Oppenheimer
INTERNATIONAL BOND FUND



Prospectus dated November 22, 2002




                                         Oppenheimer International Bond Fund is
                                         a mutual fund that seeks total return
                                         as its primary goal. As a secondary
                                         goal, it seeks income when consistent
                                         with total return. It invests
                                         primarily in foreign government and
                                         corporate bonds, in both developed and
                                         emerging markets.
                                               This Prospectus contains
                                         important information about the Fund's
                                         objectives, its investment policies,
                                         strategies and risks. It also contains
                                         important information about how to buy
                                         and sell shares of the Fund and other
                                         account features. Please read this
                                         Prospectus carefully before you invest
As with all mutual funds, the            and keep it for future reference about
Securities and Exchange Commission has   your account.
not approved or disapproved the Fund's
securities nor has it determined that
this Prospectus is accurate or
complete. It is a criminal offense to
represent otherwise.



                                                      (logo) OppenheimerFunds
                                                          The Right Way to Invest

Contents

            ABOUT THE FUND
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            The Fund's Investment Objectives and Strategies

            Main Risks of Investing in the Fund

            The Fund's Past Performance

            Fees and Expenses of the Fund

            About the Fund's Investments

            How the Fund is Managed


            ABOUT YOUR ACCOUNT
---------------------------------------------------------------------------------

            How to Buy Shares
            Class A Shares
            Class B Shares
            Class C Shares
            Class N Shares

            Special Investor Services
            AccountLink
            PhoneLink
            OppenheimerFunds Internet Website
            Retirement Plans

            How to Sell Shares
            By Wire
            By Checkwriting
            By Mail
            By Telephone

            How to Exchange Shares

            Shareholder Account Rules and Policies

            Dividends, Capital Gains and Taxes

            Financial Highlights


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A B O U T  T H E  F U N D
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The Fund's Investment Objectives and Strategies

WHAT ARE THE FUND'S INVESTMENT OBJECTIVES? The Fund's primary objective is to
seek total return. As a secondary objective, the Fund seeks income when
consistent with total return.

WHAT DOES THE FUND MAINLY INVEST IN?  The Fund invests mainly in debt
securities of foreign government and corporate issuers. Those debt securities
generally referred to as "bonds," include long-term and short-term government
bonds, participation interests in loans, corporate debt obligations,
"structured" notes and other debt obligations. They may include "zero coupon" or
"stripped" securities. Under normal circumstances, the Fund invests at least
80% of its net assets (plus borrowings for investment purposes) in "bonds" and
invests in at least three countries other than the United States. The Fund's
non-fundamental policy of investing at least 80% of its net assets in "bonds"
will not be changed by the Fund's Board of Trustees without first providing
shareholders 60 days written notice of the change.  The Fund does not limit its
investments to securities of issuers in a particular market capitalization or
maturity range or rating category, and can hold rated and unrated securities
below investment grade.

      The Fund invests in debt securities of issuers in both developed and
emerging markets throughout the world. These investments are more fully
explained in "About the Fund's Investments," below.

HOW DO THE PORTFOLIO MANAGERS DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the Fund's portfolio managers analyze the
overall investment opportunities and risks in individual national economies by
analyzing the business cycle in developed countries and political and exchange
rate factors of emerging markets. The portfolio managers currently focus on the
factors below (which may vary in particular cases and may change over time),
looking for:

o     Opportunities for higher yields than are available in U.S. markets, and
o     Opportunities in government bonds in both developed and emerging markets.

WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors
seeking total return in their investment over the long term, with the
opportunity for some income, from a fund that will invest mainly in foreign
debt securities. Those investors should be willing to assume the risks of
short-term share price fluctuations that are typical for a fund focusing on
debt investments in foreign securities, particularly those in emerging markets.
Since the Fund's income level will fluctuate, it is not designed for investors
needing an assured level of current income. Because of its focus on long-term
total return, the Fund may be appropriate for a part of an investor's
retirement plan portfolio. However, the Fund is not a complete investment
program.

Main Risks of Investing in the Fund

      All investments carry risks to some degree.  The Fund's investments are
subject to changes in their value from a number of factors, described below.
There is also the risk that poor security selection by the Fund's investment
Manager, OppenheimerFunds, Inc., will cause the Fund to underperform other
funds having similar objectives.

CREDIT RISK.  Debt securities are subject to credit risk.  Credit risk is the
risk that the issuer of a security might not make interest and principal
payments on the security as they become due. If the issuer fails to pay
interest, the Fund's income might be reduced, and if the issuer fails to repay
principal, the values of that bond and of the Fund's shares might fall.  A
downgrade in an issuer's credit rating or other adverse news about an issuer
can reduce the market value of that issuer's securities.

o     Special Risks of Lower-Grade Securities.  The Fund can invest without
         limit in securities below investment grade (commonly called "junk
         bonds") to seek total return and higher income.  Therefore, the Fund's
         credit risks are greater than those of funds that buy only
         investment-grade bonds. Lower-grade debt securities may be subject to
         greater price fluctuations and risks of loss of income and principal
         than investment-grade debt securities. Securities that are (or that
         have fallen) below investment grade are exposed to a greater risk that
         the issuers might not meet their debt obligations.  There may be less
         of a market for these securities, making it harder to value them or
         sell them at an acceptable price. These risks can reduce the Fund's
         share prices and the income it earns.

RISKS OF FOREIGN INVESTING. While foreign securities offer special investment
opportunities, there are also special risks that can reduce the Fund's share
prices and returns.  The change in value of a foreign currency against the U.S.
dollar will result in a change in the U.S. dollar value of securities
denominated in that foreign currency.  Currency rate changes can also affect
the distributions the Fund makes from the income it receives from foreign
securities as foreign currency values change against the U.S. dollar. Foreign
investing can result in higher transaction and operating costs for the Fund.
Foreign issuers are not subject to the same accounting and disclosure
requirements that U.S. companies are subject to.

      The value of foreign investments may be affected by exchange control
regulations, expropriation or nationalization of a company's assets, foreign
taxes, delays in settlement of transactions, changes in governmental economic
or monetary policy in the U.S. or abroad, or other political and economic
factors.

o     Special Risks of Emerging and Developing Markets.  Securities in emerging
         and developing markets present risks not found in more mature markets.
         Those securities may be more difficult to sell at an acceptable price
         and their prices may be more volatile than securities of issuers in
         more developed markets. Settlements of trades may be subject to
         greater delays so that the Fund may not receive the proceeds of a sale
         of a security on a timely basis.

         Emerging markets might have less developed trading markets, exchanges
         and legal and accounting systems.  Investments may be subject to
         greater risks of government restrictions on withdrawing the sales
         proceeds of securities from the country. Economies of developing
         countries may be more dependent on relatively few industries that may
         be highly vulnerable to local and global changes. Governments may be
         more unstable and present greater risks of nationalization or
         restrictions on foreign ownership of securities of local companies.
         These investments may be substantially more volatile than debt
         securities of issuers in the U.S. and other developed countries and
         may be very speculative.

INTEREST RATE RISKS. The values of debt securities are subject to change when
prevailing interest rates change.  When interest rates fall, the values of
already-issued debt securities generally rise.  When interest rates rise, the
values of already-issued debt securities generally fall. The magnitude of these
fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities.  The Fund's share prices can go up or down when
interest rates change because of the effect of the changes on the value of the
Fund's investments in debt securities. Also, if interest rates fall, the Fund's
investments in new securities at lower yields will reduce the Fund's income.

RISKS OF NON-DIVERSIFICATION.  The Fund is "non-diversified" under the
Investment Company Act of 1940. Accordingly, the Fund can invest a greater
portion of its assets in the debt securities of a single issuer than
"diversified" funds. For example, the Fund may invest a greater portion of its
assets in the debt obligations issued by the government of any single country
("sovereign debt") or corporate issuer. This policy gives the Fund more
flexibility to invest in the debt securities of a single issuer than if it were
a "diversified" fund. However, the Fund intends to diversify its investments so
that it will qualify as a "regulated investment company" under the Internal
Revenue Code (although it reserves the right not to qualify). To the extent the
Fund invests a relatively high percentage of its assets in the debt securities
of a single issuer or a limited number of issuers, the Fund is subject to
additional risk of loss if those debt securities lose market value.

RISKS OF DERIVATIVE INVESTMENTS. The Fund can use derivatives to seek increased
returns or to try to hedge investment and interest rate risks. In general
terms, a derivative investment is one whose value depends on (or is derived
from) the value of an underlying asset, interest rate or index. Options,
futures, structured notes and forward contracts are examples of derivatives the
Fund uses.

      If the issuer of the derivative does not pay the amount due, the Fund can
lose money on the investment. Also, the underlying security or investment on
which the derivative is based, and the derivative itself, might not perform the
way the Manager expected it to perform. If that happens, the Fund's share
prices could fall and the Fund could get less income than expected.  Some
derivatives may be illiquid, making it difficult to value them or sell them at
an acceptable price. Using derivatives can increase the volatility of the
Fund's share prices.

HOW RISKY IS THE FUND OVERALL? The risks described above collectively form the
overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and the prices of its shares. The Fund
is non-diversified and may focus its investments in the sovereign debt of a
limited number of countries. It will therefore be vulnerable to the effects of
economic changes that affect those countries.  Particular investments and
investment strategies also have risks. These risks mean that you can lose money
by investing in the Fund. When you redeem your shares, they may be worth more
or less than what you paid for them. There is no assurance that the Fund will
achieve its investment objectives. In the short term, the values of foreign
debt securities, particularly those of issuers in emerging markets, can be
volatile, and the prices of the Fund's shares can go up and down substantially.
The income from some of the Fund's investments may help cushion the Fund's
total return from changes in prices, but debt securities are subject to credit
and interest rate risks that can affect their values and income and the share
prices of the Fund. In the OppenheimerFunds spectrum, the Fund is generally
more aggressive and has more risks than bond funds that focus on U. S.
government securities and investment-grade bonds but is less aggressive than
funds that invest solely in emerging markets.

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 An investment in the Fund is not a deposit of any bank and is not insured or
 guaranteed by the Federal Deposit Insurance Corporation or any other
 government agency.
 -------------------------------------------------------------------------------

The Fund's Past Performance

The bar chart and table below show one measure of the risks of investing in the
Fund, by showing changes in the Fund's performance (for its Class A shares)
from year to year since the Fund's inception and by showing how the average
annual total returns of the Fund's shares, both before and after taxes, compare
to those of a broad-based market index.

The after-tax returns are shown for Class A shares only and are calculated
using the historical highest individual federal marginal income tax rates in
effect during the periods shown, and do not reflect the impact of state or
local taxes.  The after-tax returns for the other classes of shares will vary.
In certain cases, the figure representing "Return After Taxes on Distributions
and Sale of Fund Shares" may be higher than the other return figures for the
same period. A higher after-tax return results when a capital loss occurs upon
redemption and translates into an assumed tax deduction that benefits the
shareholder. The after-tax returns are calculated based on certain assumptions
mandated by regulation and your actual after-tax returns may differ from those
shown, depending on your individual tax situation.  The after-tax returns set
forth below are not relevant to investors who hold their fund shares through
tax-deferred arrangements such as 401(k) plans or IRAs or to institutional
investors not subject to tax. The Fund's past investment performance, before
and after taxes, is not necessarily an indication of how the Fund will perform
in the future.

Annual Total Returns (Class A) (as of 12/31 each year)

[See appendix to prospectus for data in bar chart showing annual total returns]

Sales charges are not included in the  calculations  of return in this bar chart,
and if those charges were included, the returns may be less than those shown.
For the period from 1/1/02  through  9/30/02,  the  cumulative  total  return for
Class A shares  before  taxes was  11.48%.  During  the  period  shown in the bar
chart,  the highest return (not  annualized)  before taxes for a calendar quarter
was 6.01%  (4thQ'99) and the lowest return  before taxes (not  annualized)  for a
calendar quarter was -9.80% (3rdQ'98).

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Average Annual Total Returns        1 Year            5 Years          10 Years
for    the    periods    ended                                        (or life of
December 31, 2001                                                   class, if less)
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Class  A   Shares   (inception
6/15/95)                            -2.71%             2.49%             6.21%
  Return Before Taxes               -2.71%            -0.49%             2.84%
  Return After Taxes on             -1.65%             0.43%             3.24%
  Distributions
  Return    After   Taxes   on
  Distributions  and  Sale  of
  Fund Shares
-------------------------------------------------------------------------------------
Salomon Brothers Non-U.S.
Dollar World Government Bond
Index (reflects no deduction        -3.54%             0.11%            0.71%1
for fees, expenses or taxes)
-------------------------------------------------------------------------------------
Class  B   Shares   (inception      -3.66%             2.42%             6.26%
(6/15/95)
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Class  C   Shares   (inception       0.16%             2.69%             6.15%
(6/15/95)
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Class  N   Shares   (inception       N/A2               N/A               N/A
3/1/01)
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1.    From 5/31/95.
2.    Because this is a new class of shares, return data for the period
   specified is not available.
The Fund's average annual total returns include the applicable sales charge:
for Class A, the current maximum initial sales charge of 4.75%; for Class B,
the contingent deferred sales charges of 5% (1-year) and 2% (5 years). Because
Class B shares convert to Class A shares 72 months after purchase, Class B
"life-of-class" performance does not include any contingent deferred sales
charge and uses Class A performance for the period after conversion. For Class
C, average annual total returns include the 1% contingent deferred sales charge
for the 1-year period.
The returns measure the performance of a hypothetical account and assume that
all dividends and capital gains distributions have been reinvested in
additional shares. The performance of the Fund's shares is compared to the
Salomon Brothers Non-U.S. Dollar World Government Bond Index, a
market-capitalization-weighted index that tracks performance of 13 government
bond markets in developed countries. The index performance includes
reinvestment of income but does not reflect transaction costs or taxes. The
Fund's investments vary from those in the index.

Fees and Expenses of the Fund

      The Fund pays a variety of expenses directly for management of its
assets, administration, distribution of its shares and other services. Those
expenses are subtracted from the Fund's assets to calculate the Fund's net
asset values per share. All shareholders therefore pay those expenses
indirectly. Shareholders pay other expenses directly, such as sales charges and
account transaction charges. The following tables are meant to help you
understand the fees and expenses you may pay if you buy and hold shares of the
Fund. The numbers below are based on the Fund's expenses during its fiscal year
ended September 30, 2002.

Shareholder Fees (charges paid directly from your investment):

-------------------------------------------------------------------------------
                         Class A       Class B       Class C      Class N
                         Shares        Shares        Shares       Shares
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Maximum Sales Charge
(Load) on purchases       4.75%         None          None           None
(as % of offering
price)
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Maximum Deferred
Sales Charge (Load)
(as % of the lower        None1          5%2           1%3           1%4
of the original
offering price or
redemption proceeds)
-------------------------------------------------------------------------------
1.    A  contingent   deferred   sales  charge  may  apply  to   redemptions   of
   investments  of $1 million  or more  ($500,000  for  certain  retirement  plan
   accounts) of Class A shares. See "How to Buy Shares" for details.
2.    Applies  to  redemptions  in first  year  after  purchase.  The  contingent
   deferred  sales  charge  declines  to 1% in the sixth  year and is  eliminated
   after that.
3.    Applies to shares redeemed within 12 months of purchase.
4.    Applies to shares  redeemed  within 18 months of a retirement  plan's first
   purchase of Class N shares.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)

--------------------------------------------------------------------------------
                            Class A       Class B       Class C      Class N
                            Shares        Shares        Shares        shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Management Fees              0.74%         0.74%         0.74%        0.74%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Distribution and/or
Service (12b-1) Fees         0.23%         1.00%         1.00%        0.50%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Other Expenses               0.40%         0.40%         0.40%        0.33%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Annual Operating       1.37%         2.14%         2.14%        1.57%
Expenses
--------------------------------------------------------------------------------
Expenses  may vary in future  years.  "Other  expenses"  include  transfer  agent
fees,  custodial  fees, and accounting and legal expenses that the Fund pays. The
Transfer  Agent has  voluntarily  undertaken  to the Fund to limit  the  transfer
agent  fees to  0.35%  of  average  daily  net  assets  per  fiscal  year for all
classes.  That  undertaking  may be amended  or  withdrawn  at any time.  For the
Fund's  fiscal year ended  September  30, 2002,  the transfer  agent fees did not
exceed the expense limitation described above.

EXAMPLES.  The following examples are intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds.  The
examples assume that you invest $10,000 in a class of shares of the Fund for
the time periods indicated and reinvest your dividends and distributions.

      The first example assumes that you redeem all of your shares at the end
of those periods. The second example assumes that you keep your shares. Both
examples also assume that your investment has a 5% return each year and that
the class's operating expenses remain the same. Your actual costs may be higher
or lower because expenses will vary over time. Based on these assumptions your
expenses would be as follows:

--------------------------------------------------------------------------------
If shares are redeemed:      1 Year        3 Years       5 Years     10 Years
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares                $608          $888         $1,189       $2,043
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares                $717          $970         $1,349       $2,0971
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares                $317          $670         $1,149       $2,472
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Shares                $260          $496          $ 855       $1,867
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
If shares are not            1 Year        3 Years       5 Years     10 Years
redeemed:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares                $608          $888         $1,189       $2,043
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares                $217          $670         $1,149       $2,0971
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares                $217          $670         $1,149       $2,472
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Shares                $160          $496          $ 855       $1,867
--------------------------------------------------------------------------------
In the first example, expenses include the initial sales charge for Class A and
the applicable Class B, Class C or Class N contingent deferred sales charges.
In the second example, the Class A expenses include the sales charge, but Class
B, Class C and Class N expenses do not include the contingent deferred sales
charges.
1.    Class B expenses for years 7 through 10 are based on Class A expenses,
   since Class B shares automatically convert to Class A after 6 years.

About the Fund's Investments

THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's
portfolio among different types of investments will vary over time based upon
the Manager's evaluation of economic and market trends.  The Fund's portfolio
might not always include all of the different types of investments described
below. At times the Fund may focus more on investing for growth with less
emphasis on income, while at other times it may have both growth and income
investments to seek total return. The Statement of Additional Information
contains more detailed information about the Fund's investment policies and
risks.

      The Manager tries to reduce risks by carefully researching securities
before they are purchased, and in some cases by using hedging techniques. The
Fund is non-diversified and may at times focus its investments in the debt
securities of a limited number of issuers. The Fund does not concentrate 25% or
more of its total assets in investments in the securities of any one foreign
government or in the debt and equity securities of companies in any one foreign
country or in any one industry.

      The debt securities the Fund buys may be rated by nationally recognized
rating organizations or they may be unrated securities assigned an equivalent
rating by the Manager. The Fund's investments may be above or below investment
grade in credit quality, and the Fund can invest without limit in
below-investment-grade debt securities, commonly called "junk bonds."

Foreign Debt Securities. The Fund's foreign debt investments can be denominated
      in U.S. dollars or in foreign currencies and can include "Brady Bonds."
      Those are U.S.-dollar denominated debt securities collateralized by
      zero-coupon U.S. Treasury securities. They are typically issued by
      emerging markets countries and are considered speculative securities with
      higher risks of default. The Fund will buy foreign currency only in
      connection with the purchase and sale of foreign securities and not for
      speculation.

Participation Interests in Loans. These securities represent an undivided
      fractional interest in a loan obligation of a borrower. They are
      typically purchased from banks or dealers that have made the loan or are
      members of the loan syndicate. The loans may be to foreign or U.S.
      companies. They are subject to the risk of default by the borrower. If
      the borrower fails to pay interest or repay principal, the Fund can lose
      money on its investment. The Fund does not invest more than 5% of its net
      assets in participation interests of any one borrower.

Derivative Investments. The Fund can invest in a number of different kinds of
      "derivative" investments.  In the broadest sense, structured notes,
      options, futures contracts, and other hedging instruments the Fund uses
      may be considered "derivative investments."  In addition to using
      derivatives for hedging, the Fund may use other derivative investments
      because they offer the potential for increased income and principal
      value.

o     "Structured" Notes. The Fund buys "structured" notes, which are
         specially-designed derivative debt investments whose principal
         payments or interest payments are linked to the value of an index
         (such as a currency or securities index) or commodity. The terms of
         the instrument may be "structured" by the purchaser (the Fund) and the
         borrower issuing the note.

         The values of these notes will fall or rise in response to the changes
         in the values of the underlying security or index. They are subject to
         both credit and interest rate risks and therefore the Fund could
         receive more or less than it originally invested when a note matures,
         or it might receive less interest than the stated coupon payment if
         the underlying investment or index does not perform as anticipated.
         The prices of these notes may be very volatile and they may have a
         limited trading market, making it difficult for the Fund to value them
         or sell them at an acceptable price.

      o  Hedging.  The Fund can buy and sell futures contracts, put and call
         options, and forward contracts.  These are all referred to as "hedging
         instruments."  The Fund is not required to hedge to seek its
         objectives. The Fund does not use hedging instruments for speculative
         purposes, and has limits on its use of them.

         The Fund could hedge for a number of purposes. It might do so to try
         to manage its exposure to the possibility that the prices of its
         portfolio securities may decline, or to establish a position in the
         securities market as a temporary substitute for purchasing individual
         securities.  It might do so to try to manage its exposure to changing
         interest rates. Forward contracts can be used to try to manage foreign
         currency risks on the Fund's foreign investments.

         Options trading involves the payment of premiums and has special tax
         effects on the Fund. There are also special risks in particular
         hedging strategies. In writing a put, there is a risk that the Fund
         may be required to buy the underlying security at a disadvantageous
         price.  If the Manager used a hedging instrument at the wrong time or
         judged market conditions incorrectly, the strategy could reduce the
         Fund's return. The Fund could also experience losses if the price of
         its futures and options positions were not correlated with its other
         investments or if it could not close out a position because of an
         illiquid market.

Portfolio Turnover. The Fund engages in short-term trading to seek its
      objectives. It might have a turnover rate in excess of 250% annually.
      Portfolio turnover affects brokerage and transaction costs the Fund pays.
      If the Fund realizes capital gains when it sells portfolio investments,
      it must generally pay those gains out to shareholders, increasing their
      taxable distributions. The Financial Highlights table at the end of this
      Prospectus shows the Fund's portfolio turnover rates during recent fiscal
      years.

CAN THE FUND'S INVESTMENT OBJECTIVES AND POLICIES CHANGE? The Fund's Board of
Trustees can change non-fundamental investment policies without shareholder
approval, although significant changes will be described in amendments to this
Prospectus. Fundamental policies cannot be changed without the approval of a
majority of the Fund's outstanding voting shares. The Fund's investment
objectives are fundamental policies. Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information. An
investment policy is not fundamental unless this Prospectus or the Statement of
Additional Information says that it is.

OTHER INVESTMENT STRATEGIES.  To seek its objectives, the Fund can use the
investment techniques and strategies described below. The Fund might not always
use all of them.  These techniques have risks, although some are designed to
help reduce overall investment or market risks.

Other Debt Securities.  Under normal market conditions, the Fund can invest (up
      to 35% of its total assets) in debt securities issued by U.S. companies
      or the U.S. government to seek the Fund's goals. However, these are not
      expected to be a significant part of the Fund's normal long term
      investment strategy. The Fund's investments in U.S. government securities
      can include U.S. Treasury securities and securities issued or guaranteed
      by agencies or instrumentalities of the U.S. government, such as
      collateralized mortgage obligations (CMOs) and other mortgage-related
      securities. Mortgage-related securities are subject to additional risks
      of unanticipated prepayments of the underlying mortgages, which can
      affect the income stream to the Fund from those securities as well as
      their values.

      The Fund can also buy U.S. commercial paper, which is short-term
      corporate debt, and asset-backed securities, which are interests in pools
      of consumer loans and other trade receivables. Prepayments on the
      underlying loans may reduce the Fund's income on the securities and
      reduce their values, as with CMOs.

Zero-Coupon and "Stripped Securities.  Some of the government and corporate
      debt securities the Fund buys are zero-coupon bonds that pay no interest
      and are issued at a substantial discount from their face value.
      "Stripped" securities are the separate income or principal components of a
      debt security. Some CMOs or other mortgage related securities may be
      stripped, with each component having a different proportion of principal
      or interest payments. One class might receive all the interest and the
      other all the principal payments. The values of these stripped mortgage
      related securities are very sensitive to prepayments of underlying
      mortgages.

      Zero-coupon and stripped securities are subject to greater fluctuations
      in price from interest rate changes than interest-bearing securities. The
      Fund may have to pay out the imputed income on zero coupon securities
      without receiving the actual cash currently. Interest-only securities are
      particularly sensitive to changes in interest rates.

Illiquid and Restricted Securities. Investments may be illiquid because they do
      not have an active trading market, making it difficult to value them or
      dispose of them promptly at an acceptable price. A restricted security is
      one that has a contractual restriction on its resale or which cannot be
      sold publicly until it is registered under the Securities Act of 1933.
      The Fund will not invest more than 10% of its net assets in illiquid or
      restricted securities (the Board can increase that limit to 15%).
      Certain restricted securities that are eligible for resale to qualified
      institutional purchasers may not be subject to that limit. The Manager
      monitors holdings of illiquid securities on an ongoing basis to determine
      whether to sell any holdings to maintain adequate liquidity.

"When-Issued" and "Delayed-Delivery" Transactions. The Fund can purchase
      securities on a "when-issued" basis and can purchase or sell securities
      on a "delayed-delivery" basis. Between the purchase and settlement, no
      payment is made for the security and no interest accrues to the buyer
      from the investment. There is a risk of loss to the Fund if the value of
      the when-issued security declines prior to the settlement date. No income
      accrues to the Fund on a when-issued security until the Fund receives the
      security on settlement of the trade.

Temporary Defensive and Interim Investments. In times of unstable, adverse
      market or economic conditions, the Fund can invest up to 100% of its
      assets in temporary investments that are inconsistent with the Fund's
      principal investment strategies.  These would ordinarily be short-term U.
      S. government securities, highly-rated commercial paper, bank obligations
      or repurchase agreements. The Fund could also hold these types of
      securities pending the investment of proceeds from the sale of Fund
      shares or portfolio securities or to meet anticipated redemptions of Fund
      shares.  To the extent the Fund invests defensively in these securities,
      it may not achieve its primary investment objective of total return.

How the Fund Is Managed

THE MANAGER. The Manager chooses the Fund's investments and handles its
day-to-day business.  The Manager carries out its duties, subject to the
policies established by the Fund's Board of Trustees, under an investment
advisory agreement that states the Manager's responsibilities.  The agreement
sets the fees the Fund pays to the Manager and describes the expenses that the
Fund is responsible to pay to conduct its business.

      The Manager has been an investment advisor since January 1960. The
Manager and its subsidiaries and controlled affiliates managed more than $120
billion in assets as of September 30, 2002 including other Oppenheimer funds,
with more than seven million shareholder accounts.  The Manager is located at
498 Seventh Avenue, New York, New York 10018.

Portfolio Managers.  The portfolio managers of the Fund, Arthur P. Steinmetz
         and Ruggero de'Rossi, are Vice Presidents of the Fund and the persons
         principally responsible for the day-to-day management of the Fund's
         investments.  Mr. Steinmetz became a portfolio manager of the Fund on
         May 20, 1999, and Mr. de'Rossi on March 6, 2000.  Mr. Steinmetz is a
         Senior Vice President of the Manager. He joined the Manager in 1986,
         and has been a portfolio manager of other Oppenheimer funds since
         1989.  Mr. de'Rossi joined the Manager as a Vice President and
         portfolio manager on March 6, 2000.  Since 1990 he had been associated
         with other international money management firms, most recently as a
         Senior Vice President and Chief Emerging Markets Strategist for ING
         Barings from July, 1998 through March, 2000, and Vice President and
         head of emerging markets trading strategies for Citicorp Securities
         from May, 1995 through July 1998. Mr. Steinmetz and Mr. de'Rossi are
         also officers and portfolio managers of other Oppenheimer funds.

Advisory Fees.  Under the investment advisory agreement, the Fund pays the
      Manager an advisory fee at an annual rate that declines on additional
      assets as the Fund grows: 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 Fund's management fee for its last fiscal year ended
      September 30, 2002 was 0.74% of average annual net assets for each class
      of shares.

ABOUT your account

How to Buy Shares

You can buy shares several ways, as described below. The Fund's Distributor,
OppenheimerFunds Distributor, Inc., may appoint servicing agents to accept
purchase (and redemption) orders. The Distributor, in its sole discretion, may
reject any purchase order for the Fund's shares.

Buying Shares Through Your Dealer. You can buy shares through any dealer,
      broker or financial institution that has a sales agreement with the
      Distributor. Your dealer will place your order with the Distributor on
      your behalf.
Buying Shares Through the Distributor. Complete an OppenheimerFunds new account
      application and return it with a check payable to "OppenheimerFunds
      Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If
      you don't list a dealer on the application, the Distributor will act as
      your agent in buying the shares. However, we recommend that you discuss
      your investment with a financial advisor before you make a purchase to be
      sure that the Fund is appropriate for you.
o     Paying by Federal Funds Wire. Shares purchased through the Distributor
      may be paid for by Federal Funds wire. The minimum investment is $2,500.
      Before sending a wire, call the Distributor's Wire Department at
      1.800.225.5677 to notify the Distributor of the wire and to receive
      further instructions.
o     Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you
      pay for shares by electronic funds transfers from your bank account.
      Shares are purchased for your account by a transfer of money from your
      bank account through the Automated Clearing House (ACH) system. You can
      provide those instructions automatically, under an Asset Builder Plan,
      described below, or by telephone instructions using OppenheimerFunds
      PhoneLink, also described below. Please refer to "AccountLink," below for
      more details.
o     Buying Shares Through Asset Builder Plans. You may purchase shares of the
      Fund automatically each month from your account at a bank or other
      financial institution under an Asset Builder Plan with AccountLink.
      Details are in the Asset Builder application and the Statement of
      Additional Information.

WHAT IS THE MINIMUM AMOUNT YOU MUST INVEST? In most cases, you can buy Fund
shares with a minimum initial investment of $1,000 and make additional
investments at any time with as little as $50. There are reduced minimums
available under the following special investment plans:
o     If you establish one of the many types of retirement plan accounts that
      OppenheimerFunds offers, more fully described below under "Special
      Investor Services," you can start your account with as little as $500.
o     By using an Asset Builder Plan or Automatic Exchange Plan (details are in
      the Statement of Additional Information), or government allotment plan,
      you can make subsequent investments (after making the initial investment
      of $500) for as little as $50. For any type of account established under
      one of these plans prior to November 1, 2002, the minimum additional
      investment will remain $25.
o     The minimum investment requirement does not apply to reinvesting
      dividends from the Fund or other Oppenheimer funds (a list of them
      appears in the Statement of Additional Information, or you can ask your
      dealer or call the Transfer Agent), or reinvesting distributions from
      unit investment trusts that have made arrangements with the Distributor.

AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price which is
the net asset value per share plus any initial sales charge that applies. The
offering price that applies to a purchase order is based on the next
calculation of the net asset value per share that is made after the Distributor
receives the purchase order at its offices in Colorado, or after any agent
appointed by the Distributor receives the order.

Net Asset Value. The Fund calculates the net asset value of each class of
      shares as of the close of The New York Stock Exchange, on each day the
      Exchange is open for trading (referred to in this Prospectus as a
      "regular business day"). The Exchange normally closes at 4:00 P.M.,
      Eastern time, but may close earlier on some days. All references to time
      in this Prospectus mean "Eastern time."

      The net asset value per share is determined 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. To determine net asset value, the Fund's
      Board of Trustees has established procedures to value the Fund's
      securities, in general, based on market value. The Board has adopted
      special procedures for valuing illiquid and restricted securities and
      obligations for which market values cannot be readily obtained. Because
      some foreign securities trade in markets and on exchanges that operate on
      weekends and U.S. holidays, the values of some of the Fund's foreign
      investments may change on days when investors cannot buy or redeem Fund
      shares.

      If, after the close of the principal market on which a security held by
      the Fund is traded, and before the time the Fund's securities are priced
      that day, an event occurs that the Manager deems likely to cause a
      material change in the value of such security, the Fund's Board of
      Trustees has authorized the Manager, subject to the Board's review, to
      ascertain a fair value for such security.  A security's valuation may
      differ depending on the method used for determining value.

The Offering Price. To receive the offering price for a particular day, in most
      cases the Distributor or its designated agent must receive your order by
      the time The New York Stock Exchange closes that day. If your order is
      received on a day when the Exchange is closed or after it has closed, the
      order will receive the next offering price that is determined after your
      order is received.
Buying Through a Dealer. If you buy shares through a dealer, your dealer must
      receive the order by the close of The New York Stock Exchange and
      transmit it to the Distributor so that it is received before the
      Distributor's close of business on a regular business day (normally 5:00
      P.M.) to receive that day's offering price, unless your dealer has made
      alternative arrangements with the Distributor. Otherwise, the order will
      receive the next offering price that is determined.

---------------------------------------------------------------------------------
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four
different classes of shares. The different classes of shares represent
investments in the same portfolio of securities, but the classes are subject to
different expenses and will likely have different share prices. When you buy
shares, be sure to specify the class of shares. If you do not choose a class,
your investment will be made in Class A shares.
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------

---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A Shares. If you buy Class A shares, you pay an initial sales charge (on
      investments up to $1 million for regular accounts or lesser amounts for
      certain retirement plans). The amount of that sales charge will vary
      depending on the amount you invest. The sales charge rates are listed in
      "How Can You Buy Class A Shares?" below.
---------------------------------------------------------------------------------
Class B Shares. If you buy Class B shares, you pay no sales charge at the time
      of purchase, but you will pay an annual asset-based sales charge. If you
      sell your shares within 6 years of buying them, you will normally pay a
      contingent deferred sales charge. That contingent deferred sales charge
      varies depending on how long you own your shares, as described in "How
      Can You Buy Class B Shares?" below.
---------------------------------------------------------------------------------
Class C Shares. If you buy Class C shares, you pay no sales charge at the time
      of purchase, but you will pay an annual asset-based sales charge. If you
      sell your shares within 12 months of buying them, you will normally pay a
      contingent deferred sales charge of 1.0%, as described in "How Can You
      Buy Class C Shares?" below.
---------------------------------------------------------------------------------
Class N Shares. If you buy Class N shares (available only through certain
      retirement plans), you pay no sales charge at the time of purchase, but
      you will pay an annual asset-based sales charge. If you sell your shares
      within 18 months of the retirement plan's first purchase of Class N
      shares, you may pay a contingent deferred sales charge of 1.0%, as
      described in "How Can You Buy Class N Shares?" below.

WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an
appropriate investment for you, the decision as to which class of shares is
best suited to your needs depends on a number of factors that you should
discuss with your financial advisor. Some factors to consider are how much you
plan to invest and how long you plan to hold your investment. If your goals and
objectives change over time and you plan to purchase additional shares, you
should re-evaluate those factors to see if you should consider another class of
shares. The Fund's operating costs that apply to a class of shares and the
effect of the different types of sales charges on your investment will vary
your investment results over time.

      The discussion below is not intended to be investment advice or a
recommendation, because each investor's financial considerations are different.
The discussion below assumes that you will purchase only one class of shares
and not a combination of shares of different classes. Of course, these examples
are based on approximations of the effects of current sales charges and
expenses projected over time, and do not detail all of the considerations in
selecting a class of shares. You should analyze your options carefully with
your financial advisor before making that choice.

How Long Do You Expect to Hold Your Investment? While future financial needs
      cannot be predicted with certainty, knowing how long you expect to hold
      your investment will assist you in selecting the appropriate class of
      shares. Because of the effect of class-based expenses, your choice will
      also depend on how much you plan to invest. For example, the reduced
      sales charges available for larger purchases of Class A shares may, over
      time, offset the effect of paying an initial sales charge on your
      investment, compared to the effect over time of higher class-based
      expenses on shares of Class B, Class C or Class N. For retirement plans
      that qualify to purchase Class N shares, Class N shares will generally be
      more advantageous than Class B and Class C shares.

   o  Investing for the Shorter Term. While the Fund is meant to be a long-term
      investment, if you have a relatively short-term investment horizon (that
      is, you plan to hold your shares for not more than six years), you should
      probably consider purchasing Class A or Class C shares rather than Class
      B shares. That is because of the effect of the Class B contingent
      deferred sales charge if you redeem within six years, as well as the
      effect of the Class B asset-based sales charge on the investment return
      for that class in the short-term. Class C shares might be the appropriate
      choice (especially for investments of less than $100,000), because there
      is no initial sales charge on Class C shares, and the contingent deferred
      sales charge does not apply to amounts you sell after holding them one
      year.

      However, if you plan to invest more than $100,000 for the shorter term,
      then as your investment horizon increases toward six years, Class C
      shares might not be as advantageous as Class A shares. That is because
      the annual asset-based sales charge on Class C shares will have a greater
      impact on your account over the longer term than the reduced front-end
      sales charge available for larger purchases of Class A shares.

      And for non-retirement plan investors who invest $1 million or more, in
      most cases Class A shares will be the most advantageous choice, no matter
      how long you intend to hold your shares. For that reason, the Distributor
      normally will not accept purchase orders of $500,000 or more of Class B
      shares or $1 million or more of Class C shares from a single investor.

o     Investing  for the Longer Term.  If you are  investing  less than  $100,000
      for the  longer-term,  for  example  for  retirement,  and do not expect to
      need  access to your money for seven  years or more,  Class B shares may be
      appropriate.

Are There  Differences  in Account  Features  That  Matter to You?  Some  account
      features   may  not  be   available  to  Class  B,  Class  C  and  Class  N
      shareholders.  Other  features may not be advisable  (because of the effect
      of the  contingent  deferred sales charge) for Class B, Class C and Class N
      shareholders.  Therefore,  you should  carefully review how you plan to use
      your investment account before deciding which class of shares to buy.

      Additionally, the dividends payable to Class B, Class C and Class N
      shareholders will be reduced by the additional expenses borne by those
      classes that are not borne by Class A shares, such as the Class B, Class
      C and Class N asset-based sales charge described below and in the
      Statement of Additional Information. Share certificates are only
      available for Class A shares. If you are considering using your shares as
      collateral for a loan, that may be a factor to consider. Also,
      checkwriting is not available on accounts subject to a contingent
      deferred sales charge.

How Do Share Classes Affect Payments to Your Broker? A financial advisor may
      receive different compensation for selling one class of shares than for
      selling another class. It is important to remember that Class B, Class C
      and Class N contingent deferred sales charges and asset-based sales
      charges have the same purpose as the front-end sales charge on sales of
      Class A shares: to compensate the Distributor for concessions and
      expenses it pays to dealers and financial institutions for selling
      shares. The Distributor may pay additional compensation from its own
      resources to securities dealers or financial institutions based upon the
      value of shares of the Fund owned by the dealer or financial institution
      for its own account or for its customers.

SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of
Additional Information details the conditions for the waiver of sales charges
that apply in certain cases, and the special sales charge rates that apply to
purchases of shares of the Fund by certain groups, or under specified
retirement plan arrangements or in other special types of transactions. To
receive a waiver or special sales charge rate, you must advise the Distributor
when purchasing shares or the Transfer Agent when redeeming shares that a
special condition applies.

HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at their offering
price, which is normally net asset value plus an initial sales charge. However,
in some cases, described below, purchases are not subject to an initial sales
charge, and the offering price will be the net asset value. In other cases,
reduced sales charges may be available, as described below or in the Statement
of Additional Information. Out of the amount you invest, the Fund receives the
net asset value to invest for your account.

      The sales charge varies depending on the amount of your purchase. A
portion of the sales charge may be retained by the Distributor or allocated to
your dealer as a concession. The Distributor reserves the right to reallow the
entire concession to dealers. The current sales charge rates and concessions
paid to dealers and brokers are as follows:

 ------------------------------------------------------------------------------
                          Front-End Sales  Front-End Sales   Concession As
                                           Charge As a
                          Charge As a      Percentage of
                          Percentage of    Net               Percentage of
 Amount of Purchase       Offering Price   Amount Invested   Offering Price
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Less than $50,000             4.75%             4.98%             4.00%
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $50,000 or more but           4.50%             4.71%             3.75%
 less than $100,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $100,000 or more but          3.50%             3.63%             2.75%
 less than $250,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $250,000 or more but          2.50%             2.56%             2.00%
 less than $500,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $500,000 or more but          2.00%             2.04%             1.60%
 less than $1 million
 ------------------------------------------------------------------------------

Can You Reduce Class A Sales Charges? You may be eligible to buy Class A shares
      at reduced sales charge rates under the Fund's "Right of Accumulation" or
      a Letter of Intent, as described in "Reduced Sales Charges" in the
      Statement of Additional Information.

Class A Contingent Deferred Sales Charge. There is no initial sales charge on
      purchases of Class A shares of any one or more of the Oppenheimer funds
      aggregating $1 million or more, or for certain purchases by particular
      types of retirement plans that were permitted to purchase such shares
      prior to March 1, 2001 ("grandfathered retirement accounts"). Retirement
      plans are not permitted to make initial purchases of Class A shares
      subject to a contingent deferred sales charge. The Distributor pays
      dealers of record concessions in an amount equal to 1.0% of purchases of
      $1 million or more other than by grandfathered retirement accounts. For
      grandfathered retirement accounts, the concession is 0.75% of the first
      $2.5 million of purchases plus 0.25% of purchases in excess of $2.5
      million. In either case, the concession will not be paid on purchases of
      shares by exchange or that were previously subject to a front-end sales
      charge and dealer concession.

      If you redeem any of those shares within an 18-month "holding period"
      measured from the beginning of the calendar month of their purchase, a
      contingent deferred sales charge (called the "Class A contingent deferred
      sales charge") may be deducted from the redemption proceeds. That sales
      charge will be equal to 1.0% of the lesser of:
o     the aggregate net asset value of the redeemed shares at the time of
         redemption (excluding shares purchased by reinvestment of dividends or
         capital gain distributions), or
o     the original net asset value of the redeemed shares.

      The Class A contingent deferred sales charge will not exceed the
      aggregate amount of the concessions the Distributor paid to your dealer
      on all purchases of Class A shares of all Oppenheimer funds you made that
      were subject to the Class A contingent deferred sales charge.

Purchases by Certain Retirement Plans. There is no initial sales charge on
      purchases of Class A shares of any one or more Oppenheimer funds by
      retirement plans that have $10 million or more in plan assets and that
      have entered into a special agreement with the Distributor and by
      retirement plans which are part of a retirement plan product or platform
      offered by certain banks, broker-dealers, financial advisors, insurance
      companies or recordkeepers which have entered into a special agreement
      with the Distributor. The Distributor currently pays dealers of record
      concessions in an amount equal to 0.25% of the purchase price of Class A
      shares by those retirement plans from its own resources at the time of
      sale, subject to certain exceptions as described in the Statement of
      Additional Information. There is no contingent deferred sales charge upon
      the redemption of such shares.

HOW CAN YOU BUY CLASS B SHARES? Class B shares are sold at net asset value per
share without an initial sales charge. However, if Class B shares are redeemed
within six years from the beginning of the calendar month of their purchase, a
contingent deferred sales charge will be deducted from the redemption proceeds.
The Class B contingent deferred sales charge is paid to compensate the
Distributor for its expenses of providing distribution-related services to the
Fund in connection with the sale of Class B shares.

      The amount of the contingent deferred sales charge will depend on the
number of years since you invested and the dollar amount being redeemed,
according to the following schedule for the Class B contingent deferred sales
charge holding period:

-------------------------------------------------------------------------------
Years Since Beginning of Month in       Contingent Deferred Sales Charge on
Which Purchase Order was Accepted       Redemptions in That Year
                                        (As % of Amount Subject to Charge)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
0 - 1                                   5.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
1 - 2                                   4.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2 - 3                                   3.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
3 - 4                                   3.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
4 - 5                                   2.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
5 - 6                                   1.0%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
More than 6                             None
-------------------------------------------------------------------------------
In the  table,  a  "year"  is a  12-month  period.  In  applying  the  contingent
deferred  sales charge,  all  purchases  are  considered to have been made on the
first regular business day of the month in which the purchase was made.

Automatic Conversion of Class B Shares. Class B shares automatically convert to
      Class A shares 72 months after you purchase them. This conversion feature
      relieves Class B shareholders of the asset-based sales charge that
      applies to Class B shares under the Class B Distribution and Service
      Plan, described below. The conversion is based on the relative net asset
      value of the two classes, and no sales load or other charge is imposed.
      When any Class B shares that you hold convert, any other Class B shares
      that were acquired by reinvesting dividends and distributions on the
      converted shares will also convert to Class A shares. For further
      information on the conversion feature and its tax implications, see
      "Class B Conversion" in the Statement of Additional Information.

How Can you Buy Class C Shares? Class C shares are sold at net asset value per
share without an initial sales charge. However, if Class C shares are redeemed
within a holding period of 12 months from the beginning of the calendar month
of their purchase, a contingent deferred sales charge of 1.0% will be deducted
from the redemption proceeds. The Class C contingent deferred sales charge is
paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class
C shares.

HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered for sale to
retirement plans (including IRAs and 403(b) plans) that purchase $500,000 or
more of Class N shares of one or more Oppenheimer funds or to group retirement
plans (which do not include IRAs and 403(b) plans) that have assets of $500,000
or more or 100 or more eligible participants. See "Availability of Class N
shares" in the Statement of Additional Information for other circumstances
where Class N shares are available for purchase.

      A contingent deferred sales charge of 1.0% will be imposed upon the
redemption of Class N shares, if:
o     The group retirement plan 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
o     With respect to an IRA 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.

      Retirement plans that offer Class N shares may impose charges on plan
participant accounts. The procedures for buying, selling, exchanging and
transferring the Fund's other classes of shares (other than the time those
orders must be received by the Distributor or Transfer Agent in Colorado) and
the special account features applicable to purchasers of those other classes of
shares described elsewhere in this Prospectus do not apply to Class N shares
offered through a group retirement plan. Instructions for buying, selling,
exchanging or transferring Class N shares offered through a group retirement
plan must be submitted by the plan, not by plan participants for whose benefit
the shares are held.

DISTRIBUTION AND SERVICE (12b-1) PLANS.

Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class
      A shares. It reimburses the Distributor for a portion of its costs
      incurred for services provided to accounts that hold Class A shares.
      Reimbursement is made quarterly at an annual rate of up to 0.25% of the
      average annual net assets of Class A shares of the Fund. The Distributor
      currently uses all of those fees to pay dealers, brokers, banks and other
      financial institutions quarterly for providing personal service and
      maintenance of accounts of their customers that hold Class A shares. With
      respect to Class A shares subject to a Class A contingent deferred sales
      charge purchased by grandfathered retirement accounts, the Distributor
      pays the 0.25% service fee to dealers in advance for the first year after
      the shares are sold by the dealer. After the shares have been held for a
      year, the Distributor pays the service fee to dealers on a quarterly
      basis.

Distribution and Service Plans for Class B, Class C and Class N Shares. The
      Fund has adopted Distribution and Service Plans for Class B, Class C and
      Class N shares to pay the Distributor for its services and costs in
      distributing Class B, Class C and Class N shares and servicing accounts.
      Under the plans, the Fund pays the Distributor an annual asset-based
      sales charge of 0.75% on Class B and Class C shares and 0.25% on Class N
      shares. The Distributor also receives a service fee of 0.25% per year
      under the Class B, Class C and Class N plans.

      The asset-based sales charge and service fees increase Class B and Class
      C expenses by 1.0% and increase Class N expenses by 0.50% of the net
      assets per year of the respective class. Because these fees are paid out
      of the Fund's assets on an on-going basis, over time these fees will
      increase the cost of your investment and may cost you more than other
      types of sales charges.

      The Distributor uses the service fees to compensate dealers for providing
      personal services for accounts that hold Class B, Class C or Class N
      shares. The Distributor pays the 0.25% service fees to dealers in advance
      for the first year after the shares are sold by the dealer. After the
      shares have been held for a year, the Distributor pays the service fees
      to dealers on a quarterly basis. The Distributor retains the service fees
      for accounts for which it renders the required personal services.

      The Distributor currently pays a sales concession of 3.75% of the
      purchase price of Class B shares to dealers from its own resources at the
      time of sale. Including the advance of the service fee, the total amount
      paid by the Distributor to the dealer at the time of sale of Class B
      shares is therefore 4.00% of the purchase price. The Distributor retains
      the Class B asset-based sales charge. See the Statement of Additional
      Information for exceptions.

      The Distributor currently pays a sales concession of 0.75% of the
      purchase price of Class C shares to dealers from its own resources at the
      time of sale. Including the advance of the service fee, the total amount
      paid by the Distributor to the dealer at the time of sale of Class C
      shares is therefore 1.0% of the purchase price. The Distributor pays the
      asset-based sales charge as an ongoing concession to the dealer on Class
      C shares that have been outstanding for a year or more. See the Statement
      of Additional Information for exceptions.

      The Distributor currently pays a sales concession of 0.75% of the
      purchase price of Class N shares to dealers from its own resources at the
      time of sale. Including the advance of the service fee, the total amount
      paid by the Distributor to the dealer at the time of sale of Class N
      shares is therefore 1.0% of the purchase price. The Distributor retains
      the asset-based sales charge on Class N shares. See the Statement of
      Additional Information for exceptions.

Special Investor Services

ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with
an account at a U.S. bank or other financial institution. It must be an
Automated Clearing House (ACH) member. AccountLink lets you:
    o transmit funds electronically to purchase shares by telephone (through a
      service representative or by PhoneLink) or automatically under Asset
      Builder Plans, or
    o have the Transfer Agent send redemption proceeds or transmit dividends
      and distributions directly to your bank account. Please call the Transfer
      Agent for more information.

      You may purchase shares by telephone only after your account has been
established. To purchase shares in amounts up to $250,000 through a telephone
representative, call the Distributor at 1.800.225.5677. The purchase payment
will be debited from your bank account.

      AccountLink privileges should be requested on your application or your
dealer's settlement instructions if you buy your shares through a dealer. After
your account is established, you can request AccountLink privileges by sending
signature-guaranteed instructions and proper documentation to the Transfer
Agent. AccountLink privileges will apply to each shareholder listed in the
registration on your account as well as to your dealer representative of record
unless and until the Transfer Agent receives written instructions terminating
or changing those privileges. After you establish AccountLink for your account,
any change of bank account information must be made by signature-guaranteed
instructions to the Transfer Agent signed by all shareholders who own the
account.

PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that
enables shareholders to perform a number of account transactions automatically
using a touch-tone phone. PhoneLink may be used on already-established Fund
accounts after you obtain a Personal Identification Number (PIN), by calling
the PhoneLink number, 1.800.225.5677.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone,
      by calling 1.800.225.5677. You must have established AccountLink
      privileges to link your bank account with the Fund to pay for these
      purchases.
Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described
      below, you can exchange shares automatically by phone from your Fund
      account to another OppenheimerFunds account you have already established
      by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone automatically by calling the
      PhoneLink number and the Fund will send the proceeds directly to your
      AccountLink bank account. Please refer to "How to Sell Shares," below for
      details.

CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain
types of account transactions to the Transfer Agent by fax (telecopier). Please
call 1.800.225.5677 for information about which transactions may be handled
this way. Transaction requests submitted by fax are subject to the same rules
and restrictions as written and telephone requests described in this
Prospectus.

OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain information about the Fund,
as well as your account balance, on the OppenheimerFunds Internet website, at
www.oppenheimerfunds.com. Additionally, shareholders listed in the account
registration (and the dealer of record) may request certain account
transactions through a special section of that website. To perform account
transactions or obtain account information online, you must first obtain a user
I.D. and password on that website. If you do not want to have Internet account
transaction capability for your account, please call the Transfer Agent at
1.800.225.5677. At times, the website may be inaccessible or its transaction
features may be unavailable.

AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable
you to sell shares automatically or exchange them to another OppenheimerFunds
account on a regular basis. Please call the Transfer Agent or consult the
Statement of Additional Information for details.

REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B
shares of the Fund, you have up to six months to reinvest all or part of the
redemption proceeds in Class A shares of the Fund or other Oppenheimer funds
without paying a sales charge. This privilege applies only to Class A shares
that you purchased subject to an initial sales charge and to Class A or Class B
shares on which you paid a contingent deferred sales charge when you redeemed
them. This privilege does not apply to Class C or Class N shares. You must be
sure to ask the Distributor for this privilege when you send your payment.

RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan
account. If you participate in a plan sponsored by your employer, the plan
trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals
and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs,
      SIMPLE IRAs and rollover IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business
      owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of
      eligible tax-exempt organizations, such as schools, hospitals and
      charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and
      self-employed individuals.
      Please call the Distributor for OppenheimerFunds retirement plan
documents, which include applications and important plan information.

How to Sell Shares

You can sell (redeem) some or all of your shares on any regular business day.
Your shares will be sold at the next net asset value calculated after your
order is received in proper form (which means that it must comply with the
procedures described below) and is accepted by the Transfer Agent. The Fund
lets you sell your shares by writing a letter, by wire, by using the Fund's
checkwriting privilege, or by telephone. You can also set up Automatic
Withdrawal Plans to redeem shares on a regular basis. If you have questions
about any of these procedures, and especially if you are redeeming shares in a
special situation, such as due to the death of the owner or from a retirement
plan account, please call the Transfer Agent first, at 1.800.225.5677, for
assistance.

Certain Requests Require a Signature Guarantee. To protect you and the Fund
      from fraud, the following redemption requests must be in writing and must
      include a signature guarantee (although there may be other situations
      that also require a signature guarantee):
   o  You wish to redeem more than $100,000 and receive a check
   o  The redemption check is not payable to all shareholders listed on the
      account statement
   o  The redemption check is not sent to the address of record on your account
      statement
   o  Shares are being transferred to a Fund account with a different owner or
      name
   o  Shares are being redeemed by someone (such as an Executor) other than the
      owners.

Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a
      guarantee of your signature by a number of financial institutions,
      including:
o     a U.S. bank, trust company, credit union or savings association,
o     a foreign bank that has a U.S. correspondent bank,
o     a U.S. registered dealer or broker in securities, municipal securities or
      government securities, or
o     a U.S. national securities exchange, a registered securities association
      or a clearing agency.
      If you are signing on behalf of a corporation, partnership or other
      business or as a fiduciary, you must also include your title in the
      signature.

Retirement Plan Accounts. There are special procedures to sell shares in an
      OppenheimerFunds retirement plan account. Call the Transfer Agent for a
      distribution request form. Special income tax withholding requirements
      apply to distributions from retirement plans. You must submit a
      withholding form with your redemption request to avoid delay in getting
      your money and if you do not want tax withheld. If your employer holds
      your retirement plan account for you in the name of the plan, you must
      ask the plan trustee or administrator to request the sale of the Fund
      shares in your plan account.

Sending Redemption Proceeds by Wire. While the Fund normally sends your money
      by check, you can arrange to have the proceeds of shares you sell sent by
      Federal Funds wire to a bank account you designate. It must be a
      commercial bank that is a member of the Federal Reserve wire system. The
      minimum redemption you can have sent by wire is $2,500. There is a $10
      fee for each request. To find out how to set up this feature on your
      account or to arrange a wire, call the Transfer Agent at 1.800.225.5677.

Checkwriting. To write checks against your Fund account, request that privilege
on your account application, or contact the Transfer Agent for signature cards.
They must be signed (with a signature guarantee) by all owners of the account
and returned to the Transfer Agent so that checks can be sent to you to use.
Shareholders with joint accounts can elect in writing to have checks paid over
the signature of one owner. If you previously signed a signature card to
establish checkwriting in another Oppenheimer fund, simply call 1.800.225.5677
to request checkwriting for an account in this Fund with the same registration
as the other account.
o     Checks can be written to the order of whomever you wish, but may not be
      cashed at the bank the checks are payable through or the Fund's custodian
      bank.
o     Checkwriting privileges are not available for accounts holding shares
      that are subject to a contingent deferred sales charge.
o     Checks must be written for at least $500. Checks written below the stated
      amount on the check will not be accepted. However, if you have existing
      checks indicating a $100 minimum, you may still use them for amounts of
      $100 or more.
o     Checks cannot be paid if they are written for more than your account
      value. Remember, your shares fluctuate in value and you should not write
      a check close to the total account value.
o     You may not write a check that would require the Fund to redeem shares
      that were purchased by check or Asset Builder Plan payments within the
      prior 10 days.
o     Don't use your checks if you changed your Fund account number, until you
      receive new checks.

HOW DO you SELL SHARES BY MAIL? Write a letter of instruction that includes:
   o  Your name
   o  The Fund's name
   o  Your Fund account number (from your account statement)
   o  The dollar amount or number of shares to be redeemed
   o  Any special payment instructions
   o  Any share certificates for the shares you are selling
   o  The signatures of all registered owners exactly as the account is
      registered, and
   o  Any special documents requested by the Transfer Agent to assure proper
      authorization of the person asking to sell the shares.

Use the following address for            Send courier or express mail
requests by mail:                        requests to:
OppenheimerFunds Services                OppenheimerFunds Services
P.O. Box 5270                            10200 E. Girard Avenue, Building D
Denver, Colorado 80217                   Denver, Colorado 80231

HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of
record may also sell your shares by telephone. To receive the redemption price
calculated on a particular regular business day, your call must be received by
the Transfer Agent by the close of The New York Stock Exchange that day, which
is normally 4:00 P.M., but may be earlier on some days. You may not redeem
shares held in an OppenheimerFunds retirement plan account or under a share
certificate by telephone.
   o  To redeem shares through a service representative or automatically on
      PhoneLink, call 1.800.225.5677.
      Whichever method you use, you may have a check sent to the address on the
account statement, or, if you have linked your Fund account to your bank
account on AccountLink, you may have the proceeds sent to that bank account.

Are There Limits on Amounts Redeemed by Telephone?
Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by
      telephone in any seven-day period. The check must be payable to all
      owners of record of the shares and must be sent to the address on the
      account statement. This service is not available within 30 days of
      changing the address on an account.

Telephone Redemptions Through AccountLink or by Wire. There are no dollar
      limits on telephone redemption proceeds sent to a bank account designated
      when you establish AccountLink. Normally the ACH transfer to your bank is
      initiated on the business day after the redemption. You do not receive
      dividends on the proceeds of the shares you redeemed while they are
      waiting to be transferred.

      If you have requested Federal Funds wire privileges for your account, the
      wire of the redemption proceeds will normally be transmitted on the next
      bank business day after the shares are redeemed. There is a possibility
      that the wire may be delayed up to seven days to enable the Fund to sell
      securities to pay the redemption proceeds. No dividends are accrued or
      paid on the proceeds of shares that have been redeemed and are awaiting
      transmittal by wire.

CAN YOU SELL SHARES THROUGH your DEALER?  The Distributor  has made  arrangements
to  repurchase   Fund  shares  from  dealers  and  brokers  on  behalf  of  their
customers.  Brokers or dealers  may charge for that  service.  If your shares are
held in the name of your dealer, you must redeem them through your dealer.

HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase
shares subject to a Class A, Class B, Class C or Class N contingent deferred
sales charge and redeem any of those shares during the applicable holding
period for the class of shares, the contingent deferred sales charge will be
deducted from the redemption proceeds (unless you are eligible for a waiver of
that sales charge based on the categories listed in Appendix C to the Statement
of Additional Information and you advise the Transfer Agent of your eligibility
for the waiver when you place your redemption request.)

      A contingent  deferred  sales charge will be based on the lesser of the net
asset value of the  redeemed  shares at the time of  redemption  or the  original
net asset value. A contingent deferred sales charge is not imposed on:
o     the amount of your account  value  represented  by an increase in net asset
      value over the initial purchase price,
o     shares  purchased  by  the  reinvestment  of  dividends  or  capital  gains
      distributions, or
o     shares  redeemed in the special  circumstances  described  in Appendix C to
      the Statement of Additional Information.
      To determine whether a contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order:
   1. shares acquired by reinvestment of dividends and capital gains
      distributions,
   2. shares held for the holding period that applies to the class, and
   3. shares held the longest during the holding period.

      Contingent deferred sales charges are not charged when you exchange
shares of the Fund for shares of other Oppenheimer funds. However, if you
exchange them within the applicable contingent deferred sales charge holding
period, the holding period will carry over to the fund whose shares you
acquire. Similarly, if you acquire shares of this Fund by exchanging shares of
another Oppenheimer fund that are still subject to a contingent deferred sales
charge holding period, that holding period will carry over to this Fund.

How to Exchange Shares

Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at
net asset value per share at the time of exchange, without sales charge. Shares
of the Fund can be purchased by exchange of shares of other Oppenheimer funds
on the same basis. To exchange shares, you must meet several conditions:
   o  Shares of the fund selected for exchange must be available for sale in
      your state of residence.
   o  The prospectuses of both funds must offer the exchange privilege.
   o  You must hold the shares you buy when you establish your account for at
      least seven days before you can exchange them. After the account is open
      seven days, you can exchange shares every regular business day.
   o  You must meet the minimum purchase requirements for the fund whose shares
      you purchase by exchange.
   o  Before exchanging into a fund, you must obtain and read its prospectus.
      Shares of a particular class of the Fund may be exchanged only for shares
of the same class in the other Oppenheimer funds. For example, you can exchange
Class A shares of this Fund only for Class A shares of another fund. In some
cases, sales charges may be imposed on exchange transactions. For tax purposes,
exchanges of shares involve a sale of the shares of the fund you own and a
purchase of the shares of the other fund, which may result in a capital gain or
loss. Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.

      You can find a list of Oppenheimer funds currently available for
exchanges in the Statement of Additional Information or obtain one by calling a
service representative at 1.800.225.5677. That list can change from time to
time.

HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or
by telephone:

Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form,
      signed by all owners of the account. Send it to the Transfer Agent at the
      address on the back cover. Exchanges of shares held under certificates
      cannot be processed unless the Transfer Agent receives the certificates
      with the request.
Telephone  Exchange  Requests.  Telephone exchange requests may be made either by
      calling  a  service  representative  or by using  PhoneLink  for  automated
      exchanges by calling  1.800.225.5677.  Telephone exchanges may be made only
      between  accounts  that are  registered  with the same name(s) and address.
      Shares held under certificates may not be exchanged by telephone.

ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you
should be aware of:
o     Shares are normally redeemed from one fund and purchased from the other
      fund in the exchange transaction on the same regular business day on
      which the Transfer Agent receives an exchange request that conforms to
      the policies described above. It must be received by the close of The New
      York Stock Exchange that day, which is normally 4:00 P.M. but may be
      earlier on some days. However, either fund may delay the purchase of
      shares of the fund you are exchanging into up to seven days if it
      determines it would be disadvantaged by the same day exchange.
o     The interests of the Fund's long-term shareholders and its ability to
      manage its investments may be adversely affected when its shares are
      repeatedly bought and sold in response to short-term market
      fluctuations--also known as "market timing." When large dollar amounts
      are involved, the Fund may have difficulty implementing long-term
      investment strategies, because it cannot predict how much cash it will
      have to invest. Market timing also may force the Fund to sell portfolio
      securities at disadvantageous times to raise the cash needed to buy a
      market timer's Fund shares. These factors may hurt the Fund's performance
      and its shareholders. When the Manager believes frequent trading would
      have a disruptive effect on the Fund's ability to manage its investments,
      the Manager and the Fund may reject purchase orders and exchanges into
      the Fund by any person, group or account that the Manager believes to be
      a market timer.
   o  The Fund may amend, suspend or terminate the exchange privilege at any
      time. The Fund will provide you notice whenever it is required to do so
      by applicable law, but it may impose changes at any time for emergency
      purposes.
   o  If the Transfer Agent cannot exchange all the shares you request because
      of a restriction cited above, only the shares eligible for exchange will
      be exchanged.

Shareholder Account Rules and Policies

More information about the Fund's policies and procedures for buying, selling
and exchanging shares is contained in the Statement of Additional Information.
A $12 annual fee is assessed on any account valued at less than $500. The fee
      is automatically deducted from accounts annually on or about the second
      to last business day of September. See the Statement of Additional
      Information, or visit the OppenheimerFunds website, to learn how you can
      avoid this fee and for circumstances when this fee will not be assessed.
The offering of shares may be suspended during any period in which the
      determination of net asset value is suspended, and the offering may be
      suspended by the Board of Trustees at any time the Board believes it is
      in the Fund's best interest to do so.
Telephone transaction privileges for purchases, redemptions or exchanges may be
      modified, suspended or terminated by the Fund at any time. The Fund will
      provide you notice whenever it is required to do so by applicable law. If
      an account has more than one owner, the Fund and the Transfer Agent may
      rely on the instructions of any one owner. Telephone privileges apply to
      each owner of the account and the dealer representative of record for the
      account unless the Transfer Agent receives cancellation instructions from
      an owner of the account.
The Transfer Agent will record any telephone calls to verify data concerning
      transactions and has adopted other procedures to confirm that telephone
      instructions are genuine, by requiring callers to provide tax
      identification numbers and other account data or by using PINs, and by
      confirming such transactions in writing. The Transfer Agent and the Fund
      will not be liable for losses or expenses arising out of telephone
      instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent
      receives all required documents in proper form. From time to time, the
      Transfer Agent in its discretion may waive certain of the requirements
      for redemptions stated in this Prospectus.
Dealers that perform account transactions for their clients by participating in
      NETWORKING through the National Securities Clearing Corporation are
      responsible for obtaining their clients' permission to perform those
      transactions, and are responsible to their clients who are shareholders
      of the Fund if the dealer performs any transaction erroneously or
      improperly.
The redemption price for shares will vary from day to day because the value of
      the securities in the Fund's portfolio fluctuates. The redemption price,
      which is the net asset value per share, will normally differ for each
      class of shares. The redemption value of your shares may be more or less
      than their original cost.
Payment for redeemed shares ordinarily is made in cash. It is forwarded by
      check, or through AccountLink or by Federal Funds wire (as elected by the
      shareholder) within seven days after the Transfer Agent receives
      redemption instructions in proper form. However, under unusual
      circumstances determined by the Securities and Exchange Commission,
      payment may be delayed or suspended. For accounts registered in the name
      of a broker-dealer, payment will normally be forwarded within three
      business days after redemption.
The Transfer Agent may delay processing any type of redemption payment as
      described under "How to Sell Shares" for recently purchased shares, but
      only until the purchase payment has cleared. That delay may be as much as
      10 days from the date the shares were purchased. That delay may be
      avoided if you purchase shares by Federal Funds wire or certified check,
      or arrange with your bank to provide telephone or written assurance to
      the Transfer Agent that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the
      account value has fallen below $200 for reasons other than the fact that
      the market value of shares has dropped. In some cases, involuntary
      redemptions may be made to repay the Distributor for losses from the
      cancellation of share purchase orders.
Shares may be "redeemed in kind" under unusual circumstances (such as a lack of
      liquidity in the Fund's portfolio to meet redemptions). This means that
      the redemption proceeds will be paid with liquid securities from the
      Fund's portfolio.
"Backup withholding" of federal income tax may be applied against taxable
      dividends, distributions and redemption proceeds (including exchanges) if
      you fail to furnish the Fund your correct, certified Social Security or
      Employer Identification Number when you sign your application, or if you
      under-report your income to the Internal Revenue Service.
To avoid sending duplicate copies of materials to households, the Fund will
      mail only one copy of each prospectus, annual and semi-annual report and
      annual notice of the Fund's privacy policy to shareholders having the
      same last name and address on the Fund's records. The consolidation of
      these mailings, called householding, benefits the Fund through reduced
      mailing expense.

      If you want to receive multiple copies of these materials, you may call
      the Transfer Agent at 1.800.225.5677. You may also notify the Transfer
      Agent in writing. Individual copies of prospectuses, reports and privacy
      notices will be sent to you commencing within 30 days after the Transfer
      Agent receives your request to stop householding.

Dividends, Capital Gains and Taxes

Dividends. The Fund intends to declare dividends separately for each class of
shares from net investment income each regular business day and pay those
dividends to shareholders monthly on a date selected by the Board of Trustees.
Daily dividends will not be declared or paid on newly purchased shares until
Federal Funds are available to the Fund from the purchase payment for shares.
Dividends and distributions paid to Class A shares will generally be higher
than dividends for Class B, Class C and Class N shares, which normally have
higher expenses than Class A shares. The Fund has no fixed dividend rate and
cannot guarantee that it will pay any dividends or distributions.

Capital Gains. The Fund may realize capital gains on the sale of portfolio
securities. If it does, it may make distributions out of any net short-term or
long-term capital gains in December of each year. The Fund may make
supplemental distributions of dividends and capital gains following the end of
its fiscal year. There can be no assurance that the Fund will pay any capital
gains distributions in a particular year.

WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your
account, specify on your application how you want to receive your dividends and
distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends
      and capital gains distributions in additional shares of the Fund.
Reinvest Dividends or Capital Gains. You can elect to reinvest some
      distributions (dividends, short-term capital gains or long-term capital
      gains distributions) in the Fund while receiving the other types of
      distributions by check or having them sent to your bank account through
      AccountLink.
Receive All Distributions in Cash. You can elect to receive a check for all
      dividends and capital gains distributions or have them sent to your bank
      through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can
      reinvest all distributions in the same class of shares of another
      OppenheimerFunds account you have established.

TAXES. If your shares are not held in a tax-deferred retirement account, you
should be aware of the following tax implications of investing in the Fund.
Distributions are subject to federal income tax and may be subject to state or
local taxes. Dividends paid from short-term capital gains and net investment
income are taxable as ordinary income.  Long-term capital gains are taxable as
long-term capital gains when distributed to shareholders.  It does not matter
how long you have held your shares. Whether you reinvest your distributions in
additional shares or take them in cash, the tax treatment is the same.

      If more than 50% of the Fund's assets are invested in foreign securities
at the end of any fiscal year, the Fund may elect under the Internal Revenue
Code to permit shareholders to take a credit or deduction on their federal
income tax returns for foreign taxes paid by the Fund.

      Every year the Fund will send you and the IRS a statement showing the
amount of any taxable distribution you received in the previous year. Any
long-term capital gains will be separately identified in the tax information
the Fund sends you after the end of the calendar year.

Avoid "Buying a Dividend." If you buy shares on or just before the Fund
      declares a capital gains distribution, you will pay the full price for
      the shares and then receive a portion of the price back as a taxable
      capital gain.
Remember, There May be Taxes on Transactions. Because the Fund's share prices
      fluctuate, you may have a capital gain or loss when you sell or exchange
      your shares. A capital gain or loss is the difference between the price
      you paid for the shares and the price you received when you sold them.
      Any capital gain is subject to capital gains tax.
Returns of Capital Can Occur. In certain cases, distributions made by the Fund
      may be considered a non-taxable return of capital to shareholders. If
      that occurs, it will be identified in notices to shareholders.

      This   information  is  only  a  summary  of  certain  federal  income  tax
information  about your  investment.  You should  consult  with your tax  advisor
about the effect of an investment in the Fund on your particular tax situation.

Financial Highlights

The Financial Highlights Table is presented to help you understand the Fund's
financial performance for the past five fiscal years. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Deloitte & Touche LLP, the
Fund's independent auditors, whose report, along with the Fund's financial
statements, is included in the Statement of Additional Information, which is
available on request.

FINANCIAL HIGHLIGHTS

 Class A   Year ended September 30,             2002      2001      2000     1999      1998
----------------------------------------------------------------------------------------------

 Per Share Operating Data
----------------------------------------------------------------------------------------------
 Net asset value, beginning of period          $ 3.95    $ 4.19    $ 4.23    $ 4.32    $ 5.51
----------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                            .24       .30       .45       .58       .56
 Net realized and unrealized gain (loss)          .41      (.24)     (.08)     (.14)    (1.20)
                                               -----------------------------------------------
 Total from investment operations                 .65       .06       .37       .44      (.64)
----------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income            (.19)       --      (.21)     (.53)     (.53)
 Tax return of capital distribution              (.03)     (.30)     (.20)       --        --
 Distributions from net realized gain              --        --        --        --      (.02)
                                               -----------------------------------------------
 Total dividends and/or distributions
 to shareholders                                 (.22)     (.30)     (.41)     (.53)     (.55)
----------------------------------------------------------------------------------------------
 Net asset value, end of period                 $4.38     $3.95     $4.19     $4.23     $4.32
                                               ===============================================

----------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value(1)            16.78%     1.40%     8.93%    10.58%   (12.50)%
----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------
 Ratios/Supplemental Data
----------------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)    $181,456  $118,733  $100,928  $102,236  $ 97,404
----------------------------------------------------------------------------------------------
 Average net assets (in thousands)           $134,912  $117,000  $110,968  $101,948  $108,264
----------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                           5.16%     7.10%    10.23%    13.47%    11.09%
 Expenses                                        1.37%     1.38%     1.31%     1.26%     1.24%(3)
 Expenses, net of reduction to custodian
 and/or voluntary waiver of transfer agent fees  1.37%     1.38%     1.29%     1.25%     1.24%
----------------------------------------------------------------------------------------------
 Portfolio turnover rate                          372%      377%      288%      285%      446%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 2. Annualized for periods of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 24 | OPPENHEIMER INTERNATIONAL BOND FUND

 Class B   Year ended September 30,             2002      2001      2000     1999      1998
----------------------------------------------------------------------------------------------

 Per Share Operating Data
----------------------------------------------------------------------------------------------
 Net asset value, beginning of period          $ 3.94    $ 4.17   $ 4.22     $ 4.31    $ 5.50
----------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                            .21       .26      .42        .55       .52
 Net realized and unrealized gain (loss)          .40      (.22)    (.09)      (.14)    (1.20)
                                               -----------------------------------------------
 Total from investment operations                 .61       .04      .33        .41      (.68)
----------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income            (.15)       --     (.20)      (.50)     (.49)
 Tax return of capital distribution              (.03)     (.27)    (.18)        --        --
 Distributions from net realized gain              --        --       --         --      (.02)
                                               -----------------------------------------------
 Total dividends and/or distributions
 to shareholders                                 (.18)     (.27)    (.38)      (.50)     (.51)
----------------------------------------------------------------------------------------------
 Net asset value, end of period                 $4.37     $3.94    $4.17      $4.22     $4.31
                                               ===============================================

----------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value(1)            15.90%     0.85%    7.94%      9.79%   (13.16)%
----------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------
 Ratios/Supplemental Data
----------------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)    $100,049   $84,427 $ 98,272   $118,632  $119,998
----------------------------------------------------------------------------------------------
 Average net assets (in thousands)           $ 85,244   $93,455 $115,116   $122,878  $128,789
----------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                           4.41%     6.40%    9.63%     12.70%    10.33%
 Expenses                                        2.14%     2.14%    2.05%      2.02%     2.00%(3)
 Expenses, net of reduction to custodian
 and/or voluntary waiver of transfer agent fees  2.14%     2.14%    2.03%      2.01%     2.00%
----------------------------------------------------------------------------------------------
 Portfolio turnover rate                          372%      377%     288%       285%      446%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 2. Annualized for periods of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 25 | OPPENHEIMER INTERNATIONAL BOND FUND

FINANCIAL HIGHLIGHTS  Continued


 Class C   Year ended September 30,             2002      2001      2000     1999      1998
----------------------------------------------------------------------------------------------

 Per Share Operating Data
----------------------------------------------------------------------------------------------
 Net asset value, beginning of period          $ 3.94    $ 4.17   $ 4.22     $ 4.31    $ 5.50
----------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                            .21       .26      .41        .55       .52
 Net realized and unrealized gain (loss)          .40      (.22)    (.08)      (.14)    (1.20)
                                               -----------------------------------------------
 Total from investment operations                 .61       .04      .33        .41      (.68)
----------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders
 Dividends from net investment income            (.15)    --        (.19)      (.50)     (.49)
 Tax return of capital distribution              (.03)     (.27)    (.19)        --        --
 Distributions from net realized gain              --        --       --         --      (.02)
                                               -----------------------------------------------
 Total dividends and/or distributions
 to shareholders                                 (.18)     (.27)    (.38)      (.50)     (.51)
----------------------------------------------------------------------------------------------
 Net asset value, end of period                 $4.37     $3.94    $4.17      $4.22     $4.31
                                               ===============================================

----------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value(1)            15.90%     0.85%    7.95%      9.80%   (13.16)%
----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------
 Ratios/Supplemental Data
----------------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)     $38,865   $25,221  $27,663    $29,456   $27,636
----------------------------------------------------------------------------------------------
 Average net assets (in thousands)            $28,635   $27,125  $30,710    $28,918   $29,336
----------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                           4.37%     6.39%    9.55%     12.76%    10.33%
 Expenses                                        2.14%     2.14%    2.05%      2.02%     2.00%(3)
 Expenses, net of reduction to custodian
 and/or voluntary waiver of transfer agent fees  2.14%     2.14%    2.03%      2.01%     2.00%
----------------------------------------------------------------------------------------------
 Portfolio turnover rate                          372%      377%     288%       285%      446%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 2. Annualized for periods of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 26 | OPPENHEIMER INTERNATIONAL BOND FUND

 Class N   Year ended September 30,                                   2002      2001(1)
---------------------------------------------------------------------------------------

 Per Share Operating Data
---------------------------------------------------------------------------------------
 Net asset value, beginning of period                               $ 3.95    $ 4.23
---------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                                 .21       .16
 Net realized and unrealized gain (loss)                               .42      (.28)
                                                                    -------------------
 Total from investment operations                                      .63      (.12)
---------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                                 (.18)       --
 Tax return of capital distribution                                   (.03)     (.16)
 Distributions from net realized gain                                   --        --
                                                                    -------------------
 Total dividends and/or distributions
 to shareholders                                                      (.21)     (.16)
---------------------------------------------------------------------------------------
 Net asset value, end of period                                      $4.37     $3.95
                                                                    ===================

---------------------------------------------------------------------------------------
 Total Return, at Net Asset Value(2)                                 16.23%    (2.88)%
---------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------
 Ratios/Supplemental Data
---------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)                           $1,280      $109
---------------------------------------------------------------------------------------
 Average net assets (in thousands)                                  $  297      $ 34
---------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                                4.87%     6.56%
 Expenses                                                             1.57%     1.39%
 Expenses, net of reduction to custodian
 and/or voluntary waiver of transfer agent fees                       1.57%     1.39%
---------------------------------------------------------------------------------------
 Portfolio turnover rate                                               372%      377%

1. For the period from March 1, 2001 (inception of offering) to September 30, 2001. 2. Assumes an investment on the business day before the first day of the fiscal period (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. 3. Annualized for periods of less than one full year.

INFORMATION AND SERVICES

For More Information on Oppenheimer International Bond Fund
The following additional information about the Fund is available without charge
upon request:

STATEMENT OF ADDITIONAL INFORMATION. This document includes additional
information about the Fund's investment policies, risks, and operations. It is
incorporated by reference into this Prospectus (which means it is legally part
of this Prospectus).

ANNUAL AND SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments and performance is available in the Fund's Annual and Semi-Annual
Reports to shareholders. The Annual Report includes a discussion of market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year.

How to Get More Information
You can request the Statement of Additional Information, the Annual and
Semi-Annual Reports, the notice explaining the Fund's privacy policy and other
information about the Fund or your account:

------------------------------------------------------------------------------
By Telephone:                 Call OppenheimerFunds Services toll-free:
                              1.800.CALL.OPP (225.5677)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
By Mail:                      Write to:
                              OppenheimerFunds Services
                              P.O. Box 5270
                              Denver, Colorado 80217-5270
------------------------------------------------------------------------------
------------------------------------------------------------------------------
On the Internet:              You can send us a request by e-mail or read or
                              down-load documents on the OppenheimerFunds
                              website: www.oppenheimerfunds.com
------------------------------------------------------------------------------

Information about the Fund including the Statement of Additional Information
can be reviewed and copied at the SEC's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be obtained
by calling the SEC at 1.202.942.8090.  Reports and other information about the
Fund are available on the EDGAR database on the SEC's Internet website at
www.sec.gov. Copies may be obtained after payment of a duplicating fee by
electronic request at the SEC's e-mail address: publicinfo@sec.gov or by
writing to the SEC's Public Reference Section, Washington, D.C. 20549-0102.
No one has been authorized to provide any information about the Fund or to make
any representations about the Fund other than what is contained in this
Prospectus. This Prospectus is not an offer to sell shares of the Fund, nor a
solicitation of an offer to buy shares of the Fund, to any person in any state
or other jurisdiction where it is unlawful to make such an offer.

The Fund's shares are distributed by:                [logo]      OppenheimerFunds
Distributor, Inc.
The Fund's SEC File No.: 811-07255
PR0880.001.1102
Printed on recycled paper

Appendix to Prospectus of
Oppenheimer International Bond Fund


      Graphic  material  included in the Prospectus of Oppenheimer  International
Bond Fund (the "Fund")  under the heading:  "Annual  Total Return (Class A) (% as
of 12/31 each year)":

      A bar chart will be included in the  Prospectus  of the Fund  depicting the
annual total returns of a  hypothetical  investment in Class A shares of the Fund
for  each  of the  six  most  recent  calendar  years,  without  deducting  sales
charges.  Set forth  below is the  relevant  data point  that will  appear on the
bar chart:


Year
Ended:                                Annual Total Return:


12/31/96                    19.29%
12/31/97                     2.46%
12/31/98                    -4.36%
12/31/99                         11.00%
12/31/00                           6.85%
12/31/01                           2.15%

------------------------------------------------------------------------------
Oppenheimer International Bond Fund
------------------------------------------------------------------------------

6803 South Tucson Way, Centennial, Colorado 80112
1.800.225.5677




      This  Statement of  Additional  Information  is not a  Prospectus.  This
document  contains  additional  information  about  the Fund  and  supplements
information  in the  Prospectus  dated  November 22,  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
    Other Investment Restrictions...................................... 28
How the Fund is Managed ............................................... 30
    Organization and History........................................... 30
    Board of Trustees and Oversight Committees......................... 30
    Trustees and Officers of the Fund.................................. 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

------------------------------------------------------------------------------
ABOUT THE FUND
------------------------------------------------------------------------------

Additional Information About the Fund's Investment Policies and Risks

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

o     Obligations Issued or Guaranteed by U.S. Government Agencies or
Instrumentalities. These include direct obligations and mortgage related
securities that have different levels of credit support from the government.
Some are supported by the full faith and credit of the U.S. government, such
as Government National Mortgage Association pass-through mortgage
certificates (called "Ginnie Maes"). Some are supported by the right of the
issuer to borrow from the U.S. Treasury under certain circumstances, such as
Federal National Mortgage Association bonds ("Fannie Maes"). Others are
supported only by the credit of the entity that issued them, such as Federal
Home Loan Mortgage Corporation obligations ("Freddie Macs").

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      No 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      The Fund will cover its short positions in these cases by 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.

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

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

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

o     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 advisor as the Fund (or
an advisor that is an affiliate of the Fund's advisor).  The exchanges also
impose position limits on futures transactions.  An exchange may order the
liquidation of positions found to be in violation of those limits and may
impose certain other sanctions.

      Under the Investment Company Act, when the Fund purchases a future, it
must maintain cash or readily marketable short-term debt instruments in an
amount equal to the market value of the securities underlying the future,
less the margin deposit applicable to it.

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

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

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

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

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

|X|   Temporary Defensive 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 or at least BBB by Standard &
         Poor's, or a comparable rating by another rating organization), or
         unrated securities judged by the Manager to have a comparable
         quality to rated securities in those categories,
o     certificates of deposit and bankers' acceptances of domestic and
         foreign banks and savings and loan associations, having total assets
         in excess of $1 billion, and
o     repurchase agreements.

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

|X|   Investment in Other Investment Companies. The Fund can also invest in
the securities of other investment companies, which can include open-end
funds, closed-end funds and unit investment trusts, subject to the limits set
forth in the Investment Company Act that apply to those types of
investments.  For example, the Fund can invest in Exchange-Traded Funds,
which are typically open-end funds or unit investment trusts, listed on a
stock exchange.  The Fund might do so as a way of gaining exposure to the
segments of the equity or fixed-income markets represented by the
Exchange-Traded Funds' portfolio, at times when the Fund may not be able to
buy those portfolio securities directly.

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

Investment Restrictions

      |X|  What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be
changed only by the vote of a "majority" of the Fund's outstanding voting
securities.  Under the Investment Company Act, a "majority" vote is defined
as the vote of the holders of the lesser of:

o     67% or more of the shares present or represented by proxy at a
         shareholder meeting, if the holders of more than 50% of the
         outstanding shares are present or represented by proxy, or
o     more than 50% of the outstanding shares.

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

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

o     The Fund cannot make loans except (a) through lending of securities,
         (b) through the purchase of debt instruments or similar evidences of
         indebtedness, (c) through an inter-fund lending program with other
         affiliated funds, and (d) through repurchase agreements.
o     The Fund cannot buy or sell real estate. However, the Fund can purchase
         debt securities secured by real estate or interests in real estate
         or issued by companies, including real estate investment trusts,
         which invest in real estate or interests in real estate.
o     The Fund cannot underwrite securities of other companies. A permitted
         exception is in case it is deemed to be an underwriter under the
         Securities Act of 1933 when reselling any securities held in its own
         portfolio.
o     The Fund cannot issue "senior securities," but this does not prohibit
         certain investment activities for which assets of the Fund are
         designated as segregated, or margin, collateral or escrow
         arrangements are established, to cover the related obligations.
         Examples of those activities include borrowing money, reverse
         repurchase agreements, delayed-delivery and when-issued arrangements
         for portfolio securities transactions, and contracts to buy or sell
         derivatives, hedging instruments, options or futures.
o     The Fund cannot borrow money in excess of 33 1/3% of the value of its
         total assets.  The Fund may borrow only from banks and/or affiliated
         investment companies.  The Fund cannot make any investment at a time
         during which its borrowings exceed 5% of the value of its assets.
         With respect to this fundamental policy, the Fund can borrow only if
         it maintains a 300% ratio of assets to borrowings at all times in
         the manner set forth in the Investment Company Act.
o     The Fund cannot concentrate investments. That means it cannot invest
         25% or more of its total assets in any one industry. The Fund will
         not invest 25% or more of its total assets in government securities
         of any one foreign company or in debt and equity securities issued
         by companies organized under the laws of any one foreign country.
         Obligations of the U.S. government, its agencies and
         instrumentalities are not considered to be part of an "industry" for
         the purposes of this policy.

      Unless the Prospectus or this Statement of Additional Information
states that a percentage restriction applies on an ongoing basis, it applies
only at the time the Fund makes an investment. 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.  Funds that are
diversified have restrictions against investing too much of their assets in
the securities of any one "issuer."  That means that the Fund can invest more
of its assets in the securities of a single issuer than a fund that is
diversified.

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

How the Fund is Managed

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

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

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

      The Fund currently has 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.

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.  Although the Fund will not normally hold annual meetings of its
shareholders,  it may hold shareholder meetings from time to time on important
matters,  and  shareholders  have the  right  to call a  meeting  to  remove a
Trustee or to take other action described in the Fund's Declaration of Trust.

      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.

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

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

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

      The Board of Trustees has an Audit Committee and a Review Committee.
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
seven meetings during the fiscal year ended September 30, 2002. The Audit
Committee furnishes the Board with recommendations regarding the selection of
the Fund's independent auditors. Other main functions of the Audit Committee
include, but are not limited to: (i) reviewing the scope and results of
audits and the audit fees charged; (ii) reviewing reports from the Fund's
independent auditors regarding the Fund's internal accounting procedures and
controls; and (iii) establishing a separate line of communication between the
Fund's independent auditors and its independent Trustees.

      The Audit Committee's functions include selecting and nominating, to
the full Board, nominees for election as Trustees, and selecting and
nominating Independent Trustees for election.  The Audit Committee may, but
need not, consider the advice and recommendation of the Manager and its
affiliates in selecting nominees. The full Board elects new trustees except
for those instances when a shareholder vote is required.

      To date, the Committee has been able to identify from its own resources
an ample number of qualified candidates.  Nonetheless, shareholders may
submit names of individuals, accompanied by complete and properly supported
resumes, for the Audit Committee's consideration by mailing such information
to the Committee in care of the Fund.  The Committee may consider such
persons at such time as it meets to consider possible nominees.  The
Committee, however, reserves sole discretion to determine the candidates to
present to the Board and/or shareholders when it meets for the purpose
considering potential nominees.

      The members of the Review Committee are Jon S. Fossel (Chairman),
Robert G. Avis, Sam Freedman, Beverly Hamilton and F. William Marshall, Jr.
The Review Committee held seven meetings during the fiscal year ended
September 30, 2002. Among other functions, the Review Committee reviews
reports and makes recommendations to the Board concerning the fees paid to
the Fund's transfer agent and the services provided to the Fund by the
transfer agent.  The Review Committee also reviews the Fund's investment
performance and policies and procedures adopted by the Fund to comply with
Investment Company Act and other applicable law.

Trustees and Officers of the Fund. Except for Mr. Murphy, each of the
Trustees is an independent trustee of the Fund ("Independent Trustee"). Mr.
Murphy is an "Interested Trustee," because he is affiliated with the Manager
by virtue of his positions as an officer and director of the Manager, and as
a shareholder of its parent company. Mr. Murphy was elected as a Trustee of
the Fund with the understanding that in the event he ceases to be the chief
executive officer of the Manager, he will resign as a trustee of the Fund and
the other Board II Funds (defined below) for which he is a trustee or
director.

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

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 Street Funds, Inc.      Centennial California Tax Exempt Trust
Oppenheimer   Main  Street   Opportunity
Fund                                     Centennial Government Trust
Oppenheimer Main Street Small Cap Fund   Centennial Money Market Trust
Oppenheimer Municipal Fund               Centennial New York Tax Exempt Trust
Oppenheimer Real Asset Fund              Centennial Tax Exempt Trust

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

      Messrs. Murphy, de'Rossi, Masterson, Molleur, Steinmetz, Vottiero,
Wixted, and Zack, and Mses. Bechtolt, Feld and Ives who are officers of the
Fund, respectively hold the same offices with one or more of the other Board
II Funds as with the Fund. As of October 29, 2002, the Trustees and officers
of the Fund, as a group, owned of record or beneficially less than 1% of each
class of shares of the Fund.  The foregoing statement does not reflect
ownership of shares held of record by an employee benefit plan for employees
of the Manager, other than the shares beneficially owned under that plan by
the officers of the Fund listed above. In addition, each Independent Trustee,
and his family members, do not own securities of either the Manager or
Distributor of the Board II Funds or any person directly or indirectly
controlling, controlled by or under common control with the Manager or
Distributor.

Affiliated Transactions and Material Business Relationships. In 2000, Mr.
Swain sold 93,000 shares of Oppenheimer Acquisition Corp. ("OAC") (the
Manager's parent holding company), for a cash payment of $4,278,930 and
surrendered for cancellation 60,000 options to MassMutual for a cash payment
of $2,569,800. In 2001, Mr. Swain surrendered for cancellation 60,000 options
to MassMutual for a cash payment of $2,700,600.  Mr. Swain has reported that
he sold a residential property to Mr. Freedman on October 23, 2001 for $1.2
million.  An independent appraisal of the property supported the sale price.

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

-------------------------------------------------------------------------------------
                                Independent Trustees
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name;               Principal  Occupation(s)  During  Past 5 Dollar      Aggregate
                                                                         Dollar
                                                                         Range of
                                                                         Shares
                                                                         Beneficially
                                                                         Owned in
                    Years;                                   Range of    any of the
Position(s) Held    Other   Trusteeships/Directorships  Held Shares      Oppenheimer
with Fund;          by Trustee;                              BeneficiallyFunds
Length of Service;  Number  of  Portfolios  in Fund  Complex Owned in    Overseen
Age                 Currently Overseen by Trustee            the Fund    by Trustee
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                                                             As of December 31, 2001
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
James C. Swain,     Formerly Chief Executive Officer (until  $0          Over
Chairman and        August 27, 2002) of the Board II Funds,              $100,000
Trustee, since 1995 Vice Chairman (until January 2, 2002)
Age: 69             of the Manager and President and a
                    director (until 1997) of Centennial
                    Asset Management Corporation (a
                    wholly-owned investment advisory
                    subsidiary of the Manager). Oversees 41
                    portfolios in the OppenheimerFunds
                    complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
William L.          Chairman of the following private        $0          $50,001-
Armstrong,          mortgage banking companies: Cherry                   $100,000
Trustee since 1999  Creek Mortgage Company (since 1991),
Age: 65             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,     Formerly, Director and President of      $0          Over
Trustee since 1995  A.G. Edwards Capital, Inc. (General                  $100,000
Age: 71             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 (until March 2000) of A.G.
                    Edwards & Sons and A.G. Edwards Trust
                    Company. Oversees 41 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
George C. Bowen,    Formerly (until April 1999) Senior Vice  $10,001-$50,Over
Trustee since 1998  President (from September 1987) and                  $100,000
Age: 66             Treasurer (from March 1985) of the
                    Manager; Vice President (from June
                    1983) and Treasurer (since March 1985)
                    of OppenheimerFunds Distributor, Inc.
                    (a subsidiary of the Manager); Senior
                    Vice President (since February 1992),
                    Treasurer (since July 1991) Assistant
                    Secretary and a director (since
                    December 1991) of Centennial Asset
                    Management Corporation; 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
                    (June 1989-January 1990) of Centennial
                    Capital Corporation  (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 (since November 1989) of
                    Shareholder Financial Services, Inc. (a
                    transfer agent subsidiary of the
                    Manager); Assistant Treasurer (since
                    March 1998) of Oppenheimer Acquisition
                    Corp. (the Manager's parent
                    corporation); Treasurer (since November
                    1989) of Oppenheimer Partnership
                    Holdings, Inc. (a holding company
                    subsidiary of the Manager); Vice
                    President and Treasurer (since July
                    1996) of Oppenheimer Real Asset
                    Management, Inc. (an investment
                    advisory subsidiary of the Manager);
                    Chief Executive Officer and director
                    (since March 1996) of MultiSource
                    Services, Inc. (a broker-dealer
                    subsidiary of the Manager); Treasurer
                    (since October 1997) of
                    OppenheimerFunds International Ltd. and
                    Oppenheimer Millennium Funds plc
                    (offshore fund management subsidiaries
                    of the Manager). Oversees 41 portfolios
                    in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Edward L. Cameron,  A member of The Life Guard of Mount      $0          $50,001-
Trustee since 1999  Vernon, George Washington's home (since              $100,000
Age: 64             June 2000). Formerly (March 2001 - May
                    2002) Director of Genetic ID, Inc. and
                    its subsidiaries (a privately held
                    biotech company); a partner with
                    PricewaterhouseCoopers LLP (from
                    1974-1999) (an accounting firm) and
                    Chairman (from 1994-1998), Price
                    Waterhouse LLP Global Investment
                    Management Industry Services Group.
                    Oversees 41 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Jon S. Fossel,      Chairman and Director (since 1998) of    $50,001-    $50,001-
Trustee since 1995  Rocky Mountain Elk Foundation (a         $100,000    $100,000
Age: 60             not-for-profit foundation); and a
                    director (since October 1999) of P.R.
                    Pharmaceuticals (a privately held
                    company) and UNUMProvident (an
                    insurance company) (since June 1,
                    2002). Formerly, 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,       A trustee or director of other           $0          Over
Trustee since 1996  Oppenheimer funds. Formerly (until                   $100,000
Age: 62             October 1994) Mr. Freedman held several
                    positions in subsidiary or affiliated
                    companies of the Manager. Oversees 41
                    portfolios in the OppenheimerFunds
                    complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Beverly L.          Trustee (since 1996) of MassMutual       N/A1           N/A1
Hamilton, Trustee   Institutional Funds and of MML Series
since 2002          Investment Fund (open-end investment
Age: 56             companies); Director of MML Services
                    (since April 1987) and America Funds
                    Emerging Markets Growth Fund (since
                    October 1991) (both are investment
                    companies), The California Endowment (a
                    philanthropy organization) (since April
                    2002), and Community Hospital of
                    Monterey Peninsula, (since February
                    2002); a trustee (since February 2000)
                    of Monterey International Studies (an
                    educational organization), 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 President (February 1991-April
                    2000) ARCO Investment Management
                    Company. Oversees 40 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert J. Malone,   Director (since 2001) of Jones              N/A1        N/A1
Trustee since 2002  Knowledge, Inc. (a privately held
Age: 58             company), U.S. Exploration, Inc.,
                    (since 1997), 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 (a subsidiary of
                    U.S. Bancorp and formerly Colorado
                    National Bank,) (July 1996-April 1,
                    1999) and a director of Commercial
                    Assets, Inc. (1993-2000). Oversees 40
                    portfolios in the OppenheimerFunds
                    complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
F. William          Trustee (since 1996) of MassMutual       $0          $50,001-
Marshall, Jr.,      Institutional Funds and of MML Series                $100,000
Trustee since 2000  Investment Fund (open-end investment
Age: 60             companies); Trustee and Chairman (since
                    May 1987) of the investment committee
                    for the Worcester Polytech Institute;
                    President and Treasurer (since January
                    1999) of the SIS Fund (a private not
                    for profit charitable organization);
                    Trustee (since 1995) of the Springfield
                    Library and Museum Association; Trustee
                    (since 1996) of the Community Music
                    School of Springfield; Member of the
                    investment committee of the Community
                    Foundation of Western Massachusetts
                    (since 1998). Formerly, Chairman
                    (January 1999-July 1999) of SIS &
                    Family Bank, F.S.B. (formerly SIS
                    Bank); President, Chief Executive
                    Officer and Director (May 1993-December
                    1998) of SIS Bankcorp, Inc. and SIS
                    Bank (formerly Springfield Institution
                    for Savings) and Executive Vice
                    President (January 1999-July 1999) of
                    Peoples Heritage Financial Group, Inc.
                    Oversees 41 portfolios in the
                    OppenheimerFunds complex.
-------------------------------------------------------------------------------------

      The address of Mr. Murphy in the chart below is 498 Seventh Avenue, New
York, NY 10018. Mr. Murphy serves for an indefinite term, until his
resignation, death or removal.

-------------------------------------------------------------------------------------
                           Interested Trustee and Officer
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name;              Principal   Occupation(s)  During  Past  5 Dollar     Aggregate
                                                                         Dollar
                                                                         Range of
                                                                         Shares
                   Years;                                     Range of   Beneficially
Position(s) Held   Other  Trusteeships/Directorships  Held by Shares     Owned in
with Fund;         Trustee;                                   Beneficiallany of the
Length of Service; Number  of   Portfolios  in  Fund  Complex Owned in   Oppenheimer
Age                Currently Overseen by Trustee              the Fund   Funds
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                                                                As of December 31,
                                                                       2001
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John V. Murphy,    Chairman, Chief Executive Officer and      $0         Over
President and      director (since June 2001) and President              $100,000
Trustee,           (since September 2000) of the Manager;
Trustee since 2001 President and a director or trustee of
Age: 53            other Oppenheimer funds; President and a
                   director (since July 2001) of Oppenheimer
                   Acquisition Corp. and of Oppenheimer
                   Partnership Holdings, Inc.; a director
                   (since November 2001) of OppenheimerFunds
                   Distributor, Inc.; Chairman and a
                   director (since July 2001) of Shareholder
                   Services, Inc. and of Shareholder
                   Financial Services, Inc.; President and a
                   director (since July 2001) of
                   OppenheimerFunds Legacy Program (a
                   charitable trust program established by
                   the Manager); a director of the following
                   investment advisory subsidiaries of
                   OppenheimerFunds, Inc.: OFI Institutional
                   Asset Management, Inc. and Centennial
                   Asset Management Corporation (since
                   November 2001), HarbourView Asset
                   Management Corporation and OFI Private
                   Investments, Inc. (since July 2001);
                   President (since November 1, 2001) and a
                   director (since July 2001) of Oppenheimer
                   Real Asset Management, Inc.; 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 DLB
                   Acquisition Corporation (a holding
                   company that owns shares of David L.
                   Babson & Company, Inc.); formerly, Chief
                   Operating Officer (September 2000-June
                   2001) of the Manager; President and
                   trustee (November 1999-November 2001) of
                   MML Series Investment Fund and MassMutual
                   Institutional Funds (open-end investment
                   companies); a director (September
                   1999-August 2000) of C.M. Life Insurance
                   Company; President, Chief Executive
                   Officer and director (September
                   1999-August 2000) of MML Bay State Life
                   Insurance Company; a director (June
                   1989-June 1998) of Emerald Isle Bancorp
                   and Hibernia Savings Bank (a wholly-owned
                   subsidiary of Emerald Isle Bancorp).
                   Oversees 69 portfolios in the
                   OppenheimerFunds complex.
-------------------------------------------------------------------------------------

      The address of the Officers in the chart below is as follows: Messrs.
de'Rossi, Molleur, Steinmetz and Zack and Ms. Feld, 498 Seventh Avenue, New
York, NY 10018, for Messrs. Masterson, Vottiero and Wixted and Mses. Bechtolt
and Ives 6803 S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves
for an annual term or until his or her earlier resignation, death or removal.

-------------------------------------------------------------------------------------
                                Officers of the Fund
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name;                  Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund;
Length of Service;
Age
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Arthur P. Steinmetz,   Senior Vice President of the Manager (since March 1993) and
Vice President and     of HarbourView Asset Management Corporation (since March
Portfolio Manager      2000); an officer of 6 portfolios in the OppenheimerFunds
since 1999             complex.
Age:  43
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Ruggero de'Rossi,      Vice President of the Manager (since March 2000); an officer
Vice President and     of 1 portfolio in the OppenheimerFunds complex. Prior to
Portfolio Manager      joining the Manager he was a Senior Vice President and Chief
since 2000             Emerging Markets Debt and Currency Strategist of ING
Age:  39               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).
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian W. Wixted,       Senior Vice President and Treasurer (since March 1999) of
Treasurer since 1999   the Manager; Treasurer (since March 1999) of HarbourView
Age: 43                Asset Management Corporation, Shareholder Services, Inc.,
                       Oppenheimer Real Asset Management Corporation, Shareholder
                       Financial Services, Inc., Oppenheimer Partnership Holdings,
                       Inc., OFI Private Investments, Inc. (since March 2000),
                       OppenheimerFunds International Ltd. and Oppenheimer
                       Millennium Funds plc (since May 2000) and OFI Institutional
                       Asset Management, Inc. (since November 2000); Treasurer and
                       Chief Financial Officer (since May 2000) of Oppenheimer
                       Trust Company (a trust company subsidiary of the Manager);
                       Assistant Treasurer (since March 1999) of Oppenheimer
                       Acquisition Corp. and OppenheimerFunds Legacy Program (since
                       April 2000); formerly Principal and Chief Operating Officer
                       (March 1995-March 1999), Bankers Trust Company-Mutual Fund
                       Services Division. An officer of 85 portfolios in the
                       OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip Vottiero,       Vice President/Fund Accounting of the Manager (since March
Assistant Treasurer    2002); formerly Vice President/Corporate Accounting of the
since 2002             Manager (July 1999-March 2002) prior to which he was Chief
Age: 39                Financial Officer at Sovlink Corporation (April 1996-June
                       1999). An officer of 82 portfolios in the OppenheimerFunds
                       complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Connie Bechtolt,       Assistant Vice President of the Manager  (since September
Assistant Treasurer    1998); formerly Manager/Fund Accounting (September
since 2002             1994-September 1998) of the Manager. An officer of 82
Age: 39                portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack,        Senior Vice President (since May 1985) and General Counsel
Vice President &       (since February 2002) of the Manager; General Counsel and a
Secretary since 2001   director (since November 2001) of OppenheimerFunds
Age: 54                Distributor, Inc.; Senior Vice President and General Counsel
                       (since November 2001) of HarbourView Asset Management
                       Corporation; Vice President and a director (since November
                       2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice
                       President, General Counsel and a director (since November
                       2001) of Shareholder Services, Inc., Shareholder Financial
                       Services, Inc., OFI Private Investments, Inc., Oppenheimer
                       Trust Company and OFI Institutional Asset Management, Inc.;
                       General Counsel (since November 2001) of Centennial Asset
                       Management Corporation; a director (since November 2001) of
                       Oppenheimer Real Asset Management, Inc.; Assistant Secretary
                       and a director (since November 2001) of OppenheimerFunds
                       International Ltd.; Vice President (since November 2001) of
                       OppenheimerFunds Legacy Program; Secretary (since November
                       2001) of Oppenheimer Acquisition Corp.; formerly Acting
                       General Counsel (November 2001-February 2002) and Associate
                       General Counsel (May 1981-October 2001) of the Manager;
                       Assistant Secretary of Shareholder Services, Inc. (May
                       1985-November 2001), Shareholder Financial Services, Inc.
                       (November 1989-November 2001); OppenheimerFunds
                       International Ltd. And Oppenheimer Millennium Funds plc
                       (October 1997-November 2001). An officer of 85 portfolios in
                       the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip T. Masterson,   Vice President and Assistant Counsel of the Manager (since
Assistant Secretary    July 1998); formerly, an associate with Davis, Graham, &
since 2002             Stubbs LLP (January 1997-June 1998). An officer of 82
Age: 38                portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Denis R. Molleur,      Vice President and Senior Counsel of the Manager (since July
Assistant Secretary    1999); formerly a Vice President and Associate Counsel of
since 2001             the Manager (September 1995-July 1999). An officer of 82
Age: 45                portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Katherine P. Feld,     Vice President and Senior Counsel (since July 1999) of the
Assistant Secretary    Manager; Vice President (since June 1990) of
since 2001             OppenheimerFunds Distributor, Inc.; Director, Vice President
Age: 44                and Assistant Secretary (since June 1999) of Centennial
                       Asset Management Corporation; Vice President (since 1997) of
                       Oppenheimer Real Asset Management, Inc.; formerly Vice
                       President and Associate Counsel of the Manager (June
                       1990-July 1999). An officer of 85 portfolios in the
                       OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives,      Vice President and Assistant Counsel (since June 1998) of
Assistant Secretary    the Manager; Vice President (since 1999) of OppenheimerFunds
since 2001             Distributor, Inc.; Vice President and Assistant Secretary
Age: 37                (since 1999) of Shareholder Services, Inc.; Assistant
                       Secretary (since December 2001) of OppenheimerFunds Legacy
                       Program and Shareholder Financial Services, Inc.; formerly
                       Assistant Vice President and Assistant Counsel of the
                       Manager (August 1997-June 1998); Assistant Counsel of the
                       Manager (August 1994-August 1997). An officer of 85
                       portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------

      |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 from the Fund with respect to the Fund's fiscal year
ended September 30, 2002.  Mr. Swain was affiliated with the Manager until
January 2, 2002.  The compensation from all of the Board II Funds (including
the Fund) represents compensation received as a director, trustee, managing
general partner or member of a committee of the Board during the calendar
year 2001.

------------------------------------------------------------------------------
  Trustee Name and Other                Aggregate        Total Compensation
                                                        From All Oppenheimer
                                                           Funds For Which
                                      Compensation      Individual Serves As
  Position(s) (as applicable)        from Fund as of      Trustee/Director
                                    Fiscal Year Ended    As of December 31,
                                   September 30, 20021          2001
                                                             (41 Funds)5
------------------------------------------------------------------------------
------------------------------------------------------------------------------
 James C. Swain                          $1,362                  $02
Chairman of the Board of Trustees
------------------------------------------------------------------------------
------------------------------------------------------------------------------
William L. Armstrong                      $805                 $78,865
  Audit Committee Member
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Robert G. Avis                            $811                 $79,452
  Review Committee Member
------------------------------------------------------------------------------
------------------------------------------------------------------------------
George Bowen                              $775                 $75,936
 Audit Committee Member
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Edward L. Cameron                         $773                 $75,794
  Audit Committee Chairman
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Jon. S. Fossel                            $859                 $84,177
  Review Committee Chairman
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Sam Freedman                              $851                 $83,402
  Review Committee Member
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Beverly Hamilton                          $299                   $03
   Review Committee Member
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Robert J. Malone                          $2994                  $03
   Audit Committee Member
------------------------------------------------------------------------------
------------------------------------------------------------------------------
F. William Marshall, Jr.                  $713                 $69,922
  Review Committee Member
------------------------------------------------------------------------------
  * Effective July 1, 2000, Ned M. Steel resigned as a Trustee of the Fund
  and subsequently became Trustee Emeritus of the Fund. For the fiscal year
  ended September 30, 2002, Mr. Steel received $408 aggregate compensation
  from the Fund and for the calendar year ended December 31, 2001, he
  received $60,000 total compensation from all the Board II Funds. Effective
  July 1, 2002, Messrs. Kast and Kirchner retired as Trustees from the Board
  II funds. For the fiscal year ended September 30, 2002, Messrs. Kast and
  Kirchner each received $669 and $608, respectively, aggregate compensation
  from the Fund and for the calendar year ended December 31, 2001, they each
  received $87,452 and $79,452, respectively, total compensation from all
  the Board II Funds.
1.    Aggregate compensation includes fees and deferred compensation.
2.    Mr. Swain became an Independent Trustee effective 1/1/02, prior to
   which he did not receive compensation from any of the Board II funds.
3.    Mrs. Hamilton and Mr. Malone were elected as 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 calendar year
   2001.  They serve as Trustees of 40 Funds.
4.    Aggregate compensation from the Fund includes $299 deferred under
   Deferred Compensation Plan described below.
5.    Mrs. Hamilton and Mr. Malone serve as Trustees for 40 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 October 29, 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 8,122,030.53 Class A shares (19.04% 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 534,694.15 Class C shares (5.76% of the Class C shares then
outstanding) for the benefit of its customers; RPSS TR Rollover IRA, FBO
Karen E Cavazos, 8902 W Palo Verde Ave., Peoria, AZ 85345-7069, which owned
16,749.44 Class N shares (5.28% of the Class N shares then outstanding)
Torchmark Corporation Svgs & Trust, 2001 3rd Ave. S., Birmingham AL
35233-2115, which owned 21,632.31 Class N shares (6.82% of the Class N shares
then outstanding) and Vincent J. Cardone TR, Oceanweather Inc. 401K, Cos
Cob,.CT 06807-2717 which owned 32,386.79 Class N shares (10.22% 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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2000                                 $1,910,655
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2001                                 $1,769,586
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
           2002                                 $1,851,525
--------------------------------------------------------------------------------

    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.

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

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

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

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

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

      In arriving at a decision, the Board did not single out any one factor
or group of factors as being more important than other factors, but
considered all factors together.  The Board judged the terms and conditions
of the investment advisory agreement, including the investment advisory fee,
in light of all of the surrounding circumstances.

Brokerage Policies of the Fund

Brokerage Provisions of the Investment Advisory Agreement.  One of the duties
of the Manager under the investment advisory agreement is to arrange the
portfolio transactions for the Fund.  The advisory agreement contains
provisions relating to the employment of broker-dealers to effect the Fund's
portfolio transactions.  The Manager is authorized by the advisory agreement
to employ broker-dealers, including "affiliated" brokers, as that term is
defined in the Investment Company Act. The Manager may employ broker-dealers
that the Manager thinks in its best judgment based on all relevant factors,
will implement the policy of the Fund to obtain, at reasonable expense, the
"best execution" of 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 on those other accounts may be useful both to the Fund and one or
more of the Manager's other accounts.  Investment research may be supplied to
the Manager by a third party at the instance of a broker through which trades
are placed.

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

    The Board of Trustees permits the Manager to use stated commissions on
secondary fixed-income agency trades to obtain research if the broker
represents to the Manager that: (i) the trade is not from or for the broker's
own inventory, (ii) the trade was executed by the broker on an agency basis
at the stated commission, and (iii) the trade is not a riskless principal
transaction. The Board of Trustees permits the Manager to use 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
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
           2000                                   $166,755
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
           2001                                   $23,8552
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
           2002                                   $34,536
---------------------------------------------------------------------------------
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    Aggregate        Class A
                           Front-End
Year      Front-End Sales  Sales Charges
Ended     Charges on       Retained by
9/30:     Class A Shares   Distributor
-------------------------------------------
-------------------------------------------
  2000        $255,294         $70,759
-------------------------------------------
-------------------------------------------
  2001        $228,525        $50,5661
-------------------------------------------
-------------------------------------------
  2002        $452,569        $98,2601
-------------------------------------------
1.  Includes  amounts  retained by a  broker-dealer  that is an affiliate or a
parent of the Distributor.

-----------------------------------------------------------------------------
Fiscal    Concessions on   Concessions on   Concessions on  Concessions on
Year      Class A Shares   Class B Shares   Class C Shares  Class N Shares
Ended     Advanced by      Advanced by      Advanced by     Advanced by
9/30:     Distributor1     Distributor1     Distributor1    Distributor1
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2000        $32,659          $551,662         $95,774           N/A
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2001        $61,374          $263,637         $48,250           $282
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2002        $115,077         $549,159        $128,269          $6,626
-----------------------------------------------------------------------------
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    Class A          Class B          Class C          Class N
          Contingent       Contingent       Contingent       Contingent
Year      Deferred Sales   Deferred Sales   Deferred Sales   Deferred Sales
Ended     Charges          Charges          Charges          Charges
9/30      Retained by      Retained by      Retained by      Retained by
          Distributor      Distributor      Distributor      Distributor
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2002        $11,854          $276,434          $7,123          $1,255
-----------------------------------------------------------------------------

Distribution and Service Plans.  The Fund has adopted a Service Plan for
Class A shares and Distribution and Service Plans for Class B, Class C and
Class N shares under Rule 12b-1 of the Investment Company Act. Under those
plans the Fund pays the Distributor for all or a portion of its costs
incurred in connection with the distribution and/or servicing of the shares
of the particular class.

    Each plan has been approved by a vote of the Board of Trustees, including
a majority of the Independent Trustees1, cast in person at a meeting called
for the purpose of voting on that plan. 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, 2002, payments under the Class
A Plan totaled $313,178, all of which was paid by the Distributor to
recipients. That included $13,551 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 9/30/02
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class:       Total          Amount Retained  Distributor's    Distributor's
                                              Aggregate        Unreimbursed
                                              Unreimbursed     Expenses as %
              Payments                        Expenses Under   of Net Assets
              Under Plan     by Distributor   Plan             of Class
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class B Plan $851,975       $656,7711        $4,991,285       4.99%

 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
              $285,981       $52,0832         $1,079,070       2.78%
 Class C Plan
 -------------------------------------------------------------------------------
 -------------------------------------------------------------------------------
 Class N Plan $1,444         $8593            $12,754          1.00%

 -------------------------------------------------------------------------------
1.    Includes  $5,248  paid  to an  affiliate  of  the  Distributor's  parent
   company.
2.    Includes  $3,442  paid  to an  affiliate  of  the  Distributor's  parent
   company.
3.    Includes $30 paid to an affiliate of the Distributor's parent company.

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

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its 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 1.800.225.5677 or by
visiting the OppenheimerFunds Internet website at www.oppenheimerfunds.com.

      The Fund's illustrations of its performance data in advertisements must
comply with rules of the 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 (unless otherwise
         indicated).

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.

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

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

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


      The symbols above represent the following factors:

      a =  dividends and interest earned during the 30-day period.

      b =  expenses accrued for the period (net of any expense assumptions).

      c =  the  average  daily  number  of shares  of that  class  outstanding
           during the 30-day period that were entitled to receive dividends.

      d =  the maximum  offering price per share of that class on the last day
           of the period, adjusted for undistributed net investment income.

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

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

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


      The maximum offering price for Class A shares includes the current
maximum initial sales charge.  The maximum offering price for Class B 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 9/30/02
  -----------------------------------------------------------------------------
  -----------------------------------------------------------------------------

                  Standardized Yield                 Dividend Yield

  Class of
  Shares
  -----------------------------------------------------------------------------
  -----------------------------------------------------------------------------
                Without         After         Without            After
                 Sales          Sales          Sales             Sales
                Charge         Charge          Charge            Charge
  -----------------------------------------------------------------------------
  -----------------------------------------------------------------------------
  Class A        5.29%          5.04%          5.60%             5.33%
  -----------------------------------------------------------------------------
  -----------------------------------------------------------------------------
  Class B        4.48%           N/A           4.74%              N/A
  -----------------------------------------------------------------------------
  -----------------------------------------------------------------------------
  Class C        4.49%           N/A           4.72%              N/A
  -----------------------------------------------------------------------------
  -----------------------------------------------------------------------------
  Class N        5.53%           N/A           5.33%              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% contingent deferred sales charge is deducted for returns for
the one year and life of class periods. Class N total returns may also be
calculated for the periods prior to 3/1/01 (the inception date for Class N
shares), based on the Fund's Class A returns, adjusted to reflect the higher
Class N 12b-1 fees.

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


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

o     Average Annual Total Return (After Taxes on Distributions). The
"average annual total return (after taxes on distributions)" of Class A
shares is an average annual compounded rate of return for each year in a
specified number of years, adjusted to show the effect of federal taxes
(calculated using the highest individual marginal federal income tax rates in
effect on any reinvestment date) on any distributions made by the Fund during
the specified period. It is the rate of return based on the change in value
of a hypothetical initial investment of $1,000 ("P" in the formula below)
held for a number of years ("n" in the formula) to achieve an ending value
("ATVD" in the formula) of that investment, after taking into account the
effect of taxes on Fund distributions, but not on the redemption of Fund
shares, according to the following formula:


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


o     Average Annual Total Return (After Taxes on Distributions and
Redemptions).  The "average annual total return (after taxes on distributions
and redemptions)" of Class A shares is an average annual compounded rate of
return for each year in a specified number of years, adjusted to show the
effect of federal taxes (calculated using the highest individual marginal
federal income tax rates in effect on any reinvestment date) on any
distributions made by the Fund during the specified period and the effect of
capital gains taxes or capital loss tax benefits (each calculated using the
highest federal individual capital gains tax rate in effect on the redemption
date) resulting from the redemption of the shares at the end of the period.
It is the rate of return based on the change in value of a hypothetical
initial investment of $1,000 ("P" in the formula below) held for a number of
years ("n" in the formula) to achieve an ending value ("ATVDR" in the
formula) of that investment, after taking into account the effect of taxes on
fund distributions and on the redemption of Fund shares, according to the
following formula:

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


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

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

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


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

       The Fund's Total Returns for the Periods Ended September 30, 2002
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
         Cumulative Total              Average Annual Total Returns
Class    Returns (Life of
of       Class)
Shares
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                 1-Year            5-Year       Life of Class
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
         After    Without   After    Without  After   Without  After    Without
         Sales    Sales     Sales    Sales    Sales   Sales    Sales    Sales
         Charge   Charge    Charge   Charge   Charge  Charge   Charge   Charge
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A  65.32%1  73.56%1   11.23%   16.78%   3.52%   4.53%    7.14%1   7.85%1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B  65.85%2  65.85%2   10.90%   15.90%   3.49%   3.76%    7.18%2   7.18%2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C  64.22%3  64.22%3   14.90%   15.90%   3.77%   3.77%    7.04%3   7.04%3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N  12.87%4  12.87%4   15.23%   16.23%   7.96%   7.96%      N/A      N/A
--------------------------------------------------------------------------------
1.    Inception of Class A:   6/15/95
2.    Inception of Class B:   6/15/95
3.    Inception of Class C:   6/15/95
4.    Inception of Class N:   3/01/01

      --------------------------------------------------------------------------
        Average Annual Total Returns for Class A Shares (After Sales Charge)
                      For the Periods Ended September 30, 2002
      --------------------------------------------------------------------------
      --------------------------------------------------------------------------
                                       1-Year         5-Year        10-Year
                                                                  (or life of
                                                                     class)
      --------------------------------------------------------------------------
      --------------------------------------------------------------------------
      After Taxes on Distributions     9.61%          0.78%          3.87%1
      --------------------------------------------------------------------------
      --------------------------------------------------------------------------
      After Taxes on                   6.79%          1.32%          4.01%1
      Distributions and
      Redemption of Fund Shares
      --------------------------------------------------------------------------
   1. Inception date of Class A: 6/15/95

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

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

      |X| Morningstar Ratings. From time to time the Fund may publish the
star rating of the performance of its classes of shares by Morningstar, Inc.,
an independent mutual fund monitoring service.  Morningstar rates mutual
funds in their specialized market sector.  The Fund is ranked among
international bond funds.

      Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. For each fund with at least a three-year history,
Morningstar calculates a Morningstar Rating(TM)based on a Morningstar
Risk-Adjusted Return measure that accounts for variation in a fund's monthly
performance (including the effects of sales charges, loads, and redemption
fees), placing more emphasis on downward variations and rewarding consistent
performance.  The top 10% of funds in each category receive 5 stars, the next
22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2
stars, and the bottom 10% receive 1 star.  (Each share class is counted as a
fraction of one fund within this scale and rated separately, which may cause
slight variations in the distribution percentages.) The Overall Morningstar
Rating for a fund is derived from a weighted average of the performance
figures associated with its three-, five-and ten-year (if applicable)
Morningstar Rating metrics.

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

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

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

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

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

ABOUT your account

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

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

      |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.

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

Oppenheimer Bond Fund                     Oppenheimer Municipal Bond Fund
Oppenheimer California Municipal Fund     Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Appreciation Fund     Oppenheimer New York Municipal Fund
Oppenheimer Capital Preservation Fund     Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Capital Income Fund           Oppenheimer Quest Balanced Value Fund
                                          Oppenheimer  Quest  Capital  Value Fund,
Oppenheimer Champion Income Fund          Inc.
                                          Oppenheimer  Quest  Global  Value  Fund,
Oppenheimer Convertible Securities Fund   Inc.
Oppenheimer Developing Markets Fund       Oppenheimer Quest Opportunity Value Fund
Oppenheimer Disciplined Allocation Fund   Oppenheimer Quest Value Fund, Inc.
Oppenheimer Discovery Fund                Oppenheimer Real Asset Fund
                                          Oppenheimer      Rochester      National
Oppenheimer Emerging Growth Fund          Municipals
Oppenheimer Emerging Technologies Fund    Oppenheimer Senior Floating Rate Fund
Oppenheimer Enterprise Fund               Oppenheimer Small Cap Value Fund
Oppenheimer Europe Fund                   Oppenheimer Strategic Income Fund
Oppenheimer Global Fund                   Oppenheimer Total Return Fund, Inc.
Oppenheimer Global Growth & Income Fund   Oppenheimer Trinity Core Fund
                                          Oppenheimer  Trinity  Large  Cap  Growth
Oppenheimer Gold & Special Minerals Fund  Fund
Oppenheimer Growth Fund                   Oppenheimer Trinity Value Fund
Oppenheimer High Yield 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 Limited Term Municipal Fund   OSM1 - Jennison Growth Fund
Oppenheimer  Main Street  Growth & Income OSM1 -  Mercury  Advisors  S&P 500 Index
Fund                                      Fund
                                          OSM1 -  Mercury  Advisors  Focus  Growth
Oppenheimer Main Street Opportunity Fund  Fund
Oppenheimer Main Street Small Cap Fund    OSM1 - QM Active Balanced Fund
Oppenheimer MidCap Fund                   OSM1 - Salomon Brothers All Cap Fund
Oppenheimer Multiple Strategies 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 described above except the money market funds
and Oppenheimer Senior Floating Rate Fund. 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.  Letters of
Intent do not consider Class C or Class N shares you purchase or may have
purchased.

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

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

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

Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales 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.
OppenheimerFunds has entered into arrangements with certain record keepers
whereby the Transfer Agent compensates the record keeper for its record
keeping and account servicing functions that it performs on behalf of the
participant level accounts of a retirement plan.  While such compensation may
act to reduce the record keeping fees charged by the retirement plan's record
keeper, that compensation arrangement may be terminated at any time,
potentially affecting the record keeping fees charged by the retirement
plan's record keeper.

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

Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund.  However, each class has
different shareholder privileges and features.  The net income attributable
to Class B, Class C or Class N shares and the dividends payable on Class B,
Class C or Class N shares will be reduced by incremental expenses borne
solely by that class. Those expenses include the asset-based sales charges to
which Class B, Class C and Class N shares are subject.

      The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time
the investor expects to hold shares, and other relevant circumstances. Class
A shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and
Class N shares is the same as that of the initial sales charge on Class A
shares - to compensate the Distributor and brokers, dealers and financial
institutions that sell shares of the Fund.  A salesperson who is entitled to
receive compensation from his or her firm for selling Fund shares may receive
different levels of compensation for selling one class of shares rather than
another.

      The Distributor will not accept 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.

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

      |X|   Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of
Class B shares to Class A shares 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
that event, no further conversions of Class B shares would occur while that
suspension remained in effect.  Although Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the
two classes, without the imposition of a sales charge or fee, such exchange
could constitute a taxable event for the shareholder, and absent such
exchange, Class B shares might continue to be subject to the asset-based
sales charge for longer than six years.

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

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

      No sales concessions will be paid to the broker-dealer of record, as
described in the Prospectus, on sales of Class N shares purchased with the
redemption proceeds of shares of another mutual fund offered as an investment
option in a retirement plan in which Oppenheimer funds are also offered as
investment options under a special arrangement with the Distributor, if the
purchase occurs more than 30 days after the Oppenheimer funds are added as an
investment option under that plan.

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

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

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

Account Fees. As stated in the Prospectus, a $12 annual fee assessed on any
account valued at less than $500.  This fee will not be assessed on the
following accounts:
o     Accounts that have balances below $500 due to the automatic conversion
      of shares from Class B to Class A shares;
o     Accounts with an active Asset Builder Plan, payroll deduction plan or a
      military allotment plan;
o     OppenheimerFunds-sponsored group retirement accounts that are making
      continuing purchases;
o     Certain accounts held by broker-dealers through the National Securities
      Clearing Corporation; and
o     Accounts that fall below the $500 threshold due solely to market
      fluctuations within the 12-month period preceding the date the fee is
      deducted.

      The fee is automatically deducted from qualifying accounts annually on
or about the second to last business day of September.  This annual fee is
waived for any shareholders who elect to access their account documents
through electronic document delivery rather than in paper copy and who elect
to utilize the Internet or PhoneLink as their primary source for their
general servicing needs.  To sign up to access account documents
electronically via eDocs Direct, please visit the Service Center on our
website at www.oppenheimerfunds.com or call 1.888.470.0862 for instructions.

Determination of Net Asset Values Per Share.  The net asset values per share
of each class of shares of the Fund are determined as of the close of
business of The New York Stock Exchange ("the Exchange") on each day that the
Exchange is open. The calculation is done by dividing the value of the Fund's
net assets attributable to a class by the number of shares of that class that
are outstanding.  The Exchange normally closes at 4:00 P.M., Eastern time,
but may close earlier on some other days (for example, in case of weather
emergencies or on days falling before a U.S. holiday).  All references to
time in this Statement of Additional Information mean "Eastern time." The
Exchange's most recent annual announcement (which is subject to change)
states that it will close on New Year's Day, 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
holidays) or after 4:00 P.M. on a regular business day. Because the Fund's
net asset values will not be calculated on those days, the Fund's net asset
values per share may be significantly affected on such days when shareholders
may not purchase or redeem shares. Additionally, trading on European and
Asian stock exchanges and over-the-counter markets normally is completed
before the close of The Exchange.

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

      |X|   Securities Valuation.  The Fund's Board of Trustees has
established procedures for the valuation of the Fund's securities. In general
those procedures are as follows:
o     Equity securities traded on a U.S. securities exchange or on Nasdaq(R)
are valued as follows:
(1)   if last sale information is regularly reported, they are valued at the
               last reported sale price on the principal exchange on which
               they are traded or on Nasdaq, 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 United Missouri Bank (the "Bank")
for clearance, the Bank will ask the Fund to redeem a sufficient number of
full and fractional shares in the shareholder's account to cover the amount
of the check.  This enables the shareholder to continue receiving dividends
on those shares until the check is presented to the Fund.  Checks may not be
presented for payment at the offices of the Bank or the Fund's custodian.
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, and Class N shares. The Fund may amend, suspend or cease
offering this reinvestment privilege at any time as to shares redeemed after
the date of such amendment, suspension or cessation.

      Any capital gain that was realized when the shares were redeemed is
taxable, and reinvestment will not alter any capital gains tax payable on
that gain.  If there has been a capital loss on the redemption, some or all
of the loss may not be tax deductible, depending on the timing and amount of
the reinvestment.  Under the Internal Revenue Code, if the redemption
proceeds of Fund shares on which a sales charge was paid are reinvested in
shares of the Fund or another of the Oppenheimer funds within 90 days of
payment of the sales charge, the shareholder's basis in the shares of the
Fund that were redeemed may not include the amount of the sales charge paid.
That would reduce the loss or increase the gain recognized from the
redemption.  However, in that case the sales charge would be added to the
basis of the shares acquired by the reinvestment of the redemption proceeds.

Payments "In Kind". The Prospectus states that payment for shares tendered
for redemption is ordinarily made in cash. However, under certain
circumstances, the Board of Trustees of the Fund may determine that it would
be detrimental to the best interests of the remaining shareholders of the
Fund to make payment of a redemption order wholly or partly in cash. In that
case, the Fund may pay the redemption proceeds in whole or in part by a
distribution "in kind" of liquid securities from the portfolio of the Fund,
in lieu of cash.

      The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act. Under that rule, the Fund is obligated to redeem shares solely
in cash up to the lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder. If shares are redeemed in
kind, the redeeming shareholder might incur brokerage or other costs in
selling the securities for cash. The Fund will value securities used to pay
redemptions in kind using the same method the Fund uses to value its
portfolio securities described above under "Determination of Net Asset Values
Per Share." That valuation will be made as of the time the redemption price
is determined.

Involuntary Redemptions. The Fund's Board of Trustees has the right to cause
the involuntary redemption of the shares held in any account if the aggregate
net asset value of those shares is less than $200 or such lesser amount as
the Board may fix.  The Board will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of such shares has
fallen below the stated minimum solely as a result of market fluctuations.
If the Board exercises this right, it may also fix the requirements for any
notice to be given to the shareholders in question (not less than 30 days).
The Board may alternatively set requirements for the shareholder to increase
the investment, or set other terms and conditions so that the shares would
not be involuntarily redeemed.

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

      If less than all shares held in an account are transferred, and some
but not all shares in the account would be subject to a contingent deferred
sales charge if redeemed at the time of transfer, the priorities described in
the Prospectus under "How to Buy Shares" for the imposition of the Class B,
Class C and Class N contingent deferred sales charge will be followed in
determining the order in which shares are transferred.

Distributions From Retirement Plans.  Requests for distributions from
OppenheimerFunds-sponsored IRAs, SEP-IRAs, SIMPLE IRAs, 403(b)(7) custodial
plans, 401(k) plans or pension or profit-sharing plans should be addressed to
"Trustee, OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its
address listed in "How To Sell Shares" in the Prospectus or on the back cover
of this Statement of Additional Information.  The request must:
(1)   state the reason for the distribution;
(2)   state the owner's awareness of tax penalties if the distribution is
         premature; and
(3)   conform to the requirements of the plan and the Fund's other redemption
         requirements.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      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 of shares by calling the Distributor.

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

      The following funds only offer Class A shares:
      Centennial America Fund, L.P.           Centennial New York Tax Exempt
                                              Trust
      Centennial California Tax Exempt Trust  Centennial Tax Exempt Trust
      Centennial Government Trust             Oppenheimer Money Market Fund, Inc.
      Centennial Money Market Trust

      The following funds do not offer Class N shares:
      Oppenheimer California Municipal Fund   Oppenheimer Pennsylvania Municipal
                                              Fund
      Oppenheimer Limited Term Municipal Fund Oppenheimer Rochester National
                                              Municipals
      Oppenheimer Municipal Bond Fund         Oppenheimer Senior Floating Rate
                                              Fund
      Oppenheimer New Jersey Municipal Fund   Limited Term New York Municipal
                                              Fund
      Oppenheimer New York Municipal Fund     Rochester Fund Municipals

      The following funds do not offer Class Y shares:
      Oppenheimer California Municipal Fund   Oppenheimer Limited Term Municipal
                                              Fund
      Oppenheimer Capital Income Fund         Oppenheimer New Jersey Municipal
                                              Fund
      Oppenheimer Cash Reserves               Oppenheimer New York Municipal Fund
      Oppenheimer Champion Income Fund        Oppenheimer Pennsylvania Municipal
                                              Fund
      Oppenheimer Convertible Securities Fund Oppenheimer Rochester National
                                              Municipals
      Oppenheimer Disciplined Allocation Fund Oppenheimer Senior Floating Rate
                                              Fund
      Oppenheimer Gold & Special Minerals
      Fund                                    Oppenheimer Small Cap Value Fund
      Oppenheimer International Bond Fund
      Oppenheimer International Small         Limited Term New York Municipal
      Company Fund                            Fund

o     Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for
      shares of any other fund.
o     Class B, Class C and Class N shares of Oppenheimer Cash Reserves are
      generally available only by exchange from the same class of shares of
      other Oppenheimer funds or through OppenheimerFunds-sponsored 401(k)
      plans.
o     Class M shares of Oppenheimer Convertible Securities Fund may be
      exchanged only for Class A shares of other Oppenheimer funds. They may
      not be acquired by exchange of shares of any class of any other
      Oppenheimer funds except Class A shares of Oppenheimer Money Market
      Fund or Oppenheimer Cash Reserves acquired by exchange of Class M
      shares.
o     Class X shares of Limited Term New York Municipal Fund may 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.
o     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.
o     Class A shares of Oppenheimer funds may be exchanged at net asset value
      for shares of any money market fund offered by the Distributor. Shares
      of any money market fund purchased without a sales charge may be
      exchanged for shares of Oppenheimer funds offered with a sales charge
      upon payment of the sales charge. They may also be used to purchase
      shares of Oppenheimer funds subject to an early withdrawal charge or
      contingent deferred sales charge.
o     Shares of 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.
o     Shares of the Fund acquired by reinvestment of dividends or
      distributions from any of the other Oppenheimer funds or from any unit
      investment trust for which reinvestment arrangements have been made
      with the Distributor may be exchanged at net asset value for shares of
      any of the Oppenheimer funds.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dividends, Capital Gains and Taxes

Dividends and Distributions. The Fund has no fixed dividend rate and there
can be no assurance as to the payment of any dividends or the realization of
any capital gains. The dividends and distributions paid by a class of shares
will vary from time to time depending on market conditions, the composition
of the Fund's portfolio, and expenses borne by the Fund or borne separately
by a class. Dividends are calculated in the same manner, at the same time,
and on the same day for each class of shares. However, dividends on Class B,
Class C and Class N shares are expected to be lower than dividends on Class A
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
advisors with specific reference to their own tax circumstances as well as
the consequences of federal, state and local tax rules affecting an
investment in the Fund.

Qualification as a Regulated Investment Company.  The Fund has elected to be
taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended.  As a regulated investment company, the
Fund is not subject to federal income tax on the portion of its net
investment income (that is, taxable interest, dividends, and other taxable
ordinary income, net of expenses) and capital gain net income (that is, the
excess of net long-term capital gains over net short-term capital losses)
that it distributes to shareholders. That qualification enables the Fund to
"pass through" its income and realized capital gains to shareholders without
having to pay tax on them. This avoids a "double tax" on that income and
capital gains, since shareholders normally will be taxed on the dividends and
capital gains they receive from the Fund (unless their Fund shares are held
in a retirement account or the shareholder is otherwise exempt from tax).

      The Internal Revenue Code contains a number of complex tests relating
to qualification that the Fund might not meet in a particular year. If it did
not qualify as a regulated investment company, the Fund would be treated for
tax purposes as an ordinary corporation and would receive no tax deduction
for payments made to shareholders.

      To qualify as a regulated investment company, the Fund must distribute
at least 90% of its investment company taxable income (in brief, net
investment income and the excess of net short-term capital gain over net
long-term capital loss) for the taxable year. The Fund must also satisfy
certain other requirements of the Internal Revenue Code, some of which are
described below.  Distributions by the Fund made during the taxable year or,
under specified circumstances, within 12 months after the close of the
taxable year, will be considered distributions of income and gains for the
taxable year and will therefore count toward satisfaction of the
above-mentioned requirement.

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

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

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

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

      Special provisions of the Internal Revenue Code govern the eligibility
of the Fund's dividends for the dividends-received deduction for corporate
shareholders.  Long-term capital gains distributions are not eligible for the
deduction.  The amount of dividends paid by the Fund that may qualify for the
deduction is limited to the aggregate amount of qualifying dividends that the
Fund derives from portfolio investments that the Fund has held for a minimum
period, usually 46 days. A corporate shareholder will not be eligible for the
deduction on dividends paid on Fund shares held for 45 days or less.  To the
extent the Fund's dividends are derived from gross income from option
premiums, interest income or short-term gains from the sale of securities or
dividends from foreign corporations, those dividends will not qualify for the
deduction. 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 a long-term capital gain and will be properly identified in reports sent
to shareholders in January of each year. Such treatment will apply no matter
how long the shareholder has held his or her shares or whether that gain was
recognized by the Fund before the shareholder acquired his or her shares.

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

      Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source.
The United States has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of, or exemption from, taxes on such
income.

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

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

      The Fund will be required in certain cases to withhold 30% (29% for
payments after December 31, 2003) of ordinary income dividends, capital gains
distributions and the proceeds of the redemption of shares, paid to any
shareholder (1) who has failed to provide a correct taxpayer identification
number or to properly certify that number when required, (2) who is subject
to backup withholding for failure to report the receipt of interest or
dividend income properly, or (3) who has failed to certify to the Fund that
the shareholder is not subject to backup withholding or is an "exempt
recipient" (such as a corporation). All income and any tax withheld by the
Fund is remitted by the Fund to the U.S. Treasury and is identified in
reports mailed to shareholders in January of each year.

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

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

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

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

      If the ordinary income dividends from the Fund are effectively
connected with the conduct of a U.S. trade or business, then the foreign
person may claim an exemption from the U.S. tax described above provided the
Fund obtains a properly completed and signed Certificate of Foreign Status.

      If the foreign person fails to provide a certification of his/her
foreign status, the Fund will be required to withhold U.S. tax at a rate of
30% (29% for payments after December 31, 2003) on ordinary income dividends,
capital gains distributions and the proceeds of the redemption of shares,
paid to any foreign person. All income and any tax withheld (in this
situation) by the Fund is remitted by the Fund to the U.S. Treasury and is
identified in reports mailed to shareholders in January of each year.

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

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


Additional Information About the Fund

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

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

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

Independent 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 -------------------------------------------------------------------------------- To the Board of Trustees and Shareholders of Oppenheimer International Bond Fund:

  We have audited the accompanying statement of assets and liabilities of Oppenheimer International Bond Fund, including the statement of investments, as of September 30, 2002, 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, 2002, 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, 2002, 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 25, 2002

STATEMENT OF INVESTMENTS  September 30, 2002

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

 U.S. Government Obligations--6.6%
------------------------------------------------------------------------------------
 Federal Home Loan Mortgage Corp., 4.75%, 1/15/13 [EUR]   5,990,000    $  5,921,693
------------------------------------------------------------------------------------
 Federal National Mortgage Assn. Sr. Unsec. Nts.,
 2.125%, 10/9/07 [JPY]                                  905,000,000       7,957,964
 Federal National Mortgage Assn. Unsec. Nts.,
 1.75%, 3/26/08(1) [JPY]                                830,000,000       7,284,828
                                                                       -------------
 Total U.S. Government Obligations (Cost $20,643,146)                    21,164,485

------------------------------------------------------------------------------------
 Foreign Government Obligations--69.7%
------------------------------------------------------------------------------------
 Argentina--0.7%
 Argentina (Republic of) Bonds:
 11.75%, 6/15/15(3)                                         105,000          22,575
 Series 2008, 7%, 12/19/08(3)                             1,279,000         278,182
 Series 2018, 3.063%, 6/19/18(3)                          3,793,969         701,884
------------------------------------------------------------------------------------
 Argentina (Republic of) Global Unsec. Unsub. Bonds, Series BGL5,
 11.375%, 1/30/17(3,4)                                      200,000          43,000
------------------------------------------------------------------------------------
 Argentina (Republic of) Unsec. Bonds, 12.375%,
 2/21/12(3,4)                                               490,000         100,450
------------------------------------------------------------------------------------
 Argentina (Republic of) Unsec. Unsub. Bonds, 11.75%,
 4/7/09(3,4,5)                                            1,165,000         250,475
------------------------------------------------------------------------------------
 Argentina (Republic of) Unsub. Bonds, Series 2031,
 2.79%, 6/19/31(3)                                        3,500,120         647,522
------------------------------------------------------------------------------------
 Buenos Aires (Province of) Bonds, Bonos de Consolidacion de Deudas,
 Series PBA1, 3.257%, 4/1/07(3,5) [ARP]                   2,307,630         277,617
                                                                       -------------
                                                                          2,321,705

------------------------------------------------------------------------------------
 Australia--1.0%
 Australia (Commonwealth of) Bonds, Series 808,
 8.75%, 8/15/08 [AUD]                                     4,870,000       3,120,850
------------------------------------------------------------------------------------
 Austria--2.1%
 Austria (Republic of) Bonds:
 3.40%, 10/20/04 [EUR]                                    1,580,000       1,570,102
 4.30%, 7/15/03 [EUR]                                       940,000         935,970
 6.25%, 7/15/27 [EUR]                                       723,000         836,727
------------------------------------------------------------------------------------
 Austria (Republic of) Nts., 5.50%, 10/20/07 [EUR]        3,330,000       3,540,911
                                                                       -------------
                                                                          6,883,710

------------------------------------------------------------------------------------
 Belgium--3.4%
 Belgium (Kingdom of) Bonds:
 5%, 9/28/11 [EUR]                                        1,020,000       1,049,497
 5.50%, 3/28/28 [EUR]                                     1,362,000       1,434,097
 Series 26, 6.25%, 3/28/07 [EUR]                          5,285,000       5,756,451
------------------------------------------------------------------------------------
 Belgium (Kingdom of) Debs., 7.25%, 4/29/04 [EUR]         2,510,000       2,635,673
                                                                       -------------
                                                                         10,875,718

------------------------------------------------------------------------------------
 Belize--0.1%
 Belize (Government of) Bonds, 9.50%, 8/15/12               450,000         446,625
------------------------------------------------------------------------------------
 Brazil--2.6%
 Brazil (Federal Republic of) Bonds:
 8.875%, 4/15/24                                          3,390,000       1,364,475
 Series 15 yr., 3.125%, 4/15/09(6)                        1,161,176         606,715

11 | OPPENHEIMER INTERNATIONAL BOND FUND

STATEMENT OF INVESTMENTS  Continued

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

 Brazil Continued
 Brazil (Federal Republic of) Debt Capitalization Bonds, Series 20 yr.,
 8%, 4/15/14                                         $    1,973,950    $    977,105
------------------------------------------------------------------------------------
 Brazil (Federal Republic of) Debt Conversion Bonds:
 Series 18 yr., 3.125%, 4/15/12(6)                        5,570,000       2,207,112
 Series D, 3.125%, 4/15/12(6)                             2,070,000         820,238
------------------------------------------------------------------------------------
 Brazil (Federal Republic of) Unsec. Unsub.
 Bonds, 11%, 8/17/40                                      5,529,200       2,446,671
                                                                       -------------
                                                                          8,422,316

------------------------------------------------------------------------------------
 Bulgaria--0.2%
 Bulgaria (Republic of) Interest Arrears Debs.,
 Series PDI, 2.688%, 7/28/11(6)                             897,250         791,823
------------------------------------------------------------------------------------
 Canada--1.0%
 Canada (Government of) Bonds, 5.50%, 6/1/09 [CAD]        4,625,000       3,084,334
------------------------------------------------------------------------------------
 Chile--0.6%
 Chile (Republic of) Nts., 7.125%, 1/11/12                1,650,000       1,799,949
------------------------------------------------------------------------------------
 Colombia--1.8%
 Colombia (Republic of) Bonds:
 9.75%, 4/23/09                                           1,500,000       1,218,750
 10%, 1/23/12                                             1,186,000         963,625
------------------------------------------------------------------------------------
 Colombia (Republic of) Nts., 8.625%, 4/1/08              2,040,000       1,637,100
------------------------------------------------------------------------------------
 Colombia (Republic of) Unsec. Unsub. Bonds:
 8.375%, 2/15/27                                            475,000         290,937
 11.75%, 2/25/20                                            213,000         174,128
------------------------------------------------------------------------------------
 Colombia (Republic of) Unsec. Unsub. Nts.:
 11.375%, 1/31/08 [EUR]                                     990,000         791,295
 11.50%, 5/31/11 [EUR]                                      900,000         694,676
                                                                       -------------
                                                                          5,770,511

------------------------------------------------------------------------------------
 Dominican Republic--0.4%
 Dominican Republic Unsec. Unsub. Bonds, 9.50%, 9/27/06   1,340,000       1,410,350
------------------------------------------------------------------------------------
 Ecuador--1.3%
 Ecuador (Republic of) Unsec. Bonds, 6%, 8/15/30(6)      11,070,000       4,095,900
------------------------------------------------------------------------------------
 El Salvador--0.3%
 El Salvador (Republic of) Unsec. Nts., 8.50%, 7/25/11(7)   760,000         822,700
------------------------------------------------------------------------------------
 France--2.7%
 France (Government of) Obligations Assimilables du Tresor Bonds:
 5%, 7/25/12 [EUR]                                          510,000         528,731
 5.75%, 10/25/32 [EUR]                                    1,320,000       1,474,514
------------------------------------------------------------------------------------
 France (Government of) Treasury Nts.:
 3.50%, 7/12/04 [EUR]                                     2,535,000       2,525,052
 3.75%, 1/12/07 [EUR]                                     4,210,000       4,190,180
                                                                       -------------
                                                                          8,718,477

12 | OPPENHEIMER INTERNATIONAL BOND FUND

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

 Germany--3.2%
 Germany (Republic of) Bonds:
 5.50%, 1/4/31 [EUR]                                      1,371,000    $  1,480,970
 Series 01, 5%, 7/4/11 [EUR]                              1,010,000       1,052,185
 Series 139, 4%, 2/16/07 [EUR]                            4,960,000       4,978,439
------------------------------------------------------------------------------------
 Treuhandanstalt Gtd. Nts., 6.75%, 5/13/04 [EUR]          2,740,000       2,860,670
                                                                       -------------
                                                                         10,372,264

------------------------------------------------------------------------------------
 Great Britain--3.2%
 United Kingdom Treasury Bonds, 5.75%, 12/7/09 [GBP]      6,105,000      10,458,068
------------------------------------------------------------------------------------
 Greece--2.8%
 Greece (Republic of) Bonds, 5.35%, 5/18/11 [EUR]         7,170,000       7,475,443
------------------------------------------------------------------------------------
 Greece (Republic of) Sr. Unsub. Bonds, 4.65%,
 4/19/07 [EUR]                                            1,550,000       1,590,352
                                                                       -------------
                                                                          9,065,795

------------------------------------------------------------------------------------
 Guatemala--0.1%
 Guatemala (Republic of) Nts., 10.25%, 11/8/11(5)           160,000         184,400
------------------------------------------------------------------------------------
 Italy--3.7%
 Italy (Republic of) Treasury Bonds, Buoni del Tesoro Poliennali:
 0.375%, 10/10/06 [JPY]                                  59,000,000         487,402
 4.50%, 7/1/04 [EUR]                                      2,050,000       2,075,247
 5%, 10/15/07 [EUR]                                       4,345,000       4,531,953
 5.25%, 8/1/11 [EUR]                                      2,045,000       2,143,146
 6%, 5/1/31 [EUR]                                           990,000       1,114,417
------------------------------------------------------------------------------------
 Italy (Republic of) Treasury Nts., Cert Di Credito Del Tesoro, 4.20%,
 10/1/02(6) [EUR]                                         1,545,000       1,526,466
                                                                       -------------
                                                                         11,878,631

------------------------------------------------------------------------------------
 Ivory Coast--0.2%
 Ivory Coast (Government of) Past Due Interest Bonds, Series F, 1.905%,
 3/29/18(3,4,5) [FRF]                                    16,007,500         521,546
------------------------------------------------------------------------------------
 Mexico--3.3%
 United Mexican States Bonds:
 8.30%, 8/15/31                                           2,995,000       2,912,637
 11.50%, 5/15/26(8)                                       2,755,000       3,478,188
------------------------------------------------------------------------------------
 United Mexican States Nts.:
 7.50%, 1/14/12                                           2,589,000       2,624,599
 8.375%, 1/14/11                                          1,595,000       1,682,725
                                                                       -------------
                                                                         10,698,149

------------------------------------------------------------------------------------
 Nigeria--0.2%
 Nigeria (Federal Republic of) Promissory Nts.,
 Series RC, 5.092%, 1/5/10(3,4)                           1,510,734         727,431
------------------------------------------------------------------------------------
 Norway--0.5%
 Norway (Government of) Bonds, 5.50%, 5/15/09 [NOK]      12,070,000       1,586,358

13 | OPPENHEIMER INTERNATIONAL BOND FUND

STATEMENT OF INVESTMENTS  Continued

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

 Panama--1.5%
 Panama (Republic of) Bonds:
 9.375%, 4/1/29                                      $    1,062,000    $  1,080,585
 10.75%, 5/15/20                                            740,000         745,550
------------------------------------------------------------------------------------
 Panama (Republic of) Interest Reduction Bonds,
 5%, 7/17/14(6)                                           1,626,657       1,354,192
------------------------------------------------------------------------------------
 Panama (Republic of) Past Due Interest Debs.,
 2.75%, 7/17/16(6)                                        2,456,947       1,726,005
                                                                       -------------
                                                                          4,906,332

------------------------------------------------------------------------------------
 Peru--1.5%
 Peru (Republic of) Sr. Nts., Zero Coupon,
 4.53%, 2/28/16(2)                                       10,058,878       4,758,855
------------------------------------------------------------------------------------
 Philippines--3.4%
 Philippines (Republic of) Nts., 10.625%, 3/16/25         4,500,000       4,691,250
------------------------------------------------------------------------------------
 Philippines (Republic of) Unsec. Bonds, 9.875%, 1/15/19  6,309,000       6,277,455
                                                                       -------------
                                                                         10,968,705

------------------------------------------------------------------------------------
 Portugal--1.4%
 Portugal (Republic of) Obrig Do Tes Medio Prazo Unsec. Unsub. Bonds,
 5.85%, 5/20/10 [EUR]                                     4,135,000       4,496,856
------------------------------------------------------------------------------------
 Russia--8.4%
 Russian Federation Unsec. Unsub. Nts.:
 8.75%, 7/24/05                                             640,000         681,600
 10%, 6/26/07                                             4,815,000       5,224,275
 12.75%, 6/24/28                                          1,372,000       1,670,716
------------------------------------------------------------------------------------
 Russian Federation Unsub. Nts., 5%, 3/31/30(6)          25,616,000      18,075,290
------------------------------------------------------------------------------------
 Russian Ministry of Finance Debs., Series V, 3%, 5/14/08 1,920,000       1,347,456
                                                                       -------------
                                                                         26,999,337

------------------------------------------------------------------------------------
 South Africa--1.1%
 South Africa (Republic of) Unsec. Nts.:
 7.375%, 4/25/12                                          3,065,000       3,237,406
 8.50%, 6/23/17                                             280,000         302,050
 9.125%, 5/19/09                                             20,000          23,300
                                                                       -------------
                                                                          3,562,756

------------------------------------------------------------------------------------
 Spain--5.9%
 Spain (Kingdom of) Bonds, Bonos y Obligacion del Estado:
 4.65%, 10/31/04(5) [EUR]                                 4,155,000       4,230,235
 4.80%, 10/31/06 [EUR]                                    8,805,000       9,134,035
 5.75%, 7/30/32 [EUR]                                     2,245,000       2,476,129
------------------------------------------------------------------------------------
 Spain (Kingdom of) Gtd. Bonds, Bonos y Obligacion del Estado,
 5.40%, 7/30/11 [EUR]                                     2,840,000       3,010,698
                                                                       -------------
                                                                         18,851,097

14 | OPPENHEIMER INTERNATIONAL BOND FUND

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

 Supranational--1.0%
 European Investment Bank Nts., 2.125%, 9/20/07 [JPY]   348,000,000    $  3,115,249
------------------------------------------------------------------------------------
 Sweden--0.5%
 Sweden (Kingdom of) Debs., Series 1040, 6.50%,
 5/5/08 [SEK]                                            13,350,000       1,571,449
------------------------------------------------------------------------------------
 The Netherlands--4.8%
 The Netherlands (Government of) Bonds:
 5%, 7/15/11 [EUR]                                        3,450,000       3,575,684
 5.50%, 1/15/28 [EUR]                                     1,820,000       1,947,459
 5.75%, 1/15/04 [EUR]                                     3,010,000       3,075,331
 Series 1, 5.75%, 2/15/07 [EUR]                           6,410,000       6,861,442
                                                                       -------------
                                                                         15,459,916

------------------------------------------------------------------------------------
 Turkey--1.0%
 Turkey (Republic of) Bonds, 11.75%, 6/15/10              1,710,000       1,534,725
------------------------------------------------------------------------------------
 Turkey (Republic of) Sr. Unsec. Unsub. Nts.,
 11.875%, 1/15/30                                         1,035,000         869,400
------------------------------------------------------------------------------------
 Turkey (Republic of) Sr. Unsub. Bonds, 12.375%, 6/15/09  1,015,000         936,337
                                                                       -------------
                                                                          3,340,462

------------------------------------------------------------------------------------
 Ukraine--1.0%
 Ukraine (Republic of) Sr. Unsec. Nts., 11%, 3/15/07      2,966,880       3,114,853
------------------------------------------------------------------------------------
 Uruguay--0.1%
 Banco Central Del Uruguay Nts., Series A,
 6.75%, 2/19/21(5)                                          315,000         194,512
------------------------------------------------------------------------------------
 Venezuela--2.7%
 Venezuela (Republic of) Bonds, 9.25%, 9/15/27            7,715,000       5,149,762
------------------------------------------------------------------------------------
 Venezuela (Republic of) Collateralized Par Bonds, Series W-B,
 6.75%, 3/31/20                                             159,000         127,598
------------------------------------------------------------------------------------
 Venezuela (Republic of) Debs., Series DL,
 2.875%, 12/18/07(6)                                      3,771,368       2,856,811
------------------------------------------------------------------------------------
 Venezuela (Republic of) Front-Loaded Interest Reduction Bonds:
 Series A, 2.688%, 3/31/07(6)                               842,839         625,808
 Series B, 2.688%, 3/31/07(6)                                76,189          56,570
                                                                       -------------
                                                                          8,816,549
                                                                       -------------
 Total Foreign Government Obligations (Cost $220,555,680)               224,214,538

------------------------------------------------------------------------------------
 Loan Participations--2.1%
------------------------------------------------------------------------------------
 Algeria (Republic of) Loan Participation Nts.,
 2.625%, 3/4/10(5,6)                                      3,236,250       2,849,923
------------------------------------------------------------------------------------
 Deutsche Bank AG, Indonesia Rupiah Loan Participation Nts.:
 2.636%, 5/21/04(3)                                         360,000         185,400
 2.636%, 3/25/05(3)                                         165,000          86,625
 2.636%, 12/14/13(3,5)                                      495,000         222,750
------------------------------------------------------------------------------------
 Deutsche Bank AG, OAO Gazprom Loan Participation Nts.,
 10%, 12/9/02(5)                                          1,400,000       1,408,820
------------------------------------------------------------------------------------
 Russia (Government of) Debs., Series VI, 3%, 5/14/06     2,320,000       1,912,118
                                                                       -------------
 Total Loan Participations (Cost $6,650,684)                              6,665,636

15 | OPPENHEIMER INTERNATIONAL BOND FUND

STATEMENT OF INVESTMENTS  Continued

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

 Corporate Bonds and Notes--8.6%
------------------------------------------------------------------------------------
 Capital Gaming International, Inc., 11.50% Promissory
 Nts., 8/1/1995(3,4,5)                               $        2,000    $         --
------------------------------------------------------------------------------------
 Chohung Bank, 11.875% Sub. Nts., 4/1/10(6)                 145,000         170,208
------------------------------------------------------------------------------------
 European Investment Bank, 3% Eligible Interest Nts.,
 9/20/06 [JPY]                                          938,000,000       8,546,325
------------------------------------------------------------------------------------
 Fuji JGB Investment LLC:
 9.87% Non-Cum. Bonds, Series A, 12/31/49(6)              1,140,000       1,037,513
 9.87% Non-Cum. Bonds, Series A, 12/31/49(7)             10,981,000       9,993,797
------------------------------------------------------------------------------------
 Hanvit Bank, 12.75% Unsec. Sub. Nts., 3/1/10(6)          2,337,000       2,776,961
------------------------------------------------------------------------------------
 IBJ Preferred Capital Co. (The) LLC, 8.79% Non-Cum. Bonds,
 Series A, 12/29/49(6)                                      380,000         318,037
------------------------------------------------------------------------------------
 Mexican Williams Sr. Nts., 2.076%, 11/15/08(5,6)           500,000         514,610
------------------------------------------------------------------------------------
 Ongko International Finance Co. BV, 10.50% Sec.
 Nts., 3/29/04(3,4,5)                                       550,000           8,250
------------------------------------------------------------------------------------
 Petronas Capital Ltd.:
 7.875% Nts., 5/22/22                                     1,385,000       1,541,526
 7.875% Nts., 5/22/22(7)                                    875,000         961,107
------------------------------------------------------------------------------------
 Pfizer, Inc., 0.80% Unsec. Bonds, Series INTL,
 3/18/08 [JPY]                                          131,000,000       1,090,806
------------------------------------------------------------------------------------
 Tokai Preferred Capital Co. LLC, 9.98% Non-Cum. Bonds,
 Series A, 12/29/49(7)                                      695,000         634,290
                                                                       -------------
 Total Corporate Bonds and Notes (Cost $28,091,611)                      27,593,430

                                                             Shares
------------------------------------------------------------------------------------
 Common Stocks--0.0%
------------------------------------------------------------------------------------
 i Shares MSCI Hong Kong Index Fund(4) (Cost $2,284)            225           1,604

                                                              Units
------------------------------------------------------------------------------------
 Rights, Warrants and Certificates--1.0%
------------------------------------------------------------------------------------
 Banco Central Del Uruguay Rts., Exp. 1/2/21(4,5)           315,000              --
------------------------------------------------------------------------------------
 Chesapeake Energy Corp. Wts.:
 Exp. 1/23/03(4,5)                                              326              --
 Exp. 9/1/04(4,5)                                               350              --
------------------------------------------------------------------------------------
 ICG Communications, Inc. Wts., Exp. 9/15/05(4,5)               495               5
------------------------------------------------------------------------------------
 Loral Space & Communications Ltd. Wts., Exp. 1/15/07(4,5)       50              --
------------------------------------------------------------------------------------
 Mexico Value Rts., Exp. 6/30/03(4)                          70,000              21
------------------------------------------------------------------------------------
 Microcell Telecommunications, Inc. Wts., Exp. 6/1/06(4,7)      100              19
------------------------------------------------------------------------------------
 Morgan Stanley Wts., Exp. 6/5/03(4)                        357,965       3,078,714
------------------------------------------------------------------------------------
 Protection One, Inc. Wts., Exp. 6/30/05(4,5)                   640              --
                                                                       -------------
 Total Rights, Warrants and Certificates (Cost $3,771,364)                3,078,759

16 | OPPENHEIMER INTERNATIONAL BOND FUND

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

 Structured Notes--7.8%
------------------------------------------------------------------------------------
 Credit Suisse First Boston Corp. (Nassau Branch), U.S. Dollar/Philippine
 Peso Linked Nts., 12.50%, 3/15/12(6) [PHP]             119,085,000    $  2,258,810
------------------------------------------------------------------------------------
 Credit Suisse First Boston International, U.S. Dollar/South African Rand
 Linked Nts., 1.965%, 5/23/22(5,6)                        2,100,000       2,087,400
------------------------------------------------------------------------------------
 Deutsche Bank AG:
 Brazilian Real Linked Nts., 22%, 2/8/04                  3,475,000       2,611,810
 Colombian Peso Linked Nts., 2.201%, 4/22/04(6)             810,000         757,269
 Columbian Peso Linked Nts., 14.61%, 8/8/04(5,6)            595,000         579,292
 Mexican Peso Linked Nts., 1.66%, 4/9/12(6)               3,000,000       2,692,800
------------------------------------------------------------------------------------
 JPMorgan Chase Bank:
 EMBI Plus Linked CD, 0.54%, 2/6/03                       2,480,000       2,443,536
 EMBI Plus/EMBI Global Linked Bonds, 1.02%, 3/11/03       1,130,000       1,001,862
 EMBI Plus/EMBI Global Linked Bonds, 1.20%, 4/4/03          740,000         644,536
 Hungarian Forint/Euro Linked Bonds, 2%, 7/14/03          2,780,000       2,757,204
 Hungarian Forint/Euro Linked Nts., 1.82%, 8/6/03         2,010,000       1,966,383
------------------------------------------------------------------------------------
 Salomon Smith Barney, Inc., Mexican Peso Linked Nts., 1.78%,
 12/6/02 [MXN]                                           23,808,000       2,231,033
------------------------------------------------------------------------------------
 Standard Chartered Bank, Indonesian Rupiah Linked Nts., 12.86%,
 10/21/02 [IDR]                                      26,733,350,000       2,970,214
                                                                       -------------
 Total Structured Notes (Cost $26,194,778)                               25,002,149

                                       Date       Strike  Contracts
------------------------------------------------------------------------------------
 Options Purchased--0.0%
------------------------------------------------------------------------------------
 Brazilian Real Call(4,5)          10/11/02     3.335brr     32,144           1,420
------------------------------------------------------------------------------------
 Chiliean Peso Call(4,5)           10/11/02    719.50clp     10,496           5,904
------------------------------------------------------------------------------------
 Japanese Yen Call(4,5)             2/18/03    116.33jpy    408,780         147,628
------------------------------------------------------------------------------------
 Qatar (State of) Sr. Unsec.
 Unsub. Bonds, 9.75%,
 6/15/30 Put(4,5)                   3/19/03         114%    155,236          17,730
                                                                       -------------
 Total Options Purchased (Cost $606,656)                                    172,682

                                                          Principal
                                                             Amount
------------------------------------------------------------------------------------
 Joint Repurchase Agreements--3.8%
------------------------------------------------------------------------------------
 Undivided interest of 4.10% in joint repurchase agreement with BNP
 Paribas Securities Corp., 1.85%, dated 9/30/02, to be repurchased at
 $12,313,633 on 10/1/02, collateralized by U.S. Treasury Bonds, 7.25%--
 10.375%, 11/15/12--2/15/20, with a value of $308,594,118
 (Cost $12,313,000)                                     $12,313,000      12,313,000
------------------------------------------------------------------------------------
 Total Investments, at Value (Cost $318,829,203)               99.6%    320,206,283
------------------------------------------------------------------------------------
 Other Assets Net of Liabilities                                0.4       1,444,713
                                                        ----------------------------
 Net Assets                                                   100.0%   $321,650,996
                                                        ============================

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

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

ARP Argentine Peso AUD Australian Dollar BRR Brazilian Real CAD Canadian Dollar CLP Chilean Peso EUR Euro FRF French Franc GBP British Pound Sterling IDR Indonesian Rupiah JPY Japanese Yen MXN Mexican Nuevo Peso NOK Norwegian Krone PHP Philippines Peso SEK Swedish Krona 1. A sufficient amount of securities has been designated to cover outstanding foreign currency contracts. See Note 5 of Notes to Financial Statements. 2. Zero coupon bond reflects effective yield on the date of purchase. 3. Issuer is in default. 4. Non-income producing security. 5. Identifies issues considered to be illiquid or restricted--See Note 9 of Notes to Financial Statements. 6. Represents the current interest rate for a variable or increasing rate security. 7. 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 $12,411,913 or 3.86% of the Fund's net assets as of September 30, 2002. 8. A sufficient amount of liquid assets has been designated to cover outstanding written options, as follows:

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

11.50%, 5/15/26                 $1,970    3/19/03    0.013%    $175,330     $184,195





          18 | OPPENHEIMER INTERNATIONAL BOND FUND

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

 Geographic Diversification                     Market Value         Percent
-----------------------------------------------------------------------------
 United States                                  $ 52,229,135            16.3%
 Russia                                           30,320,275             9.5
 Spain                                            18,851,097             5.9
 Mexico                                           16,136,613             5.0
 The Netherlands                                  15,459,916             4.8
 Philippines                                      13,227,515             4.1
 Italy                                            11,878,631             3.7
 Supranational                                    11,661,574             3.6
 Brazil                                           11,034,126             3.5
 Belgium                                          10,875,718             3.4
 Great Britain                                    10,458,068             3.3
 Germany                                          10,372,264             3.2
 Greece                                            9,065,795             2.8
 Venezuela                                         8,816,549             2.8
 France                                            8,718,477             2.7
 Colombia                                          7,107,072             2.2
 Austria                                           6,883,710             2.1
 South Africa                                      5,650,156             1.8
 Panama                                            4,906,332             1.5
 Peru                                              4,758,855             1.5
 Hungary                                           4,723,587             1.5
 Portugal                                          4,496,856             1.4
 Ecuador                                           4,095,900             1.3
 Indonesia                                         3,473,239             1.1
 Turkey                                            3,340,462             1.0
 Australia                                         3,120,850             1.0
 Ukraine                                           3,114,853             1.0
 Canada                                            3,084,353             1.0
 Korea, Republic of South                          2,947,169             0.9
 Algeria                                           2,849,923             0.9
 Malaysia                                          2,502,633             0.8
 Argentina                                         2,321,705             0.7
 Chile                                             1,799,949             0.6
 Egypt                                             1,646,398             0.5
 Norway                                            1,586,358             0.5
 Sweden                                            1,571,449             0.5
 Dominican Republic                                1,410,350             0.4
 El Salvador                                         822,700             0.3
 Bulgaria                                            791,823             0.2
 Nigeria                                             727,431             0.2
 Ivory Coast                                         521,546             0.2
 Belize                                              446,625             0.1
 Uruguay                                             194,512             0.1
 Guatemala                                           184,400             0.1
 Qatar                                                17,730              --
 Hong Kong                                             1,604              --
                                                -----------------------------
 Total                                          $320,206,283           100.0%
                                                =============================

See accompanying Notes to Financial Statements. 19 | OPPENHEIMER INTERNATIONAL BOND FUND

STATEMENT OF ASSETS AND LIABILITIES  September 30, 2002


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

 Assets
-----------------------------------------------------------------------------------
 Investments, at value (cost $318,829,203)--
 see accompanying statement                                           $320,206,283
-----------------------------------------------------------------------------------
 Cash                                                                      280,826
-----------------------------------------------------------------------------------
 Cash--foreign currencies (cost $57,960)                                    34,370
-----------------------------------------------------------------------------------
 Cash used for collateral on futures, forwards and put options           1,482,000
-----------------------------------------------------------------------------------
 Unrealized appreciation on foreign currency contracts                      72,667
-----------------------------------------------------------------------------------
 Receivables and other assets:
 Investments sold (including $8,073 sold on a when-issued basis)        10,805,149
 Interest, dividends and principal paydowns                              5,549,585
 Shares of beneficial interest sold                                      2,942,058
 Swap contract                                                              24,402
 Other                                                                       2,003
                                                                      -------------
 Total assets                                                          341,399,343

-----------------------------------------------------------------------------------
 Liabilities
-----------------------------------------------------------------------------------
 Unrealized depreciation on foreign currency contracts                      27,677
-----------------------------------------------------------------------------------
 Options written, at value (premiums received $175,330)--
 see accompanying statement                                                184,195
-----------------------------------------------------------------------------------
 Payables and other liabilities:
 Investments purchased                                                  11,165,848
 Shares of beneficial interest redeemed                                  5,719,680
 Closed foreign currency contracts                                       1,857,013
 Dividends                                                                 338,880
 Distribution and service plan fees                                        184,849
 Shareholder reports                                                       122,626
 Transfer and shareholder servicing agent fees                              55,705
 Daily variation on futures contracts                                       48,732
 Trustees' compensation                                                        561
 Other                                                                      42,581
                                                                      -------------
 Total liabilities                                                      19,748,347

-----------------------------------------------------------------------------------
 Net Assets                                                           $321,650,996
                                                                      =============

-----------------------------------------------------------------------------------
 Composition of Net Assets
-----------------------------------------------------------------------------------
 Par value of shares of beneficial interest                           $     73,530
-----------------------------------------------------------------------------------
 Additional paid-in capital                                            354,813,493
-----------------------------------------------------------------------------------
 Overdistributed net investment income                                    (896,072)
-----------------------------------------------------------------------------------
 Accumulated net realized loss on investments and foreign
 currency transactions                                                 (33,864,554)
-----------------------------------------------------------------------------------
 Net unrealized appreciation on investments and translation of
 assets and liabilities denominated in foreign currencies                1,524,599
                                                                      -------------
 Net Assets                                                           $321,650,996
                                                                      =============

20 | OPPENHEIMER INTERNATIONAL BOND FUND

----------------------------------------------------------------------------------
 Net Asset Value Per Share
----------------------------------------------------------------------------------

 Class A Shares:
 Net asset value and redemption price per share (based on net assets of
 $181,456,110 and 41,427,996 shares of beneficial interest outstanding)      $4.38
 Maximum offering price per share (net asset value plus sales charge of
 4.75% of offering price)                                                    $4.60
----------------------------------------------------------------------------------
 Class B Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of
 $100,049,144 and 22,905,683 shares of beneficial interest outstanding)      $4.37
----------------------------------------------------------------------------------
 Class C Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of
 $38,865,249 and 8,903,178 shares of beneficial interest outstanding)        $4.37
----------------------------------------------------------------------------------
 Class N Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of
 $1,280,493 and 292,966 shares of beneficial interest outstanding)           $4.37

See accompanying Notes to Financial Statements. 21 | OPPENHEIMER INTERNATIONAL BOND FUND

STATEMENT OF OPERATIONS  For the Year Ended September 30, 2002


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

 Investment Income
-----------------------------------------------------------------------------------
 Interest (net of foreign withholding taxes of $7,794)                 $16,275,556
-----------------------------------------------------------------------------------
 Dividends                                                                     929
                                                                       ------------
 Total investment income                                                16,276,485

-----------------------------------------------------------------------------------
 Expenses
-----------------------------------------------------------------------------------
 Management fees                                                         1,851,525
-----------------------------------------------------------------------------------
 Distribution and service plan fees:
 Class A                                                                   313,178
 Class B                                                                   851,975
 Class C                                                                   285,981
 Class N                                                                     1,444
-----------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Class A                                                                   332,663
 Class B                                                                   214,823
 Class C                                                                    72,417
 Class N                                                                       566
-----------------------------------------------------------------------------------
 Shareholder reports                                                       199,424
-----------------------------------------------------------------------------------
 Custodian fees and expenses                                               101,941
-----------------------------------------------------------------------------------
 Trustees' compensation                                                      9,385
-----------------------------------------------------------------------------------
 Other                                                                      60,643
                                                                       ------------
 Total expenses                                                          4,295,965
 Less reduction to custodian expenses                                       (8,013)
                                                                       ------------
 Net expenses                                                            4,287,952

-----------------------------------------------------------------------------------
 Net Investment Income                                                  11,988,533

-----------------------------------------------------------------------------------
 Realized and Unrealized Gain (Loss)
-----------------------------------------------------------------------------------
 Net realized gain (loss) on:
 Investments (including premiums on options exercised)                   9,290,822
 Closing of futures contracts                                             (406,037)
 Closing and expiration of option contracts written                        178,461
 Foreign currency transactions                                           7,156,017
                                                                       ------------
 Net realized gain                                                      16,219,263
-----------------------------------------------------------------------------------
 Net change in unrealized appreciation on:
 Investments                                                             4,381,613
 Translation of assets and liabilities denominated
 in foreign currencies                                                   2,335,373
                                                                       ------------
 Net change                                                              6,716,986
                                                                       ------------
 Net realized and unrealized gain                                       22,936,249
-----------------------------------------------------------------------------------
 Net Increase in Net Assets Resulting from Operations                  $34,924,782
                                                                       ============

See accompanying Notes to Financial Statements. 22 | OPPENHEIMER INTERNATIONAL BOND FUND

STATEMENTS OF CHANGES IN NET ASSETS


 Year Ended September 30,                                       2002          2001
-----------------------------------------------------------------------------------

 Operations
-----------------------------------------------------------------------------------
 Net investment income                                  $ 11,988,533  $ 16,024,101
-----------------------------------------------------------------------------------
 Net realized gain (loss)                                 16,219,263   (18,499,271)
-----------------------------------------------------------------------------------
 Net change in unrealized appreciation                     6,716,986     2,722,710
                                                        ---------------------------
 Net increase in net assets resulting from operations     34,924,782       247,540

-----------------------------------------------------------------------------------
 Dividends and/or Distributions to Shareholders
-----------------------------------------------------------------------------------
 Dividends from net investment income:
 Class A                                                  (5,960,008)           --
 Class B                                                  (3,128,518)           --
 Class C                                                  (1,038,402)           --
 Class N                                                     (12,245)           --
-----------------------------------------------------------------------------------
 Tax return of capital distribution:
 Class A                                                  (1,001,844)   (8,487,688)
 Class B                                                    (633,014)   (6,076,453)
 Class C                                                    (212,641)   (1,760,643)
 Class N                                                      (2,205)       (1,308)

-----------------------------------------------------------------------------------
 Beneficial Interest Transactions
-----------------------------------------------------------------------------------
 Net increase (decrease) in net assets resulting from beneficial interest
 transactions:
 Class A                                                  50,685,955    26,717,450
 Class B                                                   7,421,458    (8,296,328)
 Class C                                                  10,958,666      (825,212)
 Class N                                                   1,158,705       110,344

-----------------------------------------------------------------------------------
 Net Assets
-----------------------------------------------------------------------------------
 Total increase                                           93,160,689     1,627,702
-----------------------------------------------------------------------------------
 Beginning of period                                     228,490,307   226,862,605
                                                        ---------------------------
 End of period [including overdistributed net investment
 income of $896,072 and $436,204, respectively]         $321,650,996  $228,490,307
                                                        ===========================

See accompanying Notes to Financial Statements. 23 | OPPENHEIMER INTERNATIONAL BOND FUND

FINANCIAL HIGHLIGHTS


 Class A   Year ended September 30,             2002      2001      2000     1999      1998
----------------------------------------------------------------------------------------------

 Per Share Operating Data
----------------------------------------------------------------------------------------------
 Net asset value, beginning of period          $ 3.95    $ 4.19    $ 4.23    $ 4.32    $ 5.51
----------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                            .24       .30       .45       .58       .56
 Net realized and unrealized gain (loss)          .41      (.24)     (.08)     (.14)    (1.20)
                                               -----------------------------------------------
 Total from investment operations                 .65       .06       .37       .44      (.64)
----------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income            (.19)       --      (.21)     (.53)     (.53)
 Tax return of capital distribution              (.03)     (.30)     (.20)       --        --
 Distributions from net realized gain              --        --        --        --      (.02)
                                               -----------------------------------------------
 Total dividends and/or distributions
 to shareholders                                 (.22)     (.30)     (.41)     (.53)     (.55)
----------------------------------------------------------------------------------------------
 Net asset value, end of period                 $4.38     $3.95     $4.19     $4.23     $4.32
                                               ===============================================

----------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value(1)            16.78%     1.40%     8.93%    10.58%   (12.50)%
----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------
 Ratios/Supplemental Data
----------------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)    $181,456  $118,733  $100,928  $102,236  $ 97,404
----------------------------------------------------------------------------------------------
 Average net assets (in thousands)           $134,912  $117,000  $110,968  $101,948  $108,264
----------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                           5.16%     7.10%    10.23%    13.47%    11.09%
 Expenses                                        1.37%     1.38%     1.31%     1.26%     1.24%(3)
 Expenses, net of reduction to custodian
 and/or voluntary waiver of transfer agent fees  1.37%     1.38%     1.29%     1.25%     1.24%
----------------------------------------------------------------------------------------------
 Portfolio turnover rate                          372%      377%      288%      285%      446%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 2. Annualized for periods of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 24 | OPPENHEIMER INTERNATIONAL BOND FUND

 Class B   Year ended September 30,             2002      2001      2000     1999      1998
----------------------------------------------------------------------------------------------

 Per Share Operating Data
----------------------------------------------------------------------------------------------
 Net asset value, beginning of period          $ 3.94    $ 4.17   $ 4.22     $ 4.31    $ 5.50
----------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                            .21       .26      .42        .55       .52
 Net realized and unrealized gain (loss)          .40      (.22)    (.09)      (.14)    (1.20)
                                               -----------------------------------------------
 Total from investment operations                 .61       .04      .33        .41      (.68)
----------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income            (.15)       --     (.20)      (.50)     (.49)
 Tax return of capital distribution              (.03)     (.27)    (.18)        --        --
 Distributions from net realized gain              --        --       --         --      (.02)
                                               -----------------------------------------------
 Total dividends and/or distributions
 to shareholders                                 (.18)     (.27)    (.38)      (.50)     (.51)
----------------------------------------------------------------------------------------------
 Net asset value, end of period                 $4.37     $3.94    $4.17      $4.22     $4.31
                                               ===============================================

----------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value(1)            15.90%     0.85%    7.94%      9.79%   (13.16)%
----------------------------------------------------------------------------------------------


----------------------------------------------------------------------------------------------
 Ratios/Supplemental Data
----------------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)    $100,049   $84,427 $ 98,272   $118,632  $119,998
----------------------------------------------------------------------------------------------
 Average net assets (in thousands)           $ 85,244   $93,455 $115,116   $122,878  $128,789
----------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                           4.41%     6.40%    9.63%     12.70%    10.33%
 Expenses                                        2.14%     2.14%    2.05%      2.02%     2.00%(3)
 Expenses, net of reduction to custodian
 and/or voluntary waiver of transfer agent fees  2.14%     2.14%    2.03%      2.01%     2.00%
----------------------------------------------------------------------------------------------
 Portfolio turnover rate                          372%      377%     288%       285%      446%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 2. Annualized for periods of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 25 | OPPENHEIMER INTERNATIONAL BOND FUND

FINANCIAL HIGHLIGHTS  Continued


 Class C   Year ended September 30,             2002      2001      2000     1999      1998
----------------------------------------------------------------------------------------------

 Per Share Operating Data
----------------------------------------------------------------------------------------------
 Net asset value, beginning of period          $ 3.94    $ 4.17   $ 4.22     $ 4.31    $ 5.50
----------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                            .21       .26      .41        .55       .52
 Net realized and unrealized gain (loss)          .40      (.22)    (.08)      (.14)    (1.20)
                                               -----------------------------------------------
 Total from investment operations                 .61       .04      .33        .41      (.68)
----------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders
 Dividends from net investment income            (.15)    --        (.19)      (.50)     (.49)
 Tax return of capital distribution              (.03)     (.27)    (.19)        --        --
 Distributions from net realized gain              --        --       --         --      (.02)
                                               -----------------------------------------------
 Total dividends and/or distributions
 to shareholders                                 (.18)     (.27)    (.38)      (.50)     (.51)
----------------------------------------------------------------------------------------------
 Net asset value, end of period                 $4.37     $3.94    $4.17      $4.22     $4.31
                                               ===============================================

----------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value(1)            15.90%     0.85%    7.95%      9.80%   (13.16)%
----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------
 Ratios/Supplemental Data
----------------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)     $38,865   $25,221  $27,663    $29,456   $27,636
----------------------------------------------------------------------------------------------
 Average net assets (in thousands)            $28,635   $27,125  $30,710    $28,918   $29,336
----------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                           4.37%     6.39%    9.55%     12.76%    10.33%
 Expenses                                        2.14%     2.14%    2.05%      2.02%     2.00%(3)
 Expenses, net of reduction to custodian
 and/or voluntary waiver of transfer agent fees  2.14%     2.14%    2.03%      2.01%     2.00%
----------------------------------------------------------------------------------------------
 Portfolio turnover rate                          372%      377%     288%       285%      446%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 2. Annualized for periods of less than one full year. 3. Expense ratio has been calculated without adjustment for the reduction to custodian expenses. See accompanying Notes to Financial Statements. 26 | OPPENHEIMER INTERNATIONAL BOND FUND

 Class N   Year ended September 30,                                   2002      2001(1)
---------------------------------------------------------------------------------------

 Per Share Operating Data
---------------------------------------------------------------------------------------
 Net asset value, beginning of period                               $ 3.95    $ 4.23
---------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                                 .21       .16
 Net realized and unrealized gain (loss)                               .42      (.28)
                                                                    -------------------
 Total from investment operations                                      .63      (.12)
---------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                                 (.18)       --
 Tax return of capital distribution                                   (.03)     (.16)
 Distributions from net realized gain                                   --        --
                                                                    -------------------
 Total dividends and/or distributions
 to shareholders                                                      (.21)     (.16)
---------------------------------------------------------------------------------------
 Net asset value, end of period                                      $4.37     $3.95
                                                                    ===================

---------------------------------------------------------------------------------------
 Total Return, at Net Asset Value(2)                                 16.23%    (2.88)%
---------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------
 Ratios/Supplemental Data
---------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)                           $1,280      $109
---------------------------------------------------------------------------------------
 Average net assets (in thousands)                                  $  297      $ 34
---------------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                                4.87%     6.56%
 Expenses                                                             1.57%     1.39%
 Expenses, net of reduction to custodian
 and/or voluntary waiver of transfer agent fees                       1.57%     1.39%
---------------------------------------------------------------------------------------
 Portfolio turnover rate                                               372%      377%

1. For the period from March 1, 2001 (inception of offering) to September 30, 2001. 2. Assumes an investment on the business day before the first day of the fiscal period (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. 3. Annualized for periods of less than one full year. See accompanying Notes to Financial Statements. 27 | 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 Fund's investment objective is to seek total return. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).

  The Fund offers Class A, Class B, Class C 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 and voting privileges. Earnings, net assets and net asset value per share may differ by minor amounts due to each class having its own expenses directly attributable to that class. 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 Fund's assets are valued. In the absence of a sale, the security is valued at the last sale price on the prior trading day, if it is within the spread of the closing bid and asked prices, and if not, at the closing bid price. Securities (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 note's 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, 2002, the market value of these securities comprised 7.8% of the Fund's net assets and resulted in unrealized losses in the current period of $1,192,630. The Fund also hedges a portion of the foreign currency exposure generated by these securities, as discussed in Note 5.

28 | OPPENHEIMER INTERNATIONAL BOND FUND --------------------------------------------------------------------------------

  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 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 Fund's net asset value to the extent the Fund executes such transactions while remaining substantially fully invested. As of September 30, 2002, the Fund had entered into when-issued sale commitments of $8,073.

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

  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, 2002, securities with an aggregate market value of $4,073,708, representing 1.27% of the Fund's 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 Fund's Statement of Operations.

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

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

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

  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, 2002, the Fund had available for federal income tax purposes unused capital loss carryforwards as follows:

Expiring 2002 $ 3,670,346 2003 449,603 2006 3,413,515 2007 24,055,190 2008 4,438,059 2009 1,299,082 Total $37,325,795(1) =========== 1. Includes $4,119,949 of the $8,187,009 unused capital loss carryforward acquired in the February 15, 2001 merger with Oppenheimer World Bond Fund which is no longer subject to limitation under IRS Sections 382 or 384. --------------------------------------------------------------------------------

  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 net realized gain was recorded by the Fund.

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

  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, 2002, amounts have been reclassified to reflect a decrease in paid-in capital of $1,816,973, a decrease in undistributed net investment income of $459,524, and a decrease in accumulated net realized loss on investments of $2,276,497. As noted in the Statement of Changes in Net Assets for federal income tax purposes, the Fund realized a return of capital of $1,849,704. Net assets of the Fund were unaffected by the reclassifications.

  The tax character of distributions paid during the years ended September 30, 2002 and September 30, 2001 was as follows:

Year Ended Year Ended September 30, 2002 September 30, 2001 -------------------------------------------------------- Distributions paid from: Ordinary income $10,139,173 $ -- Long-term capital gain -- -- Return of capital 1,849,704 16,326,092 ------------------------------- Total $11,988,877 $16,326,092 ===============================

  As of September 30, 2002, the components of distributable earnings on a tax basis were as follows:

Overdistributed net investment income $ (896,072) Accumulated net realized loss (33,864,554) Net unrealized appreciation 1,524,599 ------------ Total $(33,236,027) ============ --------------------------------------------------------------------------------

  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 recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. -------------------------------------------------------------------------------- Other. The preparation of financial statements in conformity with 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. 31 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 2. Shares of Beneficial Interest

  The Fund has authorized an unlimited number of $0.001 par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:

                                     Year Ended                   Year Ended
                                 September 30, 2002          September 30, 2001(1)
                                Shares        Amount         Shares         Amount
-----------------------------------------------------------------------------------
 Class A

 Sold                       29,697,373  $129,350,915     11,475,782   $ 47,469,618
 Dividends and/or
 distributions reinvested    1,145,883     4,834,797      1,365,106      5,584,489
 Acquisition--Note 11               --            --      9,099,764     38,855,992
 Redeemed                  (19,476,112)  (83,499,757)   (15,986,371)   (65,192,649)
                           --------------------------------------------------------
 Net increase               11,367,144  $ 50,685,955      5,954,281   $ 26,717,450
                           ========================================================

-----------------------------------------------------------------------------------
 Class B
 Sold                        9,030,170  $ 39,252,375      2,577,998   $ 10,449,838
 Dividends and/or
 distributions reinvested      515,987     2,162,691        765,041      3,126,381
 Acquisition--Note 11               --            --      2,119,613      9,008,355
 Redeemed                   (8,090,580)  (33,993,608)    (7,563,989)   (30,880,902)
                           --------------------------------------------------------
 Net increase (decrease)     1,455,577  $  7,421,458     (2,101,337)  $ (8,296,328)
                           ========================================================

-----------------------------------------------------------------------------------
 Class C
 Sold                        4,734,148  $ 20,471,644      2,442,689   $ 10,125,425
 Dividends and/or
 distributions reinvested      180,877       759,597        228,472        933,199
 Acquisition--Note 11               --            --        389,518      1,655,452
 Redeemed                   (2,420,774)  (10,272,575)    (3,283,543)   (13,539,288)
                           --------------------------------------------------------
 Net increase (decrease)     2,494,251  $ 10,958,666       (222,864)  $   (825,212)
                           ========================================================

-----------------------------------------------------------------------------------
 Class N
 Sold                          292,426  $  1,277,397         27,136   $    109,074
 Dividends and/or
 distributions reinvested        2,942        12,571            426          1,270
 Redeemed                      (29,964)     (131,263)            --             --
                           --------------------------------------------------------
 Net increase                  265,404  $  1,158,705         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. -------------------------------------------------------------------------------- 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, 2002, were $817,788,025 and $785,530,575, respectively.

32 | OPPENHEIMER INTERNATIONAL BOND FUND

  As of September 30, 2002, unrealized appreciation (depreciation) based on cost of securities for federal income tax purposes of $319,807,053 was composed of:

Gross unrealized appreciation $10,536,781 Gross unrealized depreciation (10,137,551) ----------- Net unrealized appreciation $ 399,230 ===========

  The difference between book-basis and tax-basis unrealized appreciation and depreciation, if applicable, is attributable primarily to the tax deferral of losses on wash sales, or return of capital dividends, and the realization for tax purposes of unrealized gain (loss) on certain futures contracts, investments in passive foreign investment companies, and forward foreign currency exchange contracts.

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

-------------------------------------------------------------------------------- Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a $22.50 per account fee.

  OFS has voluntarily agreed to limit transfer and shareholder servicing agent fees for all classes, up to an annual rate of 0.35% of average net assets per class. This undertaking may be amended or withdrawn at any time.

-------------------------------------------------------------------------------- Distribution and Service Plan (12b-1) Fees. Under its General Distributor's Agreement with the Manager, OppenheimerFunds Distributor, Inc. (the Distributor) acts as the Fund's 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    Concessions    Concessions    Concessions    Concessions
                    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, 2002  $452,569       $98,260       $115,077       $549,159       $128,269         $6,626

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. Class A Class B Class C Class N Contingent Contingent Contingent Contingent Deferred Deferred Deferred Deferred Sales Charges Sales Charges Sales Charges Sales Charges Retained by Retained by Retained by Retained by Year Ended Distributor Distributor Distributor Distributor ------------------------------------------------------------------------------- September 30, 2002 $11,854 $276,434 $7,123 $1,255 33 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Continued

  Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A Shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. For the year ended September 30, 2002, payments under the Class A Plan totaled $313,178, all of which were paid by the Distributor to recipients, and included $13,551 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.

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

  Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B shares and on Class C shares and the Fund pays the Distributor an annual asset-based sales charge of 0.25% per year on Class N shares. The Distributor also receives a service fee of 0.25% per year under each plan.

        Distribution fees paid to the Distributor for the year ended September 30, 2002, 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 $851,975 $656,771 $4,991,285 4.99% Class C Plan 285,981 52,083 1,079,070 2.78 Class N Plan 1,444 859 12,754 1.00 -------------------------------------------------------------------------------- 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.

34 | OPPENHEIMER INTERNATIONAL BOND FUND

  As of September 30, 2002, the Fund had outstanding foreign currency contracts as follows:

                            Expiration       Contract    Valuation as of    Unrealized   Unrealized
 Contract Description            Dates  Amount (000s)     Sept. 30, 2002  Appreciation Depreciation
----------------------------------------------------------------------------------------------------

 Contracts to Purchase
 Canadian Dollar (CAD)        11/27/02          4,945CAD      $3,111,934       $    --       $18,211
 Euro (EUR)                   10/16/02-
                              12/27/02          8,880EUR       8,753,784        72,667            --
                                                                               ---------------------
                                                                                72,667        18,211
                                                                               ---------------------
 Contracts to Sell
 Australian Dollar (AUD)      11/27/02          5,760AUD       3,114,305            --           621
 British Pound Sterling (GBP)  10/1/02             23GBP          36,218            --           472
 Euro (EUR)                     5/5/03            665EUR         651,429            --         8,373
                                                                               ---------------------
                                                                                    --         9,466
                                                                               ---------------------
 Total Unrealized Appreciation and Depreciation                                $72,667       $27,677
                                                                               =====================

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

  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.

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

  As of September 30, 2002, the Fund had outstanding futures contracts as follows:

                                                                                 Unrealized
                                 Expiration   Number of     Valuation as of    Appreciation
 Contract Description                  Dates  Contracts  September 30, 2002  (Depreciation)
--------------------------------------------------------------------------------------------
 Contracts to Purchase

 Euro-Bobl                           12/6/02        782         $84,974,924        $294,535
                                                                                   ---------

 Contracts to Sell
 Euro-Bundesobligation               12/6/02        160          17,828,932         (41,113)
 Euro-Schatz                         12/6/02        241          25,051,804         (50,018)
 Japan (Government of) Bonds, 10 yr.12/11/02         20          23,065,550         118,285
 U.S. Treasury Nts., 5 yr.          12/19/02        357          40,798,406        (306,797)
                                                                                   ---------
                                                                                   (279,643)
                                                                                   ---------
                                                                                   $ 14,892
                                                                                   =========

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

  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.

36 | OPPENHEIMER INTERNATIONAL BOND FUND Written option activity for the year ended September 30, 2002 was as follows:

                                        Call Options                          Put Options
                     -------------------------------     ---------------------------------
                     Principal (000s)/                   Principal (000s)/
                             Number of     Amount of             Number of      Amount of
                             Contracts      Premiums             Contracts       Premiums
------------------------------------------------------------------------------------------

 Options outstanding as of
 September 30, 2001                 --      $     --           280,537,595      $ 147,278
 Options written                 3,624       607,801             3,702,770        242,025
 Options closed or expired      (3,605)     (139,860)         (284,237,595)      (175,953)
 Options exercised                 (19)     (467,941)                 (800)       (38,020)
                     ---------------------------------------------------------------------
 Options outstanding as of
 September 30, 2002                 --      $     --                 1,970       $175,330
                     =====================================================================

-------------------------------------------------------------------------------- 8. Credit Swap Transactions

  The Fund may enter into a credit swap transaction to seek to maintain a total return on a particular investment or portion of its portfolio, or for other non-speculative purposes. Because the principal amount is not exchanged, it represents neither an asset nor a liability to either counterparty, and is referred to as a notional principal amount. The Fund records an increase or decrease to interest income, in the amount due to or owed by the Fund at termination or settlement on a daily basis. The Fund enters into swaps only on securities it owns. Credit swaps are subject to credit risks (if the counterparty fails to meet its obligations). The Fund segregates liquid assets to cover any amounts it could owe under swaps that exceed the amounts it is entitled to receive.

  As of September 30, 2002, the Fund had entered into the following credit swap agreements:

                            Expiration    Notional       Valuation as of      Unrealized
 Contract Description             Date      Amount    September 30, 2002    Appreciation
-----------------------------------------------------------------------------------------
 J.P. Morgan Chase Bank, Jordon

 (Kingdom of ) Credit Nts.      6/6/06    390,000                $24,402         $24,402

-------------------------------------------------------------------------------- 9. Illiquid or Restricted Securities

  As of September 30, 2002, investments in securities included issues that are illiquid or restricted. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund intends to invest no more than 10% of its net assets (determined at the time of purchase and reviewed periodically) in illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of September 30, 2002 was

37 | OPPENHEIMER INTERNATIONAL BOND FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 9. Illiquid or Restricted Securities Continued

  $13,536,889, which represents 4.20% of the Fund's net assets, of which $34,370 is considered restricted. Information concerning restricted securities is as follows:

Acquisition Valuation as of Unrealized Security Date Cost September 30, 2002 Depreciation ----------------------------------------------------------------------------- Currency Argentine Peso 1/15/02 $57,960 $34,370 $23,590 -------------------------------------------------------------------------------- 10. 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 within 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, 2002.

-------------------------------------------------------------------------------- 11. 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 carryforward of $8,187,009. The exchange qualified as a tax-free reorganization for federal income tax purposes.

38 | OPPENHEIMER INTERNATIONAL BOND FUND

                                     A-1
                                  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      Pharmaceuticals
Services
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-1
                                  Appendix C

OppenheimerFunds Special Sales Charge Arrangements and Waivers

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

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

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

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

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

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

      There is no initial sales charge on purchases of Class A shares of any
of the Oppenheimer funds in the cases listed below. However, these purchases
may be subject to the Class A contingent deferred sales charge if redeemed
within 18 months (24 months in the case of Oppenheimer Rochester National
Municipals and Rochester Fund Municipals) of the beginning of the calendar
month of their purchase, as described in the Prospectus (unless a waiver
described elsewhere in this Appendix applies to the redemption).
Additionally, on shares purchased under these waivers that are subject to the
Class A contingent deferred sales charge, the Distributor will pay the
applicable concession described in the Prospectus under "Class A Contingent
Deferred Sales Charge."5 This waiver provision applies to:
|_|   Purchases of Class A shares aggregating $1 million or more.
|_|   Purchases of Class A shares by a Retirement Plan that was permitted to
         purchase such shares at net asset value but subject to a contingent
         deferred sales charge prior to March 1, 2001. That included plans
         (other than IRA or 403(b)(7) Custodial Plans) that: 1) bought shares
         costing $500,000 or more, 2) had at the time of purchase 100 or more
         eligible employees or total plan assets of $500,000 or more, or 3)
         certified to the Distributor that it projects to have annual plan
         purchases of $200,000 or more.
|_|   Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the
         purchases are made:
         1) through a broker, dealer, bank or registered investment adviser
            that has made special arrangements with the Distributor for those
            purchases, or
         2) by a direct rollover of a distribution from a qualified
            Retirement Plan if the administrator of that Plan has made
            special arrangements with the Distributor for those purchases.
|_|   Purchases of Class A shares by Retirement Plans that have any of the
         following record-keeping arrangements:
         1) The record keeping is performed by Merrill Lynch Pierce Fenner &
            Smith, Inc. ("Merrill Lynch") on a daily valuation basis for the
            Retirement Plan. On the date the plan sponsor signs the
            record-keeping service agreement with Merrill Lynch, the Plan
            must have $3 million or more of its assets invested in (a) mutual
            funds, other than those advised or managed by Merrill Lynch
            Investment Management, L.P. ("MLIM"), that are made available
            under a Service Agreement between Merrill Lynch and the mutual
            fund's principal underwriter or distributor, and  (b)  funds
            advised or managed by MLIM (the funds described in (a) and (b)
            are referred to as "Applicable Investments").
         2) The record keeping for the Retirement Plan is performed on a
            daily valuation basis by a record keeper whose services are
            provided under a contract or arrangement between the Retirement
            Plan and Merrill Lynch. On the date the plan sponsor signs the
            record keeping service agreement with Merrill Lynch, the Plan
            must have $3 million or more of its assets (excluding assets
            invested in money market funds) invested in Applicable
            Investments.
         3) The record keeping for a Retirement Plan is handled under a
            service agreement with Merrill Lynch and on the date the plan
            sponsor signs that agreement, the Plan has 500 or more eligible
            employees (as determined by the Merrill Lynch plan conversion
            manager).
II.
            Waivers of Class A Sales Charges of Oppenheimer Funds
------------------------------------------------------------------------------

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

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

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

Class A shares issued or purchased in the following transactions are not
subject to sales charges (and no concessions are paid by the Distributor on
such purchases):
|_|   Shares issued in plans of reorganization, such as mergers, asset
         acquisitions and exchange offers, to which the Fund is a party.
|_|   Shares purchased by the reinvestment of dividends or other
         distributions reinvested from the Fund or other Oppenheimer funds
         (other than Oppenheimer Cash Reserves) or unit investment trusts for
         which reinvestment arrangements have been made with the Distributor.
|_|   Shares purchased 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. The death or
         disability must have occurred after the account was established, and
         for disability you must provide evidence of a determination of
         disability by the Social Security Administration.
|_|   The contingent deferred sales charges are generally not waived
         following the death or disability of a grantor or trustee for a
         trust account. The contingent deferred sales charges will only be
         waived in the limited case of the death of the trustee of a grantor
         trust or revocable living trust for which the trustee is also the
         sole beneficiary. The death or disability must have occurred after
         the account was established, and for disability you must provide
         evidence of a determination of disability by the Social Security
         Administration.
|_|   Distributions from accounts for which the broker-dealer of record has
         entered into a special agreement with the Distributor allowing this
         waiver.
|_|   Redemptions of Class B shares held by Retirement Plans whose records
         are maintained on a daily valuation basis by Merrill Lynch or an
         independent record keeper under a contract with Merrill Lynch.
|_|   Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
         accounts of clients of financial institutions that have entered into
         a special arrangement with the Distributor for this purpose.
|_|   Redemptions 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 59 1/2,
            as long as the aggregate value of the distributions does not
            exceed 10% of the account's value, adjusted annually.
         13)      Redemptions of Class B shares under an Automatic Withdrawal
            Plan for an account other than a Retirement Plan, if the
            aggregate value of the redeemed shares does not exceed 10% of the
            account's value, adjusted annually.
         14)      For distributions from 401(k) plans sponsored by
            broker-dealers that have entered into a special arrangement with
            the Distributor allowing this waiver.
|_|   Redemptions of Class B shares or Class C shares under an Automatic
         Withdrawal Plan from an account other than a Retirement Plan if the
         aggregate value of the redeemed shares does not exceed 10% of the
         account's value annually.

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

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

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

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

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


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

|X|   Waiver of Class A Sales Charges for Certain Shareholders.  Class A
shares purchased by the following investors are not subject to any Class A
initial or contingent deferred sales charges:
o     Shareholders who were shareholders of the AMA Family of Funds on
            February 28, 1991 and who acquired shares of any of the Former
            Quest for Value Funds by merger of a portfolio of the AMA Family
            of Funds.
o     Shareholders who acquired shares of any Former Quest for Value Fund by
            merger of any of the portfolios of the Unified Funds.

|X|   Waiver of Class A Contingent Deferred Sales Charge in Certain
Transactions.  The Class A contingent deferred sales charge will not apply to
redemptions of Class A shares purchased by the following investors who were
shareholders of any Former Quest for Value Fund:

      Investors who purchased Class A shares from a dealer that is or was not
permitted to receive a sales load or redemption fee imposed on a shareholder
with whom that dealer has a fiduciary relationship, under the Employee
Retirement Income Security Act of 1974 and regulations adopted under that law.

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

|X|   Waivers for Redemptions of Shares Purchased Prior to March 6, 1995.  In
the following cases, the contingent deferred sales charge will be waived for
redemptions of Class A, Class B or Class C shares of an Oppenheimer fund. The
shares must have been acquired by the merger of a Former Quest for Value Fund
into the fund or by exchange from an Oppenheimer fund that was a Former Quest
for Value Fund or into which such fund merged. Those shares must have been
purchased prior to March 6, 1995 in connection with:
o     withdrawals under an automatic withdrawal plan holding only either
            Class B or Class C shares if the annual withdrawal does not
            exceed 10% of the initial value of the account value, adjusted
            annually, and
o     liquidation of a shareholder's account if the aggregate net asset value
            of shares held in the account is less than the required minimum
            value of such accounts.

|X|   Waivers for Redemptions of Shares Purchased on or After March 6, 1995
but Prior to November 24, 1995. In the following cases, the contingent
deferred sales charge will be waived for redemptions of Class A, Class B or
Class C shares of an Oppenheimer fund. The shares must have been acquired by
the merger of a Former Quest for Value Fund into the fund or by exchange from
an Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on
or after March 6, 1995, but prior to November 24, 1995:
o     redemptions following the death or disability of the shareholder(s) (as
            evidenced by a determination of total disability by the U.S.
            Social Security Administration);
o     withdrawals under an automatic withdrawal plan (but only for Class B or
            Class C shares) where the annual withdrawals do not exceed 10% of
            the initial value of the account value; adjusted annually, and
o     liquidation of a shareholder's account if the aggregate net asset value
            of shares held in the account is less than the required minimum
            account value.

      A shareholder's account will be credited with the amount of any
contingent deferred sales charge paid on the redemption of any Class A, Class
B or Class C shares of the Oppenheimer fund described in this section if the
proceeds are invested in the same Class of shares in that fund or another
Oppenheimer fund within 90 days after redemption.
V.         Special Sales Charge Arrangements for Shareholders of Certain
          Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
                            Investment Accounts, Inc.
---------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

Shareholders of Oppenheimer 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.CALL.OPP (225.5677)

Custodian Bank
      JPMorgan Chase Bank
      4 Chase Metro Tech Center
      Brooklyn, New York 11245

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

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

Counsel to the Independent Trustees
      Mayer, Brown, Rowe & Maw
      1675 Broadway
      New York, New York 10019
1234
PX880.001.1102

--------
                                                             1 Mrs. Hamilton and Mr. Malone were elected as Trustees to the Board II Funds
                                                                                        effective June 1, 2002.
1  In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund and who do not
have any direct or indirect financial interest in the operation of the
distribution plan or any agreement under the plan.
1 Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
2 In the case of Oppenheimer Senior Floating Rate Fund, a
continuously-offered closed-end fund, references to contingent deferred sales
charges mean the Fund's Early Withdrawal Charges and references to
"redemptions" mean "repurchases" of shares.
3 An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class N shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
4 The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase shares of an Oppenheimer fund or funds through a single investment
dealer, broker or other financial institution designated by the group. Such
plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans
other than plans for public school employees. The term "Group Retirement
Plan" also includes qualified retirement plans and non-qualified deferred
compensation plans and IRAs that purchase shares of an Oppenheimer fund or
funds through a single investment dealer, broker or other financial
institution that has made special arrangements with the Distributor.
5 However, that concession will not be paid on purchases of shares in amounts
of $1 million or more (including any right of accumulation) by a Retirement
Plan that pays for the purchase with the redemption proceeds of Class C
shares of one or more Oppenheimer funds held by the Plan for more than one
year.
6 This provision does not apply to IRAs.
7 This provision 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 and
loans from the OppenheimerFunds-sponsored Single K retirement plan.
11 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, nor to IRAs.