497 Developing Market Fund SAI rev Dec. 6, 2005

497 1 developmkt497rev1205.htm DEVELOPING MARKET FUND -REV12 06 2005 497 Developing Market Fund SAI rev Dec. 6, 2005

Oppenheimer Developing Markets Fund
6803 South Tucson Way, Centennial, Colorado 80112
1.800.225.5677

Statement of Additional Information dated October 27, 2004, revised December 6, 2005

This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated October 27, 2004. It should be read together
with the Prospectus. You can obtain the Prospectus by writing to the Fund's
Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado
80217, or by calling the Transfer Agent at the toll-free number shown above, or
by downloading it from the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

Contents Page

About the Fund
Additional Information About the Fund's Investment Policies and Risks................................... 2
The Fund's Investment Policies..................................................................... 2
Other Investment Techniques and Strategies......................................................... 7
Other Investment Restrictions...................................................................... 24
Disclosure of Portfolio Holdings................................................................... 26
How the Fund is Managed ................................................................................ 30
Organization and History........................................................................... 30
Board of Trustees and Oversight Committees......................................................... 31
Trustees and Officers of the Fund.................................................................. 33
The Manager........................................................................................ 42
Brokerage Policies of the Fund.......................................................................... 45
Distribution and Service Plans.......................................................................... 48
Payments to Fund Intermediaries......................................................................... 53
Performance of the Fund................................................................................. 56

About Your Account
How To Buy Shares....................................................................................... 61
How To Sell Shares...................................................................................... 71
How To Exchange Shares.................................................................................. 76
Dividends, Capital Gains and Taxes...................................................................... 80
Additional Information About the Fund................................................................... 84

Financial Information About the Fund
Report of Independent Registered Public Accounting Firm................................................. 85
Financial Statements.................................................................................... 86

Appendix A: Industry Classifications.................................................................... A-1
Appendix B: OppenheimerFunds Special Sales Charge Arrangements and Waivers.............................. B-1

ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

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

The Fund's Investment Policies. The composition of the Fund's portfolio and the
techniques and strategies that the Manager may use in selecting portfolio
securities will vary over time. The Fund is not required to use all of the
investment techniques and strategies described below at all times in seeking its
objective. 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 securities primarily through the exercise of its own investment
analysis. That analysis includes a number of factors, some of which are
discussed in the Prospectus. Additionally, the Manager may evaluate o the
strength of an issuer's management and the history of its operations,
o the soundness of its financial and accounting policies and its financial condition,
o the issuer's pending product developments and developments by competitors,
o the effect of general market conditions on the issuer's business and the prospects for the industry of which the issuer is a
part, and
o legislative proposals that might affect the issuer.

In addition, the Manager ordinarily looks for one of the following
characteristics: an above-average earnings growth per share; high return on
invested capital; effective research and product development; pricing
flexibility; and general operating characteristics that might enable the issuer
to compete successfully in its intended markets.

The Fund intends to spread its investments among at least three
developing markets under normal market conditions. In determining an appropriate
distribution of investments among the various countries and geographic regions
in which the Fund may invest, the Manager generally considers the following
factors:
o prospects for relative economic growth, the balance of payments,
o anticipated levels of inflation,
o governmental policies influencing business conditions,
o the outlook for currency relationships and
o the range of individual investment opportunities available to
international investors among the various counties and geographic
regions.

The percentage of the Fund's assets invested in particular developing
markets will vary from time to time based on the Manager's assessment of these
factors, the appreciation possibilities of particular issuers and social and
political factors that may affect specific markets.

The portion of the Fund's assets allocated to securities selected for
capital appreciation and the investment techniques used will depend upon the
judgment of the Fund's Manager as to the future movement of the equity
securities markets. If the Manager believes that economic conditions favor a
rising market, the Fund will emphasize securities and investment methods
selected for high capital growth. If the Manager believes that a market decline
is likely, defensive securities and investment methods may be emphasized.

Current income is not a consideration in the selection of portfolio
securities for the Fund. The fact that a security has a low yield or does not
pay current income will not be an adverse factor in considering it for the
Fund's portfolio unless the Manager believes that the lack of yield might
adversely affect appreciation possibilities.

|X| Growth Companies. Growth companies are those companies that the
Manager believes are entering into a growth cycle in their business, with the
expectation that their stock will increase in value. They may be established
companies as well as newer companies in the development stage.

Growth companies may have a variety of characteristics that in the
Manager's view define them as "growth" issuers. They may be generating or
applying new technologies, new or improved distribution techniques or new
services. They may own or develop natural resources. They may be companies that
can benefit from changing consumer demands or lifestyles, or companies that have
projected earnings in excess of the average for their sector or industry. In
each case, they have prospects that the Manager believes are favorable for the
long term. The portfolio manager of the Fund looks for growth companies with
strong, capable management sound financial and accounting policies, successful
product development and marketing and other factors.

|X| Investments in Equity Securities. The Fund focuses its investments
in equity securities of foreign companies whose principal activities are in
developing markets. Equity securities include common stocks, preferred stocks,
rights and warrants, and securities convertible into common stock. The Fund's
investment primarily include stocks of what the Manager believes are growth
companies. They may have a market capitalization of any range, small, medium or
large.

The Manager selects securities primarily on the basis of its view of a
security's potential for capital appreciation.

Small-cap growth companies may offer greater opportunities for capital
appreciation than securities of large, more established companies. However,
these securities also involve greater risks than securities of larger companies.
Securities of small capitalization issuers may be subject to greater price
volatility in general than securities of large-cap and mid-cap companies.
Therefore, to the degree that the Fund has investments in smaller capitalization
companies at times of market volatility, the Fund's share price may fluctuate
more. As noted below, the Fund may invest without limit in unseasoned small cap
issuers.

Convertible Securities. 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.

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.

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

Rights and Warrants. The Fund may invest in warrants or 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| Foreign Securities. The Fund emphasizes investments in equity
securities issued or guaranteed by foreign companies. "Foreign securities"
include equity and debt securities of companies organized under the laws of
countries other than the United States, and debt securities of governments other
than the U.S. government. 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 considered "foreign securities" for the
purpose of the Fund's investment allocations. They are subject to some of the
special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.

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

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.

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

Investing in PFICs involves the risks associated with investing in
foreign securities, as described above. There are also the risks that the Fund
may not realize that a foreign corporation it invests in is a PFIC for federal
tax purposes. Federal tax laws impose severe tax penalties for failure to
properly report investment income from PFICs. Following industry standards, the
Fund makes every effort to ensure compliance with federal tax reporting of these
investments. PFICs are considered foreign securities for the purposes of the
Fund's minimum percentage requirements or limitations of investing in foreign
securities.

Subject to the limits under the Investment Company Act of 1940 (the
"Investment Company Act"), the Fund may also invest in foreign mutual funds
which are also deemed PFICs (since nearly all of the income of a mutual fund is
generally passive income). Investing in these types of PFICs may allow exposure
to various countries because some foreign countries limit, or prohibit, all
direct foreign investment in the securities of companies domiciled therein.

In addition to bearing their proportionate share of a fund's expenses
(management fees and operating expenses), shareholders will also indirectly bear
similar expenses of such entities. Additional risks of investing in other
investment companies are described below under "Investment in Other Investment
Companies."

Developing Markets and Their Special Risks. Emerging and developing markets
abroad may also offer special opportunities for growth investing but have
greater risks than markets in the United States or more developed foreign
markets, such as those in Western Europe, Canada, Australia, New Zealand and
Japan. Some of those special risks are described below.

Settlement of Transactions. Settlement procedures in developing markets may
differ from those of more established securities markets. Settlements may also
be delayed by operational problems. Securities issued by developing countries
and by issuers located in those countries may be subject to extended settlement
periods. Delays in settlement could result in temporary periods during which a
portion of the Fund's assets is uninvested and no return is earned on those
assets. The inability of the Fund to make intended purchases of securities due
to settlement problems could cause the Fund to miss investment opportunities.
The Fund could suffer losses from the inability to dispose of portfolio
securities due to settlement problems. As a result there could be subsequent
declines in the value of the portfolio security, a decrease in the level of
liquidity of the Fund's portfolio or, if the Fund has entered into a contract to
sell the security, a possible liability to the purchaser.

Price Volatility. Securities prices in developing markets may be
significantly more volatile than is the case in more developed nations of the
world. In particular, countries with emerging markets may have relatively
unstable governments. That presents the risk of nationalization of businesses,
restrictions on foreign ownership or prohibitions of repatriation of assets.
These countries may have less protection of property rights than more developed
countries. The economies of developing countries may be predominantly based on
only a few industries and, as such, may be highly vulnerable to changes in local
or global trade conditions.

Less Developed Securities Markets. Developing market countries may have
less well-developed securities markets and exchanges. Consequently they have
lower trading volume than the securities markets of more developed countries.
These markets may be unable to respond effectively to increases in trading
volume. Therefore, prompt liquidation of substantial portfolio holdings may be
difficult at times. As a result, these markets may be substantially less liquid
than those of more developed countries, and the securities of issuers located in
these markets may have limited marketability.

Government Restrictions. In certain developing countries, government
approval may be required for the repatriation of investment income, capital or
the proceeds of sales of securities by foreign investors, such as the Fund.
Also, a government might impose temporary restrictions on remitting capital
abroad if the country's balance of payments deteriorates, or it might do so for
other reasons. If government approval were delayed or refused, the Fund could be
adversely affected. Additionally, the Fund could be adversely affected by the
imposition of restrictions on investments by foreign entities.

Among the countries that the Manager has identified as developing or
emerging markets in which the Fund will consider investing are the following
countries. The Fund might not invest in all of these countries and the list may
change.

Algeria Czech Republic Ivory Coast Nigeria Sri Lanka
Argentina Ecuador Jamaica Pakistan Swaziland
Bangladesh Egypt Jordan Paraguay Taiwan
Bolivia Estonia Kenya Peru Tanzania
Botswana Ghana Latvia Philippines Thailand
Brazil Greece Lebanon Poland Tunisia
Bulgaria Guyana Lithuania Portugal Turkey
Chile Hong Kong Malaysia Russia Ukraine
China Hungary Mauritius Singapore Uruguay
Colombia India Mexico Slovakia Republic Venezuela
Costa Rica Indonesia Morocco Slovenia Vietnam
Croatia Iran Myanmar South Africa Zambia
Cyprus Israel Namibia South Korea Zimbabwe

|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, although the Fund does not expect to have a
portfolio turnover rate of more than 100% 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 long-term 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 objective, 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| Investing in Small, Unseasoned Companies. The Fund may invest in securities
of small, unseasoned companies. These are companies that have been in operation
for less than three years, including the operations of any predecessors.
Securities of these companies may be subject to volatility in their prices. They
may have a limited trading market, which may adversely affect the Fund's ability
to dispose of them and can reduce the price the Fund might be able to obtain for
them. Other investors that own a security issued by a small, unseasoned issuer
for which there is limited liquidity might trade the security when the Fund is
attempting to dispose of its holdings of that security. In that case the Fund
might receive a lower price for its holdings than might otherwise be obtained.
The Fund has no limit on the amount of its net assets that may be invested in
those securities.

|X| Debt Securities. While the Fund does not invest for the purpose of
seeking current income, at times certain debt securities (other than convertible
debt securities described above under the description of equity investments) may
be selected for investment by the Fund for investment or defensive purposes, as
described below. Certain debt securities may be selected for the Fund's
portfolio for defensive purposes (including debt securities that the Manager
believes may offer some opportunities for capital appreciation when stocks are
disfavored). Up to 35% of the Fund's assets may be invested in any combination
of debt securities of government or corporate issuers in developing countries,
equity and debt securities of issuers in developed countries (including the
United States) and cash and money market instruments. For example, when the
stock market is volatile, or when the portfolio manager believes that growth
opportunities in stocks are not attractive, certain debt securities might
provide not only defensive opportunities but also some opportunities for capital
appreciation. These investments could include corporate bonds and notes of
foreign or U.S. companies, as well as U.S. and foreign government securities. It
is not expected that this will be a significant portfolio strategy of the Fund
under normal market circumstances.

Credit Risk. Debt securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a debt security to make interest or
principal payments on the security as they become due. If the issuer fails to
pay interest, the Fund's income may be reduced and if the issuer fails to repay
principal, the value of that bond and of the Fund's shares may be reduced. The
Manager may rely to some extent on credit ratings by nationally recognized
rating agencies in evaluating the credit risk of securities selected for the
Fund's portfolio. It may also use its own research and analysis. Many factors
affect an issuer's ability to make timely payments, and the credit risks of a
particular security may change over time. The Fund may invest in higher-yielding
lower-grade debt securities (that is "junk bonds"), which have special risks.
Those are securities rated below the four highest rating categories of Standard
& Poor's Rating Service or Moody's Investors Service, Inc., or equivalent
ratings of other rating agencies or ratings assigned to a security by the
Manager.

Special Risks of Lower-Grade Securities. "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, Inc., or
similar ratings by other rating organizations, or if they are unrated, are
determined by the Manager to be of comparable quality to debt securities rated
below investment grade. The Fund will not invest in securities rated "C" or "D"
by Moody's, Standard & Poor's or Fitch, Inc. or which are in default.

Among the special credit risks of lower-grade securities is the 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, Inc. are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics.
? Interest Rate Risks. In addition to credit risks, debt
securities are subject to changes in value when prevailing interest rates
change. When prevailing interest rates fall, the values of outstanding debt
securities generally rise, and the bonds may sell for more than their face
amount. When prevailing interest rates rise, the values of outstanding debt
securities generally decline, and the bonds may sell at a discount from their
face amount. The magnitude of these price changes is generally greater for bonds
with longer maturities. Therefore, when the average maturity of the Fund's debt
securities is longer, its share price may fluctuate more when interest rates
change.

Privatization Programs. The governments in some developing countries have
been engaged in programs to sell all or part of their interests in
government-owned or controlled enterprises. Privatization programs may offer
opportunities for significant capital appreciation, and the Manager may invest
Fund assets in privatization programs in what it considers to be appropriate
circumstances. In certain developing countries, the ability of foreign entities
such as the Fund to participate in privatization programs may be limited by
local law. Additionally, the terms on which the Fund might be permitted to
participate may be less advantageous than those afforded local investors. There
can be no assurance that privatization programs will be successful.

"When-Issued" and Delayed-Delivery Transactions. The Fund can purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"delayed-delivery" or "forward commitment basis. These terms refer to securities
that have been created and for which a market exists, but which are not
available for immediate delivery. There may be a risk of loss to the Fund if the
value of the security declines prior to the settlement date.

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 (generally within 45
days of the date the offer is accepted). 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.

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 objective and policies for its portfolio 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 value. In a sale transaction, it records the proceeds to be
received. The Fund will identify on its books liquid obligations 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.

Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It may do so:
o for liquidity purposes to meet anticipated redemptions of Fund shares, or pending the investment of the proceeds from sales
of Fund shares, or
o pending the settlement of portfolio securities transactions, or
o 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 Fund's Manager from time to time.

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

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

Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission (the "SEC"), the Fund, along with other affiliated entities managed
by the Manager, may transfer uninvested cash balances into one or more joint
repurchase accounts. These balances are invested in one or more repurchase
agreements, secured by U.S. government securities. Securities 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 of the collateral may be subject to legal proceedings.

|X| Illiquid and Restricted Securities. Under the policies and
procedures established by the Fund's Board of Trustees, the Manager determines
the liquidity of certain of the Fund's investments. To enable the Fund to sell
its holdings of a restricted security not registered under applicable securities
laws, 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 can 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| Loans of Portfolio Securities. To raise cash for liquidity
purposes, 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 10% of the value of the Fund's total
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 bank 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 and Leverage. The Fund may not borrow money, except to
the extent permitted under the Investment Company Act, the rules or regulations
thereunder or any exemption therefrom that is applicable to the Fund, as such
statute, rules or regulations may be amended or interpreted from time to time.
Borrowing may entail "leverage," and may be a speculative investment strategy.
Any borrowing will be made only from banks and, pursuant to the requirements of
the Investment Company Act, will be made only to the extent that the value of
the Fund's assets, less its liabilities other than borrowings, is equal to at
least 300% of all borrowings including the proposed borrowing. If the value of
the Fund's assets, when computed in that manner, should fail to meet the 300%
asset coverage requirement, the Fund is required within three days to reduce its
bank debt to the extent necessary to meet that coverage requirement. To do so,
the Fund may have to sell a portion of its investments at a time when it would
otherwise not want to sell the securities. Interest on money the Fund borrows is
an expense the Fund would not otherwise incur, so that during periods of
substantial borrowings, its expenses may increase more than the expenses of
funds that do not borrow. The use of leverage also may make the Fund's share
prices more sensitive to interest rate changes.

|X| Derivatives. The Fund can invest in a variety of derivative
investments to seek income for liquidity needs or for hedging purposes. Some
derivative investments the Fund can use are the hedging instruments described
below in this Statement of Additional Information. However, the Fund does not
use, and does not currently contemplate using, derivatives or hedging
instruments to a significant degree in the coming year.

Some of the 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| Hedging. Although the Fund does not anticipate the extensive use of
hedging instruments, the Fund can use hedging instruments. 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 can
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 is not obligated to use hedging instruments, even though it is
permitted to use them in the Manager's discretion, as described below. 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 objective and
are permissible under applicable regulations governing the Fund.

? Futures. The Fund can buy and sell futures contracts that relate to
(1) broadly-based stock indices (these are referred to as "stock index
futures"), (2) an individual stock ("single stock futures"), (3) other broadly
based securities indices (these are referred to as "financial futures"), (4)
debt securities (these are referred to as "interest rate futures"), (5) foreign
currencies (these are referred to as "forward contracts") and (6) commodities
(these are referred to as "commodity futures").

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 common stocks included in the index and its value fluctuates in
response to the changes in value of the underlying stocks. A stock index cannot
be purchased or sold directly. Financial 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. Similarly, a single stock future obligates the seller
to deliver (and the purchaser to take) cash or a specified equity security to
settle the futures transaction. Either party could also enter into an offsetting
contract to close out the position. Single stock futures trade on a very limited
number of exchanges, with contracts typically not fungible among the exchanges.

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 (except forward contracts)
are effected through a clearinghouse associated with the exchange on which the
contracts are traded.

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

? Writing Covered Call Options. The Fund can 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 liquid
assets identified on the Fund's books to enable the Fund to satisfy its
obligations if the call is exercised. Up to 25% 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 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 bank, or a securities depository acting for the
custodian bank, 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 identification requirement, in no circumstances would the Fund's receipt
of an exercise notice as to that future require the Fund to deliver a futures
contract. It would simply put the Fund in a short futures position, which is
permitted by the Fund's hedging policies.

? Writing Put Options. The Fund can sell put options. 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 on the Fund's books 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 identify liquid assets with a
value equal to or greater than the exercise price of the underlying securities.
The Fund therefore forgoes the opportunity of investing the identified assets or
writing calls against those assets.

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

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

? Purchasing Puts and Calls. The Fund can purchase calls 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 whether or not it holds the underlying investment
in its portfolio. 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 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.

Buying a put on an investment the Fund does not own (such as an index
or future) permits the Fund 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.

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

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

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

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

A call the Fund writes on a foreign currency is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or it can do so for additional cash consideration identified on
its books) 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. This is known as a "cross-hedging" strategy. In those
circumstances, the Fund covers the option by identifying on its books cash, U.S.
government securities or other liquid securities in an amount equal to the
exercise price of the option.

? 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 value being more sensitive to changes in
the value of the underlying investment.

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

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

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

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

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

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

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

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

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

When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in" the
U.S. dollar price of the security or the U.S. dollar equivalent of the dividend
payments. To do so, the Fund could 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 could 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 might 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 might 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 position in these cases by identifying on
its books liquid 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.

|X| Regulatory Aspects of Hedging Instruments. The Commodities Futures Trading
Commission (the "CFTC") recently eliminated limitations on futures trading by
certain regulated entities including registered investment companies and
consequently registered investment companies may engage in unlimited futures
transactions and options thereon provided that the Fund claims an exclusion from
regulation as a commodity pool operator. The Fund has claimed such an exclusion
from registration as a commodity pool operator under the Commodity Exchange Act
("CEA"). The Fund may use futures and options for hedging and non-hedging
purposes to the extent consistent with its investment objective, internal risk
management guidelines adopted by the Fund's investment advisor (as they may be
amended from time to time), and as otherwise set forth in the Fund's prospectus
or this statement of additional information.

Transactions in options by the Fund are subject to limitations
established by the option exchanges. The exchanges limit the maximum number of
options that may be written or held by a single investor or group of investors
acting in concert. Those limits apply regardless of whether the options were
written or purchased on the same or different exchanges or are held in one or
more accounts or through one or more different exchanges or through one or more
brokers. Thus, the number of options that the Fund may write or hold may be
affected by options written or held by other entities, including other
investment companies having the same Advisor as the Fund (or an Advisor that is
an affiliate of the Fund's Advisor). The exchanges also impose position limits
on Futures transactions. An exchange may order the liquidation of positions
found to be in violation of those limits and may impose certain other sanctions.

Under interpretations of staff members of the SEC regarding applicable
provisions of the Investment Company Act, when the Fund purchases a future, it
must segregate cash or readily marketable short-term debt instruments in an
amount equal to the purchase price of the future, less the margin deposit
applicable to it.

? Tax Aspects of Certain 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.

Investment in Other Investment Companies. The Fund can also invest in the
securities of other investment companies, which can include open-end funds,
closed-end funds and unit investment trusts, subject to the limits set forth in
the Investment Company Act that apply to those types of investments, and the
following additional limitation: the Fund cannot invest in the securities of
other registered investment companies or registered unit investment trusts in
reliance on sub-paragraph (F) or (G) of section 12(d)(1) of the Investment
Company Act. For 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. At the same time,
the Fund would bear its own management fees and other expenses. The Fund does
not anticipate investing a substantial amount of its net assets in shares of
other investment companies.

|X| Temporary Defensive and Interim Investments. When market, economic
or political conditions are unstable, or the Manager believes it is otherwise
appropriate to reduce holdings in stocks, the Fund can invest in a variety of
debt securities for defensive purposes. The Fund can also purchase these
securities for liquidity purposes to meet cash needs due to the redemption of
Fund shares, or to hold while waiting to reinvest cash received from the sale of
other portfolio securities. The Fund can hold cash or buy: o high-quality (rated
in the top rating categories of nationally-recognized rating organizations or
deemed by the Manager to
be of comparable quality), short-term money market instruments, including those issued by the U. S. Treasury or other
government agencies,
o commercial paper (short-term, unsecured, promissory notes of
domestic or foreign companies) rated in the top two rating
categories of a nationally recognizes rating organization,
o debt obligations of corporate or foreign government issuers, rated
investment grade (rated at least Baa by Moody's Investors Service,
Inc. or at least BBB by Standard & Poor's Corporation, or a
comparable rating by another rating organization), or unrated
securities judge 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, 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.

Other Investment Restrictions

|X| What Are "Fundamental Policies?" Fundamental policies are those
policies that the Fund has adopted to govern its investments that can be changed
only by the vote of a "majority" of the Fund's outstanding voting securities.
Under the Investment Company Act, a "majority" vote is defined as the vote of
the holders of the lesser of:
o 67% or more of the shares present or represented by proxy at a shareholder meeting, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or
o more than 50% of the outstanding shares.

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

|X| What Are The Fund's Additional Fundamental Policies? The following
investment restrictions are fundamental policies of the Fund. o The Fund cannot
buy securities or other instruments issued or guaranteed by any one issuer if
more than 5% of its total
assets would be invested in securities or other instruments of
that issuer or if it would then own more than 10% of that
issuer's voting securities. This limitation applies to 75% of
the Fund's total assets. The limit does not apply to securities
issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities or securities of other investment
companies.
o The Fund cannot invest 25% or more of its total assets in any
one industry. That limit does not apply to securities issued or
guaranteed by the U.S. government or its agencies and
instrumentalities or securities issued by investment companies.
o The Fund cannot make loans, except to the extent permitted under
the Investment Company Act, the rules or regulations thereunder
or any exemption therefrom that is applicable to the Fund, as
such statute, rules or regulations may be amended or interpreted
from time to time.
o The Fund cannot invest in real estate, physical commodities or
commodity contracts, except to the extent permitted under the
Investment Company Act, the rules or regulations thereunder or
any exemption therefrom, as such statute, rules or regulations
may be amended or interpreted from time to time.
o The Fund cannot issue senior securities, except to the extent
permitted under the Investment Company Act, the rules or
regulations thereunder or any exemption therefrom, as such
statute, rules or regulations may be amended or interpreted from
time to time.
o The Fund may not borrow money, except to the extent permitted
under the Investment Company Act, the rules or regulations
thereunder or any exemption therefrom that is applicable to the
Fund, as such statute, rules or regulations may be amended or
interpreted from time to time.
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 may not borrow money, except to the extent permitted
under the Investment Company Act, the rules or regulations
thereunder or any exemption therefrom that is applicable to the
Fund, as such statute, rules or regulations may be amended or
interpreted from time to time.

In addition, the Fund may invest in funds selected by a Trustee of the
Fund under its Deferred Compensation Plan for Disinterested Trustees.

|X| Does the Fund Have Any Restrictions That Are Not Fundamental? The
Fund has a number of other investment restrictions that are not fundamental
policies, which means that they can be changed by the Board of Trustees without
shareholder approval. o The Fund cannot invest in companies for the purpose of
acquiring control or management of them. o The Fund cannot purchase securities
on margin. However, the Fund may make margin deposits in connection with any of
the
hedging instruments permitted by any of its other investment policies.
o The Fund cannot invest in or hold securities of any issuer if
officers and Trustees of the Fund or the Manager individually
beneficially own more than 1/2 of 1% of the securities of that
issuer and together own more than 5% of the securities of that
issuer.
o The Fund cannot mortgage or pledge any of its assets. However,
this does not prohibit the escrow arrangements contemplated by the
writing of covered call options or other collateral or margin
arrangements in connection with any of the hedging instruments
permitted by any of its other investment policies.
o The Fund cannot invest in the securities of other registered
investment companies or registered unit investment trusts in
reliance on sub-paragraph (F) or (G) of Section 12(d)(1) of the
Investment Company Act.

Another non-fundamental policy adopted by the Fund permits it to invest
all of its assets in the securities of a single open-end management investment
company for which the Manager, one of its subsidiaries or a successor is the
investment Advisor or sub-Advisor. That fund must have substantially the same
fundamental investment objective, policies and limitations as the Fund. This
policy would permit the Fund to adopt a "master-feeder" structure. Under that
structure, the Fund would be a "feeder" fund and would invest all of its assets
in a single pooled "master fund" in which other feeder funds could also invest.
This could enable the Fund to take advantage of potential operational and cost
efficiencies in the master-feeder structure. The Fund has no present intention
of adopting the master-feeder structure. If it did so, the Prospectus and this
Statement of Additional Information would be revised accordingly

Unless the Prospectus or this Statement of Additional Information
states that a percentage restriction applies on an ongoing basis, it applies
only at the time the Fund makes an investment (except in the case of borrowing
and investments in illiquid securities). The Fund need not sell securities to
meet the percentage limits if the value of the investment increases in
proportion to the size of the Fund.
For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth in
Appendix A to this Statement of Additional Information. This is not a
fundamental policy.

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

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

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

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

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

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

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

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

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

Portfolio holdings information of the Fund may be provided, under limited
circumstances, to brokers and/or dealers with whom the Fund trades and/or
entities that provide investment coverage and/or analytical information
regarding the Fund's portfolio, provided that there is a legitimate investment
reason for providing the information to the broker, dealer or other entity.
Month-end portfolio holdings information may, under this procedure, be provided
to vendors providing research information and/or analytics to the fund, with at
least a 15-day delay after the month end, but in certain cases may be provided
to a broker or analytical vendor with a 1-2 day lag to facilitate the provision
of requested investment information to the manager to facilitate a particular
trade or the portfolio manager's investment process for the Fund. Any third
party receiving such information must first sign the Manager's portfolio
holdings non-disclosure agreement as a pre-condition to receiving this
information.
Portfolio holdings information (which may include information on individual
securities positions or multiple securities) may be provided to the entities
listed below (1) by portfolio traders employed by the Manager in connection with
portfolio trading, and (2) by the members of the Manager's Security Valuation
Group and Accounting Departments in connection with portfolio pricing or other
portfolio evaluation purposes:

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

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

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

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

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

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

The Manager and/or the Fund have entered into ongoing arrangements to make
available information about the Fund's portfolio holdings. One or more of the
Oppenheimer funds may currently disclose portfolio holdings information based on
ongoing arrangements to the following parties:

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

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management investment company with an unlimited number of authorized
shares of beneficial interest. The Fund was organized as a Massachusetts business trust in May 1996

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

The Fund currently has five classes of shares: Class A, Class B, Class
C, Class N and Class Y. All classes invest in the same investment portfolio.
Only retirement plans may purchase Class N shares. Only certain institutional
investors may purchase Class Y shares. Each class of shares:

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

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

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

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

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

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

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

The Board of Trustees has an Audit Committee, a Regulatory & Oversight
Committee, a Governance Committee and a Proxy Committee. Each committee is
comprised solely of Trustees who are not "interested persons" under the
Investment Company Act (the "Independent Trustees"). The members of the Audit
Committee are Joel W. Motley (Chairman), Mary F. Miller, Kenneth A. Randall and
Joseph M. Wikler. The Audit Committee held 6 meetings during the Fund's fiscal
year ended August 31, 2004. The Audit Committee furnishes the Board with
recommendations regarding the selection of the Fund's independent registered
public accounting firm (also referred to as the "independent Auditors"). Other
main functions of the Audit Committee outlined in the Audit Committee Charter,
include, but are not limited to: (i) reviewing the scope and results of
financial statement audits and the audit fees charged; (ii) reviewing reports
from the Fund's independent Auditors regarding the Fund's internal accounting
procedures and controls; (iii) reviewing reports from the Manager's Internal
Audit Department; (iv) maintaining a separate line of communication between the
Fund's independent Auditors and the Independent Trustees; (v) reviewing the
independence of the Fund's independent Auditors; and (vi) pre-approving the
provision of any audit or non-audit services by the Fund's independent Auditors,
including tax services, that are not prohibited by the Sarbanes-Oxley Act, to
the Fund, the Manager and certain affiliates of the Manager.

The members of the Regulatory & Oversight Committee are Robert G. Galli
(Chairman), Matthew P. Fink, Phillip A. Griffiths, Joel W. Motley and Brian F.
Wruble. The Regulatory & Oversight Committee held 6 meetings during the Fund's
fiscal year ended August 31, 2004. The Regulatory & Oversight Committee
evaluates and reports to the Board on the Fund's contractual arrangements,
including the Investment Advisory and Distribution Agreements, transfer agency
and shareholder service agreements and custodian agreements as well as the
policies and procedures adopted by the Fund to comply with the Investment
Company Act and other applicable law, among other duties as set forth in the
Regulatory & Oversight Committee's Charter.

The members of the Governance Committee are, Phillip A. Griffiths
(Chairman), Kenneth A. Randall, Russell S. Reynolds, Jr. and Peter I Wold. The
Governance Committee held 7 meetings during the Fund's fiscal year ended August
31, 2004. The Governance Committee reviews the Fund's governance guidelines, the
adequacy of the Fund's Codes of Ethics, and develops qualification criteria for
Board members consistent with the Fund's governance guidelines, among other
duties set forth in the Governance Committee's Charter.

The Governance Committee's functions also include the selection and
nomination of Trustees, including Independent Trustees for election. The
Governance 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 Governance Committee has been able to identify from its
own resources an ample number of qualified candidates. Nonetheless, under the
current policy of the Board, if the Board determines that a vacancy exists or is
likely to exist on the Board, the Governance Committee will consider candidates
for Board membership including those recommended by the Fund's shareholders. The
Governance Committee will consider nominees recommended by Independent Board
members or recommended by any other Board members including Board members
affiliated with the Fund's Manager. The Governance Committee may, upon Board
approval, retain an executive search firm to assist in screening potential
candidates. Upon Board approval, the Governance Committee may also use the
services of legal, financial, or other external counsel that it deems necessary
or desirable in the screening process. Shareholders wishing to submit a nominee
for election to the Board may do so by mailing their submission to the offices
of OppenheimerFunds, Inc., Two World Financial Center, 225 Liberty Street, 11th
Floor, New York, New York 10281-1008, to the attention of the Board of Trustees
of Oppenheimer Developing Markets Fund, c/o the Secretary of the Fund.

Submissions should, at a minimum, be accompanied by the following: (1)
the name, address, and business, educational, and/or other pertinent background
of the person being recommended; (2) a statement concerning whether the person
is an "interested person" as defined in the Investment Company Act; (3) any
other information that the Fund would be required to include in a proxy
statement concerning the person if he or she was nominated; and (4) the name and
address of the person submitting the recommendation and, if that person is a
shareholder, the period for which that person held Fund shares. Shareholders
should note that a person who owns securities issued by Massachusetts Mutual
Life Insurance Company (the parent company of the Manager) would be deemed an
"interested person" under the Investment Company Act. In addition, certain other
relationships with Massachusetts Mutual Life Insurance Company or its
subsidiaries, with registered broker-dealers, or with the Funds' outside legal
counsel may cause a person to be deemed an "interested person."

The Governance Committee has not established specific qualifications
that it believes must be met by a trustee nominee. In evaluating trustee
nominees, the Governance Committee considers, among other things, an
individual's background, skills, and experience; whether the individual is an
"interested person" as defined in the Investment Company Act; and whether the
individual would be deemed an "audit committee financial expert" within the
meaning of applicable SEC rules. The Governance Committee also considers whether
the individual's background, skills, and experience will complement the
background, skills, and experience of other nominees and will contribute to the
Board. There are no differences in the manner in which the Governance Committee
evaluates nominees for trustees based on whether the nominee is recommended by a
shareholder. Candidates are expected to provide a mix of attributes, experience,
perspective and skills necessary to effectively advance the interests of
shareholders.

The members of the Proxy Committee are Russell S. Reynolds, Jr.
(Chairman), Matthew P. Fink and Mary F. Miller. The Proxy Committee held 1
meeting during the Fund's fiscal year ended August 31, 2004. The Proxy Committee
provides the Board with recommendations for the proxy voting of portfolio
securities held by the Fund and monitors proxy voting by the Fund.

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

Oppenheimer AMT-Free Municipals Oppenheimer International Growth Fund
Oppenheimer AMT-Free New York Municipals Oppenheimer International Large Cap Core Fund
Oppenheimer Balanced Fund Oppenheimer International Small Company Fund
Oppenheimer California Municipal Fund Oppenheimer International Value Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Limited Term California Municipal Fund
Oppenheimer Developing Markets Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Discovery Fund Oppenheimer Multi-State Municipal Trust
Oppenheimer Dividend Growth Fund Oppenheimer Portfolio Series
Oppenheimer Emerging Growth Fund Oppenheimer Real Estate Fund
Oppenheimer Emerging Technologies Fund Oppenheimer Select Value Fund
Oppenheimer Enterprise Fund Oppenheimer Series Fund, Inc.
Oppenheimer Global Fund OFI Tremont Core Strategies Hedge Fund
Oppenheimer Global Opportunities Fund OFI Tremont Market Neutral Hedge Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Tremont Market Neutral Fund LLC
Oppenheimer Growth Fund Oppenheimer Tremont Opportunity Fund LLC
Oppenheimer International Diversified Fund Oppenheimer U.S. Government Trust

In addition to being a director or trustee of each of the Board I
Funds, Messrs. Galli and Wruble are directors or trustees of ten other
portfolios, and Messrs. Wikler and Wold are trustees of one other portfolio, in
the OppenheimerFunds complex.

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

Messrs. Madden, Gillespie, Murphy, Petersen, Vandehey, Vottiero, Wixted
and Zack and Mss. Bloomberg and Ives, who are officers of the Fund, hold the
same offices with one or more of the other Board I Funds. As of October 31, 2005
the Trustees and officers of the Fund, as a group, owned of record or
beneficially less than 1% of any class of shares of the Fund. The foregoing
statement does not reflect ownership of shares held of record by an employee
benefit plan for employees of the Manager, other than the shares beneficially
owned under that plan by the officers of the Fund listed above. In addition,
none of the Independent Trustees (nor any of their immediate family members)
owns securities of either the Manager or the Distributor of the Board I Funds or
of any entity directly or indirectly controlling, controlled by or under common
control with the Manager or the Distributor.

Affiliated Transactions and Material Business Relationships. Mr.
Reynolds has reported he has a controlling interest in The Directorship Group,
Inc. (the "Directorship Group"), a director recruiting firm that provided
consulting services to Massachusetts Mutual Life Insurance Company (which
controls the Manager) for fees of $137,500 for calendar year ended December 31,
2002. Mr. Reynolds reported that the Directorship Group did not provide
consulting services to Massachusetts Mutual Life Insurance Company during the
calendar years ended December 31, 2003 and 2004 and does not expect to provide
any such services in the calendar year ending December 31, 2005.

The Independent Trustees have unanimously (except for Mr. Reynolds, who
abstained) determined that the consulting arrangements between the Directorship
Group and Massachusetts Mutual Life Insurance Company were not material business
or professional relationships that would compromise Mr. Reynolds's status as an
Independent Trustee. Nonetheless, to assure certainty as to determinations of
the Board and the Independent Trustees as to matters upon which the Investment
Company Act or the rules thereunder require approval by a majority of
Independent Trustees, Mr. Reynolds will not be counted for purposes of
determining whether a quorum of Independent Trustees was present or whether a
majority of Independent Trustees approved the matter.

Biographical Information. The Trustees and officers, their positions
with the Fund, length of service in such position(s) and principal occupations
and business affiliations during at least the past five years are listed in the
charts below. The charts also include information about each Trustee's
beneficial share ownership in the Fund and in all of the registered investment
companies that the Trustee oversees in the Oppenheimer family of funds
("Supervised Funds"). Ms. Miller was elected to certain Board I Funds during
2004 and did not hold shares of Board I Funds during the calendar year ended
December 31, 2004. Mr. Fink was elected to the Board I Funds in 2005 and did not
hold shares of Board I Funds during the calendar year ended December 31, 2004.
The address of each Trustee in the chart below is 6803 S. Tucson Way,
Centennial, Colorado 80112-3924. Each Trustee serves for an indefinite term, or
until his or her resignation, retirement, death or removal.

-------------------------------------------------------------------------------------------------------------------------------------
                              Independent Trustees
-------------------------------------------------------------------------------------------------------------------------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Name, Position(s) Held       Principal Occupation(s) During the Past 5 Years; Other           Dollar Range of     Aggregate Dollar
                                                                                                   Shares
                                                                                                Beneficially      Range Of Shares
with the Fund, Length of     Trusteeships/Directorships Held; Number of Portfolios in the         Owned in       Beneficially Owned
Service, Age                 Fund Complex Currently Overseen                                      the Fund      in Supervised Funds
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ---------------------------------------
                                                                                                     As of December 31, 2004
---------------------------- ---------------------------------------------------------------- ---------------------------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Clayton K. Yeutter,          Director of American Commercial Lines (barge company) (since     None              Over $100,000
Chairman of the Board of     January 2005); Attorney at Hogan & Hartson (law firm) (since
Trustees since 2003,         June 1993); Director of Covanta Holding Corp. (waste-to-energy
Trustee since 1996           company) (since 2002); Director of Weyerhaeuser Corp.
Age: 74                      (1999-April 2004); Director of Caterpillar, Inc.
                             (1993-December 2002); Director of ConAgra Foods
                             (1993-2001); Director of Texas Instruments
                             (1993-2001); Director of FMC Corporation
                             (1993-2001). Oversees 38 portfolios in the
                             OppenheimerFunds complex.
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Matthew P. Fink,             Trustee of the Committee for Economic Development (policy        None              None
Trustee since 2005           research foundation) (since 2005); Director of ICI Education
Age: 64                      Foundation (education foundation) (since October 1991);
                             President of the Investment Company Institute
                             (trade association) (1991-2004); Director of ICI
                             Mutual Insurance Company (insurance company)
                             (1991-2004). Oversees 38 portfolios in the
                             OppenheimerFunds complex.
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Robert G. Galli,             A director or trustee of other Oppenheimer funds. Oversees 48    Over $100,000     Over $100,000
Trustee since 1996           portfolios in the OppenheimerFunds complex.
Age: 72

---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Phillip A. Griffiths,        Director of GSI Lumonics Inc. (precision medical equipment       $50,001-$100,000  Over $100,000
Trustee since 1999           supplier) (since 2001); Trustee of Woodward Academy (since
Age: 67                      1983); Senior Advisor of The Andrew W. Mellon Foundation
                             (since 2001); Member of the National Academy of
                             Sciences (since 1979); Member of the American
                             Philosophical Society (since 1996); Council on
                             Foreign Relations (since 2002); Director of the
                             Institute for Advanced Study (1991-2004); Director
                             of Bankers Trust New York Corporation (1994-1999).
                             Oversees 38 portfolios in the OppenheimerFunds
                             complex.
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Mary F. Miller,              Trustee of the American Symphony Orchestra (not-for-profit)      None              None
Trustee since 2004           (since October 1998); and Senior Vice President and General
Age: 63                      Auditor of American Express Company (financial services
                             company) (July 1998-February 2003). Oversees 38
                             portfolios in the OppenheimerFunds complex.
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Joel W. Motley,              Director of Columbia Equity Financial Corp. (privately-held      $10,001-$50,000   Over $100,000
Director since 2002          financial adviser) (since 2002); Managing Director of Carmona
Age: 53                      Motley, Inc. (privately-held financial adviser) (since January
                             2002); Managing Director of Carmona Motley Hoffman
                             Inc. (privately-held financial adviser) (January
                             1998-December 2001); Member of the Finance and
                             Budget Committee of the Council on Foreign
                             Relations, the Investment Committee of the
                             Episcopal Church of America, the Investment
                             Committee of Human Rights Watch and the Investment
                             Committee of Historic Hudson Valley. Oversees 38
                             portfolios in the OppenheimerFunds complex.
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Kenneth A. Randall,          Director of Dominion Resources, Inc. (electric utility holding   None              Over $100,000
Trustee since 1996           company) (since February 1972); Former Director of Prime
Age: 78                      Retail, Inc. (real estate investment trust), Dominion Energy
                             Inc. (electric power and oil & gas producer),
                             Lumbermens Mutual Casualty Company, American
                             Motorists Insurance Company and American
                             Manufacturers Mutual Insurance Company; Former
                             President and Chief Executive Officer of The
                             Conference Board, Inc. (international economic and
                             business research). Oversees 38 portfolios in the
                             OppenheimerFunds complex.
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Russell S. Reynolds, Jr.,    Chairman of The Directorship Search Group, Inc. (corporate       None              Over $100,000
Trustee since 1996           governance consulting and executive recruiting) (since 1993);
Age: 73                      Life Trustee of International House (non-profit educational
                             organization); Former Trustee of The Historical Society of the
                             Town of Greenwich. Oversees 38 portfolios in the
                             OppenheimerFunds complex.
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Joseph M. Wikler,            Director of the following  medical device  companies:  Medintec  None              $50,001-$100,000
Trustee since 2005           (since  1992)  and  Cathco  (since  1996);  Director  of  Lakes
Age: 64                      Environmental   Association   (since   1996);   Member  of  the
                             Investment Committee of the Associated Jewish
                             Charities of Baltimore (since 1994); Director of
                             Fortis/Hartford mutual funds (1994-December 2001).
                             Oversees 39 portfolios in the OppenheimerFunds
                             complex.
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Peter I. Wold,               President   of  Wold  Oil   Properties,   Inc.   (oil  and  gas  None              Over $100,000
Trustee since 2005           exploration  and  production   company)   (since  1994);   Vice
Age: 57                      President,  Secretary and Treasurer of Wold Trona Company, Inc.
                             (soda ash processing and production) (since 1996);
                             Vice President of Wold Talc Company, Inc. (talc
                             mining) (since 1999); Managing Member of
                             Hole-in-the-Wall Ranch (cattle ranching) (since
                             1979); Director and Chairman of the Denver Branch
                             of the Federal Reserve Bank of Kansas City
                             (1993-1999); and Director of PacifiCorp. (electric
                             utility) (1995-1999). Oversees 39 portfolios in the
                             OppenheimerFunds complex.
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------
Brian F. Wruble,             General Partner of Odyssey  Partners,  L.P. (hedge fund) (since  None              Over $100,000
Trustee since 2005           September 1995);  Director of Special Value Opportunities Fund,
Age: 62                      LLC (registered  investment  company) (since  September  2004);
                             Director of Zurich Financial Investment Advisory
                             Board (affiliate of the Manager's parent company)
                             (since October 2004); Board of Governing Trustees
                             of The Jackson Laboratory (non-profit) (since
                             August 1990); Trustee of the Institute for Advanced
                             Study (non-profit educational institute) (since May
                             1992); Special Limited Partner of Odyssey
                             Investment Partners, LLC (private equity
                             investment) (January 1999-September 2004); Trustee
                             of Research Foundation of AIMR (2000-2002)
                             (investment research, non-profit); Governor, Jerome
                             Levy Economics Institute of Bard College (August
                             1990-September 2001) (economics research); Director
                             of Ray & Berendtson, Inc. (May 2000-April 2002)
                             (executive search firm). Oversees 48 portfolios in
                             the OppenheimerFunds complex.
---------------------------- ---------------------------------------------------------------- ----------------- ---------------------

         The address of Mr. Murphy is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, New York 10281-1008. Mr.
Murphy serves as a Trustee and as an officer for an indefinite term, or until his resignation, retirement, death or removal. Mr.
Murphy is an "Interested Trustee" because he is affiliated with the Manager by virtue of his positions as an officer and director of
the Manager, and as a shareholder of its parent company.

------------------------------------------------------------------------------------------------------------------------------------
                         Interested Trustee and Officer
------------------------------------------------------------------------------------------------------------------------------------
--------------------------- ----------------------------------------------------------------- ---------------- ---------------------
Name, Position(s) Held      Principal Occupation(s) During the Past 5 Years; Other             Dollar Range      Aggregate Dollar
                                                                                                 of Shares
                                                                                               Beneficially      Range Of Shares
with Fund, Length of        Trusteeships/Directorships Held; Number of Portfolios in the         Owned in       Beneficially Owned
Service, Age                Fund Complex Currently Overseen                                      the Fund      in Supervised Funds
--------------------------- ----------------------------------------------------------------- ---------------- ---------------------
--------------------------- ----------------------------------------------------------------- --------------------------------------
                                                                                                     As of December 31, 2004
--------------------------- ----------------------------------------------------------------- --------------------------------------
--------------------------- ----------------------------------------------------------------- ----------------- --------------------
John V. Murphy,             Chairman, Chief Executive Officer and Director (since June        None              Over $100,000
President since 2001and     2001) and President (since September 2000) of the Manager;
Trustee since 2001          President and a director or trustee of other Oppenheimer funds;
Age: 56                     President and Director of Oppenheimer Acquisition Corp. ("OAC")
                            (the Manager's parent holding company) and of
                            Oppenheimer Partnership Holdings, Inc. (holding
                            company subsidiary of the Manager) (since July
                            2001); Director of OppenheimerFunds Distributor,
                            Inc. (subsidiary of the Manager) (since November
                            2001); Chairman and Director of Shareholder
                            Services, Inc. and of Shareholder Financial
                            Services, Inc. (transfer agent subsidiaries of the
                            Manager) (since July 2001); President and Director
                            of OppenheimerFunds Legacy Program (charitable trust
                            program established by the Manager) (since July
                            2001); Director of the following investment advisory
                            subsidiaries of the Manager: OFI Institutional Asset
                            Management, Inc., Centennial Asset Management
                            Corporation, Trinity Investment Management
                            Corporation and Tremont Capital Management, Inc.
                            (since November 2001), HarbourView Asset Management
                            Corporation and OFI Private Investments, Inc. (since
                            July 2001); President (since November 1, 2001) and
                            Director (since July 2001) of Oppenheimer Real Asset
                            Management, Inc.; Executive Vice President of
                            Massachusetts Mutual Life Insurance Company (OAC's
                            parent company) (since February 1997); Director of
                            DLB Acquisition Corporation (holding company parent
                            of Babson Capital Management LLC) (since June 1995);
                            Member of the Investment Company Institute's Board
                            of Governors (since October 3, 2003); Chief
                            Operating Officer of the Manager (September
                            2000-June 2001); President and Trustee of MML Series
                            Investment Fund and MassMutual Select Funds
                            (open-end investment companies) (November
                            1999-November 2001); Director of C.M. Life Insurance
                            Company (September 1999-August 2000); President,
                            Chief Executive Officer and Director of MML Bay
                            State Life Insurance Company (September 1999-August
                            2000); Director of Emerald Isle Bancorp and Hibernia
                            Savings Bank (wholly-owned subsidiary of Emerald
                            Isle Bancorp) (June 1989-June 1998). Oversees 77
                            portfolios in the OppenheimerFunds complex as a
                            director or trustee and officer and an additional 10
                            portfolios as an officer.
--------------------------- ----------------------------------------------------------------- ----------------- --------------------

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

-----------------------------------------------------------------------------------------------------------------------------
                                                 Other Officers of the Fund
-----------------------------------------------------------------------------------------------------------------------------
----------------------------------- -----------------------------------------------------------------------------------------
Name, Position(s) Held with Fund,   Principal Occupation(s) During Past 5 Years
Length of Service, Age
----------------------------------- -----------------------------------------------------------------------------------------
----------------------------------- -----------------------------------------------------------------------------------------
Mark Madden,                        Vice President of the Manager (since August 2004); Mr. Madden held the following
Vice President and Portfolio        positions in Global Asset Management at Pioneer Investment Management, Inc.: Managing
Manager since 2004                  Director, Global Emerging Markets Team (November 2000-July 2004), Senior Vice President
Age:  48                            and Portfolio Manager, International Equities (December 1998-October 2000) and Vice
                                    President and Portfolio Manager, International Equities (February 1993-November 1998).
                                    An officer of 1 portfolio in the OppenheimerFunds complex.
----------------------------------- -----------------------------------------------------------------------------------------
----------------------------------- -----------------------------------------------------------------------------------------
Mark S. Vandehey,                   Senior Vice President and Chief Compliance Officer of the Manager (since March 2004);
Vice President and Chief            Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset Management
Compliance Officer since 2004       Corporation and Shareholder Services, Inc. (since June 1983). Former Vice President and
Age: 55                             Director of Internal Audit of the Manager (1997-February 2004). An officer of 87
                                    portfolios in the OppenheimerFunds complex.
----------------------------------- -----------------------------------------------------------------------------------------
----------------------------------- -----------------------------------------------------------------------------------------
Brian W. Wixted,                    Senior Vice President and Treasurer of the Manager (since March 1999); Treasurer of the
Treasurer since 1999                following: HarbourView Asset Management Corporation, Shareholder Financial Services,
Age: 46                             Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation, and
                                    Oppenheimer Partnership Holdings, Inc.
                                    (since March 1999), OFI Private Investments,
                                    Inc. (since March 2000), OppenheimerFunds
                                    International Ltd. (since May 2000),
                                    OppenheimerFunds plc (since May 2000), OFI
                                    Institutional Asset Management, Inc. (since
                                    November 2000), and OppenheimerFunds Legacy
                                    Program (charitable trust program
                                    established by the Manager) (since June
                                    2003); Treasurer and Chief Financial Officer
                                    of OFI Trust Company (trust company
                                    subsidiary of the Manager) (since May 2000);
                                    Assistant Treasurer of the following: OAC
                                    (since March 1999),Centennial Asset
                                    Management Corporation (March 1999-October
                                    2003) and OppenheimerFunds Legacy Program
                                    (April 2000-June 2003); Principal and Chief
                                    Operating Officer of Bankers Trust
                                    Company-Mutual Fund Services Division (March
                                    1995-March 1999). An officer of 87
                                    portfolios in the OppenheimerFunds complex.
----------------------------------- -----------------------------------------------------------------------------------------
----------------------------------- -----------------------------------------------------------------------------------------
Brian Petersen,                     Assistant Vice President of the Manager (since August 2002); Manager/Financial Product
Assistant Treasurer since 2004      Accounting of the Manager (November 1998-July 2002). An officer of 87 portfolios in the
Age: 35                             OppenheimerFunds complex.

----------------------------------- -----------------------------------------------------------------------------------------
----------------------------------- -----------------------------------------------------------------------------------------
Philip F. Vottiero,                 Vice President/Fund Accounting of the Manager (since March 2002); Vice
Assistant Treasurer since 2002      President/Corporate Accounting of the Manager (July 1999-March 2002); Chief Financial
Age: 42                             Officer of Sovlink Corporation (April 1996-June 1999). An officer of 87 portfolios in
                                    the OppenheimerFunds complex.
----------------------------------- -----------------------------------------------------------------------------------------
----------------------------------- -----------------------------------------------------------------------------------------
Robert G. Zack,                     Executive Vice President (since January 2004) and General Counsel (since March 2002) of
Secretary since 2001                the Manager; General Counsel and Director of the Distributor (since December 2001);
Age: 57                             General Counsel of Centennial Asset Management Corporation (since December 2001);
                                    Senior Vice President and General Counsel of HarbourView Asset Management Corporation
                                    (since December 2001); Secretary and General Counsel of OAC (since November 2001);
                                    Assistant Secretary (since September 1997) and Director (since November 2001) of
                                    OppenheimerFunds International Ltd. and OppenheimerFunds plc; Vice President and
                                    Director of Oppenheimer Partnership Holdings, Inc. (since December 2002); Director of
                                    Oppenheimer Real Asset Management, Inc. (since November 2001); Senior Vice President,
                                    General Counsel and Director of Shareholder Financial Services, Inc. and Shareholder
                                    Services, Inc. (since December 2001); Senior Vice President, General Counsel and
                                    Director of OFI Private Investments, Inc. and OFI Trust Company (since November 2001);
                                    Vice President of OppenheimerFunds Legacy Program (since June 2003); Senior Vice
                                    President and General Counsel of OFI Institutional Asset Management, Inc. (since
                                    November 2001); Director of OppenheimerFunds (Asia) Limited (since December 2003);
                                    Senior Vice President (May 1985-December 2003), Acting General Counsel (November
                                    2001-February 2002) and Associate General Counsel (May 1981-October 2001) of the
                                    Manager; Assistant Secretary of the following: Shareholder Services, Inc. (May
                                    1985-November 2001), Shareholder Financial Services, Inc. (November 1989-November
                                    2001), and OppenheimerFunds International Ltd. (September 1997-November 2001). An
                                    officer of 87 portfolios in the OppenheimerFunds complex.
----------------------------------- -----------------------------------------------------------------------------------------
----------------------------------- -----------------------------------------------------------------------------------------
Kathleen T. Ives,                   Vice President (since June 1998) and Senior Counsel and Assistant Secretary (since
Assistant Secretary since 2001      October 2003) of the Manager; Vice President (since 1999) and Assistant Secretary
Age: 40                             (since October 2003) of the Distributor; Assistant Secretary of Centennial Asset
                                    Management Corporation (since October 2003); Vice President and Assistant Secretary of
                                    Shareholder Services, Inc. (since 1999); Assistant Secretary of OppenheimerFunds Legacy
                                    Program and Shareholder Financial Services, Inc. (since December 2001); Assistant
                                    Counsel of the Manager (August 1994-October 2003). An officer of 87 portfolios in the
                                    OppenheimerFunds complex.
----------------------------------- -----------------------------------------------------------------------------------------
----------------------------------- -----------------------------------------------------------------------------------------
Lisa I. Bloomberg,                  Vice President and Associate Counsel of the Manager (since May 2004); First Vice
Assistant Secretary since 2004      President (April 2001-April 2004), Associate General Counsel (December 2000-April
Age: 37                             2004), Corporate Vice President (May 1999-April 2001) and Assistant General Counsel
                                    (May 1999-December 2000) of UBS Financial Services Inc. (formerly, PaineWebber
                                    Incorporated). An officer of 87 portfolios in the OppenheimerFunds complex.
----------------------------------- -----------------------------------------------------------------------------------------
----------------------------------- -----------------------------------------------------------------------------------------
Phillip S. Gillespie,               Senior Vice President and Deputy General Counsel of the Manager (since September 2004);
Assistant Secretary since 2004      Mr. Gillespie held the following positions at Merrill Lynch Investment Management:
Age: 41                             First Vice President (2001-September 2004); Director (2000-September 2004) and Vice
                                    President (1998-2000). An officer of 87
portfolios in the OppenheimerFunds complex.
----------------------------------- -----------------------------------------------------------------------------------------

         Remuneration of the Officers and Trustees. The officers and the
interested Trustees of the Fund, who are affiliated with the Manager, receive no
salary or fee from the Fund. The Independent Trustees' compensation from the
Fund, shown below, is for serving as a Trustee and member of a committee (if
applicable), with respect to the Fund's fiscal year ended August 31, 2004. The
total compensation from the Fund and fund complex represents compensation,
including accrued retirement benefits, for serving as a Trustee and member of a
committee (if applicable) of the Boards of the Fund and other funds in the
OppenheimerFunds complex during the calendar year ended December 31, 2004.

--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Name and Other Fund Position(s) Aggregate Retirement Benefits Estimated Annual Total Compensation From
Compensation From Accrued as Part of Benefits Upon the Fund and Fund
(as applicable) the Fund(1) Fund Expenses Retirement(2) Complex
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Clayton K. Yeutter $6,023 (3) $3,421 $86,171 $173,700
Chairman of the Board
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Matthew P. Fink(4) None None $2,641 None
Proxy Committee Member and
Regulatory & Oversight
Committee Member
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Robert G. Galli $4,483 $2,437 $100,824(5) $237,312(6)
Regulatory & Oversight
Committee Chairman
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Phillip A. Griffiths $4,700(7) $1,022 $34,972 $142,092
Governance Committee Chairman
and Regulatory & Oversight
Committee Member
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Mary F. Miller(8)
Audit Committee Member and None None $7,128 $8,532
Proxy Committee Member
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Joel W. Motley $4,995(9) $291 $23,945 $150,760
Audit Committee Chairman and
Regulatory & Oversight
Committee Member
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Kenneth A. Randall $4,396 None(10) $85,944 $134,080
Audit Committee Member and
Governance Committee Member
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Edward V. Regan(11) $4,103 $2,708 $70,977 $118,788
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Russell S. Reynolds, Jr. $3,631 $2,390 $66,602 $106,792
Proxy Committee Chairman and
Governance Committee Member
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Donald W. Spiro(12) $2,221 $945 None $64,080
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Joseph M. Wikler(13) None None - $23,000
Audit Committee Member
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Peter I. Wold(13) None None - $20,500
Governance Committee Member
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
Brian F. Wruble(1(4)) None None $22,238(15) $111,000(16)
Regulatory & Oversight
Committee Member
--------------------------------- -------------------- --------------------- ---------------------- --------------------------
1. "Aggregate Compensation From the Fund" includes fees and deferred
compensation, if any.
2. "Estimated Annual Benefits Upon Retirement" is based on a straight life
payment plan election with the assumption that a Trustee will retire at the
age of 75 and is eligible (after 7 years of service) to receive retirement
plan benefits with respect to certain Board I Funds as described below
under "Retirement Plan for Trustees."
3. Includes $1,506 deferred by Mr. Yeutter under the "Deferred Compensation
Plan" described below.
4. Mr. Fink was appointed as a Board member of 10 of the Board I Funds effective January 1, 2005 and was elected as a Board
Member of all of the other Board I Funds during 2005.
5. Includes $45,840 estimated benefits to be paid to Mr. Galli for serving as a director or trustee of 10 other Oppenheimer
funds that are not Board I Funds.
6. Includes $111,000 for serving as a director or trustee of 10 other Oppenheimer funds (at December 31, 2004) that are not
Board I Funds.
7. Includes $4,700 deferred by Mr. Griffiths under the "Deferred Compensation
Plan" described below.
8. Ms. Miller was appointed as a Board member of 13 of the Board I Funds
effective August 13, 2004 and of 9 of the Board I Funds effective October
26, 2004. She was elected as a Board member of all of the Board I Funds
during 2005.
9. Includes $1,998 deferred by Mr. Motley under the "Deferred Compensation
Plan" described below. 10. Due to actuarial considerations, no additional
retirement benefits were accrued with respect to Mr. Randall. 11. Mr. Regan
retired as Trustees of the Board I funds effective June 30, 2005. 12. Mr.
Spiro retired as Trustees of the Board I funds effective October 31, 2004.
13. Mr. Wikler and Mr. Wold were elected as Board members of 23 of the
Board I Funds, including the Fund, as of August 17, 2005.
They had served as Board members of the other 11 Board I Funds prior to that date.
14. Mr. Wruble was appointed as Trustee of the Board I Funds effective October 10, 2005.
15. Estimated benefits to be paid to Mr. Wruble for serving as a director or
trustee of 10 other Oppenheimer funds that are not Board I Funds. Mr.
Wruble's service as a director or trustee of such funds will not be counted
towards the fulfillment of his eligibility requirements for payments under
the Board I retirement plan, described below.
16. For serving as a director or trustee of 10 other Oppenheimer funds (at December 31, 2004) that are not Board I Funds.

Retirement Plan for Trustees. Certain Board I Funds have adopted a
retirement plan that provides for payments to retired Independent Trustees.
Payments are up to 80% of the average compensation paid during a Trustee's five
years of service in which the highest compensation was received. A Trustee must
serve as director or trustee for any of the Board I Funds for at least seven
years to be eligible for retirement plan benefits and must serve for at least 15
years to be eligible for the maximum benefit. The amount of retirement benefits
a Trustee will receive depends on the amount of the Trustee's compensation,
including future compensation and the length of his or her service on the Board.

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

Deferral of the Trustees' fees under the plan will not materially
affect the Fund's assets, liabilities or net income per share. The plan will not
obligate a Fund to retain the services of any Trustee or to pay any particular
level of compensation to any Trustee. Pursuant to an Order issued by the SEC, a
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 compensation account.

Major Shareholders. As of October 6, 2004, the only persons or entities
who owned of record or were known by the Fund to own beneficially 5% or more of
any class of the Fund's outstanding shares were:

Charles Schwab & Co Inc., 101 Montgomery St., San Francisco, CA 94104-4122, which owned 10,039,522.684 Class A shares
(13.13%).

The Manufacturers Life Insurance Co., P.O. Box 600, Buffalo, NY 14201-0600, which owned 5,501,576.121 Class A shares (7.19%).

Merrill Lynch Pierce Fenner & Smith, Inc. for the Sole Benefit of its
Customers, 4800 Deer Lake Drive East, Floor 3, Jacksonville, Florida
32246-6484, which owned 7,862,390.303 Class A shares (10.28%);
309,838.805 Class B shares (5.43%) and 959,262.209 Class C shares
(11.30%).

Citigroup Global Markets Inc., 333 West 34th Street, New York, NY
10001-2483, which owned 301,836.474 Class B shares (5.29%) and
1,059,202.396 Class C shares (12.48%).

MCB Trust Services TR., Centerprise Savings Plan, 700 17th Street,
Denver, CO 80202-3531, which owned 84,547.158 Class N shares (6.11%).

Investors Bank & Trust Comp. TR., 4 Manhattanville Road, Purchase, NY 10577-2139, which owned 192,068.888 Class N shares
(13.88%).

The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding company controlled by Massachusetts Mutual Life
Insurance Company, a global, diversified insurance and financial services organization.

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

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

|X| Portfolio Proxy Voting. The Fund has adopted Portfolio Proxy Voting Policies
and Procedures under which the Fund votes proxies relating to securities
("portfolio proxies") held by the Fund. The Fund's primary consideration in
voting portfolio proxies is the financial interests of the Fund and its
shareholders. The Fund has retained an unaffiliated third-party as its agent to
vote portfolio proxies in accordance with the Fund's Portfolio Proxy Voting
Guidelines and to maintain records of such portfolio proxy voting. The Proxy
Voting Guidelines include provisions to address conflicts of interest that may
arise between the Fund and the Manager where a directly-controlled affiliate of
the Manager manages or administers the assets of a pension plan of a company
soliciting the proxy. The Fund's Portfolio Proxy Voting Guidelines on routine
and non-routine proxy proposals are summarized below.

o The Fund votes with the recommendation of the issuer's management
on routine matters, including election of directors nominated by
management and ratification of the independent registered public
accounting firm, unless circumstances indicate otherwise.
o In general, the Fund opposes "anti-takeover" proposals and
supports the elimination of anti-takeover proposals, absent
unusual circumstances.
o The Fund supports shareholder proposals to reduce a super-majority
vote requirement, and opposes management proposals to add a
super-majority vote requirement.
o The Fund opposes proposals to classify the board of directors. o The Fund
supports proposals to eliminate cumulative voting. o The Fund opposes re-pricing
of stock options.
o The Fund generally considers executive compensation questions such
as stock option plans and bonus plans to be ordinary business
activity. The Fund analyzes stock option plans, paying particular
attention to their dilutive effect. While the Fund generally
supports management proposals, the Fund opposes plans it considers
to be excessive.

The Fund is required to file Form N-PX, with its complete proxy voting
record for the 12 months ended June 30th, no later than August 31st of each
year. The Fund's Form N-PX filing is available (i) without charge, upon request,
by calling the Fund toll-free at 1.800.525.7048 and (ii) on the SEC's website at
www.sec.gov.

|X| The Investment Advisory Agreement. The Manager provides investment advisory
and management services to the Fund under an investment advisory agreement
between the Manager and the Fund. The Manager selects securities for the Fund's
portfolio and handles its day-to-day business. The portfolio manager of the Fund
is employed by the Manager and is the person who is principally responsible for
the day-to-day management of the Fund's portfolio. Other members of the
Manager's Equity Portfolio Department provide the portfolio managers with
counsel and support in managing the Fund's portfolio.

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

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

--------------------------------------- -----------------------------------------------------------------------------
Fiscal Year ended 8/31: Management Fees Paid to OppenheimerFunds, Inc.
--------------------------------------- -----------------------------------------------------------------------------
--------------------------------------- -----------------------------------------------------------------------------
2002 $3,406,473
--------------------------------------- -----------------------------------------------------------------------------
--------------------------------------- -----------------------------------------------------------------------------
2003 $4,792,388
--------------------------------------- -----------------------------------------------------------------------------
--------------------------------------- -----------------------------------------------------------------------------
2004 $12,974,384
--------------------------------------- -----------------------------------------------------------------------------

The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment advisory
agreement, the Manager is not liable for any loss the Fund sustains for any
investment, adoption of any investment policy, or the purchase, sale or
retention of any security.

The agreement permits the Manager to act as investment advisor for any
other person, firm or corporation and to use the name "Oppenheimer" in
connection with other investment companies for which it may act as investment
advisor or general distributor. If the Manager shall no longer act as investment
advisor to the Fund, the Manager may withdraw the right of the Fund to use the
name "Oppenheimer" as part of its name.

Portfolio Manager. The Fund's portfolio is managed by Mark Madden (the "Portfolio Manager") who is responsible for the day-to-day
management of the Fund's investments.

Other Accounts Managed. In addition to managing the Fund's
investments, the Portfolio Manager also manages other investment portfolios and
accounts. The following table provides information regarding the other
portfolios and accounts managed by the Portfolio Manager as of August 31, 2005.
No account has a performance-based advisory fee:

Portfolio Manager Registered Total Assets Other Pooled Total Assets in Other Total Assets
in Registered Other Pooled
Investment Investment Investment in Other
Investment Companies Vehicles Vehicles Accounts Accounts
Companies Managed Managed* Managed Managed* Managed Managed*
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
Mark Madden 2 $5,899.2 2 $156.5 None None
* In millions.

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

Compensation of the Portfolio Manager. The Fund's Portfolio Manager is
employed and compensated by the Manager, not the Fund. Under the Manager's
compensation program for its portfolio managers and portfolio analysts, their
compensation is based primarily on the investment performance results of the
funds and accounts they manage, rather than on the financial success of the
Manager. This is intended to align the portfolio managers and analysts'
interests with the success of the funds and accounts and their shareholders. The
Manager's compensation structure is designed to attract and retain highly
qualified investment management professionals and to reward individual and team
contributions toward creating shareholder value. As of August 31, 2005, the
Portfolio Manager's compensation consisted of three elements: a base salary, an
annual discretionary bonus and eligibility to participate in long-term awards of
options and appreciation rights in regard to the common stock of the Manager's
holding company parent. Senior portfolio managers may also be eligible to
participate in the Manager's deferred compensation plan.

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

Ownership of Fund Shares. As of August 31, 2005, the Portfolio Manager did
not beneficially own any shares of the Fund.

Brokerage Policies of the Fund

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

Under the investment advisory agreement, in choosing brokers to execute
portfolio transactions for the Fund, the Manager may select brokers (other than
affiliates) that provide brokerage and/or research services to the Fund and/or
the other accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to those brokers may be higher than another
qualified broker would charge, if the Manager makes a good faith determination
that the commission is fair and reasonable in relation to the services provided.

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

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

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.

In an option transaction, the Fund ordinarily uses the same broker for
the purchase or sale of the option and any transaction in the securities to
which the option relates. When possible, the Manager tries to combine concurrent
orders to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates. The transactions under those combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account.

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

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

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

The research services provided by brokers broaden 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 8/31:               Total Brokerage Commissions Paid by the Fund(1)
     ---------------------------------- -----------------------------------------------------------------
     ---------------------------------- -----------------------------------------------------------------
                   2002                                             $955,773
     ---------------------------------- -----------------------------------------------------------------
     ---------------------------------- -----------------------------------------------------------------
                   2003                                             $737,792
     ---------------------------------- -----------------------------------------------------------------
     ---------------------------------- -----------------------------------------------------------------
                   2004                                          $3,586,565 (2)
     ---------------------------------- -----------------------------------------------------------------
1.       Amounts do not include spreads or commissions on principal transactions
         on a net trade basis.
2.       In the fiscal year ended 8/31/04, the amount of transactions directed
         to brokers for research services was $14,515,146 and amount of the
         commissions paid to broker-dealers for those services was $50,626.

Distribution and Service Plans

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

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

--------------- ----------------------- -----------------------
Fiscal Year     Aggregate Front-End     Class A Front-End
                                        Sales Charges
Ended 8/31:     Sales Charges on        Retained by
                Class A Shares          Distributor(1)
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
     2002             $1,059,341               $222,403
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
     2003              $903,547                $192,174
--------------- ----------------------- -----------------------
--------------- ----------------------- -----------------------
     2004             $3,322,274               $673,973
--------------- ----------------------- -----------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent
of the Distributor.

--------------- ----------------------- ---------------------- ------------------------ ------------------------
Fiscal Year     Concessions on Class    Concessions on Class   Concessions on Class C   Concessions on Class N
Ended 8/31:     A Shares Advanced by    B Shares Advanced by   Shares Advanced by       Shares Advanced by
                Distributor(1) Distributor(1) Distributor(1) Distributor(1)
--------------- ----------------------- ---------------------- ------------------------ ------------------------
--------------- ----------------------- ---------------------- ------------------------ ------------------------
     2002              $289,954               $706,630                $308,937                  $17,158
--------------- ----------------------- ---------------------- ------------------------ ------------------------
--------------- ----------------------- ---------------------- ------------------------ ------------------------
     2003              $225,942               $508,114                $265,308                  $49,110
--------------- ----------------------- ---------------------- ------------------------ ------------------------
--------------- ----------------------- ---------------------- ------------------------ ------------------------
     2004              $517,051              $1,238,790               $972,194                 $146,591
--------------- ----------------------- ---------------------- ------------------------ ------------------------
1.   The Distributor advances concession payments to financial intermediaries
     for certain sales of Class A shares and for sales of Class B, Class C and
     Class N shares from its own resources at the time of sale.

--------------- ----------------------- ----------------------- ------------------------- -----------------------
Fiscal    Year  Class A Contingent      Class B Contingent      Class C Contingent        Class N Contingent
                Deferred Sales          Deferred Sales                                    Deferred Sales
Ended 8/31:     Charges Retained by     Charges Retained by     Deferred Sales Charges    Charges Retained by
                Distributor             Distributor             Retained by Distributor   Distributor
--------------- ----------------------- ----------------------- ------------------------- -----------------------
--------------- ----------------------- ----------------------- ------------------------- -----------------------
     2002              $10,976                 $132,957                 $14,261                    $510
--------------- ----------------------- ----------------------- ------------------------- -----------------------
--------------- ----------------------- ----------------------- ------------------------- -----------------------
     2003              $14,364                 $205,512                 $31,227                  $21,239
--------------- ----------------------- ----------------------- ------------------------- -----------------------
--------------- ----------------------- ----------------------- ------------------------- -----------------------
     2004              $21,792                 $222,817                 $87,428                  $44,033
--------------- ----------------------- ----------------------- ------------------------- -----------------------


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

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

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

         The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares 72 months after purchase, the Fund must obtain the
approval of both Class A and Class B shareholders for a proposed material
amendment to the Class A plan that would materially increase payments under the
plan. That approval must be by a majority of the shares of each class, voting
separately by class.

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

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

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

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

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

         For the fiscal year ended August 31, 2004 payments under the Class A
plan totaled $2,693,152, of which $28,389 was retained by the Distributor under
the arrangement described above, regarding grandfathered retirement accounts,
and included $38,384 paid to an affiliate of the Distributor's parent company.
Any unreimbursed expenses the Distributor incurs with respect to Class A shares
in any fiscal year cannot be recovered in subsequent years. The Distributor may
not use payments received under the Class A plan to pay any of its interest
expenses, carrying charges, or other financial costs, or allocation of overhead.


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

         Each plan permits the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a periodic
basis, without payment in advance. However, the Distributor currently intends to
pay the service fee to recipients in advance for the first year after Class B,
Class C and Class N shares are purchased. After the first year Class B, Class C
or Class N shares are outstanding, after their purchase, the Distributor makes
service fee payments periodically on those shares. The advance payment is based
on the net asset value of shares sold. Shares purchased by exchange do not
qualify for the advance service fee payment. If Class B, Class C or Class N
shares are redeemed during the first year after their purchase, the recipient of
the service fees on those shares will be obligated to repay the Distributor a
pro rata portion of the advance payment of the service fee made on those shares.
Class B, Class C or Class N shares may not be purchased by an investor directly
from the Distributor without the investor designating another registered
broker-dealer. If the investor no longer has another broker-dealer of record for
an existing account, the Distributor is automatically designated as the
broker-dealer of record, but solely for the purpose of acting as the investor's
agent to purchase the shares. In those cases, the Distributor retains the
asset-based sales charge paid on Class B, Class C and Class N shares, but does
not retain any service fees as to the assets represented by that account.

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

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

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

         During a calendar year, 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 asset-based sales charges paid to the Distributor by the Fund under the
distribution and service plans. Those excess expenses are carried over on the
Distributor's books and may be recouped from asset-based sales charge payments
from the Fund in future years. However, the Distributor has voluntarily agreed
to cap the amount of expenses under the plans that may be carried over from year
to year and recouped that relate to (i) expenses the Distributor has incurred
that represent compensation and expenses of its sales personnel and (ii) other
direct distribution costs it has incurred, such as sales literature, state
registration fees, advertising and prospectuses used to offer Fund shares. The
cap on the carry-over of those categories of expenses is set at 0.70% of annual
gross sales of shares of the Fund. If those categories of expenses exceed the
capped amount, the Distributor bears the excess costs. If the Class B, Class C
or Class N plan were to be terminated by the Fund, the Fund's Board of Trustees
may allow the Fund to continue payments of the asset-based sales charge to the
Distributor for distributing shares prior to the termination of the plan.


---------------------------------------------------------------------------------------------------------------------
                   Distribution Fees Paid to the Distributor for the Fiscal Year Ended 8/31/2004
---------------------------------------------------------------------------------------------------------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
      Class:          Total Payments Under     Amount Retained by         Distributor's           Distributor's
                                                                            Aggregate         Unreimbursed Expenses
                                                                      Unreimbursed Expenses   as % of Net Assets of
                              Plan                 Distributor              Under Plan                Class
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class B Plan               $1,171,251              $879,566(1)              $2,377,812                1.99%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class C Plan               $1,451,896              $687,880(2)              $2,453,423                1.40%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
Class N Plan                $93,162                $65,266(3)                $293,334                 1.12%
-------------------- ----------------------- ------------------------ ----------------------- -----------------------
1. Includes $14,995 paid to an affiliate of the Distributor's parent company. 2.
Includes $16,989 paid to an affiliate of the Distributor's parent company. 3.
Includes $1,043 paid to an affiliate of the Distributor's parent company.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Performance of the Fund

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

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

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

o             Total returns measure the performance of a hypothetical account in
              the Fund over various periods and do not show the performance of
              each shareholder's account. Your account's performance will vary
              from the model performance data if your dividends are received in
              cash, or you buy or sell shares during the period, or you bought
              your shares at a different time and price than the shares used in
              the model.
o The Fund's performance returns do not reflect the effect of taxes on dividends
and capital gains distributions. o An investment in the Fund is not insured by
the FDIC or any other government agency. o The principal value of the Fund's
shares, and 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 Total returns for any given past period
represent historical performance information and are not, and should not be
              considered, a prediction of future 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 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| Total Return Information. There are different types of "total
returns" to measure the Fund's performance. Total return is the change in value
of a hypothetical investment in the Fund over a given period, assuming that all
dividends and capital gains distributions are reinvested in additional shares
and that the investment is redeemed at the end of the period. Because of
differences in expenses for each class of shares, the total returns for each
class are separately measured. The cumulative total return measures the change
in value over the entire period (for example, ten years). An average annual
total return shows the average rate of return for each year in a period that
would produce the cumulative total return over the entire period. However,
average annual total returns do not show actual year-by-year performance. The
Fund uses standardized calculations for its total returns as prescribed by the
SEC. The methodology is discussed below.

              In calculating total returns for Class A shares, the current
maximum sales charge of 5.75% (as a percentage of the offering price) is
deducted from the initial investment ("P" in the formula below) (unless the
return is shown without sales charge, as described below). For Class B shares,
payment of the applicable contingent deferred sales charge is applied, depending
on the period for which the return is shown: 5.0% in the first year, 4.0% in the
second year, 3.0% in the third and fourth years, 2.0% in the fifth year, 1.0% in
the sixth year and none thereafter. For Class C shares, the 1.0% contingent
deferred sales charge is deducted for returns for the one-year period. For Class
N shares, the 1.0% contingent deferred sales charge is deducted for returns for
the one-year period, and total returns for the periods prior to 03/01/01 (the
inception date for Class N shares) are based on the Fund's Class A returns,
adjusted to reflect the higher Class N 12b-1 fees. There is no sales charge on
Class Y shares.

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

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

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

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

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

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

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

    ERV - P        = Total Return
----------------
       P
o Total Returns at Net Asset Value. From time to time the Fund may also quote a
cumulative or an average annual total return "at net asset value" (without
deducting sales charges) for Class A, Class B, Class C or Class N shares. There
is no sales charge on Class Y shares. Each is based on the difference in net
asset value per share at the beginning and the end of the period for a
hypothetical investment in that class of shares (without considering front-end
or contingent deferred sales charges) and takes into consideration the
reinvestment of dividends and capital gains distributions.

----------------------------------------------------------------------------------------------------------------------
                              The Fund's Total Returns for the Periods Ended 8/31/2004
----------------------------------------------------------------------------------------------------------------------
-------------- ------------------------- -----------------------------------------------------------------------------
Class      of      Cumulative Total                              Average Annual Total Returns
                 Returns (10 years or
Shares              life-of-class)
-------------- ------------------------- -----------------------------------------------------------------------------
-------------- ------------------------- ------------------------- ------------------------- -------------------------
                                                  1-Year                    5-Year                   10-Year
                                                                     (or life of class if      (or life of class if

less) less)
-------------- ------------------------- ------------------------- ------------------------- -------------------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
                  After       Without       After       Without       After       Without       After       Without
                  Sales        Sales        Sales        Sales        Sales        Sales        Sales        Sales
                 Charge       Charge       Charge       Charge       Charge       Charge       Charge       Charge
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class A(1)       138.42%      152.97%      21.22%       28.61%       14.27%       15.63%       11.81%       12.66%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class B(2)       141.85%      141.85%      22.50%       27.50%       14.54%       14.77%       12.01%       12.01%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class C(3)       138.23%      138.23%      26.60%       27.60%       14.74%       14.74%       11.79%       11.79%
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Class N(4)       45.60%       45.60%       27.16%       28.16%       11.33%       11.33%         N/A          N/A
-------------- ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
1. Inception of Class A: 11/18/96 2. Inception of Class B: 11/18/96 3. Inception
of Class C: 11/18/96 4. Inception of Class N: 03/01/01

----------------------------------------------------------------------------------------------------------------
                    Average Annual Total Returns for Class A(1) Shares (After Sales Charge)
                                        For the Periods Ended 8/31/2004
----------------------------------------------------------------------------------------------------------------
------------------------------------------ --------------------- ------------------------ ----------------------
                                                  1-Year                 5-Year                  10-Year
                                                                  (or life of class if    (or life of class if
                                                                          less)                   less)
------------------------------------------ --------------------- ------------------------ ----------------------
------------------------------------------ --------------------- ------------------------ ----------------------
After Taxes on Distributions                      20.50%                 13.55%                  10.96%
------------------------------------------ --------------------- ------------------------ ----------------------
------------------------------------------ --------------------- ------------------------ ----------------------
After Taxes on Distributions and                  14.30%                 12.09%                   9.89%
Redemption of Fund Shares
------------------------------------------ --------------------- ------------------------ ----------------------
     1. Inception of Class A: 11/18/96


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 rated among diversified emerging markets
funds.

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

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

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

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

         From time to time the Fund may include in its advertisements and sales
literature the total return performance of a hypothetical investment account
that includes shares of the Fund and other Oppenheimer funds. The combined
account may be part of an illustration of an asset allocation model or similar
presentation. The account performance may combine total return performance of
the Fund and the total return performance of other Oppenheimer funds included in
the account. Additionally, from time to time, the Fund's advertisements and
sales literature may include, for illustrative or comparative purposes,
statistical data or other information about general or specific market and
economic conditions. That may include, for example, o information about the
performance of certain securities or commodities markets or segments of those
markets, o information about the performance of the economies of particular
countries or regions, o the earnings of companies included in segments of
particular industries, sectors, securities markets, countries or regions, o the
availability of different types of securities or offerings of securities, o
information relating to the gross national or gross domestic product of the
United States or other countries or regions, o comparisons of various market
sectors or indices to demonstrate performance, risk, or other characteristics of
the Fund.

ABOUT YOUR ACCOUNT

---------------------------------------------------------------------------------------------------------------------------------------
                                How to Buy Shares
---------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

And the following money market funds:

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

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

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

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

Each purchase of Class A shares under the Letter will be made at the
offering price (including the sales charge) that would apply to a single
lump-sum purchase of shares in the amount intended to be purchased under the
Letter.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charges or at reduced sales charge rates, as
described in Appendix B 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 $1 million in assets invested in applicable investments
(other than assets invested in money market funds), then the retirement plan may
purchase only Class C shares of the Oppenheimer funds. If on the date the plan
sponsor signed the Merrill Lynch record keeping service agreement the plan has
$1 million or more in assets but less than $5 million in assets invested in
applicable investments (other than assets invested in money market funds), then
the retirement plan may purchase only Class N shares of the Oppenheimer funds.
If on the date the plan sponsor signed the Merrill Lynch record keeping service
agreement the plan has $5 million or more in assets invested in applicable
investments (other than assets invested in money market funds), then the
retirement plan may purchase only Class A shares of the Oppenheimer funds.

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

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

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

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

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

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

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

|X| Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of Class
B shares to Class A shares 72 months after purchase is not treated as a taxable
event for the shareholder. If those laws or the IRS interpretation of those laws
should change, the automatic conversion feature may be suspended. In that event,
no further conversions of Class B shares would occur while that suspension
remained in effect. Although Class B shares could then be exchanged for Class A
shares on the basis of relative net asset value of the two classes, without the
imposition of a sales charge or fee, such exchange could constitute a taxable
event for the shareholder, and absent such exchange, Class B shares might
continue to be subject to the asset-based sales charge for longer than six
years.

|X| Availability of Class N Shares. In addition to the description of
the types of retirement plans which may purchase Class N shares contained in the
prospectus, Class N shares also are offered to the following: o to all rollover
IRAs (including SEP IRAs and SIMPLE IRAs), o to all rollover contributions made
to Individual 401(k) plans, Profit-Sharing Plans and Money Purchase Pension
Plans, o to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and
Ascender retirement plans, o to all trustee-to-trustee IRA transfers, o to all
90-24 type 403(b) transfers, o to Group Retirement Plans (as defined in Appendix
B to this Statement of Additional Information) which have entered into a
special agreement with the Distributor for that purpose,
o to Retirement Plans qualified under Sections 401(a) or 401(k)
of the Internal Revenue Code, the recordkeeper or the plan
sponsor for which has entered into a special agreement with
the Distributor,
o to Retirement Plans of a plan sponsor where the aggregate
assets of all such plans invested in the Oppenheimer funds is
$500,000 or more,
o to Retirement Plans with at least 100 eligible employees or $500,000 or more in plan assets,
o to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the purchase with the redemption proceeds of Class A shares
of one or more Oppenheimer funds, and
o to certain customers of broker-dealers and financial advisors
that are identified in a special agreement between the
broker-dealer or financial advisor and the Distributor for
that purpose.

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

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

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

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

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

Fund Account Fees. As stated in the Prospectus, a $12 annual "Minimum Balance
Fee" is assessed on each Fund account with a share balance valued under $500.
The Minimum Balance Fee is automatically deducted from each such Fund account in
September.

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

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

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

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

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

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

|X| Securities Valuation. The Fund's Board of Trustees has established procedures for the valuation of the Fund's
securities. In general those procedures are as follows:
o Equity securities traded on a U.S. securities exchange or on NASDAQ(R) are valued as follows:
(1) if last sale information is regularly reported, they are valued at the last reported sale price on the principal exchange on
which they are traded or on NASDAQ(R), as applicable, on that day, or
(2) if last sale information is not available on a valuation
date, they are valued at the last reported sale price
preceding the valuation date if it is within the spread of
the closing "bid" and "asked" prices on the valuation date
or, if not, at the closing "bid" price on the valuation
date.
o Equity securities traded on a foreign securities exchange generally are valued
in one of the following ways: (1) at the last sale price available to the
pricing service approved by the Board of Trustees, or (2) at the last sale price
obtained by the Manager from the report of the principal exchange on which the
security is traded at
its last trading session on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained
from the principal exchange on which the security is
traded or, on the basis of reasonable inquiry, from two
market makers in the security.
o Long-term debt securities having a remaining maturity in excess of 60 days are
valued based on the mean between the "bid" and "asked" prices determined by a
portfolio pricing service approved by the Fund's Board of Trustees or obtained
by the Manager from two active market makers in the security on the basis of
reasonable inquiry.
o The following securities are valued at the mean between the "bid" and "asked"
prices determined by a pricing service approved by the Fund's Board of Trustees
or obtained by the Manager from two active market makers in the security on the
basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when issued,
(2) debt instruments that had a maturity of 397 days or less when issued and
have a remaining maturity of more than 60 days, and (3) non-money market debt
instruments that had a maturity of 397 days or less when issued and which have a
remaining maturity of
60 days or less.
o The following securities are valued at cost, adjusted for amortization of
premiums and accretion of discounts: (1) money market debt securities held by a
non-money market fund that had a maturity of less than 397 days when issued that
have
a remaining maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining maturity
of 397 days or less. o Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the "bid"
and "asked" prices provided by a single active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).

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

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

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

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

How to Sell Shares

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

Sending Redemption Proceeds by Federal Funds Wire. The Federal Funds wire of
redemption proceeds may be delayed if the Fund's custodian bank is not open for
business on a day when the Fund would normally authorize the wire to be made,
which is usually the Fund's next regular business day following the redemption.
In those circumstances, the wire will not be transmitted until the next bank
business day on which the Fund is open for business. No dividends will be paid
on the proceeds of redeemed shares awaiting transfer by Federal Funds wire.

Reinvestment Privilege. Within six months of a redemption, a shareholder may
reinvest all or part of the redemption proceeds of: o Class A shares purchased
subject to an initial sales charge or Class A shares on which a contingent
deferred sales charge
was paid, or
o Class B shares that were subject to the Class B contingent deferred sales
charge when redeemed.

The reinvestment may be made without sales charge only in Class A
shares of the Fund or any of the other Oppenheimer funds into which shares of
the Fund are exchangeable as described in "How to Exchange Shares" below.
Reinvestment will be at the net asset value next computed after the Transfer
Agent receives the reinvestment order. The shareholder must ask the Transfer
Agent for that privilege at the time of reinvestment. This privilege does not
apply to Class C, Class N or Class Y shares. The Fund may amend, suspend or
cease offering this reinvestment privilege at any time as to shares redeemed
after the date of such amendment, suspension or cessation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Exchange Shares

As stated in the Prospectus, shares of a particular class of Oppenheimer funds
having more than one class of shares may be exchanged only for shares of the
same class of other Oppenheimer funds. Shares of Oppenheimer funds that have a
single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes
of shares by calling the Distributor.

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

The following funds only offer Class A shares:
Centennial California Tax Exempt Trust Centennial New York Tax Exempt Trust
Centennial Government Trust Centennial Tax Exempt Trust
Centennial Money Market Trust

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dividends, Capital Gains and Taxes

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

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

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

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

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

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

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

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

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

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

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

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

The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. If net long term capital gains are distributed and designated as a
capital gain distribution, it will be taxable to shareholders as a long-term
capital gain and will be properly identified in reports sent to shareholders in
January of each year. Such treatment will apply no matter how long the
shareholder has held his or her shares or whether that gain was recognized by
the Fund before the shareholder acquired his or her shares.

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

Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
The Fund may be subject to U.S. Federal income tax, and an interest charge, on
certain distributions or gains from the sale of shares of a foreign company
considered to be a PFIC, even if those amounts are paid out as dividends to
shareholders. To avoid imposition of the interest charge, the Fund may elect to
"mark to market" all PFIC shares that it holds at the end of each taxable year.
In that case, any increase or decrease in the value of those shares would be
recognized as ordinary income or as ordinary loss (but only to the extent of
previously recognized "mark-to-market" gains).

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

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

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

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

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

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

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

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

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

Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the same
class of any of the other Oppenheimer funds 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 may be invested in shares of this Fund
on the same basis.

Additional Information About the Fund

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

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

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

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


OPPENHEIMER REAL ASSET FUND

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER REAL ASSET FUND:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Real Asset Fund, including the statement of investments, as of
August 31, 2004, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the periods 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of August 31, 2004, by correspondence with
the custodian and brokers; where replies were not received from brokers, we
performed other auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Real Asset Fund as of August 31, 2004, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for the periods
presented, in conformity with accounting principles generally accepted in the
United States of America.

/s/Deloitte & Touche LLP
-------------------------
DELOITTE & TOUCHE LLP

Denver, Colorado
October 14, 2004



Oppenheimer
REAL ASSET FUND(R)

STATEMENT OF INVESTMENTS  August 31, 2004
--------------------------------------------------------------------------------



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

ASSET-BACKED SECURITIES--2.3%
---------------------------------------------------------------------------------------------------------------
BMW Vehicle Owner Trust, Automobile Loan Certificates, Series 2003-A,
Cl. A2, 1.45%, 11/25/05                                                             $    27,651    $    27,664
---------------------------------------------------------------------------------------------------------------
Capital Auto Receivables Asset Trust, Automobile Mtg.-Backed Nts.,
Series 2002-3, Cl. A2A, 3.05%, 9/15/05 1                                                839,893        842,154
---------------------------------------------------------------------------------------------------------------
Chase Funding Mortgage Loan Asset-Backed Certificates, Home Equity
Mtg. Obligations, Series 2003-1, Cl. 1A3, 3.14%, 7/25/23                              2,440,000      2,445,227
---------------------------------------------------------------------------------------------------------------
Chase Manhattan Auto Owner Trust, Automobile Loan Pass-Through
Certificates, Series 2002-A, Cl. A4, 4.24%, 9/15/08                                     960,000        973,704
---------------------------------------------------------------------------------------------------------------
DaimlerChrysler Auto Trust, Automobile Loan Pass-Through Certificates,
Series 2004-B, Cl. A2, 2.48%, 2/8/07                                                  3,300,000      3,300,000
---------------------------------------------------------------------------------------------------------------
Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.,
Series 2002-2, Cl. A1, 1.91%, 4/15/07                                                    66,003         66,050
---------------------------------------------------------------------------------------------------------------
M&I Auto Loan Trust, Automobile Loan Certificates, Series 2003-1,
Cl. A2, 1.60%, 7/20/06                                                                  644,006        643,648
---------------------------------------------------------------------------------------------------------------
MSF Funding LLC, Collateralized Mtg. Obligations, Series 2000-1, Cl. C,
8.965%, 7/25/07 2,3                                                                     295,529         11,821
---------------------------------------------------------------------------------------------------------------
NC Finance Trust, Collateralized Mtg. Obligations, Series 1999-I,
Cl. ECFD, 8.75%, 1/25/29 2                                                              645,555        172,283
---------------------------------------------------------------------------------------------------------------
Nissan Auto Receivables Owner Trust, Automobile Receivable Nts.,
Series 2002-A, Cl. A4, 4.28%, 10/16/06                                                  973,000        983,132
---------------------------------------------------------------------------------------------------------------
Salomon Smith Barney Mutual Fund Fee Trust XIV, Asset-Backed Nts.,
Series 2000-14, Cl. 2, 8.61%, 9/30/08                                                 3,449,697      1,244,047
---------------------------------------------------------------------------------------------------------------
Toyota Auto Receivables Owner Trust, Automobile Mtg.-Backed
Obligations, Series 2003-A, Cl. A2, 1.28%, 8/15/05                                       53,454         53,477
---------------------------------------------------------------------------------------------------------------
USAA Auto Owner Trust, Automobile Loan Asset-Backed Nts.,
Series 2004-2, Cl. A2, 2.38%, 2/15/07                                                 3,260,000      3,266,371
---------------------------------------------------------------------------------------------------------------
Wells Fargo Home Equity Trust, Home Equity Loan Pass-Through
Certificates, Series 2004-2, Cl. AI1B, 3.35%, 9/26/34 4                               6,310,000      6,310,000
                                                                                                   ------------
Total Asset-Backed Securities (Cost $23,285,642)                                                    20,339,578

---------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--41.3%
---------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY--38.2%
---------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/SPONSORED--38.2%
Federal Home Loan Mortgage Corp.:
7%, 9/1/33                                                                            1,400,188      1,495,580
7%, 9/1/34 4                                                                         78,800,000     83,725,000
8%, 4/1/16                                                                              356,867        383,594
9%, 8/1/22-5/1/25                                                                        90,809        101,889
---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security, Series 177, Cl. B, (0.551)%, 7/1/26 5                           2,212,261        423,559
---------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Structured Pass-Through
Securities, Collateralized Mtg. Obligations, Series T-42, Cl. A2, 5.50%, 2/25/42          1,706          1,707



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



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

FHLMC/FNMA/SPONSORED Continued
Federal National Mortgage Assn.:
4.50%, 9/1/19 4                                                               $ 17,293,000    $ 17,282,192
5%, 9/1/34 4                                                                       743,000         737,196
5.50%, 9/1/19-9/1/34 4                                                          62,917,000      64,485,412
6.50%, 9/30/34 4                                                                27,190,000      28,549,500
7%, 11/1/33-7/1/34                                                              12,422,738      13,212,423
7%, 9/1/34-10/1/34 4                                                           119,405,000     126,715,822
8.50%, 7/1/32                                                                      102,751         111,524
                                                                                              -------------
                                                                                               337,225,398

-----------------------------------------------------------------------------------------------------------
GNMA/GUARANTEED--0.0%
Government National Mortgage Assn., 8.50%, 8/15/17-12/15/17                        124,712         137,579
                                                                                              -------------
                                                                                                   137,579

-----------------------------------------------------------------------------------------------------------
PRIVATE--3.1%
-----------------------------------------------------------------------------------------------------------
COMMERCIAL--3.1%
Bank of America Mortgage Securities, Inc., Collateralized Mtg. Obligations
Pass-Through Certificates:
Series 2004-2, Cl. 2A1, 6.50%,7/20/32                                            6,190,000       6,393,109
Series 2004-E, Cl. 2A9, 3.712%, 6/25/34                                          3,553,552       3,562,160
Series 2004-G, Cl. 2A1, 2.469%, 8/25/34                                          3,824,689       3,825,286
-----------------------------------------------------------------------------------------------------------
Bear Stearns Commercial Mortgage Securities, Inc., Commercial Mtg.
Obligations, Series 2003-T10, Cl. A1, 4%, 3/13/40                                1,260,138       1,262,706
-----------------------------------------------------------------------------------------------------------
GE Capital Commercial Mortgage Corp., Commercial Mtg. Obligations:
Series 2003-C1, Cl. A2, 4.093%, 1/10/38                                          1,081,000       1,089,506
Series 2004-C3, Cl. A2, 4.433%, 7/10/39                                          2,050,000       2,088,945
-----------------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, Commercial Mtg. Pass-Through
Certificates, Series 2004-GG2, Cl. A3, 4.602%, 8/10/38                           1,370,000       1,410,063
-----------------------------------------------------------------------------------------------------------
J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial
Mtg. Pass-Through Certificates, Series 2003-ML1A, Cl. A1, 3.972%, 3/12/39          774,830         775,294
-----------------------------------------------------------------------------------------------------------
Wells Fargo Mortgage Backed Securities Trust, Collateralized Mtg.
Obligations, Series 2004-N, Cl. A10, 3.803%, 8/25/34 2                           6,611,970       6,636,764
                                                                                              -------------
                                                                                                27,043,833
                                                                                              -------------
Total Mortgage-Backed Obligations (Cost $362,343,458)                                          364,406,810

-----------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--36.4%
-----------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Unsec. Bonds:
4.125%, 5/13/05                                                                 25,000,000      25,374,525
Series EY06, 5.25%, 8/15/06 1                                                    9,286,000       9,748,536
-----------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts.:
1.75%, 5/15/05                                                                  47,330,000      47,260,756
4.25%, 6/15/05                                                                  11,000,000      11,193,446
7%, 7/15/05                                                                     55,000,000      57,355,265

                                                                          PRINCIPAL           VALUE
                                                                             AMOUNT      SEE NOTE 1
----------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Continued
----------------------------------------------------------------------------------------------------

Federal National Mortgage Assn. Unsec. Nts.:
1.33%, 2/23/05 1                                                        $24,000,000    $ 23,933,064
1.50%, 9/21/05                                                           20,000,000      19,880,080
3.01%, 6/2/06                                                             7,600,000       7,635,462
5.75%, 6/15/05                                                           22,250,000      22,901,057
7%, 7/15/05 1                                                            50,000,000      52,141,150
----------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
1.125%, 6/30/05 1                                                        18,000,000      17,893,836
3%, 2/15/09 1,6                                                             805,000         798,649
6.75%, 5/15/05 7                                                         24,000,000      24,820,320
                                                                                       -------------
Total U.S. Government Obligations (Cost $320,703,160)                                   320,936,146

----------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.5%
----------------------------------------------------------------------------------------------------
Ontario (Province of) Nts., 7% 8/4/05                                     4,200,000       4,389,844
----------------------------------------------------------------------------------------------------
Quebec (Province of) Nts., 8.625% 1/19/05                                   500,000         512,872
                                                                                       -------------
Total Foreign Government Obligations (Cost $4,890,291)                                    4,902,716

----------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES--28.8%
----------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--4.2%
----------------------------------------------------------------------------------------------------
AUTOMOBILES--1.7%
DaimlerChrysler North America Holding Corp.:
3.40% Nts., Series D, 12/15/04 1                                            860,000         861,903
6.90% Unsec. Nts., 9/1/04                                                 1,850,000       1,850,000
7.40% Unsec. Nts., 1/20/05                                                  700,000         713,917
7.75% Nts., 6/15/05                                                       1,000,000       1,041,354
----------------------------------------------------------------------------------------------------
Ford Motor Credit Co.:
7.50% Unsec. Nts., 3/15/05                                                1,000,000       1,026,419
7.60% Nts., 8/1/05                                                        1,900,000       1,982,369
----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp.:
7.50% Nts., 7/15/05                                                       2,200,000       2,293,267
8.75% Medium-Term Nts., Series SMN1, 7/15/05                                650,000         681,176
----------------------------------------------------------------------------------------------------
General Motors Nova Scotia Finance Co., 6.85% Nts., 10/15/08              1,205,000       1,282,694
----------------------------------------------------------------------------------------------------
Hertz Corp. (The), 6.50% Sr. Nts., 5/15/06 1                              1,215,000       1,273,783
----------------------------------------------------------------------------------------------------
Volkswagen Credit, Inc., 1.719% Nts., 6/13/05 3,8                         2,000,000       2,001,260
                                                                                       -------------
                                                                                         15,008,142

----------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--0.1%
Fortune Brands, Inc., 7.125% Sr. Unsec. Nts., 11/1/04 8                   1,415,000       1,426,495
----------------------------------------------------------------------------------------------------
MEDIA--2.0%
Clear Channel Communications, Inc., 4.625% Sr. Unsec. Nts., 1/15/08         875,000         892,525
----------------------------------------------------------------------------------------------------
Cox Communications, Inc., 6.69% Nts., 9/20/04                             1,700,000       1,703,205
----------------------------------------------------------------------------------------------------
Gannett Co., Inc., 4.95% Unsec. Nts., 4/1/05                              4,165,000       4,228,758
----------------------------------------------------------------------------------------------------
New York Times Co. (The), 7.625% Unsec. Unsub. Nts., 3/15/05              2,620,000       2,699,928



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



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

MEDIA Continued
News America, Inc., 6.625% Sr.Nts., 1/9/08                                    $   443,000    $   484,984
---------------------------------------------------------------------------------------------------------
Time Warner Cos., Inc., 8.18% Nts., 8/15/07 1                                     890,000      1,003,065
---------------------------------------------------------------------------------------------------------
Viacom, Inc.:
6.40% Sr. Nts., 1/30/06 1                                                         675,000        710,356
7.15% Sr. Unsec. Nts., 5/20/05                                                  3,050,000      3,154,801
7.75% Sr. Unsec. Nts., 6/1/05                                                     500,000        520,790
---------------------------------------------------------------------------------------------------------
Walt Disney Co. (The):
4.50% Nts., 9/15/04                                                             1,500,000      1,501,481
5.375% Sr. Unsec. Nts., 6/1/07                                                    410,000        430,919
                                                                                             ------------
                                                                                              17,330,812

---------------------------------------------------------------------------------------------------------
MULTILINE RETAIL--0.4%
Target Corp., 7.50% Sr. Unsec. Nts., 2/15/05                                    3,525,000      3,607,450
---------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--1.9%
---------------------------------------------------------------------------------------------------------
BEVERAGES--0.6%
Coca-Cola Enterprises, Inc., 8% Nts., 1/4/05                                    3,000,000      3,057,006
---------------------------------------------------------------------------------------------------------
Diageo Capital plc, 6.125% Unsec. Nts., 8/15/05                                 2,250,000      2,330,791
                                                                                             ------------
                                                                                               5,387,797

---------------------------------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--0.8%
Kroger Co. (The), 7.625% Sr. Nts., 9/15/06                                        460,000        500,354
---------------------------------------------------------------------------------------------------------
Price/Costco Wholesale Corp., 7.125% Sr. Nts., 6/15/05                          2,500,000      2,590,145
---------------------------------------------------------------------------------------------------------
Safeway, Inc., 7.25% Nts., 9/15/04                                              1,500,000      1,502,003
---------------------------------------------------------------------------------------------------------
Secured Finance, Inc., 9.05% Bonds, 12/15/04                                    2,000,000      2,032,226
                                                                                             ------------
                                                                                               6,624,728

---------------------------------------------------------------------------------------------------------
FOOD PRODUCTS--0.5%
ConAgra, Inc., 7.40% Sub. Nts., 9/15/04                                           150,000        150,249
---------------------------------------------------------------------------------------------------------
General Mills, Inc., 3.875% Nts., 11/30/07                                        515,000        521,973
---------------------------------------------------------------------------------------------------------
Nabisco, Inc., 6.375% Nts., 2/1/05                                              4,000,000      4,055,756
                                                                                             ------------
                                                                                               4,727,978

---------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.0%
Procter & Gamble Co. (The),  6.60% Unsec. Unsub. Bonds, 12/15/04                   50,000         50,711
---------------------------------------------------------------------------------------------------------
ENERGY--0.5%
---------------------------------------------------------------------------------------------------------
OIL & GAS--0.5%
BP Canada Energy Co., 6.75% Unsec. Debs., 2/15/05                                 100,000        102,163
---------------------------------------------------------------------------------------------------------
BP Capital Markets plc, 4.625% Nts., 5/27/05                                    3,900,000      3,969,588
---------------------------------------------------------------------------------------------------------
Chevron Corp. Profit Sharing Savings Plan Trust Fund, 8.11% Debs., 12/1/04         44,000         44,654
                                                                                             ------------
                                                                                               4,116,405


                                                                                      PRINCIPAL          VALUE
                                                                                         AMOUNT     SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
FINANCIALS--14.4%
---------------------------------------------------------------------------------------------------------------

CAPITAL MARKETS--0.9%
Amvescap plc, 6.60% Sr. Unsec. Nts., 5/15/05                                        $ 1,175,000    $ 1,206,204
---------------------------------------------------------------------------------------------------------------
Bank of New York Co., Inc. (The):
3.75% Unsec. Unsub. Nts., 2/15/08 1                                                     470,000        475,307
8.50% Unsec. Sub. Nts., 12/15/04 1                                                    1,600,000      1,629,982
---------------------------------------------------------------------------------------------------------------
Bankers Trust Corp., 8.25% Unsec. Sub. Nts., 5/1/05                                   1,800,000      1,869,242
---------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc., (USA), 5.75% Nts., 4/15/07                            600,000        639,441
---------------------------------------------------------------------------------------------------------------
Northern Trust Co., 7.50% Nts., 2/11/05                                               2,000,000      2,048,300
                                                                                                   ------------
                                                                                                     7,868,476

---------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--4.6%
Abbey National First Capital BV, 8.20% Sub. Nts., 10/15/04                            2,300,000      2,317,213
---------------------------------------------------------------------------------------------------------------
ABN Amro Bank NV (Chicago), 7.25% Unsec. Sub. Nts., 5/31/05                           2,500,000      2,589,915
---------------------------------------------------------------------------------------------------------------
Bank of America Corp.:
3.875% Nts., 1/15/08 1                                                                  500,000        508,536
6.875% Sub. Nts., 2/15/05                                                               125,000        127,596
7.875% Sr. Unsec. Nts., 5/16/05                                                       1,050,000      1,091,854
---------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc. (New York), 1.41% Nts., 9/9/05 3                     3,800,000      3,802,660
---------------------------------------------------------------------------------------------------------------
Fleet Boston Corp., 8% Sub. Nts., 9/15/04                                               100,000        100,208
---------------------------------------------------------------------------------------------------------------
Fleet National Bank, 8.625% Sub. Nts., 2/15/05                                          250,000        257,970
---------------------------------------------------------------------------------------------------------------
FleetBoston Financial Corp., 4.20% Nts., 11/30/07                                       430,000        443,207
---------------------------------------------------------------------------------------------------------------
Household Finance Corp.:
6.50% Unsec. Nts., 1/24/06                                                              515,000        542,632
8% Sr. Nts., 5/9/05                                                                   3,700,000      3,847,427
---------------------------------------------------------------------------------------------------------------
KeyCorp, 4.625% Sr. Nts., Series G, 5/16/05                                           2,400,000      2,437,272
---------------------------------------------------------------------------------------------------------------
M&I Bank, Central US, 1.568% Certificate of Deposit, 3/10/05                          3,200,000      3,195,568
---------------------------------------------------------------------------------------------------------------
Manufacturers & Traders Trust, 7% Unsec. Sub. Nts., 7/1/05                            3,400,000      3,523,437
---------------------------------------------------------------------------------------------------------------
National City Corp., 7.20% Unsec. Sub. Nts., 5/15/05                                  1,510,000      1,563,090
---------------------------------------------------------------------------------------------------------------
PNC Bank NA, 7.875% Sub. Nts., 4/15/05 1                                              1,630,000      1,686,105
---------------------------------------------------------------------------------------------------------------
PNC Funding Corp., 7% Unsec. Nts., 9/1/04                                             1,250,000      1,250,000
---------------------------------------------------------------------------------------------------------------
Santander Financial Issuances Ltd., 7.875% Unsec. Sub. Nts., 4/15/05                  1,600,000      1,656,888
---------------------------------------------------------------------------------------------------------------
U.S. Bancorp, 4.75% Sr. Nts., Series N, 6/30/05                                       3,500,000      3,567,480
---------------------------------------------------------------------------------------------------------------
Wachovia Corp.:
6.80% Unsec. Sub. Nts., 6/1/05                                                        1,400,000      1,446,221
7.45% Sr. Unsec. Unsub. Nts., 7/15/05                                                 2,900,000      3,025,326
---------------------------------------------------------------------------------------------------------------
Washington Mutual, Inc.:
4.375% Nts., 1/15/08                                                                    515,000        528,565
7.25% Sr. Nts., 8/15/05                                                                 750,000        782,441
                                                                                                   ------------
                                                                                                    40,291,611


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



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

CONSUMER FINANCE--0.4%
Newcourt Credit Group, Inc., 6.875% Unsec. Sub. Nts., Series B, 2/16/05             $ 3,600,000    $ 3,677,904
---------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--4.6%
American Express Co., 5.50% Nts., 9/12/06 1                                             770,000        810,480
---------------------------------------------------------------------------------------------------------------
Associates Corp. of North America:
6.20% Sr. Nts., 5/16/05                                                               2,000,000      2,055,850
6.625% Sr. Nts., 6/15/05                                                                100,000        103,249
---------------------------------------------------------------------------------------------------------------
Bank One Corp., 7% Jr. Unsec. Sub. Nts., 7/15/05                                        600,000        624,081
---------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp.:
6.75% Sr. Nts., Series C, 12/1/04                                                     1,200,000      1,214,316
7.125% Sub. Debs., 3/1/05                                                               350,000        358,880
---------------------------------------------------------------------------------------------------------------
CIT Group, Inc.:
4.125% Sr. Nts., 2/21/06                                                                900,000        919,318
7.125% Sr. Nts., 10/15/04                                                             1,200,000      1,207,828
---------------------------------------------------------------------------------------------------------------
Citigroup, Inc., 3.50% Nts., 2/1/08                                                     800,000        803,524
---------------------------------------------------------------------------------------------------------------
Export Development Canada, 4.55% Nts., 6/30/05                                        4,000,000      4,086,232
---------------------------------------------------------------------------------------------------------------
Exxon Capital Corp., 1.70% Unsec. Unsub. Nts., 11/15/04 9                             1,100,000      1,095,602
---------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The):
4.125% Nts., 1/15/08 1                                                                1,000,000      1,021,291
7.50% Sr. Unsec. Unsub. Nts., 1/28/05 1                                               2,300,000      2,350,600
7.625% Nts., 8/17/05                                                                  1,000,000      1,050,591
---------------------------------------------------------------------------------------------------------------
JPMorgan Chase & Co., 4% Nts., 2/1/08                                                   800,000        813,579
---------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 7.75% Sr. Unsec. Nts., 1/15/05                        2,440,000      2,491,250
---------------------------------------------------------------------------------------------------------------
MBNA Corp., 5.625% Nts., 11/30/07                                                       500,000        530,385
---------------------------------------------------------------------------------------------------------------
Mellon Funding Corp., 7.50% Sr. Unsec. Nts., 6/15/05                                  3,600,000      3,738,222
---------------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.:
4% Nts., Series B, 11/15/07                                                             410,000        417,715
4.125% Nts., Series C, 1/15/09                                                        3,530,000      3,573,677
---------------------------------------------------------------------------------------------------------------
Morgan Stanley, 7.75% Sr. Nts., 6/15/05                                               4,150,000      4,330,264
---------------------------------------------------------------------------------------------------------------
SLM Corp., 2.90% Nts., Series A, 7/1/05                                               4,400,000      4,418,775
---------------------------------------------------------------------------------------------------------------
Tyco Capital Corp., 6.625% Sr. Unsec. Nts., 6/15/05                                   1,100,000      1,136,918
---------------------------------------------------------------------------------------------------------------
Volkswagen Credit, Inc., 1.88% Nts., 7/21/05 3,8                                      1,900,000      1,899,894
                                                                                                   ------------
                                                                                                    41,052,521

---------------------------------------------------------------------------------------------------------------
INSURANCE--3.2%
Allstate Corp., 7.875% Sr. Unsec. Nts., 5/1/05                                        3,000,000      3,110,304
---------------------------------------------------------------------------------------------------------------
Allstate Financial Global Funding LLC, 7.125% Nts., 9/26/05 8                         1,400,000      1,466,304
---------------------------------------------------------------------------------------------------------------
AXA Financial, Inc., 9% Sr. Unsec. Nts., 12/15/04                                     3,830,000      3,901,227
---------------------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The), 7.75% Sr. Unsec. Nts., 6/15/05         2,670,000      2,777,753
---------------------------------------------------------------------------------------------------------------
John Hancock Global Funding II, 5% Nts., 7/27/078                                       760,000        799,873
---------------------------------------------------------------------------------------------------------------
Lincoln National Corp., 7.25% Unsec. Debs., 5/15/05                                   3,475,000      3,603,266
---------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc., 3.625% Nts., 2/15/08                                     1,130,000      1,136,948

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

INSURANCE Continued
MetLife, Inc., 3.911% Nts., 5/15/05                                                 $ 4,550,000    $ 4,608,668
---------------------------------------------------------------------------------------------------------------
Monumental Global Funding II, 3.85% Nts., 3/3/08 8                                    1,120,000      1,139,168
---------------------------------------------------------------------------------------------------------------
Pricoa Global Funding I, 3.90% Nts., 12/15/08 8                                       1,800,000      1,807,715
---------------------------------------------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The), 7.875% Sr. Unsec. Nts., 4/15/05                  2,350,000      2,429,432
---------------------------------------------------------------------------------------------------------------
Teachers Insurance and Annuity Assn. Global Markets, 3.875% Sr
Unsec. Nts., 1/22/08 8                                                                1,750,000      1,779,146
                                                                                                   ------------
                                                                                                    28,559,804

---------------------------------------------------------------------------------------------------------------
REAL ESTATE--0.3%
Security Capital Group, Inc., 6.95% Sr. Unsec. Nts., 6/15/05                          1,500,000      1,554,638
---------------------------------------------------------------------------------------------------------------
Spieker Properties LP, 6.75% Unsec. Unsub. Nts., 1/15/08                                800,000        883,198
                                                                                                   ------------
                                                                                                     2,437,836

---------------------------------------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--0.4%
Aristar, Inc., 7.375% Sr. Unsec. Nts., 9/1/04                                         2,061,000      2,061,000
---------------------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc.:
5.50% Nts., Series K, 2/1/07 1                                                          635,000        669,121
6.51% Nts., Series F, 2/11/05                                                           250,000        254,755
6.84% Nts., Series F, 10/22/04                                                          320,000        322,156
6.875% Sr. Unsec. Unsub. Nts., Series D, 9/15/05                                        115,000        119,773
                                                                                                   ------------
                                                                                                     3,426,805

---------------------------------------------------------------------------------------------------------------
HEALTH CARE--1.2%
---------------------------------------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--0.3%
Boston Scientific Corp., 6.625% Unsec. Nts., 3/15/05                                  3,000,000      3,066,138
---------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.5%
Anthem, Inc., 4.875% Unsub. Nts., 8/1/05                                                420,000        428,056
---------------------------------------------------------------------------------------------------------------
Kaiser Foundation Hospitals, 9.55% Debs., 7/15/05                                     3,400,000      3,607,172
                                                                                                   ------------
                                                                                                     4,035,228

---------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--0.4%
Bristol-Myers Squibb Co., 4.75% Nts., 10/1/06                                           875,000        907,751
---------------------------------------------------------------------------------------------------------------
Merck & Co., Inc., 4.125% Nts., Series E, 1/18/05                                       310,000        312,553
---------------------------------------------------------------------------------------------------------------
Pfizer, Inc., 3.625% Nts., 11/1/04                                                    2,500,000      2,507,495
                                                                                                   ------------
                                                                                                     3,727,799

---------------------------------------------------------------------------------------------------------------
INDUSTRIALS--2.9%
---------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--1.1%
Boeing Capital Corp., 5.65% Sr. Unsec. Nts., 5/15/06                                    144,000        151,097
---------------------------------------------------------------------------------------------------------------
Boeing Co., 6.625% Unsec. Nts., 6/1/05                                                3,500,000      3,600,776
---------------------------------------------------------------------------------------------------------------
Honeywell International, Inc., 6.125% Unsec. Unsub. Nts., 7/1/05                      3,321,000      3,418,485


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



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

AEROSPACE & DEFENSE Continued
McDonnell Douglas Corp., 6.875% Unsec. Unsub. Nts., 11/1/06                 $   259,000    $   279,579
-------------------------------------------------------------------------------------------------------
United Technologies Corp., 6.625% Unsec. Sub. Nts., 11/15/04                  1,800,000      1,816,679
                                                                                           ------------
                                                                                             9,266,616

-------------------------------------------------------------------------------------------------------
AIRLINES--0.1%
Southwest Airlines Co., 8% Unsec. Nts., 3/1/05                                1,000,000      1,024,836
-------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--0.2%
Block Financial Corp., 6.75% Sr. Unsec. Nts., 11/1/04                         2,000,000      2,015,942
-------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.9%
3M Co., 4.25% Nts., Series C, 9/1/04                                            695,000        695,000
-------------------------------------------------------------------------------------------------------
General Electric Capital Corp.:
5.625% Sr. Unsec. Unsub. Nts., 5/13/05                                          350,000        358,365
7.50% Nts., Series A, 5/15/05                                                 2,700,000      2,801,404
8.85% Debs., 4/1/05                                                             500,000        518,808
-------------------------------------------------------------------------------------------------------
Textron Financial Corp., 7.125% Nts., 12/9/04                                 3,355,000      3,400,386
                                                                                           ------------
                                                                                             7,773,963

-------------------------------------------------------------------------------------------------------
MACHINERY--0.4%
Ingersoll-Rand Co., 6.51% Nts., Series B, 12/1/04                             2,000,000      2,021,406
-------------------------------------------------------------------------------------------------------
John Deere Capital Corp., 4.125% Sr. Nts., Series D, 7/15/05                  1,675,000      1,702,177
                                                                                           ------------
                                                                                             3,723,583

-------------------------------------------------------------------------------------------------------
ROAD & RAIL--0.2%
Consolidated Rail Corp., 7.07% Sec. Nts., Series 92-A, 4/1/05                   300,000        308,326
-------------------------------------------------------------------------------------------------------
Norfolk Southern Railway Co., 7% Equipment Trust Nts., Series J, 6/15/05        650,000        673,138
-------------------------------------------------------------------------------------------------------
Sante Fe Pacific Corp., 8.625% Sr. Unsec. Nts., 11/1/04                         600,000        605,030
                                                                                           ------------
                                                                                             1,586,494

-------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--0.4%
-------------------------------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--0.4%
Hewlett-Packard Co., 7.15% Nts., 6/15/05                                      3,700,000      3,841,803
-------------------------------------------------------------------------------------------------------
MATERIALS--0.1%
-------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.1%
Westvaco Corp., 6.85% Unsec. Unsub. Nts., 11/15/04                              350,000        352,743
-------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.8%
-------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.4%
Ameritech Capital Funding Corp.:
6.30% Unsec. Sub. Nts., 10/15/04                                                500,000        502,517
7.50% Unsec. Unsub. Debs., 4/1/05 1                                           2,000,000      2,058,770
-------------------------------------------------------------------------------------------------------
BellSouth Telecommunication, Inc., 7% Nts., 2/1/05                               30,000         30,597
-------------------------------------------------------------------------------------------------------
British Telecommunications plc, 6.75% Unsec. Bonds, 10/28/04                  1,600,000      1,612,800
-------------------------------------------------------------------------------------------------------
Citizens Communications Co., 7.625% Sr. Unsub. Nts., 8/15/08                    515,000        535,600


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

DIVERSIFIED TELECOMMUNICATION SERVICES Continued
GTE North, Inc., 6.40% Debs., Series E, 2/15/05                                 $  605,000   $    615,761
----------------------------------------------------------------------------------------------------------
NYNEX Capital Funding Co., 8.75% Nts., Series B, 12/1/04                           600,000        608,986
----------------------------------------------------------------------------------------------------------
Pacific Bell, 6.25% Nts., 3/1/05                                                   350,000        356,815
----------------------------------------------------------------------------------------------------------
Southern New England Telecommunications Corp., 7% Nts., Series 2, 8/15/05          200,000        208,643
----------------------------------------------------------------------------------------------------------
Southwestern Bell Telephone Co., 6.625% Unsec. Nts., 4/1/05                      1,908,000      1,956,221
----------------------------------------------------------------------------------------------------------
Telefonica Europe BV, 7.35% Nts., 9/15/05                                        2,600,000      2,731,916
----------------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375% Unsub. Nts., 12/15/06                         860,000        904,788
                                                                                             -------------
                                                                                               12,123,414

----------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.4% Vodafone Group plc:
3.95% Unsec. Nts., 1/30/08                                                         860,000        875,302
7.625% Jr. Unsec. Nts., 2/15/05                                                  2,632,000      2,696,284
                                                                                             -------------
                                                                                                3,571,586

----------------------------------------------------------------------------------------------------------
UTILITIES--1.4%
----------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.8%
Alabama Power Co., 4.875% Sr. Unsec. Nts., Series N, 9/1/04                      2,000,000      2,000,000
----------------------------------------------------------------------------------------------------------
Cinergy Corp., 6.25% Unsec. Sub. Debs., 9/1/04                                     429,000        429,000
----------------------------------------------------------------------------------------------------------
DTE Energy Co., 6.45% Sr. Unsub. Nts., 6/1/06                                      615,000        649,471
----------------------------------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., 4.625% Sr. Nts., 10/1/07                          910,000        934,837
----------------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 5.375% Sr. Unsec. Nts., 10/1/04                      2,805,000      2,812,885
----------------------------------------------------------------------------------------------------------
Progress Energy, Inc., 6.75% Sr. Nts., 3/1/06                                      465,000        491,138
                                                                                             -------------
                                                                                                7,317,331

----------------------------------------------------------------------------------------------------------
GAS UTILITIES--0.5%
Consolidated Natural Gas Co.:
7.25% Sr. Unsec. Nts., 10/1/04                                                   2,300,000      2,309,200
7.375% Unsec. Debs., 4/1/05                                                      1,080,000      1,111,904
----------------------------------------------------------------------------------------------------------
NiSource Finance Corp., 3.20% Nts., 11/1/06                                        680,000        680,095
                                                                                             -------------
                                                                                                4,101,199

----------------------------------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER--0.1%
Duke Energy Corp., 8.25% Nts., 10/15/04                                            900,000        905,673
                                                                                             -------------
Total Corporate Bonds and Notes (Cost $253,442,074)                                           254,029,823


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



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

STRUCTURED NOTES--14.2%
------------------------------------------------------------------------------------------------------------
AB Svensk Exportkredit, Goldman Sachs Commodity Index Excess
Return Linked Nts., 0.48%, 12/2/04 10                                          $ 13,000,000    $ 20,839,000
------------------------------------------------------------------------------------------------------------
AIG:
Goldman Sachs Commodity Index Total Return Linked Nts., 1.17%, 1/28/05 10        15,000,000      19,443,013
Goldman Sachs Commodity Index Total Return Linked Nts., 2.295%, 11/2/05 10       15,000,000      14,464,100
------------------------------------------------------------------------------------------------------------
Cargill, Inc.:
Goldman Sachs Commodity Index Total Return Linked Nts., 1.098%, 3/18/05 10       18,000,000      20,030,881
Goldman Sachs Commodity Index Total Return Linked Nts., 1.189%, 3/4/05 10        23,000,000      31,418,090
------------------------------------------------------------------------------------------------------------
Core Investment Grade Bond Trust I, Pass-Through Certificates,
Series 2002-1, 4.727%, 11/30/07                                                   9,700,000      10,124,036
------------------------------------------------------------------------------------------------------------
Koch Supply & Trading LP, Goldman Sachs Energy Total Return Linked
Nts., 1.70%, 5/3/05 3,10                                                          7,000,000       8,818,908
                                                                                               -------------
Total Structured Notes (Cost $100,866,611)                                                      125,138,028

------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS AND NOTES--0.3%
------------------------------------------------------------------------------------------------------------
TX Public Finance Authority Revenue Bonds, Unemployment
Compensation-B, 2%, 6/15/05 (Cost $2,493,569)                                     2,500,000       2,496,675

------------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES--11.7%
------------------------------------------------------------------------------------------------------------
Barton Capital Corp., 1.53%, 9/17/04 11                                           5,000,000       4,996,600
------------------------------------------------------------------------------------------------------------
Bryant Park Funding LLC, 1.55%, 10/1/04 11                                        5,000,000       4,993,542
------------------------------------------------------------------------------------------------------------
Cooperative Assn. of Tractor Dealers, Inc., Series A, 1.65%, 10/26/04             5,000,000       4,987,396
------------------------------------------------------------------------------------------------------------
Crown Point Capital Co., 1.60%, 10/5/04 11                                        5,000,000       4,992,444
------------------------------------------------------------------------------------------------------------
Federal Home Loan Board, 1.77%, 10/27/04                                          1,827,000       1,822,078
------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 1.58%, 10/27/04                                 28,000,000      27,930,295
------------------------------------------------------------------------------------------------------------
Gemini Securitization Corp., 1.62%, 10/1/04 11                                    5,000,000       4,993,417
------------------------------------------------------------------------------------------------------------
Gotham Funding Corp., 1.59%, 9/16/04 11                                           5,000,000       4,996,688
------------------------------------------------------------------------------------------------------------
Grampian Funding LLC, 1.52%, 9/9/04 11                                            5,000,000       4,998,311
------------------------------------------------------------------------------------------------------------
K2 (USA) LLC, 1.55%, 10/20/04 11                                                  5,000,000       4,989,383
------------------------------------------------------------------------------------------------------------
Lexington Parker Capital Co. LLC, 1.53%, 9/16/04 11                               5,000,000       4,996,771
------------------------------------------------------------------------------------------------------------
Neptune Funding Corp., 1.59%, 9/28/04 11                                          5,000,000       4,994,038
------------------------------------------------------------------------------------------------------------
Perry Global Funding LLC, Series A, 1.55%, 9/22/04 11                             4,014,000       4,010,371
------------------------------------------------------------------------------------------------------------
Regency Markets No. 1 LLC, 1.59%, 9/30/04 11                                      5,000,000       4,993,797
------------------------------------------------------------------------------------------------------------
Sheffield Receivables Corp., 1.48%, 9/3/04 11                                     5,000,000       4,999,589
------------------------------------------------------------------------------------------------------------
Solitaire Funding LLC, 1.42%, 9/1/04 11                                           5,000,000       5,000,000
------------------------------------------------------------------------------------------------------------
Windmill Funding Corp., 1.60%, 10/8/04 11                                         5,000,000       4,991,778
                                                                                               -------------
Total Short-Term Notes (Cost $103,686,504)                                                      103,686,498


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

JOINT REPURCHASE AGREEMENTS--2.2%
--------------------------------------------------------------------------------------------------------------------
Undivided interest of 2.37% in joint repurchase agreement (Principal Amount/
Value $806,836,000, with a maturity value of $806,870,963) with UBS Warburg LLC,
1.56%, dated 8/31/04, to be repurchased at $19,138,829 on 9/1/04, collateralized
by Federal National Mortgage Assn., 5%, 3/1/34, with a
value of $824,829,716 (Cost $19,138,000)                                            $19,138,000      $   19,138,000

--------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $1,190,849,309)                                         137.7%      1,215,074,274
--------------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS                                                     (37.7)       (332,373,343)
                                                                                    --------------------------------
NET ASSETS                                                                                100.0%     $  882,700,931
                                                                                    ================================


FOOTNOTES TO STATEMENT OF INVESTMENTS

1. All or a portion of the security is held in collateralized accounts to cover
initial margin requirements on open futures sales contracts with an aggregate
market value of $51,757,180. See Note 5 of Notes to Financial Statements.

2. Illiquid security. See Note 8 of Notes to Financial Statements.

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

4. When-issued security or forward commitment to be delivered and settled after
August 31, 2004. See Note 1 of Notes to Financial Statements.

5. Interest-Only Strips represent the right to receive the monthly interest
payments on an underlying pool of mortgage loans. These securities typically
decline in price as interest rates decline. Most other fixed income securities
increase in price when interest rates decline. The principal amount of the
underlying pool represents the notional amount on which current interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment rates than traditional mortgage-backed securities (for example,
GNMA pass-throughs). Interest rates disclosed represent current yields based
upon the current cost basis and estimated timing and amount of future cash
flows. These securities amount to $423,559 or 0.05% of the Fund's net assets as
of August 31, 2004.

6. A sufficient amount of liquid assets has been designated to cover outstanding
written call options, as follows:



                                   CONTRACTS   EXPIRATION   EXERCISE    PREMIUM         VALUE
                             SUBJECT TO CALL        DATES      PRICE   RECEIVED    SEE NOTE 1
---------------------------------------------------------------------------------------------

Soybean Futures, 11/12/04                 30      9/24/04    $   700    $ 6,638       $11,250
Soybean Futures, 11/12/04                 60      9/24/04        720     12,524        15,750
                                                                        ---------------------
                                                                        $19,162       $27,000
                                                                        =====================


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



                                   CONTRACTS   EXPIRATION   EXERCISE    PREMIUM        VALUE
                             SUBJECT TO CALL        DATES      PRICE   RECEIVED   SEE NOTE 1
--------------------------------------------------------------------------------------------

Cocoa Futures, 12/14/04                   30       9/3/04    $   450    $ 3,188      $   300
Cocoa Futures, 12/14/04                   30       9/3/04        550      1,988          300
Corn Futures, 12/14/04                    40      9/24/04        220      2,850        2,500
                                                                        --------------------
                                                                        $ 8,026      $ 3,100
                                                                        ====================



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

FOOTNOTES TO STATEMENT OF INVESTMENTS Continued

8. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $12,319,855 or 1.40% of the Fund's net
assets as of August 31, 2004.

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

10. Security is linked to the Goldman Sachs Commodity Index, the Goldman Sachs
Commodity Excess Return Index or the Goldman Sachs Commodity Index Total Return
Index. The indexes currently contain twenty-six commodities from the sectors of
energy, metals and agricultural products. Individual components qualify for the
inclusion in the index based on liquidity and are weighted by their respective
world production quantities.

11. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $68,946,729, or 7.81% of the
Fund's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


STATEMENT OF ASSETS AND LIABILITIES  August 31, 2004
--------------------------------------------------------------------------------



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

Investments, at value (cost $1,190,849,309)--see accompanying statement of investments    $1,215,074,274
---------------------------------------------------------------------------------------------------------
Unrealized appreciation on swap contracts                                                        311,698
---------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $117,003,441 sold on a
when-issued basis or forward commitment)                                                     117,290,020
Interest                                                                                       7,411,944
Shares of beneficial interest sold                                                             5,507,175
Other                                                                                              8,240
                                                                                          ---------------
Total assets                                                                               1,345,603,351

---------------------------------------------------------------------------------------------------------
LIABILITIES
---------------------------------------------------------------------------------------------------------
Bank overdraft                                                                                   672,572
---------------------------------------------------------------------------------------------------------
Options written, at value (premiums received $27,188)
--see accompanying statement of investments                                                       30,100
---------------------------------------------------------------------------------------------------------
Payables and otherb liabilities:
Investments purchased (including $442,231,512 purchased on
a when-issued basis or forward commitment)                                                   452,346,976
Shares of beneficial interest redeemed                                                         5,306,667
Futures margins                                                                                3,881,025
Distribution and service plan fees                                                               332,024
Transfer and shareholder servicing agent fees                                                    136,948
Shareholder communications                                                                        91,579
Trustees' compensation                                                                             9,006
Other                                                                                             95,523
                                                                                          ---------------
Total liabilities                                                                            462,902,420

---------------------------------------------------------------------------------------------------------
NET ASSETS                                                                                $  882,700,931
                                                                                          ===============

---------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
---------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest                                                $       96,928
---------------------------------------------------------------------------------------------------------
Additional paid-in capital                                                                   797,998,462
---------------------------------------------------------------------------------------------------------
Accumulated net investment income                                                                277,611
---------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments                                                  83,911,731
---------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                                       416,199
                                                                                          ---------------
NET ASSETS                                                                                $  882,700,931
                                                                                          ===============



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



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

Class A Shares:
Net asset value and redemption price per share (based on net assets of
$638,254,035 and 69,930,807 shares of beneficial interest outstanding) $9.13
Maximum offering price per share (net asset value plus sales charge of 5.75% of
offering price) $9.69
-----------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $78,125,449 and 8,634,973 shares
of beneficial interest outstanding)                                                                  $9.05
-----------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $110,728,402 and 12,281,455 shares
of beneficial interest outstanding)                                                                  $9.02
-----------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $8,205,680 and 904,148 shares of
beneficial interest outstanding)                                                                     $9.08
-----------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets of
$47,387,365 and 5,176,596 shares of beneficial interest outstanding)                                 $9.15


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

STATEMENT OF OPERATIONS  For the Year Ended August 31, 2004
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------
Interest                                                            $ 9,196,869

--------------------------------------------------------------------------------
EXPENSES
--------------------------------------------------------------------------------
Management fees                                                       5,195,892
--------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                                 996,627
Class B                                                                 521,169
Class C                                                                 680,001
Class N                                                                  22,399
--------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                 796,965
Class B                                                                 173,759
Class C                                                                 185,947
Class N                                                                  16,414
Class Y                                                                  10,381
--------------------------------------------------------------------------------
Shareholder
communications:
Class A                                                                 104,357
Class B                                                                  31,494
Class C                                                                  25,977
Class N                                                                   1,814
--------------------------------------------------------------------------------
Custodian fees and expenses                                              31,634
--------------------------------------------------------------------------------
Trustees' compensation                                                   17,141
--------------------------------------------------------------------------------
Other                                                                   101,977
                                                                     -----------
Total expenses                                                        8,913,948
Less reduction to custodian expenses                                    (27,493)
Less payments and waivers of expenses                                   (11,599)
                                                                     -----------
Net expenses                                                          8,874,856

--------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                   322,013

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

--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
--------------------------------------------------------------------------------
Net realized gain on:
Investments (including premiums on options exercised)             $  51,597,136
Closing of futures contracts                                         79,806,088
Closing and expiration of option contracts written                      722,842
Swap contracts                                                        8,232,810
                                                                  --------------
Net realized gain                                                   140,358,876
--------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on:
Investments                                                          (4,204,438)
Futures contracts                                                   (27,501,835)
Option contracts                                                         (9,221)
Swap contracts                                                          311,698
                                                                  -------------
Net change in unrealized appreciation                               (31,403,796)

--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS              $ 109,277,093
                                                                  ==============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


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



YEAR ENDED AUGUST 31,                                                                   2004              2003
----------------------------------------------------------------------------------------------------------------

OPERATIONS
----------------------------------------------------------------------------------------------------------------
Net investment income                                                          $     322,013     $     783,826
----------------------------------------------------------------------------------------------------------------
Net realized gain                                                                140,358,876        29,067,435
----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation                                            (31,403,796)       21,272,368
                                                                               ---------------------------------
Net increase in net assets resulting from operations                             109,277,093        51,123,629

----------------------------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
----------------------------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                                              (51,684)       (1,303,888)
Class B                                                                                   --           (43,213)
Class C                                                                                   --           (29,456)
Class N                                                                                   --            (6,191)
Class Y                                                                              (64,204)         (148,718)
----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A                                                                           (9,145,151)               --
Class B                                                                           (1,194,188)               --
Class C                                                                           (1,409,006)               --
Class N                                                                              (77,055)               --
Class Y                                                                             (793,204)               --

----------------------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from beneficial interest transactions:
Class A                                                                          328,433,627        54,035,053
Class B                                                                           31,994,068         7,287,354
Class C                                                                           63,172,169        15,042,430
Class N                                                                            5,907,317         1,134,147
Class Y                                                                           16,401,022        14,764,802

----------------------------------------------------------------------------------------------------------------
NET ASSETS
----------------------------------------------------------------------------------------------------------------
Total increase                                                                   542,450,804       141,855,949
----------------------------------------------------------------------------------------------------------------
Beginning of period                                                              340,250,127       198,394,178
                                                                               ---------------------------------
End of period (including accumulated net investment income
of $277,611 and $73,631, respectively)                                         $ 882,700,931     $ 340,250,127
                                                                               =================================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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



CLASS A   YEAR ENDED AUGUST 31,                      2004           2003          2002            2001          2000
-----------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $   7.51       $   6.15      $   6.93        $   8.18      $   5.74
-----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                 .01            .03           .29             .45           .32
Net realized and unrealized gain (loss)              1.85           1.38          (.71)          (1.21)         2.40
                                                 ----------------------------------------------------------------------
Total from investment operations                     1.86           1.41          (.42)           (.76)         2.72
-----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   -- 1         (.05)         (.36)           (.43)         (.28)
Distributions from net realized gain                 (.24)            --            --            (.06)           --
                                                 ----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                      (.24)          (.05)         (.36)           (.49)         (.28)
-----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $   9.13       $   7.51      $   6.15        $   6.93      $   8.18
                                                 ======================================================================

-----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                  25.44%         23.08%        (5.54)%         (9.83)%       48.55%

RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $638,254       $238,828      $148,319        $117,331      $161,547
-----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $413,618       $193,837      $115,458        $139,631      $126,143
-----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                0.22%          0.46%         4.73%           5.73%         4.81%
Total expenses                                       1.40% 4,5      1.49% 4       1.68% 4,5       1.51% 4       1.50% 4
-----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                87%            61%           49%            105%           93%


1. Less than $0.005 per share.

2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

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

4. Reduction to custodian expenses less than 0.01%.

5. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

CLASS B    YEAR ENDED AUGUST 31,                      2004          2003         2002             2001          2000
----------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $   7.51      $   6.16     $   6.95         $   8.20      $   5.75
----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                          (.05)         (.04)         .23              .40           .27
Net realized and unrealized gain (loss)               1.83          1.40         (.70)           (1.22)         2.40
                                                  --------------------------------------------------------------------
Total from investment operations                      1.78          1.36         (.47)            (.82)         2.67
----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                    --          (.01)        (.32)            (.37)         (.22)
Distributions from net realized gain                  (.24)           --           --             (.06)           --
                                                  --------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                       (.24)         (.01)        (.32)            (.43)         (.22)
----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $   9.05      $   7.51     $   6.16         $   6.95      $   8.20
                                                  ====================================================================

----------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                   24.32%        22.12%       (6.38)%         (10.49)%       47.44%
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $ 78,125      $ 37,589     $ 24,738         $ 21,321      $ 27,156
----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $ 52,436      $ 32,101     $ 20,032         $ 26,295      $ 21,416
----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)                         (0.69)%       (0.41)%       4.10%            4.99%         4.03%
Total expenses                                        2.32%         2.44%        2.45%            2.27%         2.27%
Expenses after payments and waivers
and reduction to custodian expenses                   2.31%         2.36%         N/A 3,4          N/A 3         N/A 3
----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                 87%           61%          49%             105%           93%


1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

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

3. Reduction to custodian expenses less than 0.01%.

4. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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



CLASS C    YEAR ENDED AUGUST 31,                          2004         2003        2002            2001        2000
---------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period                  $   7.48      $  6.14     $  6.93         $  8.17     $  5.73
---------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                              (.03)        (.03)        .23             .41         .27
Net realized and unrealized gain (loss)                   1.81         1.38        (.70)          (1.22)       2.39
                                                      ---------------------------------------------------------------
Total from investment operations                          1.78         1.35        (.47)           (.81)       2.66
Dividends and/or distributions to shareholders:
Dividends from net investment income                        --         (.01)       (.32)           (.37)       (.22)
Distributions from net realized gain                      (.24)          --          --            (.06)         --
                                                      ---------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                           (.24)        (.01)       (.32)           (.43)       (.22)
---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                        $   9.02      $  7.48     $  6.14         $  6.93     $  8.17
                                                      ===============================================================

---------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                       24.42%       22.04%      (6.39)%        (10.43)%     47.43%
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)              $110,728      $36,531     $18,115         $12,588     $20,256
---------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                     $ 68,392      $25,746     $11,771         $16,165     $16,536
---------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)                             (0.62)%      (0.43)%      3.99%           4.95%       4.03%
Total expenses                                            2.24%        2.40%       2.45%           2.26%       2.27%
Expenses after payments and waivers
and reduction to custodian expenses                        N/A 3       2.36%        N/A 3,4         N/A 3       N/A 3
---------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                     87%          61%         49%            105%         93%


1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

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

3. Reduction to custodian expenses less than 0.01%.

4. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

CLASS N    YEAR ENDED AUGUST 31,                     2004        2003        2002            2001 1
---------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
---------------------------------------------------------------------------------------------------
Net asset value, beginning of period               $ 7.50      $ 6.15      $ 6.99          $ 7.67
---------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                  --         .07         .30             .22
Net realized and unrealized gain (loss)              1.82        1.36        (.78)           (.73)
                                                   ------------------------------------------------
Total from investment operations                     1.82        1.43        (.48)           (.51)
---------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   --        (.08)       (.36)           (.17)
Distributions from net realized gain                 (.24)         --          --              --
                                                   ------------------------------------------------
Total dividends and/or distributions
to shareholders                                      (.24)       (.08)       (.36)           (.17)
---------------------------------------------------------------------------------------------------
Net asset value, end of period                     $ 9.08      $ 7.50      $ 6.15          $ 6.99
                                                   ================================================

---------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                  24.90%      23.63%      (6.47)%         (6.75)%
---------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)           $8,206      $1,578      $  314          $   61
---------------------------------------------------------------------------------------------------
Average net assets (in thousands)                  $4,516      $1,001      $  146          $   14
---------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss)                        (0.17)%      0.27%       3.57%           5.95%
Total expenses                                       1.84%       1.83%       1.94%           1.88%
Expenses after payments and waivers
and reduction to custodian expenses                  1.80%       1.63%        N/A 4,5         N/A 4
---------------------------------------------------------------------------------------------------
Portfolio turnover rate                                87%         61%         49%            105%


1. For the period from March 1, 2001 (inception of offering) to August 31, 2001.

2. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

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

4. Reduction to custodian expenses less than 0.01%.

5. Voluntary waiver of transfer agent fees less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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



CLASS Y    YEAR ENDED AUGUST 31,                     2004        2003        2002        2001        2000
------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period               $ 7.52      $ 6.15      $ 6.94      $ 8.16      $ 5.72
------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                 .05         .06         .32         .25         .36
Net realized and unrealized gain (loss)              1.84        1.39        (.73)       (.95)       2.38
                                                   ---------------------------------------------------------
Total from investment operations                     1.89        1.45        (.41)       (.70)       2.74
Dividends and/or distributions to shareholders:
Dividends from net investment income                 (.02)       (.08)       (.38)       (.46)       (.30)
Distributions from net realized gain                 (.24)         --          --        (.06)         --
                                                   ---------------------------------------------------------
Total dividends and/or distributions
to shareholders                                      (.26)       (.08)       (.38)       (.52)       (.30)
------------------------------------------------------------------------------------------------------------
Net asset value, end of period                     $ 9.15      $ 7.52      $ 6.15      $ 6.94      $ 8.16
                                                   =========================================================

------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                  25.84%      23.69%      (5.36)%     (9.21)%     49.20%
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)           $47,387     $25,724     $6,908      $1,741      $    1
------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                  $31,449     $15,755     $3,420      $  868      $    1
------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income                                0.65%       0.83%       3.95%       6.46%       5.28%
Total expenses                                       0.97%       1.08%       1.27%       1.38% 3     1.09%
Expenses after payments and waivers
and reduction to custodian expenses                    N/A 4       N/A 4     1.26%       1.17%        N/A 4
------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                87%         61%         49%        105%         93%


1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.

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

3. Added since August 31, 2001 to reflect expenses before reduction to custodian
expenses and voluntary waiver of transfer agent fees.

4. Reduction to custodian expenses less than 0.01%.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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

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

Oppenheimer Real Asset Fund (the Fund) is a non-diversified, open-end management
investment company registered 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 Advisor). The Sub-Advisor is
Oppenheimer Real Asset Management, Inc. (the Manager), a wholly owned subsidiary
of the Advisor.

      The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase. The Fund assesses a 2% fee on the proceeds of
fund shares that are redeemed (either by selling or exchanging to another
Oppenheimer fund) within 30 days of their purchase. The fee, which is retained
by the Fund, is accounted for as an addition to paid-in capital.

      The following is a summary of significant accounting policies consistently
followed by the Fund.

--------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities listed
or traded on National Stock Exchanges or other domestic or foreign exchanges are
valued based on the last sale price of the security traded on that exchange
prior to the time when the Fund's assets are valued. Securities traded on NASDAQ
are valued based on the closing price provided by NASDAQ prior to the time when
the Fund's assets are valued. In the absence of a sale, the security is valued
at the last sale price on the prior trading day, if it is within the spread of
the closing bid and asked prices, and if not, at the closing bid price.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of 60 days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities may be valued primarily
using dealer-supplied valuations or a portfolio pricing service authorized by
the Board of Trustees. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value.
Foreign and domestic securities whose values have been materially

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

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

affected by what the Manager identifies as a significant event occurring before
the Fund's assets are valued but after the close of their respective exchanges
will be fair valued. Fair value is determined in good faith using consistently
applied procedures under the supervision of the Board of Trustees. Short-term
"money market type" debt securities with remaining maturities of sixty days or
less are valued at amortized cost (which approximates market value).

--------------------------------------------------------------------------------
STRUCTURED NOTES. The Fund invests in structured notes whose market values,
interest rates and/or redemption prices are linked to the performance of
underlying foreign currencies, interest rate spreads, stock market indices,
prices of individual securities, commodities or other financial instruments or
the occurrence of other specific events. The structured notes are often
leveraged, increasing the volatility of each note's market value relative to the
change in the underlying linked financial element or event. Fluctuations in
value of these securities are recorded as unrealized gains and losses in the
accompanying financial statements. The Fund records a realized gain or loss when
a structured note is sold or matures. As of August 31, 2004, the market value of
these securities comprised 14.2% of the Fund's net assets and resulted in
unrealized cumulative gains of $24,271,417.

--------------------------------------------------------------------------------
SECURITIES ON A WHEN-ISSUED BASIS OR FORWARD COMMITMENT. Delivery and payment
for securities that have been purchased by the Fund on a when-issued basis or
forward commitment can take place up to ten days or more after the trade date.
Normally the settlement date occurs within six months after the trade date;
however, the Fund may, from time to time, purchase securities whose settlement
date extends six months or more beyond trade date. During this period, such
securities do not earn interest, are subject to market fluctuation and may
increase or decrease in value prior to their delivery. The Fund maintains
internally designated assets with a market value equal to or greater than the
amount of its purchase commitments. The purchase of securities on a when-issued
basis or forward commitment may increase the volatility of the Fund's net asset
value to the extent the Fund executes such transactions while remaining
substantially fully invested. The Fund may also sell securities that it
purchased on a when-issued basis or forward commitment prior to settlement of
the original purchase. As of August 31, 2004, the Fund had purchased
$442,231,512 of securities on a when-issued basis or forward commitment and sold
$117,003,441 of securities issued on a when-issued basis or forward commitment.

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

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

--------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the
Securities and Exchange Commission, the Fund, along with other affiliated funds
advised by the Manager, may transfer uninvested cash balances into joint trading
accounts on a daily basis. These balances are invested in one or more repurchase
agreements. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal. In the event of default by the other party to the agreement,
retention of the collateral may be subject to legal proceedings.

--------------------------------------------------------------------------------
ALLOCATION OF INCOME, EXPENSES, GAINS AND LOSSES. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated on a
daily basis to each class of shares based upon the relative proportion of net
assets represented by such class. Operating expenses directly attributable to a
specific class are charged against the operations of that class.

--------------------------------------------------------------------------------
FEDERAL TAXES. The Fund intends to comply with provisions of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its investment company taxable income, including any net
realized gain on investments not offset by capital loss carryforwards, if any,
to shareholders, therefore, no federal income or excise tax provision is
required.

The tax components of capital shown in the table below represent distribution
requirements the Fund must satisfy under the income tax regulations, losses the
Fund may be able to offset against income and gains realized in future years and
unrealized appreciation or depreciation of securities and other investments for
federal income tax purposes.

                                                                  NET UNREALIZED
                                                                    APPRECIATION
                                                                BASED ON COST OF
                                                                  SECURITIES AND
UNDISTRIBUTED          UNDISTRIBUTED          ACCUMULATED      OTHER INVESTMENTS
NET INVESTMENT             LONG-TERM                 LOSS     FOR FEDERAL INCOME
INCOME                          GAIN   CARRYFORWARD 1,2,3           TAX PURPOSES
--------------------------------------------------------------------------------
$34,836,643              $53,416,727          $24,036,296            $20,462,918

1. The Fund had $24,036,296 of straddle losses which were deferred.

2. During the fiscal year ended August 31, 2004, the Fund did not utilize any
capital loss carryforward.

3. During the fiscal year ended August 31, 2003, the Fund utilized $27,556,670
of capital loss carryforward to offset capital gains realized in that fiscal
year.

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

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

Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for August 31, 2004. Net assets of the
Fund were unaffected by the reclassifications.

                                    REDUCTION TO        REDUCTION TO
                                     ACCUMULATED     ACCUMULATED NET
             INCREASE TO          NET INVESTMENT       REALIZED GAIN
             PAID-IN CAPITAL              INCOME    ON INVESTMENTS 4
             -------------------------------------------------------
             $22,298,093                  $2,145         $22,295,948

4. $22,240,388, including $13,513,420 of long-term capital gain, was distributed
in connection with Fund share redemptions.

The tax character of distributions paid during the years ended August 31, 2004
and August 31, 2003 was as follows:

                                          YEAR ENDED         YEAR ENDED
                                     AUGUST 31, 2004    AUGUST 31, 2003
         --------------------------------------------------------------
         Distributions paid from:
         Ordinary income                 $   115,888         $1,531,466
         Long-term capital gain           12,618,604                 --
                                         ------------------------------
         Total                           $12,734,492         $1,531,466
                                         ==============================

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of August 31, 2004 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.

            Federal tax cost of securities           $1,190,849,309
            Federal tax cost of other investments        12,972,097
                                                     --------------
            Total federal tax cost                   $1,203,821,406
                                                     ==============

            Gross unrealized appreciation            $   28,527,637
            Gross unrealized depreciation                (8,064,719)
            Net unrealized appreciation              $   20,462,918
                                                     ==============

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

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

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

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

--------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENT. The reduction of custodian fees, if applicable,
represents earnings on cash balances maintained by the Fund.

--------------------------------------------------------------------------------
SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
Realized gains and losses on securities sold are determined on the basis of
identified cost.

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

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

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



                               YEAR ENDED AUGUST 31, 2004        YEAR ENDED AUGUST 31, 2003
                                 SHARES            AMOUNT          SHARES            AMOUNT
---------------------------------------------------------------------------------------------

CLASS A
Sold                         60,864,784     $ 526,237,973      34,470,741     $ 240,879,466
Dividends and/or
distributions reinvested      1,021,225         7,760,573         182,879         1,164,613
Redeemed                    (23,760,653)     (205,564,919)    (26,972,700)     (188,009,026)
                            -----------------------------------------------------------------
Net increase                 38,125,356     $ 328,433,627       7,680,920     $  54,035,053
                            =================================================================

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

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



                              YEAR ENDED AUGUST 31, 2004      YEAR ENDED AUGUST 31, 2003
                                 SHARES           AMOUNT         SHARES           AMOUNT
-----------------------------------------------------------------------------------------

CLASS B
Sold                          6,075,661     $ 52,623,081      4,589,002     $ 32,275,935
Dividends and/or
distributions reinvested        136,911        1,037,789          6,070           38,017
Redeemed                     (2,581,998)     (21,666,802)    (3,603,595)     (25,026,598)
                             ------------------------------------------------------------
Net increase                  3,630,574     $ 31,994,068        991,477     $  7,287,354
                             ============================================================

-----------------------------------------------------------------------------------------
CLASS C
Sold                         10,218,639     $ 87,296,277      6,300,352     $ 44,752,722
Dividends and/or
distributions reinvested        148,152        1,118,549          3,715           23,258
Redeemed                     (2,968,721)     (25,242,657)    (4,370,436)     (29,733,550)
                             ------------------------------------------------------------
Net increase                  7,398,070     $ 63,172,169      1,933,631     $ 15,042,430
                             ============================================================

-----------------------------------------------------------------------------------------
CLASS N
Sold                            818,178     $  6,975,731        310,503     $  2,241,096
Dividends and/or
distributions reinvested         10,161           77,023          1,012            6,180
Redeemed                       (134,749)      (1,145,437)      (151,980)      (1,113,129)
                             ------------------------------------------------------------
Net increase                    693,590     $  5,907,317        159,535     $  1,134,147
                             ============================================================

-----------------------------------------------------------------------------------------
CLASS Y
Sold                          3,051,718     $ 26,560,158      3,474,505     $ 22,981,857
Dividends and/or
distributions reinvested         28,193          213,586          8,593           56,004
Redeemed                     (1,324,757)     (10,372,722)    (1,184,394)      (8,273,059)
                             ------------------------------------------------------------
Net increase                  1,755,154     $ 16,401,022      2,298,704     $ 14,764,802
                             ============================================================


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

The aggregate cost of purchases and proceeds from sales of securities, other
than U.S. government obligations and short-term obligations, for the year ended
August 31, 2004, were $225,453,250 and $141,469,850, respectively. There were
purchases of $19,847,819 and sales of $19,603,472 of U.S. government and
government agency obligations for the year ended August 31, 2004.

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

MANAGEMENT FEES. Management fees paid to the Advisor were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of 1.00% of the first $200 million of average annual net assets,
0.90% of the next $200 million, 0.85% of the next $200 million, 0.80% of the
next $200 million, and 0.75% of net assets in excess of $800 million. Under the
sub-advisory agreement, the Advisor pays the Sub-Advisor the following annual
fees: 0.50% of the first $200 million of average annual

net assets, 0.45% of the next $200 million, 0.425% of the next $200 million,
0.40% of the next $200 million, and 0.375% of the net assets in excess of $800
million.

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

--------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended August 31, 2004, the Fund paid
$1,105,884 to OFS for services to the Fund.

      Additionally, Class Y shares are subject to minimum fees of $10,000 for
assets of $10 million or more. The Class Y shares are subject to the minimum
fees in the event that the per account fee does not equal or exceed the
applicable minimum fees. OFS may voluntarily waive the minimum fees.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN (12B-1) FEES. Under its General Distributor's
Agreement with the Fund, OppenheimerFunds Distributor, Inc. (the Distributor)
acts as the Fund's principal underwriter in the continuous public offering of
the Fund's classes of shares.

--------------------------------------------------------------------------------
SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A
shares. It reimburses the Distributor for a portion of its costs incurred for
services provided to accounts that hold Class A shares. Reimbursement is made
quarterly at an annual rate of up to 0.25% of the average annual net assets of
Class A shares of the Fund. The Distributor currently uses all of those fees to
pay dealers, brokers, banks and other financial institutions quarterly for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
years. Fees incurred by the Fund under the Plan are detailed in the Statement of
Operations.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B and Class C shares and 0.25% per year on Class N shares. The Distributor
also receives a service fee of up to 0.25% per year under each plan. If either
the Class B, Class C or Class N plan is terminated by the Fund or by the
shareholders of a class, the Board of Trustees and its independent trustees must
determine whether the Distributor shall be entitled to payment from the Fund of
all or a portion of the service fee and/or asset-based sales charge in respect
to shares sold prior to the effective date of such termination. The
Distributor's aggregate uncompensated expenses under the plan at August 31, 2004
for Class B, Class C and Class N shares were $2,777,625, $1,505,400 and
$121,351, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.


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

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

SALES CHARGES. Front-end sales charges and contingent deferred sales charges
(CDSC) do not represent expenses of the Fund. They are deducted from the
proceeds of sales of Fund shares prior to investment or from redemption proceeds
prior to remittance, as applicable. The sales charges retained by the
Distributor from the sale of shares and the CDSC retained by the Distributor on
the redemption of shares is shown in the table below for the period indicated.



                                            CLASS A           CLASS B           CLASS C           CLASS N
                          CLASS A        CONTINGENT        CONTINGENT        CONTINGENT        CONTINGENT
                        FRONT-END          DEFERRED          DEFERRED          DEFERRED          DEFERRED
                    SALES CHARGES     SALES CHARGES     SALES CHARGES     SALES CHARGES     SALES CHARGES
                      RETAINED BY       RETAINED BY       RETAINED BY       RETAINED BY       RETAINED BY
YEAR ENDED            DISTRIBUTOR       DISTRIBUTOR       DISTRIBUTOR       DISTRIBUTOR       DISTRIBUTOR
----------------------------------------------------------------------------------------------------------

August 31, 2004          $735,882            $2,156          $194,545           $91,638            $6,646


--------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. OFS has voluntarily agreed to limit transfer
and shareholder servicing agent fees for all classes to 0.35% of average daily
net assets per fiscal year for all classes. During the year ended August 31,
2004, OFS waived $2,343, $7,588 and $1,668 for Class A, Class B and Class N
shares, respectively. This undertaking may be amended or withdrawn at any time.

--------------------------------------------------------------------------------
5. FUTURES CONTRACTS

A futures contract is a commitment to buy or sell a specific amount of a
commodity or financial instrument at a negotiated price on a stipulated future
date. Futures contracts are traded on a commodity exchange. The Fund may buy and
sell futures contracts that relate to broadly based securities indices
(financial futures), debt securities (interest rate futures) and various
commodities (commodity index futures) inherent in the Fund's holdings of
structured notes. 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 the resulting negative effect on the value of fixed rate
portfolio securities, decreases in market value of portfolio securities, or
decreases in commodity prices. The Fund may also purchase futures contracts
without owning the underlying fixed-income security as an efficient or cost
effective means to gain exposure to changes in interest rates, commodity prices
or market indices. The Fund will then either purchase the underlying
fixed-income security or close out the futures contract.

      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 or
payable for the daily mark to market for variation margin. Realized gains and
losses are reported in the Statement of Operations as the closing and expiration
of futures contracts.

      Risks of entering into futures contracts (and related options) include the
possibility that there may be an illiquid market and that a change in the value
of the contract or option may not correlate with changes in the value of the
underlying securities.

As of August 31, 2004, the Fund had outstanding futures contracts as follows:



                                                                                                UNREALIZED
                                          EXPIRATION         NUMBER OF   VALUATION AS OF      APPRECIATION
CONTRACT DESCRIPTION                           DATES         CONTRACTS   AUGUST 31, 2004     (DEPRECIATION)
------------------------------------------------------------------------------------------------------------

CONTRACTS TO PURCHASE
AGRICULTURE
Corn                                        12/14/04             1,369       $16,273,988       $(3,325,046)
Cotton #2                                    12/7/04               301         8,181,180           224,211
Soybean                                     11/12/04               484        15,179,450          (125,315)
Wheat                              12/14/04-12/21/04             1,321        21,643,513        (1,530,167)
ENERGY
Brent Crude Oil                             10/14/04             2,208        87,657,600        (1,421,640)
Crude Oil                                    9/21/04             3,607       151,926,840         1,029,424
Gas Oil                                     10/12/04               703        24,710,450        (1,905,536)
Heating Oil                                  9/30/04               969        45,703,854        (3,648,478)
Natural Gas                                  9/28/04               918        46,579,320        (6,443,453)
Unleaded Gasoline                            9/30/04               927        44,326,359        (3,267,170)
LIVESTOCK
Feeder Cattle                               10/28/04               100         5,471,250          (186,450)
Lean Hogs                                   10/15/04               375         9,896,250          (482,376)
Live Cattle                                 10/29/04               522        17,674,920          (665,158)
INDUSTRIAL METALS
Copper                                      12/29/04               598        19,150,950           592,718
London Metals Exchange
Aluminum High Grade                         11/17/04               491        20,821,469          (275,616)
London Metals Exchange Lead                 11/17/04               196         4,272,800            78,539
London Metals Exchange Nickel               11/17/04                64         4,778,880          (516,588)
London Metals Exchange Zinc                 11/17/04                31           753,494           (44,848)
PRECIOUS METALS
Gold 100 oz                                 12/29/04               295        12,165,800           139,684
SOFTS
Coffee                                      12/20/04               141         3,838,725            90,034
Sugar #11                                    9/30/04               412         3,686,906          (137,782)
GOVERNMENTS
U.S. Long Bonds                             12/20/04                21         2,337,563            21,578
U.S. Treasury Nts., 10 yr                   12/20/04               217        24,371,813            67,624
                                                                                               -------------
                                                                                               (21,731,811)
                                                                                               -------------

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

--------------------------------------------------------------------------------
5. FUTURES CONTRACTS Continued



                                                                                            UNREALIZED
                                      EXPIRATION         NUMBER OF   VALUATION AS OF      APPRECIATION
CONTRACT DESCRIPTION                       DATES         CONTRACTS   AUGUST 31, 2004     (DEPRECIATION)
---------------------------------------------------------------------------------------------------------

CONTRACTS TO SELL
SOFTS
Cocoa                                   12/14/04                28      $    472,080      $     (8,695)
GOVERNMENTS
U.S. Long Bonds                          9/21/04               205        23,068,906          (744,988)
U.S. Treasury Nts., 2 yr        9/30/04-12/30/04             2,290       485,745,578        (1,390,517)
U.S. Treasury Nts., 5 yr                12/20/04               653        72,268,734          (230,370)
PRECIOUS METALS
Silver                                  12/28/04                27           919,620           (11,171)
                                                                                          --------------
                                                                                            (2,385,741)
                                                                                          --------------
                                                                                          $(24,117,552)
                                                                                          ==============


--------------------------------------------------------------------------------
6. OPTION ACTIVITY

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

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

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

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

      The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security or commodity
increases and the option is exercised. The risk in writing a put option is that
the Fund may incur a loss if the market price of the security or commodity
decreases and the option is exercised. The risk in buying an option is that the
Fund pays a premium whether or not the option is exercised. The Fund also has
the additional risk of not being able to enter into a closing transaction if a
liquid secondary market does not exist.


Written option activity for the year ended August 31, 2004 was as follows:



                                            CALL OPTIONS                     PUT OPTIONS
                               -------------------------       --------------------------
                               NUMBER OF       AMOUNT OF       NUMBER OF       AMOUNT OF
                               CONTRACTS        PREMIUMS       CONTRACTS        PREMIUMS
-----------------------------------------------------------------------------------------

Options outstanding as of
August 31, 2003                      100         $17,875             172         $37,670
Options written                    2,566       1,440,424           1,471         335,335
Options closed or expired         (1,875)     (1,040,216)         (1,494)       (359,955)
Options exercised                   (701)       (398,921)            (49)         (5,024)
                                  -------------------------------------------------------
Options outstanding as of
August 31, 2004                       90         $19,162             100          $8,026
                                  =======================================================


--------------------------------------------------------------------------------
7.TOTAL RETURN SWAP CONTRACTS

The Fund may enter into a total return swap transaction to maintain a total
return on a particular investment, or portion of its portfolio, or for other
non-speculative purposes. Because the principal amount is not exchanged, it
represents neither an asset nor a liability to either counterparty, and is
referred to as notional. The Fund records an increase or decrease to unrealized
gain (loss), in the amount due to or owed by the Fund at termination or
settlement. Total return swaps are subject to risks (if the counterparty fails
to meet its obligations).

As of August 31, 2004, the Fund had entered into the following total return swap
agreements:



                                                PAID BY           RECEIVED BY
                                            THE FUND AT           THE FUND AT
SWAP                         NOTIONAL        AUGUST 31,            AUGUST 31,    TERMINATION       UNREALIZED
COUNTERPARTY                   AMOUNT              2004                  2004          DATES     APPRECIATION
--------------------------------------------------------------------------------------------------------------

                                                                     Value of
                                              One-Month       total return of
                                          LIBOR less 50       Lehman Brothers
Deutsche Bank AG           $7,410,000      basis points            CMBS Index       12/31/04        $155,909
                                                                     Value of
                                              One-Month       total return of
Morgan Stanley                            LIBOR less 55     Lehman Investment
Capital Services, Inc.      7,410,000      basis points           Grade Index        9/30/04         155,789
                                                                                                    ---------
                                                                                                    $311,698
                                                                                                    =========


Index abbreviations are as follows:
CMBS    Commercial Mortgage Backed Securities Markets
LIBOR   London-Interbank Offered Rate

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

--------------------------------------------------------------------------------
8. ILLIQUID SECURITIES

As of August 31, 2004, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund will not invest more than 15% of its net assets (determined at the time of
purchase and reviewed periodically) in illiquid securities. The aggregate value
of illiquid securities subject to this limitation as of August 31, 2004 was
$6,820,868, which represents 0.77% of the Fund's net assets.

------------------------------------------------------------------------------
9. LITIGATION

Six complaints have been filed as putative derivative and class actions against
the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as well
as 51 of the Oppenheimer funds (collectively, the "Funds") including this Fund,
and nine directors/ trustees of certain of the Funds other than this Fund
(collectively, the "Directors/Trustees"). The complaints allege that the Manager
charged excessive fees for distribution and other costs, improperly used assets
of the Funds in the form of directed brokerage commissions and 12b-1 fees to pay
brokers to promote sales of the Funds, and failed to properly disclose the use
of Fund assets to make those payments in violation of the Investment Company Act
of 1940 and the Investment Advisers Act of 1940. The complaints further allege
that by permitting and/or participating in those actions, the Directors/Trustees
breached their fiduciary duties to Fund shareholders under the Investment
Company Act of 1940 and at common law.

      OppenheimerFunds believes that it is premature to render any opinion as to
the likelihood of an outcome unfavorable to them, the Funds or the
Directors/Trustees and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss. However,
OppenheimerFunds, the Funds and the Directors/Trustees believe that the
allegations contained in the complaints are without merit and intend to defend
these lawsuits vigorously.

(1) In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund and who do not have
any direct or indirect financial interest in the operation of the distribution
plan or any agreement under the plan. (2) Certain waivers also apply to Class M
shares of Oppenheimer Convertible Securities Fund. (3) In the case of
Oppenheimer Senior Floating Rate Fund, a continuously-offered closed-end fund,
references to contingent deferred sales charges mean the Fund's Early Withdrawal
Charges and references to "redemptions" mean "repurchases" of shares. (4) An
"employee benefit plan" means any plan or arrangement, whether or not it is
"qualified" under the Internal Revenue Code, under which Class N shares of an
Oppenheimer fund or funds are purchased by a fiduciary or other administrator
for the account of participants who are employees of a single employer or of
affiliated employers. These may include, for example, medical savings accounts,
payroll deduction plans or similar plans. The fund accounts must be registered
in the name of the fiduciary or administrator purchasing the shares for the
benefit of participants in the plan.
(5) The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship, members
and employees of a partnership or association or other organized group of
persons (the members of which may include other groups), if the group has made
special arrangements with the Distributor and all members of the group
participating in (or who are eligible to participate in) the plan purchase
shares of an Oppenheimer fund or funds through a single investment dealer,
broker or other financial institution designated by the group. Such plans
include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans other than
plans for public school employees. The term "Group Retirement Plan" also
includes qualified retirement plans and non-qualified deferred compensation
plans and IRAs that purchase shares of an Oppenheimer fund or funds through a
single investment dealer, broker or other financial institution that has made
special arrangements with the Distributor. (6) However, that concession will not
be paid on purchases of shares in amounts of $1 million or more (including any
right of accumulation) by a Retirement Plan that pays for the purchase with the
redemption proceeds of Class C shares of one or more Oppenheimer funds held by
the Plan for more than one year.
(7) This provision does not apply to IRAs.
(8) This provision only applies to qualified retirement plans and 403(b)(7)
custodial plans after your separation from service in or after the year you
reached age 55. (9) The distribution must be requested prior to Plan termination
or the elimination of the Oppenheimer funds as an investment option under the
Plan.
(10) This provision does not apply to IRAs.
(11) This provision does not apply to loans from 403(b)(7) custodial plans and
loans from the OppenheimerFunds-sponsored Single K retirement plan. (12) This
provision does not apply to 403(b)(7) custodial plans if the participant is less
than age 55, nor to IRAs.

                                   Appendix A

                            Industry Classifications

Aerospace & Defense                                   Household Products
Air Freight & Couriers                                Industrial Conglomerates
Airlines                                              Insurance
Auto Components                                       Internet & Catalog Retail
Automobiles                                           Internet Software & Services
Beverages                                             IT Services
Biotechnology                                         Leisure Equipment & Products
Building Products                                     Machinery
Chemicals                                             Marine
Consumer Finance                                      Media
Commercial Banks                                      Metals & Mining
Commercial Services & Supplies                        Multiline Retail
Communications Equipment                              Multi-Utilities
Computers & Peripherals                               Office Electronics
Construction & Engineering                            Oil & Gas
Construction Materials                                Paper & Forest Products
Containers & Packaging                                Personal Products
Distributors                                          Pharmaceuticals
Diversified Financial Services                        Real Estate
Diversified Telecommunication Services                Road & Rail
Electric Utilities                                    Semiconductors and Semiconductor Equipment
Electrical Equipment                                  Software
Electronic Equipment & Instruments                    Specialty Retail
Energy Equipment & Services                           Textiles, Apparel & Luxury Goods
Food & Staples Retailing                              Thrifts & Mortgage Finance
Food Products                                         Tobacco
Gas Utilities                                         Trading Companies & Distributors
Health Care Equipment & Supplies                      Transportation Infrastructure
Health Care Providers & Services                      Water Utilities
Hotels Restaurants & Leisure                          Wireless Telecommunication Services
Household Durables

                                   Appendix B

         OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class A
shares(2) of the Oppenheimer funds or the contingent deferred sales charge that
may apply to Class A, Class B or Class C shares may be waived.(3) That is
because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors. Not all waivers apply to all funds.

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

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

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

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

         There is no initial sales charge on purchases of Class A shares of any
of the Oppenheimer funds in the cases listed below. However, these purchases may
be subject to the Class A contingent deferred sales charge if redeemed within 18
months (24 months in the case of Oppenheimer Rochester National Municipals and
Rochester Fund Municipals) of the beginning of the calendar month of their
purchase, as described in the Prospectus (unless a waiver described elsewhere in
this Appendix applies to the redemption). Additionally, on shares purchased
under these waivers that are subject to the Class A contingent deferred sales
charge, the Distributor will pay the applicable concession described in the
Prospectus under "Class A Contingent Deferred Sales Charge."(6) This waiver
provision applies to:
|_| Purchases of Class A shares aggregating $1 million or more.
|_|           Purchases of Class A shares by a Retirement Plan that was
              permitted to purchase such shares at net asset value but subject
              to a contingent deferred sales charge prior to March 1, 2001. That
              included plans (other than IRA or 403(b)(7) Custodial Plans) that:
              1) bought shares costing $500,000 or more, 2) had at the time of
              purchase 100 or more eligible employees or total plan assets of
              $500,000 or more, or 3) certified to the Distributor that it
              projects to have annual plan purchases of $200,000 or more.
|_| Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases
are made:
              1)  through a broker, dealer, bank or registered investment
                  adviser that has made special arrangements with the
                  Distributor for those purchases, or
              2)  by a direct rollover of a distribution from a qualified
                  Retirement Plan if the administrator of that Plan has made
                  special arrangements with the Distributor for those purchases.
|_|      Purchases of Class A shares by Retirement Plans that have any of the following record-keeping arrangements:
              1)  The record keeping is performed by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") on a daily valuation
                  basis for the Retirement Plan. On the date the plan sponsor
                  signs the record-keeping service agreement with Merrill Lynch,
                  the Plan must have $3 million or more of its assets invested
                  in (a) mutual funds, other than those advised or managed by
                  Merrill Lynch Investment Management, L.P. ("MLIM"), that are
                  made available under a Service Agreement between Merrill Lynch
                  and the mutual fund's principal underwriter or distributor,
                  and (b) funds advised or managed by MLIM (the funds described
                  in (a) and (b) are referred to as "Applicable Investments").
              2)  The record keeping for the Retirement Plan is performed on a
                  daily valuation basis by a record keeper whose services are
                  provided under a contract or arrangement between the
                  Retirement Plan and Merrill Lynch. On the date the plan
                  sponsor signs the record keeping service agreement with
                  Merrill Lynch, the Plan must have $5 million or more of its
                  assets (excluding assets invested in money market funds)
                  invested in Applicable Investments.
              3)  The record keeping for a Retirement Plan is handled under a
                  service agreement with Merrill Lynch and on the date the plan
                  sponsor signs that agreement, the Plan has 500 or more
                  eligible employees (as determined by the Merrill Lynch plan
                  conversion manager).

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

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

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

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

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

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

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

The Class A contingent deferred sales charge is also waived if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed in the
following cases: |_| To make Automatic Withdrawal Plan payments that are limited
annually to no more than 12% of the account value adjusted
              annually.
|_|           Involuntary redemptions of shares by operation of law or
              involuntary redemptions of small accounts (please refer to
              "Shareholder Account Rules and Policies," in the applicable fund
              Prospectus).
|_|      For distributions from Retirement Plans, deferred compensation plans or other employee benefit plans for any of the
              following purposes:
              1)  Following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary. The
                  death or disability must occur after the participant's account was established.
              2)  To return excess contributions.
              3)  To return contributions made due to a mistake of fact.
4) Hardship withdrawals, as defined in the plan.(7)
              5)  Under a Qualified Domestic Relations Order, as defined in the
                  Internal Revenue Code, or, in the case of an IRA, a divorce or
                  separation agreement described in Section 71(b) of the
                  Internal Revenue Code.
              6)  To meet the minimum distribution requirements of the Internal
                  Revenue Code.
              7)  To make "substantially equal periodic payments" as described
                  in Section 72(t) of the Internal Revenue Code. 8) For loans to
                  participants or beneficiaries.
              9)  Separation from service.(8)
              10) Participant-directed redemptions to purchase shares of a
                  mutual fund (other than a fund managed by the Manager or a
                  subsidiary of the Manager) if the plan has made special
                  arrangements with the Distributor.
              11) Plan termination or "in-service distributions," if the
                  redemption proceeds are rolled over directly to an
                  OppenheimerFunds-sponsored IRA.
|_|           For distributions from 401(k) plans sponsored by broker-dealers
              that have entered into a special agreement with the Distributor
              allowing this waiver.
|_|      For distributions from retirement plans that have $10 million or more in plan assets and that have entered into a special
              agreement with the Distributor.
|_|           For distributions from retirement plans which are part of a
              retirement plan product or platform offered by certain banks,
              broker-dealers, financial advisors, insurance companies or record
              keepers which have entered into a special agreement with the
              Distributor.

III.                               Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds
---------------------------------------------------------------------------------------------------------------------------------------

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

A.   Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases: |_| Shares redeemed
involuntarily, as described in "Shareholder Account Rules and Policies," in the
applicable Prospectus. |_| Redemptions from accounts other than Retirement Plans
following the death or disability of the last surviving shareholder.
              The death or disability must have occurred after the account was
              established, and for disability you must provide evidence of a
              determination of disability by the Social Security Administration.
|_|           The contingent deferred sales charges are generally not waived
              following the death or disability of a grantor or trustee for a
              trust account. The contingent deferred sales charges will only be
              waived in the limited case of the death of the trustee of a
              grantor trust or revocable living trust for which the trustee is
              also the sole beneficiary. The death or disability must have
              occurred after the account was established, and for disability you
              must provide evidence of a determination of disability (as defined
              in the Internal Revenue Code).
|_|           Distributions from accounts for which the broker-dealer of record
              has entered into a special agreement with the Distributor allowing
              this waiver.
|_|           Redemptions of Class B shares held by Retirement Plans whose
              records are maintained on a daily valuation basis by Merrill Lynch
              or an independent record keeper under a contract with Merrill
              Lynch.
|_|           Redemptions of Class C shares of Oppenheimer U.S. Government Trust
              from accounts of clients of financial institutions that have
              entered into a special arrangement with the Distributor for this
              purpose.
|_|           Redemptions of Class C shares of an Oppenheimer fund in amounts of
              $1 million or more requested in writing by a Retirement Plan
              sponsor and submitted more than 12 months after the Retirement
              Plan's first purchase of Class C shares, if the redemption
              proceeds are invested to purchase Class N shares of one or more
              Oppenheimer funds.
|_|      Distributions(9) from Retirement Plans or other employee benefit plans for any of the following purposes:
              1)  Following the death or disability (as defined in the Internal Revenue Code) of the participant or beneficiary. The
                  death or disability must occur after the participant's account was established in an Oppenheimer fund.
              2)  To return excess contributions made to a participant's account.
              3)  To return contributions made due to a mistake of fact.
              4) To make hardship withdrawals, as defined in the plan.(10)
              5) To make distributions required under a Qualified Domestic
              Relations Order or, in the case of an IRA, a divorce or separation
              agreement described in Section 71(b) of the Internal Revenue Code.
              6) To meet the minimum distribution requirements of the Internal
              Revenue Code.
              7) To make "substantially equal periodic payments" as described in
              Section 72(t) of the Internal Revenue Code. 8) For loans to
              participants or beneficiaries.(11) 9) On account of the
              participant's separation from service.(12) 10)
              Participant-directed redemptions to purchase shares of a mutual
              fund (other than a fund managed by the Manager or a
                  subsidiary of the Manager) offered as an investment option in
                  a Retirement Plan if the plan has made special arrangements
                  with the Distributor.
              11) Distributions made on account of a plan termination or
                  "in-service" distributions, if the redemption proceeds are
                  rolled over directly to an OppenheimerFunds-sponsored IRA.
              12) For distributions from a participant's account under an
                  Automatic Withdrawal Plan after the participant reaches age 59
                  1/2, as long as the aggregate value of the distributions does
                  not exceed 10% of the account's value, adjusted annually.
              13) Redemptions of Class B shares under an Automatic Withdrawal
                  Plan for an account other than a Retirement Plan, if the
                  aggregate value of the redeemed shares does not exceed 10% of
                  the account's value, adjusted annually.
              14) For distributions from 401(k) plans sponsored by
                  broker-dealers that have entered into a special arrangement
                  with the Distributor allowing this waiver.
|_|           Redemptions of Class B shares or Class C shares under an Automatic
              Withdrawal Plan from an account other than a Retirement Plan if
              the aggregate value of the redeemed shares does not exceed 10% of
              the account's value annually.

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

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

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

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

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

|X| Waivers for Redemptions of Shares Purchased on or After March 6, 1995 but
Prior to November 24, 1995. In the following cases, the contingent deferred
sales charge will be waived for redemptions of Class A, Class B or Class C
shares of an Oppenheimer fund. The shares must have been acquired by the merger
of a Former Quest for Value Fund into the fund or by exchange from an
Oppenheimer fund that was a Former Quest For Value Fund or into which such
Former Quest for Value Fund merged. Those shares must have been purchased on or
after March 6, 1995, but prior to November 24, 1995:
o        redemptions following the death or disability of the shareholder(s) (as evidenced by a determination of total disability by
                  the U.S. Social Security Administration);
o                 withdrawals under an automatic withdrawal plan (but only for
                  Class B or Class C shares) where the annual withdrawals do not
                  exceed 10% of the initial value of the account value; adjusted
                  annually, and
o                 liquidation of a shareholder's account if the aggregate net
                  asset value of shares held in the account is less than the
                  required minimum account value.
         A shareholder's account will be credited with the amount of any
contingent deferred sales charge paid on the redemption of any Class A, Class B
or Class C shares of the Oppenheimer fund described in this section if the
proceeds are invested in the same Class of shares in that fund or another
Oppenheimer fund within 90 days after redemption.
V.        Special Sales Charge Arrangements for Shareholders of Certain Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
                                                         Investment Accounts, Inc.
-----------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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


Oppenheimer Developing Markets Fund

Internet Website:
         www.oppenheimerfunds.com

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

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

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

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

Independent Registered Public Accounting Firm
         KPMG LLP
         707 Seventeenth Street
         Denver, Colorado 80202

Legal Counsel
         Mayer, Brown, Rowe & Maw LLP
         1675 Broadway
         New York, New York 10019

1234

PX785.001.1205