareholders of a Fund and the other Former Connecticut Mutual Funds are entitled to continue to make additional purchases of Class A shares at net asset value without a Class A initial sales charge, but subject to the Class A contingent deferred sales charge that was in effect prior to March 18, 1996 (the "prior Class A CDSC"). Under the prior Class A CDSC, if any of those shares are redeemed within one year of purchase, they will be assessed a 1% contingent deferred sales charge on an amount equal to the current market value or the original purchase price of the shares sold, whichever is smaller (in such redemptions, any shares not subject to the prior Class A CDSC will be redeemed first). Those shareholders who are eligible for the prior Class A CDSC are: 1) persons whose purchases of Class A shares of a Fund and other Former Connecticut Mutual Funds were $500,000 prior to March 18, 1996, as a result of direct purchases or purchases pursuant to the Fund's policies on Combined Purchases or Rights of Accumulation, who still hold those shares in that Fund or other Former Connecticut Mutual Funds, and 2) persons whose intended purchases under a Statement of Intention entered into prior to March 18, 1996, with the former general distributor of the Former Connecticut Mutual Funds to purchase shares valued at $500,000 or more over a 13-month period entitled those persons to purchase shares at net asset value without being subject to the Class A initial sales charge Any of the Class A shares of a Fund and the other Former Connecticut Mutual Funds that were purchased at net asset value prior to March 18, 1996, remain subject to the prior Class A CDSC, or if any additional shares are purchased by those shareholders at net asset value pursuant to this arrangement they will be subject to the prior Class A CDSC. |X| Class A Sales Charge Waivers. Additional Class A shares of a Fund may be purchased without a sales charge, by a person who was in one (or more) of the categories below and acquired Class A shares prior to March 18, 1996, and still holds Class A shares: 1) any purchaser, provided the total initial amount invested in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more, including investments made pursuant to the Combined Purchases, Statement of Intention and Rights of Accumulation features available at the time of the initial purchase and such investment is still held in one or more of the Former Connecticut Mutual Funds or a Fund into which such Fund merged; 2) any participant in a qualified plan, provided that the total initial amount invested by the plan in the Fund or any one or more of the Former Connecticut Mutual Funds totaled $500,000 or more; 3) Directors of the Fund or any one or more of the Former Connecticut Mutual Funds and members of their immediate families; 4) employee benefit plans sponsored by Connecticut Mutual Financial Services, L.L.C. ("CMFS"), the prior distributor of the Former Connecticut Mutual Funds, and its affiliated companies; 5) one or more members of a group of at least 1,000 persons (and persons who are retirees from such group) engaged in a common business, profession, civic or charitable endeavor or other activity, and the spouses and minor dependent children of such persons, pursuant to a marketing program between CMFS and such group; and 6) an institution acting as a fiduciary on behalf of an individual or individuals, if such institution was directly compensated by the individual(s) for recommending the purchase of the shares of the Fund or any one or more of the Former Connecticut Mutual Funds, provided the institution had an agreement with CMFS. Purchases of Class A shares made pursuant to (1) and (2) above may be subject to the Class A CDSC of the Former Connecticut Mutual Funds described above. Additionally, Class A shares of a Fund may be purchased without a sales charge by any holder of a variable annuity contract issued in New York State by Connecticut Mutual Life Insurance Company through the Panorama Separate Account which is beyond the applicable surrender charge period and which was used to fund a qualified plan, if that holder exchanges the variable annuity contract proceeds to buy Class A shares of the Fund. B. Class A and Class B Contingent Deferred Sales Charge Waivers. In addition to the waivers set forth in the Prospectus and in this Appendix, above, the contingent deferred sales charge will be waived for redemptions of Class A and Class B shares of a Fund and exchanges of Class A or Class B shares of a Fund into Class A or Class B shares of a Former Connecticut Mutual Fund provided that the Class A or Class B shares of the Fund to be redeemed or exchanged were (i) acquired prior to March 18, 1996 or (ii) were acquired by exchange from an Oppenheimer fund that was a Former Connecticut Mutual Fund. Additionally, the shares of such Former Connecticut Mutual Fund must have been purchased prior to March 18, 1996: 1) by the estate of a deceased shareholder; 2) upon the disability of a shareholder, as defined in Section 72(m)(7) of the Internal Revenue Code; 3) for retirement distributions (or loans) to participants or beneficiaries from retirement plans qualified under Sections 401(a) or 403(b)(7)of the Code, or from IRAs, deferred compensation plans created under Section 457 of the Code, or other employee benefit plans; 4) as tax-free returns of excess contributions to such retirement or employee benefit plans; 5) in whole or in part, in connection with shares sold to any state, county, or city, or any instrumentality, department, authority, or agency thereof, that is prohibited by applicable investment laws from paying a sales charge or concession in connection with the purchase of shares of any registered investment management company; 6) in connection with the redemption of shares of the Fund due to a combination with another investment company by virtue of a merger, acquisition or similar reorganization transaction; 7) in connection with the Fund's right to involuntarily redeem or liquidate the Fund; 8) in connection with automatic redemptions of Class A shares and Class B shares in certain retirement plan accounts pursuant to an Automatic Withdrawal Plan but limited to no more than 12% of the original value annually; or 9) as involuntary redemptions of shares by operation of law, or under procedures set forth in the Fund's Articles of Incorporation, or as adopted by the Board of Directors of the Fund. VI. Special Reduced Sales Charge for Former Shareholders of Advance America Funds, Inc. --------------------------------------------------------------------------------------------------------------------------------------- Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government Trust, Oppenheimer Strategic Income Fund and Oppenheimer Capital Income Fund who acquired (and still hold) shares of those funds as a result of the reorganization of series of Advance America Funds, Inc. into those Oppenheimer funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a maximum sales charge rate of 4.50%. VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer Convertible Securities Fund --------------------------------------------------------------------------------------------------------------------------------------- Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this section) may sell Class M shares at net asset value without any initial sales charge to the classes of investors listed below who, prior to March 11, 1996, owned shares of the Fund's then-existing Class A and were permitted to purchase those shares at net asset value without sales charge: |_| the Manager and its affiliates, |_| present or former officers, directors, trustees and employees (and their "immediate families" as defined in the Fund's Statement of Additional Information) of the Fund, the Manager and its affiliates, and retirement plans established by them or the prior investment advisor of the Fund for their employees, |_| registered management investment companies or separate accounts of insurance companies that had an agreement with the Fund's prior investment advisor or distributor for that purpose, |_| dealers or brokers that have a sales agreement with the Distributor, if they purchase shares for their own accounts or for retirement plans for their employees, |_| employees and registered representatives (and their spouses) of dealers or brokers described in the preceding section or financial institutions that have entered into sales arrangements with those dealers or brokers (and whose identity is made known to the Distributor) or with the Distributor, but only if the purchaser certifies to the Distributor at the time of purchase that the purchaser meets these qualifications, |_| dealers, brokers, or registered investment advisors that had entered into an agreement with the Distributor or the prior distributor of the Fund specifically providing for the use of Class M shares of the Fund in specific investment products made available to their clients, and |_| dealers, brokers or registered investment advisors that had entered into an agreement with the Distributor or prior distributor of the Fund's shares to sell shares to defined contribution employee retirement plans for which the dealer, broker, or investment advisor provides administrative services.

Oppenheimer International Bond Fund

Internet Website:
WWW.OPPENHEIMERFUNDS.COM
------------------------

Investment Advisor
OppenheimerFunds, Inc.
498 Seventh Avenue,
New York, New York 10018

Distributor
OppenheimerFunds Distributor, Inc.
498 Seventh Avenue,
New York, New York 10018

Transfer Agent
OppenheimerFunds Services
P.O. Box 5270,
Denver, Colorado 80217
1.800.525.7048

Custodian Bank
The Bank of New York
One Wall Street,
New York, New York 10015

Independent Auditors
Deloitte & Touche LLP
555 Seventeenth Street,
Denver, Colorado 80202

Legal Counsel
Myer, Swanson, Adams & Wolf, P.C.
1600 Broadway,
Denver, Colorado 80202
890

PX880.0502(revised)070102

--------

1 Mr. Malone and Mrs. Hamilton are not Trustees of Oppenheimer Senior Floating Rate Fund. Mr. Murphy is not a Trustee or Managing
General Partner of any of the Centennial Trusts.
2. In accordance with Rule 12b-1 of the Investment Company Act, the term "Independent Trustees" in this Statement of Additional
Information refers to those Trustees who are not "interested persons" of the Fund and who do not have any direct or indirect
financial interest in the operation of the distribution plan or any agreement under the plan.
1 Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund.

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