SAI TOTAL RETURN FUND 485b 2002

EX-99 6 sai485b4202002.htm SAI - 485B TOTAL RETURN FUND SAI TOTAL RETURN FUND 485b 2002

Oppenheimer Total Return Fund, Inc.

6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048

Statement of Additional Information dated April 30, 2002

This Statement of Additional Information is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus dated April 30, 2002. It should be read
together with the Prospectus, which may be obtained 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 web site 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
Investment Restrictions.............................................................................. 22
How the Fund is Managed .................................................................................. 24
Organization and History............................................................................. 24
Directors and Officers............................................................................... 25
The Manager.......................................................................................... 30
Brokerage Policies of the Fund............................................................................ 32
Distribution and Service Plans............................................................................ 34
Performance of the Fund................................................................................... 37

About Your Account

How To Buy Shares......................................................................................... 41
How To Sell Shares........................................................................................ 50
How To Exchange Shares.................................................................................... 54
Dividends, Capital Gains and Taxes........................................................................ 57
Additional Information About the Fund..................................................................... 58

Financial Information About the Fund

Independent Auditors' Report.............................................................................. 60
Financial Statements...................................................................................... 61

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

A B O U T T H E F U N D

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

In selecting securities for the Fund's portfolio, the Manager evaluates the merits of 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
|_| the strength of an issuer's management and the history of its operations,
|_| the soundness of its financial and accounting policies and its financial condition,
|_| the issuer's pending product developments and developments by competitors,
|_| 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
|_| legislative proposals that might affect the issuer.

|X| Investments in Equity Securities. The Fund does not limit its investments in equity securities to
issuers having a market capitalization of a specified size or range, and therefore may invest in securities of
small-, mid- and large-capitalization issuers. At times, the Fund may focus its equity investments in securities
of one or more capitalization ranges, based upon the Manager's judgment of where the best market opportunities
are to seek the Fund's objective. At times, the market may favor or disfavor securities of issuers of a
particular capitalization range. Securities of small capitalization issuers may be subject to greater price
volatility in general than securities of larger companies. Therefore, if the Fund is focusing on, or has
substantial investments in, smaller capitalization companies at times of market volatility, the Fund's share
price may fluctuate more than that of funds focusing on larger capitalization issuers.

|_| 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 managers of the Fund look for growth companies with strong, capable management, sound financial and
accounting policies, successful product development and marketing and other factors.

|_| Value Investing. In using a value approach, the portfolio managers look for stock and other equity
securities that appear to be temporarily undervalued, by various measures, such as price/earnings ratios. This
approach is subject to change and may not necessarily be used in all cases. Value investing seeks stocks having
prices that are low in relation to their real worth or future prospects, in the hope that the Fund will realize
appreciation in the value of its holdings when other investors realize the intrinsic value of the stock.

Using value investing requires research as to the issuer's underlying financial condition and prospects.
Some of the measures used to identify these securities include, among others:

|_| Price/Earnings Ratio, which is the stock's price divided by its earnings per share. A stock having
a price/earnings ratio lower than its historical range, or lower than the market as a whole or that
of similar companies may offer attractive investment opportunities.
|_| Price/Book Value Ratio, which is the stock price divided by the book value of the company per
share. It measures the company's stock price in relation to its asset value.
|_| Dividend Yield, which is measured by dividing the annual dividend by the stock price per share.
|_| Valuation of Assets which compares the stock price to the value of the company's underlying assets,
including their projected value in the marketplace and liquidation value.

|_| Convertible Securities. Convertible securities are debt securities that are convertible into an
issuer's common stock. Convertible securities rank senior to common stock in a corporation's capital structure
and therefore are subject to less risk than common stock in case of the issuer's bankruptcy or liquidation.

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

While some convertible securities are a form of debt security, in certain cases the Manager regards them
more as "equity equivalents" or "equity substitutes" because of their conversion feature (allowing conversion
into common stock or other equity securities). In those cases, the rating assigned to the security has less
impact on the Manager's investment decision than in the case of non-convertible debt securities. Convertible
debt securities are subject to credit risks and interest rate risks described below in "Investments in Debt
Securities."

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

o 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,
o 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
o 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. 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.

|_| Preferred Stock. Preferred stock, unlike common stock, has a stated dividend rate payable from the
corporation's earnings. Preferred stock dividends may be cumulative or non-cumulative, participating, or auction
rate. "Cumulative" dividend provisions require all or a portion of prior unpaid dividends to be paid before
dividends can be paid to the issuer's common stock. "Participating" preferred stock may be entitled to a dividend
exceeding the stated dividend in certain cases.

If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price
of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as
provisions allowing the stock to be called or redeemed prior to its maturity, which can have a negative impact on
the stock's price when interest rates decline. Preferred stock generally has a preference over common stock on
the distribution of a corporation's assets in the event of liquidation of the corporation. The rights of
preferred stock on distribution of a corporation's assets in the event of a liquidation are generally subordinate
to the rights associated with a corporation's debt securities.

|X| Investments in Debt Securities. The Fund can invest in bonds, debentures and other debt securities
to seek income as part of its investment objective. When the Fund emphasizes investments for growth, it focuses
on equity securities, such as stocks, and it is not anticipated that significant amounts of the Fund's assets
will be invested in debt securities in that case. However, if market conditions suggest that debt securities may
offer better total return opportunities than stocks, or if the Manager determines to seek a higher amount of
current income to distribute to shareholders, the Manager may shift more of the Fund's investments into debt
securities.

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

Fluctuations in the market value of debt securities after the Fund buys them will not affect the
interest income payable on those securities (unless the coupon rate is a floating rate pegged to an index or
other measure) . However, those price fluctuations will be reflected in the valuations of the securities, and
therefore the Fund's net asset values will be affected by those fluctuations.

|_| Credit Risk. Credit risk relates to the ability of the issuer of a debt security to meet interest
or principal payments, or both, as they become due. In general, lower-grade, high-yield bonds are subject to
greater credit risk than lower-yielding, higher-quality bonds. The Fund's debt investments can include
investment-grade and non-investment-grade bonds (commonly referred to as "junk bonds"). In making investments in
debt securities, the Manager may rely to some extent on the ratings of ratings organizations or it may use its
own research to evaluate a security's credit-worthiness. Investment-grade bonds are bonds rated at least "Baa" by
Moody's Investors Service, Inc., or at least "BBB" by Standard & Poor's Ratings Service or Fitch, Inc., or that
have comparable ratings by another nationally-recognized rating organization. If the securities that the Fund
buys are unrated, to be considered part of the Fund's holdings of investment-grade securities, they must be
judged by the Manager to be of comparable quality to bonds rated as investment grade by a rating organization.

|_| Special Risks of Lower-Grade Securities. While it is not anticipated that the Fund will invest a
substantial portion of its assets in debt securities, the Fund can do so to seek current income. Because
lower-rated securities tend to offer higher yields than investment-grade securities, the Fund may invest in
lower-grade securities to try to achieve higher income (and, in some cases, the appreciation possibilities of
lower-grade securities may be a reason they are selected for the Fund's portfolio).

The Fund can invest without limit in "lower-grade" debt securities. However, the Fund does not currently
intend to invest a substantial amount of its assets in lower-grade debt securities. "Lower-grade" debt securities
are those rated below "investment grade." The Fund can invest in securities rated as low as "C" or "D" or which
are in default at the time the Fund buys them.

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

However, the Fund's current limitations on buying these investments may reduce the effect of those risks
to the Fund, as will the Fund's policy of diversifying its investments. Additionally, to the extent they can be
converted into stock, convertible securities may be less subject to some of these risks than non-convertible high
yield bonds, since stock may be more liquid and less affected by some of these risk factors.

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

|_| U.S. Government Securities. The Fund can buy securities issued or guaranteed by the U.S. Government
or its agencies and instrumentalities. Securities issued by the U.S. Treasury are backed by the full faith and
credit of the U.S. Government and are subject to very little credit risk. Obligations of U.S. Government agencies
or instrumentalities (including mortgage-backed securities) may or may not be guaranteed or supported by the
"full faith and credit" of the United States. Some are backed by the right of the issuer to borrow from the U.S.
Treasury; others, by discretionary authority of the U.S. government to purchase the agencies' obligations; while
others are supported only by the credit of the instrumentality. If a security is not backed by the full faith
and credit of the United States, the owner of the security must look principally to the agency issuing the
obligation for repayment and might not be able to assert a claim against the United States in the event that the
agency or instrumentality does not meet its commitment.

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

|_| Treasury Inflation-Protection Securities. The Fund can buy these U.S. Treasury securities, called
"TIPS," that are designed to provide an investment vehicle that is not vulnerable to inflation. The interest rate
paid by TIPS is fixed. The principal value rises or falls semi-annually based on changes in the published
Consumer Price Index. If inflation occurs, the principal and interest payments on TIPS are adjusted to protect
investors from inflationary loss. If deflation occurs, the principal and interest payments will be adjusted
downward, although the principal will not fall below its face amount at maturity.

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

|_| Real Estate Investment Trust (REITs). The Fund may invest in real estate investment trusts, as well
as real estate development companies and operating companies. It may also buy shares of companies engaged in
other real estate businesses. REITs are trusts that sell shares to investors and use the proceeds to invest in
real estate. A REIT may focus on a particular project, such as a shopping center or apartment complex, or may
buy many properties or properties located in a particular geographic region.

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

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

Other Investment Techniques and Strategies. In seeking its 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| Foreign Securities. The Fund may purchase equity and debt securities issued or guaranteed by
foreign companies or foreign governments or their agencies. "Foreign securities" include equity and debt
securities of companies organized under the laws of countries other than the United States and debt securities of
foreign governments. They may be traded on foreign securities exchanges or in the foreign over-the-counter
markets. The debt obligations of a foreign government and its agencies and instrumentalities may or may not be
supported by the full faith and credit of the foreign government.

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

Investing in foreign securities offers potential benefits not available from investing solely in
securities of domestic issuers. They include the opportunity to invest in foreign issuers that appear to offer
growth or income 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 securities 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 devaluation, 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, securities 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| Zero-Coupon Securities. The Fund may buy zero-coupon and delayed-interest securities and "stripped"
securities. Stripped securities are debt securities whose interest coupons are separated from the security and
sold separately. The Fund can buy the following types of zero-coupon or stripped securities, among other: U.S.
Treasury notes or bonds that have been stripped of their interest coupons, U.S. Treasury bills issued without
interest coupons, and certificates representing interests in stripped securities.

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

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

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

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

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 120 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 until it receives the security at settlement.

The Fund may engage in when-issued transactions to secure what the Manager considers to be an
advantageous price and yield at the time the Fund enters 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 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 assets at least equal in value to the value of the Fund's purchase
commitments until the Fund pays for the investment.

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

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

Participation interests are primarily dependent upon the creditworthiness of the borrowing corporation,
which is obligated to make payments of principal and interest on the loan. There is a risk that a borrower may
have difficulty making payments. If a borrower fails to pay scheduled interest or principal payments, the Fund
could experience a reduction in its income. The value of that participation interest might also decline, which
could affect the net asset value of the Fund's

shares. If the issuing financial institution fails to perform its obligations under the participation agreement,
the Fund might incur costs and delays in realizing payment and suffer a loss of principal and/or interest.

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

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

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

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.

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

The Fund can acquire restricted securities through private placements. Those securities have contractual
restrictions on their public resale. Those restrictions may make it more difficult to value them, and 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. The Fund can lend its portfolio securities to certain types of
eligible borrowers approved by the Board of Directors. It might do so to try to provide income or to raise cash
for liquidity purposes. These loans are limited to not more than 10% of the value of the Fund's net 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. The Fund presently does
not intend to lend its securities, but if it does so, it is not anticipated that loans will exceed 5% of the
Fund's total assets.

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

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

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

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

Other derivative investments the Fund can use include "debt exchangeable for common stock" of an issuer
or "equity-linked debt securities" of an issuer. At maturity, the debt security is exchanged for common stock of
the issuer or it is payable in an amount based on the price of the issuer's common stock at the time of maturity.

Both alternatives present a risk that the amount payable at maturity will be less than the principal amount of
the debt because the price of the issuer's common stock might not be as high as the Manager expected.

|X| Hedging. The Fund can use hedging 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. To do so, the Fund could:

|_| sell futures contracts,
|_| buy puts on futures or on securities, or
|_| 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 might 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:

|_| buy futures, or
|_| 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 called "stock index futures") (2) debt securities (these are referred to as "interest
rate futures"), (3) other broadly-based securities indices (these are referred to as "financial futures"), (4)
foreign currencies (these are referred to as "forward contracts"), or (5) commodities (these are referred to as
"commodity futures").

A broadly-based stock index is used as the basis for trading stock index futures. In some cases an index
may 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.

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

|_| Writing Covered Call Options. The Fund can write (that is, sell) 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 segregating liquid assets 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, it receives cash (a premium). In writing calls on a security, 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 also receives a premium. If the buyer of the call exercises
it, the Fund will pay an amount of cash equal to the difference between the closing price of the call and the
exercise price, multiplied by a specified multiple that determines the total value of the call for each point of
difference. If the value of the underlying investment does not rise above the call price, it is likely that the
call will lapse without being exercised. In that case the Fund would keep the cash premium.

The Fund's custodian 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
segregating an equivalent dollar amount of liquid assets on its books. The Fund will identify additional liquid
assets on its books to cover the call if the value of the identified assets drops below 100% of the current value
of the future. Because of this segregation requirement, in no circumstances would the Fund's receipt of an
exercise notice as to that future require the Fund to deliver a futures contract. It would simply put the Fund in
a short futures position, which is permitted by the Fund's hedging policies.

|_| Writing Put Options. The Fund can sell put options. 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 segregated to cover such put options.

If the Fund writes a put, the put must be covered by segregated liquid assets. 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 on its books liquid assets with a value equal to or greater than the exercise price of the
underlying securities. The Fund therefore forgoes the opportunity of investing the identified assets or writing
calls against those assets.

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

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

|_| Purchasing Calls and Puts. The Fund can purchase calls 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.

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

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

|_| Buying and Selling Options on Foreign Currencies. The Fund can buy and sell calls and puts on
foreign currencies. They include puts and calls that trade on a securities or commodities exchange or in the
over-the-counter markets or are quoted by major recognized dealers in such options. The Fund could use these
calls and puts to try to protect against declines in the dollar value of foreign securities and increases in the
dollar cost of foreign securities the Fund wants to acquire.
If the Manager anticipates a rise in the dollar value of a foreign currency in which securities to be
acquired are denominated, the increased cost of those securities may be partially offset by purchasing calls or
writing puts on that foreign currency. If the Manager anticipates a decline in the dollar value of a foreign
currency, the decline in the dollar value of portfolio securities denominated in that currency might be partially
offset by writing calls or purchasing puts on that foreign currency. However, the currency rates could fluctuate
in a direction adverse to the Fund's position. The Fund will then have incurred option premium payments and
transaction costs without a corresponding benefit.

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

The Fund could write a call on a foreign currency to provide a hedge against a decline in the U.S.
dollar value of a security which the Fund owns or has the right to acquire and which is denominated in the
currency underlying the option. That decline might be one that occurs due to an expected adverse change in the
exchange rate. This is known as a "cross-hedging" strategy. In those circumstances, the Fund covers the option
by identifying on its books liquid assets 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
may also use "cross-hedging" where the Fund hedges against changes in currencies other than the currency in which
a security it holds is denominated.

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

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

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

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

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

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

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

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

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

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

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

|_| 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.

|X| Temporary Defensive Investments. The Fund's temporary defensive investments can include (i)
obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities; (ii) commercial paper
rated in the highest category by an established rating organization; (iii) certificates of deposit or bankers'
acceptances of domestic banks with assets of $1 billion or more; (iv) any of the foregoing securities that mature
in one year or less (generally known as "cash equivalents"); (v) other short-term corporate debt obligations; and
(vi) repurchase agreements.

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:

|_| 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
|_| 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 Directors can change non-fundamental policies without shareholder approval. However, significant changes to
investment policies will be described in supplements or updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Fund's most significant investment policies are described in the Prospectus.

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

|_| The Fund cannot buy securities issued or guaranteed by any one issuer if more than 5% of its total
assets would be invested in securities 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 by the U.S. government or any of its agencies or instrumentalities or securities of other
investment companies.

|_| The Fund cannot make loans except (a) through lending of securities, (b) through the purchase of
debt instruments or similar evidence of indebtedness, (c) through an inter-fund lending program with other
affiliated funds and (d) through repurchase agreements.

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.

|_| The Fund cannot borrow money in excess of 33 1/3% of the value of its total assets. The Fund may
borrow only from banks and/or affiliated investment companies. With respect to this fundamental policy, the Fund
can borrow only if it maintains a 300% ratio of assets to borrowings at all times in the manner set forth in the
Investment Company Act of 1940.

|_| The Fund cannot invest in real estate or in interests in real estate. However, the Fund can
purchase securities of issuers holding real estate or interests in real estate.

|_| The Fund cannot invest in physical commodities or physical commodity contracts.

However, the Fund can buy and sell any of the hedging instruments permitted by any of its other policies. It can
also buy and sell options, futures, securities or other instruments backed by physical commodities or whose
investment return is linked to changes in the price of physical commodities.

|_| 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.

|_| The Fund cannot issue "senior securities." This restriction does not prohibit the Fund from
borrowing money as described in the Prospectus or this Statement of Additional Information. It does not prohibit
the Fund from entering into margin, collateral, segregation or escrow arrangements, or options, futures, hedging
transactions or from buying and selling other investments permitted by its other investment policies.

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

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management investment company that was organized
in 1944. Since 1979 the Fund has been a Maryland corporation.

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

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

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

|X| Meetings of Shareholders. Although the Fund is not required by Maryland law to hold annual meetings,
it may hold shareholder meetings from time to time on important matters. The shareholders of the Fund's parent
corporation have the right to call a meeting to remove a Director or to take certain other action described in
the Articles of Incorporation or under Maryland law.

The Fund will hold meetings when required to do so by the Investment Company Act or other applicable
law. The Fund will hold a meeting when the Directors call a meeting or upon proper request of shareholders. If
the Fund's parent corporation receives a written request of the record holders of at least 25% of the outstanding
shares eligible to be voted at a meeting to call a meeting for a specified purpose (which might include the
removal of a Director), the Directors will call a meeting of shareholders for that specified purpose. The Fund's
parent corporation has undertaken that it will then either give the applicants access to the Fund's shareholder
list or mail the applicants' communication to all other shareholders at the applicants' expense.

Board of Directors

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

The Board of Directors has an Audit Committee and a Review Committee. The members of the Audit
Committee are Edward L. Cameron (Chairman), C. Howard Kast and F. William Marshall. The Audit Committee held six
meetings during the fiscal year ended December 31, 2001. The Audit Committee furnishes the Board with
recommendations regarding the selection of the Fund's independent auditors. Other main functions of the Audit
Committee include, but are not limited to: (i) reviewing the scope and results of audits and the audit fees
charged; (ii) reviewing reports from the Fund's independent auditors regarding the Fund's internal accounting
procedures and controls; and (iii) establishing a separate line of communication between the Fund's independent
auditors and its independent Directors.

The Audit Committee's functions include selecting and nominating to the full Board, Independent nominees
for election as Independent Directors. The Audit Committee may, but need not consider the advice and
recommendation of the Manager and its affiliates in selecting nominees. The full Board elects new Directors
except for those instances when a shareholder vote is required. To date, the Audit Committee has been able to
identify from its own resources an ample number of qualified candidates. Nonetheless, shareholders may submit
names of individuals, accompanied by complete and properly supported resumes, for the Audit Committee's
consideration by mailing such information to the Committee in care of the Fund. The Committee may consider such
persons at such time as it meets to consider possible nominees. The Committee, however, reserves sole discretion
to determine the candidates to present to the Board and/or shareholders and when it meets for the purpose of
considering potential nominees.

The members of the Review Committee are Jon S. Fossel (Chairman), Sam Freedman, William L. Armstrong,
Robert G. Avis and George C. Bowen. The Review Committee held six meetings during the fiscal year ended December
31, 2001. Among other functions, the Review Committee reviews reports and makes recommendations to the Board
concerning the fees paid to the Fund's transfer agent and the services provided to the Fund by the transfer
agent. The Review Committee also reviews the Fund's investment performance and policies and procedures adopted
by the Fund to comply with Investment Company Act of 1940 and other applicable law.

Directors and Officers of the Fund. The Fund's Directors and officers and their positions held with the Fund and
length of service in such position(s) and their principal occupations and business affiliations during the past
five years are listed below. Each of the Directors, except Mr. Murphy, is an "Independent Director," as defined
in the Investment Company Act. Mr. Murphy is an "Interested Director," because he is affiliated with the Manager
by virtue of his positions as an officer and director of the Manager, and as a shareholder of its parent
company. Mr. Murphy was elected as a Director of the Fund with the understanding that in the event he ceases to
be the chief executive officer of the Manager, he will resign as a director of the Fund and the other Board II
Funds for which he is a trustee or director. The information for the Directors also includes the dollar range of
shares of the Fund as well as the aggregate dollar range of shares of the Board II Funds beneficially owned by
the Director. All information is as of December 31, 2001. All of the Directors are also trustees or directors of
the following Oppenheimer funds1 (referred to as "Board II Funds"):

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

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

Mr. Swain has reported that he sold a residential property to Mr. Freedman on October 23, 2001 for $1.2
million. An independent appraisal of the property supported the sale price.

Independent Directors and Officer

--------------------------- ----------------------------------------------------------- -------------- ----------------
Aggregate
Dollar Range
Name, Address, 2 Age, Dollar Range of Shares
Position(s) Held with Principal Occupation(s) During Past 5 Years /Other of Shares Owned in any
Fund and Length of Time Directorships Held by Director/Number of Portfolios in Owned in the of the Board
Served3 Fund Complex Overseen by Director Fund II Funds
--------------------------- ----------------------------------------------------------- -------------- ----------------
--------------------------- ----------------------------------------------------------- -------------- ----------------
James C. Swain, Chairman, Formerly Vice Chairman of the Manager (until January 2, $0 Over $100,000
Chief Executive Officer 2002) and President and a director of Centennial Asset
and Director, since 1969 Management Corporation (the Fund's Distributor) (until
Age: 68 1997). Oversees 41 portfolios in the OppenheimerFunds
complex.
--------------------------- ----------------------------------------------------------- -------------- ----------------
--------------------------- ----------------------------------------------------------- -------------- ----------------
William L. Armstrong, Chairman of the following private mortgage banking
Director since 1999 companies: Cherry Creek Mortgage Company (since 1991),
Age: 65 Centennial State Mortgage Company (since 1994), The El
Paso Mortgage Company (since 1993), Transland Financial
Services, Inc. (since 1997); Chairman of the following
private companies: Great Frontier Insurance (insurance
agency) (since 1995) and Ambassador Media Corporation
(since 1984); a director of the following public
companies: Storage Technology Corporation (computer
equipment company) (since 1991), Helmerich & Payne, Inc. $50,001-
(oil and gas drilling/production company) (since 1992), $0 $100,000
UNUMProvident (insurance company) (since 1991). Formerly
Director of International Family Entertainment
(television channel) (1992 - 1997) and Natec Resources,
Inc. (air pollution control equipment and services
company) (1991-1995), Frontier Real Estate, Inc.
(residential real estate brokerage) (1994-1999), and
Frontier Title (title insurance agency) (1995-June 1999);
a U.S. Senator (January 1979-January 1991). Oversees 40
portfolios in the OppenheimerFunds complex.
--------------------------- ----------------------------------------------------------- -------------- ----------------
--------------------------- ----------------------------------------------------------- -------------- ----------------
Robert G. Avis, Director Formerly Mr. Avis held the following positions: Director
since 1993 and President of A.G. Edwards Capital, Inc. (General
Age: 70 Partner of private equity funds) (until February 2001);
Chairman, President and Chief Executive Officer of A.G.
Edwards Capital, Inc. (until March 2000); Vice Chairman
and Director of A.G. Edwards, Inc. and Vice Chairman of
A.G. Edwards & Sons, Inc. (its brokerage company $0 $1 - $10,000
subsidiary) (until - March 1999); Chairman of A.G.
Edwards Trust Company and A.G.E. Asset Management
(investment advisor) (until - March 1999); and a Director
of A.G. Edwards & Sons and A.G. Edwards Trust Company
(until - March 2000). Oversees 41 portfolios in the
OppenheimerFunds complex.
--------------------------- ----------------------------------------------------------- -------------- ----------------
--------------------------- ----------------------------------------------------------- -------------- ----------------
George C. Bowen, Director Formerly (until April 1999) Mr. Bowen held the following
since 1997 positions: Senior Vice President (from September 1987)
Age: 65 and Treasurer (from March 1985) of the Manager; Vice
President (from June 1983) and Treasurer (since March
1985) of OppenheimerFunds Distributor, Inc., the Fund's
Sub-Distributor; Senior Vice President (since February
1992), Treasurer (since July 1991) Assistant Secretary
and a director (since December 1991) of the Manager; Vice
President (since October 1989) and Treasurer (since April
1986) of HarbourView Asset Management Corporation an
investment advisory subsidiary of the Manager; President,
Treasurer and a director of Centennial Capital
Corporation (June 1989 - January 1990), an investment
advisory subsidiary of the Manager; Vice President and
Treasurer (since August 1978) and Secretary (since April
1981) of Shareholder Services, Inc., a transfer agent
subsidiary of the Manager; Vice President, Treasurer and $10,001 - Over $100,000
Secretary of Shareholder Financial Services, Inc. (since $50,000
November 1989), a transfer agent subsidiary of the
Manager; Assistant Treasurer of Oppenheimer Acquisition
Corp. (since March 1998), the Manager's parent
corporation; Treasurer of Oppenheimer Partnership
Holdings, Inc. (since November 1989), a holding company
subsidiary of the Manager; Vice President and Treasurer
of Oppenheimer Real Asset Management, Inc. (since July
1996), an investment advisory subsidiary of the Manager;
Chief Executive Officer and director of MultiSource
Services, Inc., a broker-dealer subsidiary of the Manager
(since March 1996); Treasurer of OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc
(since October 1997), offshore fund management
subsidiaries of the Manager. Oversees 36 portfolios in
the OppenheimerFunds complex.
--------------------------- ----------------------------------------------------------- -------------- ----------------
--------------------------- ----------------------------------------------------------- -------------- ----------------
Edward L. Cameron, Director of Genetic ID, Inc. and its subsidiaries, a
Director since 1999 privately held biotech company (since March 2001); a
Age: 63 member of The Life Guard of Mount Vernon, George
Washington's home (since June 2000). Formerly a partner
with PricewaterhouseCoopers LLP (an accounting firm) $0 Over $100,000
(from 1974-1999) and Chairman, Price Waterhouse LLP
Global Investment Management Industry Services Group
(from 1994-1998). Oversees 36 portfolios in the
OppenheimerFunds complex.
--------------------------- ----------------------------------------------------------- -------------- ----------------
--------------------------- ----------------------------------------------------------- -------------- ----------------
Jon S. Fossel, Chairman and Director of Rocky Mountain Elk Foundation, a
Director since 1990 not-for-profit foundation (since 1998); and a director of
Age: 60 P.R. Pharmaceuticals, a privately held company (since
October 1999). Formerly Mr. Fossel held the following
positions: Chairman and a director (until October 1996)
and President and Chief Executive Officer (until October $0 Over $100,000
1995) of the Manager; President, Chief Executive Officer
and a director of Oppenheimer Acquisition Corp.,
Shareholder Services, Inc. and Shareholder Financial
Services, Inc. (until October 1995). Oversees 40
portfolios in the OppenheimerFunds complex.
--------------------------- ----------------------------------------------------------- -------------- ----------------
--------------------------- ----------------------------------------------------------- -------------- ----------------
Sam Freedman, Formerly (until October 1994) Mr. Freedman held the
Director since 1996 following positions: Chairman and Chief Executive Officer
Age: 61 of OppenheimerFunds Services (from August 1980);
Chairman, Chief Executive Officer and a director of
Shareholder Services, Inc. (from August 1980); Chairman,
Chief Executive Officer and director of Shareholder $50,001 - Over $100,000
Financial Services, Inc. (from November 1989); Vice $100,000
President and director of Oppenheimer Acquisition Corp.
(from October 1990) and a director of the Manager (from
October 1990). Oversees 41 portfolios in the
OppenheimerFunds complex.
--------------------------- ----------------------------------------------------------- -------------- ----------------
--------------------------- ----------------------------------------------------------- -------------- ----------------
C. Howard Kast, Formerly (until June 1984) Managing Partner of Deloitte,
Director since 1987 Haskins & Sells (an accounting firm). Oversees 41 $0 Over $100,000
Age: 80 portfolios in the OppenheimerFunds complex.
--------------------------- ----------------------------------------------------------- -------------- ----------------
--------------------------- ----------------------------------------------------------- -------------- ----------------
Robert M. Kirchner, President (since 1977) of The Kirchner Company
Director since 1963 (management consultants); Director of Andrisen Marten Co
Age: 80 (a privately held men's clothing company). Oversees 41 Over $100,000 Over $100,000
portfolios in the OppenheimerFunds complex.
--------------------------- ----------------------------------------------------------- -------------- ----------------
--------------------------- ----------------------------------------------------------- -------------- ----------------
F. William Marshall, Jr., Trustee (since 1996) of MassMutual Institutional Funds $0 Over $100,000
Director since 2000 and of MML Series Investment Fund (open-end investment
Age: 59 companies). Formerly Chairman of SIS & Family Bank,
F.S.B. (formerly SIS Bank) (January 1999 - July 1999);
President, Chief Executive Officer and Director of SIS
Bankcorp., Inc. and SIS Bank (formerly Springfield
Institution for Savings) (May 1993 - December 1998);
Executive Vice President of Peoples Heritage Financial
Group, Inc. (January 1999 - July 1999); Chairman and
Chief Executive Office of Bank of Ireland First Holdings,
Inc. and First New Hampshire Banks (June 1990 - May
1993). Oversees 36 portfolios in the OppenheimerFunds
complex.
--------------------------- ----------------------------------------------------------- -------------- ----------------

Interested Director and Officer

-------------------------- ------------------------------------------------------------- ------------- ----------------
Name, Address,4 Age, Principal Occupation(s) During Past 5 Years / Other Dollar Aggregate
Dollar Range
of Shares
Range of Owned in any
Position(s) Held with Shares of the
Fund and Length of Time Directorships Held by Director/Number of Portfolios in Fund Owned in Oppenheimer
Served5 Complex Overseen by Director the Fund Funds6
-------------------------- ------------------------------------------------------------- ------------- ----------------
-------------------------- ------------------------------------------------------------- ------------- ----------------
John V. Murphy, Chairman, Chief Executive Officer and director (since June
President and Director 2001) and President (since September 2000) of the Manager;
Director since October President and a director or trustee of other Oppenheimer $0 Over $100,000
2001 funds; President and a director (since July 2001) of
Age: 52 Oppenheimer Acquisition Corp. and of Oppenheimer
Partnership Holdings, Inc.; a director (since November
2001) of OppenheimerFunds Distributor, Inc.; Chairman and a
director (since July 2001) of Shareholder Services, Inc.
and of Shareholder Financial Services, Inc.; President and
a director (since July 2001) of OppenheimerFunds Legacy
Program, a charitable trust program established by the
Manager; a director of the following investment advisory
subsidiaries of OFI: OAM Institutional, Inc. and Centennial
Asset Management Corporation (since November 2001),
HarbourView Asset Management Corporation and OFI Private
Investments, Inc. (since July 2001); President (since
November 1, 2001) and a director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; a director (since
November 2001) of Trinity Investment Management Corp. and
Tremont Advisers, Inc., investment advisory affiliates of
the Manager; Executive Vice President (since February 1997)
of Massachusetts Mutual Life Insurance Company, the
Manager's parent company; a director (since June 1995) of
DBL Acquisition Corporation; formerly, Chief Operating
Officer (from September 2000 to June 2001) of the Manager;
President and trustee (from November 1999 to November 2001)
of MML Series Investment Fund and MassMutual Institutional
Funds, open-end investment companies; a director (from
September 1999 to August 2000) of C.M. Life Insurance
Company; President, Chief Executive Officer and director
(from September 1999 to August 2000) of MML Bay State Life
Insurance Company; a director (from June 1989 to June 1998)
of Emerald Isle Bancorp and Hibernia Savings Bank, a
wholly-owned subsidiary of Emerald Isle Bancorp. Oversees
63 portfolios in the OppenheimerFunds complex.
-------------------------- ------------------------------------------------------------- ------------- ----------------

Officers of the Fund

------------------------------------------------ ---------------------------------------------------------------------
Name, Address,7 Age, Position(s) Held with Principal Occupation(s) During Past 5 Years
Fund and Length of Time Served8
------------------------------------------------ ---------------------------------------------------------------------
------------------------------------------------ ---------------------------------------------------------------------
Bruce Bartlett, Vice President and Portfolio Senior Vice President (since January 1999) of the Manager; an
Manager officer and portfolio manager of other Oppenheimer funds. Prior to
Age: 51 joining the Manager in April, 1995, he was a Vice President and
Senior Portfolio Manager at First of America Investment Corp.
(September 1986 - April 1995).
------------------------------------------------ ---------------------------------------------------------------------
------------------------------------------------ ---------------------------------------------------------------------
Christopher Leavy, Vice President and Senior Vice President (since September 2000) of the Manager; prior
Portfolio Manager to joining the Manager in September 2000, he was a portfolio
Age: 30 manager of Morgan Stanley Dean Witter Investment Management (from
1997) prior to which he was a portfolio manager and equity analyst
of Crestar Asset Management (from 1995).
------------------------------------------------ ---------------------------------------------------------------------
------------------------------------------------ ---------------------------------------------------------------------
Brian W. Wixted, Treasurer, Principal Senior Vice President and Treasurer (since March 1999) of the
Financial and Accounting Officer since April Manager; Treasurer (since March 1999) of HarbourView Asset
1999 Management Corporation, Shareholder Services, Inc., Oppenheimer
Age: 42 Real Asset Management Corporation, Shareholder Financial Services,
Inc., Oppenheimer Partnership Holdings, Inc., OFI Private
Investments, Inc. (since March 2000), OppenheimerFunds
International Ltd. and Oppenheimer Millennium Funds plc (since May
2000), offshore fund management subsidiaries of the Manager, and
OAM Institutional, Inc. (since November 2000), an investment
advisory subsidiary of the Manager; Treasurer and Chief Financial
Officer (since May 2000) of Oppenheimer Trust Company, a trust
company subsidiary of the Manager; Assistant Treasurer (since March
1999) of Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy
Program (since April 2000); an officer of other Oppenheimer funds;
formerly Principal and Chief Operating Officer, Bankers Trust
Company - Mutual Fund Services Division (March 1995 - March 1999).
------------------------------------------------ ---------------------------------------------------------------------
------------------------------------------------ ---------------------------------------------------------------------
Robert G. Zack, Vice President and Secretary Senior Vice President (since May 1985) and General Counsel (since
(since November 1, 2001) February 2002) of the Manager; Assistant Secretary of Shareholder
Age: 53 Services, Inc. (since May 1985), Shareholder Financial Services,
Inc. (since November 1989); OppenheimerFunds International Ltd. and
Oppenheimer Millennium Funds plc (since October 1997); an officer
of other Oppenheimer funds; formerly, Acting General Counsel
(November 2001-February 2002) and Associate General Counsel (1984 -
October 2001)
------------------------------------------------ ---------------------------------------------------------------------
------------------------------------------------ ---------------------------------------------------------------------
Denis R. Molleur, Assistant Secretary (since Vice President and Senior Counsel of the Manager (since July 1999);
November 1, 2001) an officer of other Oppenheimer funds; formerly a Vice President
Age: 44 and Associate Counsel of the Manager (September 1995 - July 1999).
------------------------------------------------ ---------------------------------------------------------------------
------------------------------------------------ ---------------------------------------------------------------------
Katherine P. Feld, Assistant Secretary (since Vice President and Senior Counsel of the Manager (since July 1999);
November 1, 2001) an officer of other Oppenheimer funds; formerly a Vice President
Age: 43 and Associate Counsel of the Manager (June 1990 - July 1999).
------------------------------------------------ ---------------------------------------------------------------------
------------------------------------------------ ---------------------------------------------------------------------
Kathleen T. Ives, Assistant Secretary (since Vice President and Assistant Counsel of the Manager (since June
November 1, 2001) 1998); an officer of other Oppenheimer funds; formerly an Assistant
Age: 36 Vice President and Assistant Counsel of the Manager (August 1997 -
June 1998); and Assistant Counsel of the Manager (August
1994-August 1997).
------------------------------------------------ ---------------------------------------------------------------------

|X| Remuneration of Directors. The officers of the Fund and one Director of the Fund (Mr. Murphy) are
affiliated with the Manager and receive no salary or fee from the Fund. The remaining Directors of the Fund
received the compensation shown below. The compensation from the Fund was paid during its fiscal year ended
December 31, 2001. The compensation from all of the Board II funds includes the compensation from the Fund and
represents compensation received as a director, trustee, managing general partner or member of a committee of the
Board during the calendar year 2001. Mr. Swain was affiliated with the Manager until January 2, 2002.

-------------------------------------- ----------------------------------- ---------------------------------------
Director's Name and Other Positions Aggregate Compensation Total Compensation
from Board II
from Fund1 Funds (40 funds)2
-------------------------------------- ----------------------------------- ---------------------------------------
-------------------------------------- ----------------------------------- ---------------------------------------

William L. Armstrong $3,141 $78,865
Review Committee Member

Robert G. Avis $3,165 $79,452

Review Committee Member
-------------------------------------- ----------------------------------- ---------------------------------------
-------------------------------------- ----------------------------------- ---------------------------------------

George C. Bowen
Review Committee Member $3,025 $75,936

Edward L. Cameron
Audit Committee Chairman $3,019 $75,794

Jon S. Fossel
Review Committee Chairman $3,353 $84,177

Sam Freedman $3,322 $83,402
Review Committee Member

C. Howard Kast $3,483 $87,452
Audit Committee Member

Robert M. Kirchner $3,165 $79,452

F. William Marshall, Jr. $2,785 $69,922

Audit Committee Member
-------------------------------------- ----------------------------------- ---------------------------------------

1. For the Fund's fiscal year ended December 31, 2001. Aggregate compensation includes fees and deferred
compensation, if any, accrued for a Director.
2. For the 2001 calendar year.

|X| Deferred Compensation Plan for Directors. The Board of Directors has adopted a Deferred Compensation
Plan for Independent Directors that enables them to elect to defer receipt of all or a portion of the annual fees
they are entitled to receive from the Fund. Under the plan, the compensation deferred by a Director is
periodically adjusted as though an equivalent amount had been invested in shares of one or more Oppenheimer funds
selected by the Director. The amount paid to the Director under the plan will be determined based upon the
performance of the selected funds. As of December 31, 2001 none of the Independent Directors has elected to
participate.

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

|X| Major Shareholders. As of April 1, 2002, the only persons 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 the following:

RPSS TR, Roossien Masonry Inc., 401(k) Plan, Attn.: James Vandyken, 3388 Busch Drive SW, Grandville,
Michigan 49418-1095 which owned 61,010.168 Class N shares (representing 16.10% of the Class N shares
then outstanding);

RPSS TR, Marcotte Ford Sales Inc. 401k Plan, Attn.: Mary McDonald, 1025 Main Street, Holyoke,
Massachusetts 01040-5343 which owned 33,245.527 Class N shares (representing 8.77% of the Class N shares
then outstanding);

Reliance Trust Co. Cust., FBO Independent GRP Home, Living Program Ret. Plan, P.O. Box 48449, Atlanta,
Georgia 30362-1449 which owned 33,245.061 Class N shares (representing 8.76% of the Class N shares then
outstanding);

RPSS TR, Compass Medical PC, 401k/PSP, Attn.: Laura Sebastyn, 500 Belmont Street, Suite 150, Brockton,
Massachusetts 02301-4953 which owned 29,337,704 Class N shares (representing 7.74% of the Class N shares
then outstanding);

RPSS TR Rollover IRA, FBO John B. Schamel, P.O. Box 250, Chemung, NY 14825 which owned 19,520.133 Class
N shares (representing 5.15% of the Class N shares then outstanding);

Massachusetts Mutual Life Insurance Co., Separate Investment Account, Attn.: Monica Margeson N-328, 1295
State Street, Springfield, Massachusetts 01111-0001 which owned 4,205,577.135 Class Y shares
(representing 88.27% of the Class Y shares then outstanding);

Persumma Financial Services, Massachusetts Mutual Financial Group, 1295 State Street #N328, Springfield,
Massachusetts 01111-0001 which owned 370,269.541 Class Y shares (representing 7.77% of the Class Y
shares then outstanding).

The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding company controlled by
Massachusetts Mutual Life Insurance Company.

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

The Code of Ethics is an exhibit to the Fund's registration statement filed with the Securities and
Exchange Commission and can be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. You
can obtain information about the hours of operation of the Public Reference Room by calling the SEC at
1-202-942-8090. The Code of Ethics can also be viewed as part of the Fund's registration statement on the SEC's
EDGAR database at the SEC's Internet web site at WWW.SEC.GOV. Copies may be obtained, after paying a duplicating
-----------
fee, by electronic request at the following e-mail address: PUBLICINFO@SEC.GOV., or by writing to the SEC's
-------------------
Public Reference Section, Washington, D.C. 20549-0102.

|X| The Investment Advisory Agreement. The Manager provides investment advisory and management services
to the Fund under an investment advisory agreement between the Manager and the Fund. The Manager selects
securities for the Fund's portfolio and handles its day-to-day business. The portfolio managers of the Fund are
employed by the Manager and are the persons who are principally responsible for the day-to-day management of the
Fund's portfolio. Other members of the Manager's Equity and Fixed-Income Portfolio Departments 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 Directors, 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.

---------------------------------------- ---------------------------------------------------------------------------
Fiscal Year ended 12/31: Management Fees Paid to OppenheimerFunds, Inc.
---------------------------------------- ---------------------------------------------------------------------------
---------------------------------------- ---------------------------------------------------------------------------
1999 $21,073,662
---------------------------------------- ---------------------------------------------------------------------------
---------------------------------------- ---------------------------------------------------------------------------

2000 $23,262,457

The investment advisory agreement states that provided the Manager acted with due care and in good
faith, and 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.

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

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

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

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

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

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

Brokerage Policies of the Fund

Brokerage Provisions of the Investment Advisory Agreement. One of the duties of the Manager under the investment
advisory agreement is to arrange the portfolio transactions for the Fund. The advisory agreement contains
provisions relating to the employment of broker-dealers to effect the Fund's portfolio transactions. The Manager
is authorized by the advisory agreement to employ broker-dealers, including "affiliated" brokers, as that term is
defined in the Investment Company Act. The Manager may employ broker-dealers that the Manager thinks, in its best
judgment based on all relevant factors, will implement the policy of the Fund to obtain, at reasonable expense,
the "best execution" of 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 Directors.

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

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

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

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

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

The investment advisory agreement permits the Manager to allocate brokerage for research services. The
research services provided by a particular broker may be useful only to one or more of the advisory accounts of
the Manager and its affiliates. The investment research received for the commissions of those other accounts may
be useful both to the 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 Directors 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 Directors permits the Manager to use
concessions on fixed-price offerings to obtain research, in the same manner as is permitted for agency
transactions.

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

--------------------------------------- ---------------------------------------------------------------------------
Fiscal Year Ended 12/31: Total Brokerage Commissions Paid by the Fund1
--------------------------------------- ---------------------------------------------------------------------------
--------------------------------------- ---------------------------------------------------------------------------
1999 $2,635,816
--------------------------------------- ---------------------------------------------------------------------------
--------------------------------------- ---------------------------------------------------------------------------

2000 $5,706,728

1. Amounts do not include spreads or concessions on principal transactions on a net trade basis.
During the fiscal year ended 12/31/01, the amount of transactions directed to brokers for research services was
$1,791,062,389 and the amount of the commissions paid to broker-dealers for those services was $2,626,376.

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 different classes of shares of the Fund. 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. Expenses normally attributable to sales are borne by the Distributor.

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

-------------- ------------------ ------------------
Fiscal Year Aggregate Class A
Front-End Sales Front-End Sales
Charges on Class Charges Retained
Ended 12/31: A Shares by Distributor
-------------- ------------------ ------------------
-------------- ------------------ ------------------
1999 $3,586,666 $1,235,6531
-------------- ------------------ ------------------
-------------- ------------------ ------------------

2000 $4,165,200 $1,462,3801

-------------- ------------------ ------------------
-------------- ------------------ ------------------
2001 $2,368,023 $814,8641
-------------- ------------------ ------------------
1. Included amounts retained by a broker-dealer that is an affiliate or a parent of the Distributor.

-------------- ------------------- -------------------- ------------------- -------------------
Fiscal Year Concessions on Concessions on Concessions on Concessions on
Class A Shares Class B Shares Class C Shares Class N Shares
Advanced by Advanced by Advanced by Advanced by
Ended 12/31: Distributor1 Distributor1 Distributor1 Distributor1
-------------- ------------------- -------------------- ------------------- -------------------
-------------- ------------------- -------------------- ------------------- -------------------
1999 $101,858 $4,474,217 $223,694 N/A
-------------- ------------------- -------------------- ------------------- -------------------
-------------- ------------------- -------------------- ------------------- -------------------
2000 $230,496 $5,467,394 $415,565 N/A
-------------- ------------------- -------------------- ------------------- -------------------
-------------- ------------------- -------------------- ------------------- -------------------
2001 $135,377 $2,511,141 $165,947 $13,8552
-------------- ------------------- -------------------- ------------------- -------------------
1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for
sales of Class B, Class C and Class N shares from its own resources at the time of sale.
2. The inception date of Class N shares was March 1, 2001.

--------------- ----------------------- ----------------------- ------------------------ -----------------------
Fiscal Year Class A Contingent Class B Contingent Class C Contingent Class N Contingent
Deferred Sales Deferred Sales Deferred Sales
Ended 12/31 Charges Retained by Charges Retained by Deferred Sales Charges Charges Retained by
Distributor Distributor Retained by Distributor Distributor
--------------- ----------------------- ----------------------- ------------------------ -----------------------
--------------- ----------------------- ----------------------- ------------------------ -----------------------
2001 $18,737 $1,087,714 $31,088 $0
--------------- ----------------------- ----------------------- ------------------------ -----------------------

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 Directors, including a majority of the Independent
Directors9, 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 from time to time from their own
resources to brokers, dealers or other financial institutions including affiliates for distribution and
administrative services they perform, at no direct cost to the Fund to make those payments. The Manager may use
its profits from the advisory fee it receives from the Fund. In their sole discretion, the Distributor and the
Manager may increase or decrease the amount of payments they make from their own resources to plan recipients.

Unless a plan is terminated as described below, the plan continues in effect from year to year but only
if the Fund's Board of Directors and its Independent Directors 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 Directors
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 Directors and the Independent Directors must approve all material amendments to a plan. An
amendment to increase materially the amount of payments to be made under a plan must be approved by shareholders
of the class affected by the amendment. Because Class B shares of the Fund automatically convert into Class A
shares after six years, the Fund must obtain the approval of both Class A and Class B shareholders for a proposed
material amendment to the Class A plan that would materially increase payments under the plan. That approval
must be by a "majority" (as defined in the Investment Company Act) of the shares of each class, voting separately
by class.

While the plans are in effect, the Treasurer of the Fund shall provide separate written reports on the
plans to the Board of Directors 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 Directors.

Each plan states that while it is in effect, the selection and nomination of those Directors of the Fund
who are not "interested persons" of the Fund is committed to the discretion of the Independent Directors. 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 Directors.

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

|X| Class A Service Plan Fees. Under the Class A service plan, the Distributor currently uses the fees
it receives from the Fund to pay brokers, dealers and other financial institutions (they are referred to as
"recipients") for personal services and account maintenance services they provide for their customers who hold
Class A shares. The services include, among others, answering customer inquiries about the Fund, assisting in
establishing and maintaining accounts in the Fund, making the Fund's investment plans available and providing
other services at the request of the Fund or the Distributor. While the plan permits the Board to authorize
payments to the Distributor to reimburse itself for services under the plan, the Board has not yet done so. The
Distributor makes payments to plan recipients quarterly at an annual rate not to exceed 0.25% of the average
annual net assets consisting of Class A shares held in the accounts of the recipients or their customers.

For the fiscal year ended December 31, 2001 payments under the Class A Plan totaled $5,874,198, all of
which was paid by the Distributor to recipients. That included $463,144 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal
year cannot be recovered in subsequent years. The Distributor may not use payments received under the Class A
Plan to pay any of its interest expenses, carrying charges, or other financial costs, or allocation of overhead.

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

The Class B, Class C and Class N Plans permit the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a quarterly basis, without payment in
advance. However, the Distributor currently intends to pay the service fee to recipients in advance for the first
year after the shares are purchased. After the first year shares are outstanding, the Distributor makes service
fee payments quarterly on those shares. 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.

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 increases Class N expenses by 0.50% of the net assets per year of the
respective class.

The Distributor retains the asset-based sales charge on Class B and Class N shares. The Distributor
retains the asset-based sales charge on Class C shares during the first year the shares are outstanding. It pays
the asset-based sales charge as an ongoing commission 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 on Class C shares to the dealer quarterly in lieu of
paying the sales commissions and service fee in advance at the time of purchase.

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

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

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

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

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

Distribution Fees Paid to the Distributor for the Year Ended 12/31/01

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

Class B Plan $6,589,597 $5,178,7261 $4,175,971 0.73%

Class C Plan $981,520 $273,8002 $1,407,235 1.56%

1. Includes $113,989 paid to and affiliate of the Distributor's parent company.
2. Includes $38,861 paid to and affiliate of the Distributor's parent 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 1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at www.oppenheimerfunds.com.

The Fund's illustrations of its performance data in advertisements must comply with rules of the
Securities and Exchange Commission. Those rules describe the types of performance data that may be used and how
it is to be calculated. In general, any advertisement by the Fund of its performance data must include the
average annual total returns for the advertised class of shares of the Fund. Those returns must be shown for the
1-, 5- and 10-year periods (or the life of the class, if less) ending as of the most recently ended calendar
quarter prior to the publication of the advertisement (or its submission for publication).

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:

|_| 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.
|_| An investment in the Fund is not insured by the FDIC or any other government agency.
|_| The Fund's performance returns do not reflect the effect of taxes on dividends and capital gains
distributions.
|_| The principal value of the Fund's shares and total returns are not guaranteed and normally will
fluctuate on a daily basis.
|_| When an investor's shares are redeemed, they may be worth more or less than their original
cost.
|_| 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 debt 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") (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% contingent deferred sales charge is deducted for returns for the 1-year
period. For Class N shares, the 1% contingent deferred sales charge is deducted for returns for the
life-of-class periods as applicable. There is no sales charge on Class Y shares.

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

ERV - 1 = AVERAGE ANNUAL TOTAL RETURN
------
P

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

ERV - P = TOTAL RETURN
---------
P

|_| Total Returns at Net Asset Value. From time to time the Fund may also quote a cumulative
or an average annual total return "at net asset value" (without deducting sales charges) for Class A, Class B,
Class C or Class N shares. 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 12/31/01
---------------------------------------------------------------------------------------------------------------------
--------------- ------------------------ ----------------------------------------------------------------------------
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) (or life-of-class)
--------------- ------------------------ ------------------------- ------------------------ -------------------------
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
Class A 185.75%1 203.18%1 -15.58% -10.43% 7.79% 9.08% 11.07%1 11.73%1
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
Class B 139.67%2 139.67%2 -15.57% -11.15% 7.89% 8.18% 10.62%2 10.62%2
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
Class C 91.22%3 91.22%3 -12.12% -11.24% 8.17% 8.17% 10.77%3 10.77%3
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
Class N -8.45%4 -7.54%4 N/A N/A N/A N/A N/A N/A
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
Class Y 134.98%5 134.98%5 -10.29% -10.29% 9.22% 9.22% 11.92%5 11.92%5
--------------- ------------ ----------- ------------ ------------ ----------- ------------ ------------ ------------
1. Inception of Class A: 10/2/47.
2. Inception of Class B: 5/3/93.
3. Inception of Class C: 8/29/95.
4. Inception of Class N: 3/1/01.
5. Inception of Class Y: 6/1/94.
---------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

How to Buy Shares

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

AccountLink. When shares are purchased through AccountLink, each purchase must be at least $25. Shares will be
purchased on the regular business day the Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased with the proceeds of ACH transfers
on the business day the Fund receives Federal Funds for the purchase through the ACH system before the close of The
New York Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier on certain days. If
Federal Funds are received on a business day after the close of the Exchange, the shares will be purchased and
dividends will begin to accrue on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund 3 days after the transfers are initiated. 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 charege rate may be obtained for Class A
shares under Right of Accumulation and Letters of Intent because of the economies of sales efforts and reduction in
expenses realized by the Distributor, dealers and brokers making such sales. No sales charge is imposed in certain
other circumstances described in Appendix C to this Statement of Additional Information because the Distributor
or dealer or broker incurs little or no selling expenses.

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

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

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

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

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

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

1 - "OSM" stands for Oppenheimer Select Managers

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

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

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

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

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

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

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

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

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

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

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

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

If a request is received to redeem escrowed shares prior to the payment of such additional sales charge,
the sales charge will be withheld from the redemption proceeds.

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

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

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

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

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

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

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

Retirement Plans. Certain types of retirement plans are entitled to purchase shares of the Fund without sales
charge or at reduced sales charge rates, as described in Appendix C to this Statement of Additional Information.
Certain special sales charge arrangements described in that Appendix apply to retirement plans whose records are
maintained on a daily valuation basis by Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an
independent record keeper that has a contract or special arrangement with Merrill Lynch. If on the date the plan
sponsor signed the Merrill Lynch record keeping service agreement the plan has less than $3 million in assets
(other than assets invested in money market funds) invested in applicable investments, then the retirement plan
may purchase only Class B shares of the Oppenheimer funds. Any retirement plans in that category that currently
invest in Class B shares of the Fund will have their Class B shares converted to Class A shares of the Fund when
the Plan's applicable investments reach $5 million.

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

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

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

The Distributor will not accept any order in the amount of $500,000 or more for Class B shares or $1
million or more for Class C shares on behalf of a single investor (not including dealer "street name" or omnibus
accounts). That is because generally it will be more advantageous for that investor to purchase Class A shares of
the Fund.

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

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

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

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

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

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

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

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

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

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

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

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

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

|_| Equity securities traded on a U.S. securities exchange or on Nasdaq are valued as follows:

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

|_| 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 Directors, 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.

|_| 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 Directors or obtained by the Manager from two active market makers in the security on the basis of reasonable
inquiry.

|_| 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 Directors 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.
|_| 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.

|_| 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 Directors. The pricing service may use "matrix" comparisons to the prices for
comparable instruments on the basis of quality, yield and maturity. Other special factors may be involved (such
as the tax-exempt status of the interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for portfolio valuation to actual sales
prices of selected securities.

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

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

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

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

Reinvestment Privilege. Within six months of a redemption, a shareholder may reinvest all or part of the
redemption proceeds of:

|_| Class A shares purchased subject to an initial sales charge or Class A shares on which a contingent
deferred sales charge was paid, or

|_| 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 Directors 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 Directors 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 $500 or such lesser
amount as the Board may fix. The Board will not cause the involuntary redemption of shares in an account if the
aggregate net asset value of such shares has fallen below the stated minimum solely as a result of market
fluctuations. If the Board exercises this right, it may also fix the requirements for any notice to be given to
the shareholders in question (not less than 30 days). The Board may alternatively set requirements for the
shareholder to increase the investment, or set other terms and conditions so that the shares would not be
involuntarily redeemed.

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

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

Sending Redemption Proceeds by Wire. The 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 wire.

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

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

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

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

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

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

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

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

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

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

|X| Automatic Exchange Plans. Shareholders can authorize the Transfer Agent to exchange a
pre-determined amount of shares of the Fund for shares (of the same class) of other Oppenheimer funds
automatically on a monthly, quarterly, semi-annual or annual basis under an Automatic Exchange Plan. The minimum
amount that may be exchanged to each other fund account is $25. Instructions should be provided on the
OppenheimerFunds Application or signature-guaranteed instructions. Exchanges made under these plans are subject
to the restrictions that apply to exchanges as set forth in "How to Exchange Shares" in the Prospectus and below
in this Statement of Additional Information.

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

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

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

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

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

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

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

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

How to Exchange Shares

As stated in the Prospectus, shares of a particular class of Oppenheimer funds having more than one
class of shares may be exchanged only for shares of the same class of other Oppenheimer funds. Shares of
Oppenheimer funds that have a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes by calling the Distributor at
1.800.525.7048.

o All of the Oppenheimer funds currently offer Class A, B and C shares except Oppenheimer Money Market
Fund, Inc., Centennial Money Market Trust, Centennial Tax Exempt Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax Exempt Trust, and Centennial America Fund,
L.P., which only offer Class A shares.

o Class B, Class C and Class N shares of Oppenheimer Cash Reserves are generally available only by
exchange from the same class of shares of other Oppenheimer funds or through OppenheimerFunds-sponsored
401(k) plans.
o Only certain Oppenheimer funds currently offer Class Y shares. Class Y shares of Oppenheimer Real Asset
Fund may not be exchanged for shares of any other fund.

o Only certain Oppenheimer funds currently offer Class N shares, which are only offered to retirement
plans as described in the Prospectus. Class N shares can be exchanged only for Class N shares of other
Oppenheimer funds.

o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged only for Class A shares of
other Oppenheimer funds. They may not be acquired by exchange of shares of any class of any other
Oppenheimer funds except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves
acquired by exchange of Class M shares.
o Class X shares of Limited Term New York Municipal Fund can be exchanged only for Class B shares of other
Oppenheimer funds and no exchanges may be made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for shares of Oppenheimer Money
Market Fund, Inc., Oppenheimer Cash Reserves or Oppenheimer Limited-Term Government Fund. Only participants
in certain retirement plans may purchase shares of Oppenheimer Capital Preservation Fund, and only those
participants may exchange shares of other Oppenheimer funds for shares of Oppenheimer Capital Preservation
Fund.

o Class A shares of Oppenheimer Senior Floating Rate Fund are not available by exchange of shares of
Oppenheimer Money Market Fund or Class A shares of Oppenheimer Cash Reserves. Shares of Oppenheimer Senior
Floating Rate Fund may only be sold or exchanged in a quarterly repurchase offer. If any Class A shares of
another Oppenheimer fund that are exchanged for Class A shares of Oppenheimer Senior Floating Rate Fund are
subject to the Class A contingent deferred sales charge of the other Oppenheimer fund at the time of
exchange, the holding period for that Class A contingent deferred sales charge will carry over to the Class
A shares of Oppenheimer Senior Floating Rate Fund acquired in the exchange. The Class A shares of
Oppenheimer Senior Floating Rate Fund acquired in that exchange will be subject to the Class A Early
Withdrawal Charge of Oppenheimer Senior Floating Rate Fund if they are repurchased before the expiration of
the holding period.

o Class o A, Class B, Class C, Class N and Class Y Shares of Oppenheimer Select Managers Mercury Advisors
S&P Index Fund and Oppenheimer Select Managers QM Active Balanced Fund are only available to retirement
plans and are available only by exchange from the same class of shares of other Oppenheimer funds held by
retirement plans.

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

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

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

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

|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. However,
when Class A shares acquired by exchange of Class A shares of other Oppenheimer funds purchased subject to a
Class A contingent deferred sales charge are redeemed within 18 months of the end of the calendar month of the
initial purchase of the exchanged Class A shares, the Class A contingent deferred sales charge is imposed on the
redeemed shares. The Class B contingent deferred sales charge is imposed on Class B shares acquired by exchange
if they are redeemed within 6 years of the initial purchase of the exchanged Class B shares. The Class C
contingent deferred sales charge is imposed on Class C shares acquired by exchange if they are redeemed within 12
months of the initial purchase of the exchanged Class C shares. The Class N contingent deferred sales charge is
imposed on Class N shares acquired by exchange if they are redeemed within eighteen (18) months of the initial
purchase of the exchanged Class N shares.

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, the Class C or the Class N contingent
deferred sales charge will be followed in determining the order in which the shares are exchanged. Before
exchanging shares, shareholders should take into account how the exchange may affect any contingent deferred
sales charge that might be imposed in the subsequent redemption of remaining shares. Shareholders owning shares
of more than one Class must specify which class of shares they wish to exchange.

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

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

|X| Processing Exchange Requests. Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption Date"). Normally, shares of the fund
to be acquired are purchased on the Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate transfer of the redemption
proceeds. The Fund reserves the right, in its discretion, to refuse any exchange request that may disadvantage
it. For example, if the receipt of multiple exchange requests from a dealer might require the disposition of
portfolio securities at a time or at a price that might be disadvantageous to the Fund, the Fund may refuse the
request. For full or partial exchanges of an account made by telephone, any special account features such as
Asset Builder Plans and Automatic Withdrawal Plans will be switched to the new account unless the Transfer Agent
is instructed otherwise. 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 no to do so.

In connection with any exchange request, the number of shares exchanged may be less than the number
requested if the exchange or the number requested would include shares subject to a restriction cited in the
Prospectus or this 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 does not attempt to pay dividends at a fixed dividend rate for any class of
shares. 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 U.S. Postal Service as undeliverable will be invested in shares of Oppenheimer Money
Market Fund, Inc. Reinvestment will be made as promptly as possible after the return of such checks to the
Transfer Agent, to enable the investor to earn a return on otherwise idle funds. Unclaimed accounts may be
subject to state escheatment laws, and the Fund and the Transfer Agent will not be liable to shareholders or
their representatives for compliance with those laws in good faith.

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

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

|X| Qualification as a Regulated Investment Company. The Fund has elected to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. As a regulated
investment company, the Fund is not subject to federal income tax on the portion of its investment company
taxable income (that is, taxable interest, dividends, other taxable ordinary income net of expenses, and net
short-term capital gain in excess of long-term capital loss) 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 twelve months after the close of the taxable year, will be considered
distributions of income and gains for the taxable year and will therefore count toward satisfaction of the
above-mentioned requirement.

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

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

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

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

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

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

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

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

Distributions by the Fund that do not constitute ordinary income dividends or capital gain distributions
will be treated as a return of capital to the extent of the shareholder's tax basis in their shares. Any excess
will be treated as gain from the sale of those shares, as discussed below. Shareholders will be advised annually
as to the U.S. federal income tax consequences of distributions made (or deemed made) during the year. If prior
distributions made by the Fund must be re-characterized as a non-taxable return of capital at the end of the
fiscal year as a result of the effect of the Fund's investment policies, they will be identified as such in
notices sent to shareholders.
Distributions by the Fund will be treated in the manner described above regardless of whether the
distributions are paid in cash or reinvested in additional shares of the Fund (or of another fund). Shareholders
receiving a distribution in the form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of the reinvestment date.

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

|X| Tax Effects of Redemptions of Shares. If a shareholder redeems all 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.

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

Additional Information About the Fund

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

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

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

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

INDEPENDENT AUDITORS' REPORT

================================================================================
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
OPPENHEIMER TOTAL RETURN FUND, INC.:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Total Return Fund, Inc., including the statement of investments, as
of December 31, 2001, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for the periods indicated. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

        We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2001, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

        In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Oppenheimer Total Return Fund, Inc. as of December 31, 2001, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for the periods indicated, in conformity with accounting principles generally
accepted in the United States of America.



/s/DELOITTE & TOUCHE LLP
--------------------------
DELOITTE & TOUCHE LLP

Denver, Colorado
January 23, 2002


                     34 OPPENHEIMER TOTAL RETURN FUND, INC.

STATEMENT OF INVESTMENTS       December 31, 2001
-------------------------------------------------------------------------------

MARKET VALUE
                                                             SHARES     SEE NOTE 1
==================================================================================

 COMMON STOCKS--79.2%
----------------------------------------------------------------------------------
 BASIC MATERIALS--1.6%

----------------------------------------------------------------------------------
 METALS--0.4%
 ALCOA, Inc.                                                389,000   $ 13,828,950
----------------------------------------------------------------------------------
 PAPER--1.2%
 Sappi Ltd., Sponsored ADR(1)                             4,091,400     41,936,850
----------------------------------------------------------------------------------
 CAPITAL GOODS--16.5%
----------------------------------------------------------------------------------
 AEROSPACE/DEFENSE--5.3%
 Boeing Co.                                                 319,700     12,397,966
----------------------------------------------------------------------------------
 Lockheed Martin Corp.                                    1,976,100     92,224,587
----------------------------------------------------------------------------------
 Raytheon Co.                                             2,328,700     75,612,889
                                                                      ------------
                                                                       180,235,442

----------------------------------------------------------------------------------
 INDUSTRIAL SERVICES--2.7%
 Republic Services, Inc.(1)                               1,714,500     34,238,565
----------------------------------------------------------------------------------
 Waste Management, Inc.                                   1,755,200     56,008,432
                                                                      ------------
                                                                        90,246,997

----------------------------------------------------------------------------------
 MANUFACTURING--8.5%
 Caterpillar, Inc.                                        1,194,800     62,428,300
----------------------------------------------------------------------------------
 Titan Corp. (The)(1)                                     2,653,800     66,212,310
----------------------------------------------------------------------------------
 Tyco International Ltd.                                  2,700,000    159,030,000
                                                                      ------------
                                                                       287,670,610

----------------------------------------------------------------------------------
 COMMUNICATION SERVICES--5.0%

----------------------------------------------------------------------------------
 TELECOMMUNICATIONS: LONG DISTANCE--4.0%
 AT&T Corp.                                               3,956,500     71,770,910
----------------------------------------------------------------------------------
 Qwest Communications International, Inc.                 2,081,400     29,410,182
----------------------------------------------------------------------------------
 Verizon Communications, Inc.                               717,000     34,028,820
                                                                      ------------
                                                                       135,209,912

----------------------------------------------------------------------------------
 TELECOMMUNICATIONS: WIRELESS--1.0%
 Leap Wireless International, Inc.(1)                       835,200     17,514,144
----------------------------------------------------------------------------------
 Vodafone Group plc, Sponsored ADR                          622,579     15,987,829
                                                                      ------------
                                                                        33,501,973

----------------------------------------------------------------------------------
 CONSUMER CYCLICALS--8.1%
----------------------------------------------------------------------------------
 AUTOS & HOUSING--0.5%
 Delphi Automotive Systems Corp.                          1,300,000     17,758,000
----------------------------------------------------------------------------------
 CONSUMER SERVICES--2.6%
 Cendant Corp.(1)                                         3,204,800     62,846,128
----------------------------------------------------------------------------------
 Moody's Corp.                                              600,000     23,916,000
                                                                      ------------
                                                                        86,762,128



                   12 | OPPENHEIMER TOTAL RETURN FUND, INC.






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

 RETAIL: GENERAL--3.7%
 Family Dollar Stores, Inc.                                 600,000   $ 17,988,000
----------------------------------------------------------------------------------
 Kohl's Corp.(1)                                          1,533,500    108,019,740
                                                                      ------------
                                                                       126,007,740

----------------------------------------------------------------------------------
 RETAIL: SPECIALTY--1.3%
 Bed Bath & Beyond, Inc.(1)                                 700,000     23,730,000
----------------------------------------------------------------------------------
 BJ's Wholesale Club, Inc.(1)                               425,000     18,742,500
                                                                      ------------
                                                                        42,472,500

----------------------------------------------------------------------------------
 CONSUMER STAPLES--4.6%
----------------------------------------------------------------------------------
 BROADCASTING--2.3%
 Comcast Corp., Cl. A Special                               850,000     30,600,000
----------------------------------------------------------------------------------
 Fox Entertainment Group, Inc., A Shares(1)               1,737,800     46,103,834
                                                                      ------------
                                                                        76,703,834

----------------------------------------------------------------------------------
 ENTERTAINMENT--1.1%
 News Corp. Ltd. (The), Sponsored ADR, Preference         1,375,400     36,393,084
----------------------------------------------------------------------------------
 FOOD--0.3%
 General Mills, Inc.                                        200,000     10,402,000
----------------------------------------------------------------------------------
 TOBACCO--0.9%
 Philip Morris Cos., Inc.                                   700,000     32,095,000
----------------------------------------------------------------------------------
 ENERGY--1.5%
----------------------------------------------------------------------------------
 ENERGY SERVICES--1.1%
 Noble Drilling Corp.(1)                                  1,080,100     36,766,604
----------------------------------------------------------------------------------
 OIL: INTERNATIONAL--0.4%
 BP plc, ADR                                                255,400     11,878,654
----------------------------------------------------------------------------------
 FINANCIAL--18.4%
----------------------------------------------------------------------------------
 BANKS--0.5%
 J.P. Morgan Chase & Co.                                    450,000     16,357,500
----------------------------------------------------------------------------------
 DIVERSIFIED FINANCIAL--14.2%
 AMBAC Financial Group, Inc.                                150,000      8,679,000
----------------------------------------------------------------------------------
 Citigroup, Inc.                                          1,466,666     74,037,299
----------------------------------------------------------------------------------
 Concord EFS, Inc.(1)                                     1,140,000     37,369,200
----------------------------------------------------------------------------------
 Franklin Resources, Inc.                                   720,000     25,394,400
----------------------------------------------------------------------------------
 Freddie Mac                                              2,892,700    189,182,580
----------------------------------------------------------------------------------
 Merrill Lynch & Co., Inc.                                  509,700     26,565,564
----------------------------------------------------------------------------------
 USA Education, Inc.                                      1,404,700    118,022,894
                                                                      ------------
                                                                       479,250,937


                   13 | OPPENHEIMER TOTAL RETURN FUND, INC.



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



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

 INSURANCE--3.7%
 Aetna, Inc.                                                647,100   $ 21,347,829
----------------------------------------------------------------------------------
 Allstate Corp.                                             754,700     25,433,390
----------------------------------------------------------------------------------
 Cigna Corp.                                                529,200     49,030,380
----------------------------------------------------------------------------------
 MBIA, Inc.                                                 450,000     24,133,500
----------------------------------------------------------------------------------
 XL Capital Ltd., Cl. A                                      50,000      4,568,000
                                                                      ------------
                                                                       124,513,099

----------------------------------------------------------------------------------
 HEALTHCARE--11.1%
----------------------------------------------------------------------------------
 HEALTHCARE/DRUGS--4.0%
 American Home Products Corp.                               300,000     18,408,000
----------------------------------------------------------------------------------
 Bristol-Myers Squibb Co.                                   664,800     33,904,800
----------------------------------------------------------------------------------
 Johnson & Johnson                                     1,200,000     70,920,000
----------------------------------------------------------------------------------
 Pharmacia Corp.                                            280,800     11,976,120
----------------------------------------------------------------------------------
 Zimmer Holdings, Inc.(1)                                    20,000        610,800
                                                                      ------------
                                                                       135,819,720

----------------------------------------------------------------------------------
 HEALTHCARE/SUPPLIES & SERVICES--7.1%
 Baxter International, Inc.                               1,050,000     56,311,500
----------------------------------------------------------------------------------
 Biomet, Inc.                                             1,450,000     44,805,000
----------------------------------------------------------------------------------
 Cardinal Health, Inc.                                    1,275,000     82,441,500
----------------------------------------------------------------------------------
 Lincare Holdings, Inc.(1)                                  300,000      8,595,000
----------------------------------------------------------------------------------
 Stryker Corp.(1)                                           832,500     48,593,025
                                                                      ------------
                                                                       240,746,025

----------------------------------------------------------------------------------
 TECHNOLOGY--9.1%
----------------------------------------------------------------------------------
 COMPUTER HARDWARE--2.6%
 Lexmark International, Inc., Cl. A(1)                    1,100,100     64,905,900
----------------------------------------------------------------------------------
 Pinnacle Systems, Inc.(1)                                  326,800      2,594,792
----------------------------------------------------------------------------------
 SanDisk Corp.(1)                                         1,344,100     19,355,040
                                                                      ------------
                                                                        86,855,732

----------------------------------------------------------------------------------
 COMPUTER SERVICES--1.8%
 First Data Corp.                                           780,000     61,191,000
----------------------------------------------------------------------------------
 COMPUTER SOFTWARE--1.6%
 Microsoft Corp.(1)                                         800,000     53,000,000
----------------------------------------------------------------------------------
 COMMUNICATIONS EQUIPMENT--1.5%
 Lucent Technologies, Inc.                                7,905,300     49,724,337
----------------------------------------------------------------------------------
 ELECTRONICS--1.6%
 LSI Logic Corp.(1)                                         173,200      2,733,096
----------------------------------------------------------------------------------
 Micron Technology, Inc.(1)                               1,707,100     52,920,100
                                                                      ------------
                                                                        55,653,196



                   14 | OPPENHEIMER TOTAL RETURN FUND, INC.









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

 UTILITIES--3.3%
-------------------------------------------------------------------------------------
 ELECTRIC UTILITIES--2.7%
 Dominion Resources, Inc.                                 1,131,900     $  68,027,190
-------------------------------------------------------------------------------------
 Duke Energy Corp.                                          257,200        10,097,672
-------------------------------------------------------------------------------------
 Exelon Corp.                                               262,500        12,568,500
                                                                        -------------
                                                                           90,693,362

-------------------------------------------------------------------------------------
 GAS UTILITIES--0.6%
 El Paso Corp.                                              492,000        21,948,120
                                                                        -------------
 Total Common Stocks (Cost $2,147,337,616)                              2,675,623,306

=====================================================================================
 PREFERRED STOCKS--0.4%

 Sprint Corp., Equity Units [each equity
 unit consists of units referred to as
 corporate units which consist of $25
 principal amount of Sprint Capital
 Corp., 6% sr. nts., 8/17/06 and a
 purchase contract to purchase Sprint
 Corp. (PCS Group) common stock](2)
 (Cost $14,577,500)                                         583,100        14,816,571

=====================================================================================
 OTHER SECURITIES--0.5%

 Nasdaq-100 Unit Investment Trust(1) (Cost $16,625,743)     475,900        18,517,269

                                                              UNITS
=====================================================================================
 RIGHTS, WARRANTS AND CERTIFICATES--0.0%

 Per-Se Technologies, Inc. Wts., Exp. 2/23/10(1,3) (Cost $0)  2,204                --

                                                          PRINCIPAL
                                                             AMOUNT
=====================================================================================
 U.S. GOVERNMENT OBLIGATIONS--5.4%

 U.S. Treasury Bonds:
 6.625%, 2/15/27                                       $ 25,675,000        28,618,613
 STRIPS, 6.17%, 2/15/20(4)                              100,000,000        33,716,800
 STRIPS, 6.51%, 8/15/19(4)                              100,000,000        34,684,100
 STRIPS, 6.92%, 11/15/18(4)                              54,000,000        19,624,896
-------------------------------------------------------------------------------------

 U.S. Treasury Nts.:
 6.25%, 2/15/07                                          31,200,000        33,720,399
 6.625%, 3/31/02                                         30,050,000        30,419,765
                                                                       --------------
 Total U.S. Government Obligations (Cost $168,043,442)                    180,784,573

=====================================================================================
 CONVERTIBLE CORPORATE BONDS AND NOTES--0.9%

 Tyco International Ltd., Zero Coupon Cv. Sr.
 Unsec. Unsub. Liquid Yield Option Nts.:
 1.28%, 11/17/20(4)                                       3,000,000         2,325,000
 1.43%, 11/17/20(4,5)                                    35,500,000        27,512,500
                                                                       --------------
 Total Convertible Corporate Bonds and
 Notes (Cost $29,483,079)                                                  29,837,500


                   15 | OPPENHEIMER TOTAL RETURN FUND, INC.



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




                                                          PRINCIPAL      MARKET VALUE
                                                             AMOUNT        SEE NOTE 1
=====================================================================================

 SHORT-TERM NOTES--9.5%

 Breeds Hill Capital Co. LLC, Series A, 1.92%, 1/22/02 $ 62,893,000      $ 62,822,352
-------------------------------------------------------------------------------------
 Charta Corp.:
 1.91%, 2/5/02                                           30,000,000        29,944,292
 1.97%, 1/3/02                                           25,000,000        24,997,264
 2.38%, 1/8/02                                           20,000,000        19,991,872
-------------------------------------------------------------------------------------
 Countrywide Home Loans, 2%, 1/18/02                     50,000,000        49,952,778
-------------------------------------------------------------------------------------
 Delaware Funding Corp., 1.95%, 1/9/02                   35,000,000        34,984,833
-------------------------------------------------------------------------------------
 New Center Asset Trust, 2.01%, 1/11/02                  25,000,000        24,986,042
-------------------------------------------------------------------------------------
 Old Line Funding Corp., 2.06%, 1/3/02                   45,429,000        45,423,801
-------------------------------------------------------------------------------------
 Park Avenue Receivables Corp., 1.90%, 1/15/02           26,116,000        26,096,703
                                                                         ------------
 Total Short-Term Notes (Cost $319,199,937)                               319,199,937

=====================================================================================
 REPURCHASE AGREEMENTS--3.9%

 Repurchase agreement with Banque
 Nationale De Paris, 1.65%, dated
 12/31/01, to be repurchased at
 $130,697,980 on 1/2/02,
 collateralized by U.S. Treasury Bonds,
 6.125%-10.625%, 8/15/15-8/15/29, with
 a value of $121,950,044 and U.S.
 Treasury Nts., 5.50%-6.375%,
 6/30/02-1/31/03, with a value of
 $11,812,858 (Cost $130,686,000)                        130,686,000       130,686,000
-------------------------------------------------------------------------------------
 TOTAL INVESTMENTS, AT VALUE (COST
 $2,825,953,317)                                               99.8%    3,369,465,156
-------------------------------------------------------------------------------------
 OTHER ASSETS NET OF LIABILITIES                                0.2         7,894,046
                                                              -----------------------
 NET ASSETS                                                   100.0%   $3,377,359,202
                                                              =======================



FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Non-income-producing security.
2. Units may be comprised of several components, such as debt and equity
and/or warrants to purchase equity at some point in the future. For units
which represent debt securities, principal amount disclosed represents total
underlying principal.
3. Identifies issues considered to be illiquid--See Note 6 of Notes to
Financial Statements.
4. Zero coupon bond reflects the effective yield on the date of purchase.
5. 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
Directors. These securities amount to $27,512,500 or 0.81% of the Fund's net
assets as of December 31, 2001.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   16 | OPPENHEIMER TOTAL RETURN FUND, INC.


STATEMENT OF ASSETS AND LIABILITIES  December 31, 2001



===============================================================================================
ASSETS

Investments, at value (cost $2,825,953,317)--see accompanying statement        $ 3,369,465,156
-----------------------------------------------------------------------------------------------
Cash                                                                                   598,063
-----------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold                                                                    13,045,170
Interest and dividends                                                               4,461,672
Shares of capital stock sold                                                         2,018,848
Other                                                                                   34,210
                                                                               ----------------
Total assets                                                                     3,389,623,119

===============================================================================================
LIABILITIES

Payables and other liabilities:
Shares of capital stock redeemed                                                     4,926,183
Investments purchased                                                                4,888,420
Distribution and service plan fees                                                   1,748,860
Shareholder reports                                                                    651,894
Transfer and shareholder servicing agent fees                                            2,016
Directors' compensation                                                                  1,609
Other                                                                                   44,935
                                                                               ----------------
Total liabilities                                                                   12,263,917

===============================================================================================
NET ASSETS                                                                     $ 3,377,359,202
                                                                               ================

===============================================================================================
COMPOSITION OF NET ASSETS
-----------------------------------------------------------------------------------------------
Par value of shares of capital stock                                           $    32,543,910
-----------------------------------------------------------------------------------------------
Additional paid-in capital                                                       2,834,597,130
-----------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments
and foreign currency transactions                                                  (33,293,677)
-----------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments                          543,511,839
                                                                               ----------------
NET ASSETS                                                                     $ 3,377,359,202
                                                                               ================



                    17 | OPPENHEIMER TOTAL RETURN FUND, INC.




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
 $2,665,613,500 and 256,380,336 shares of capital stock outstanding)                    $10.40
 Maximum offering price per share (net asset value plus sales charge of 5.75% of
 offering price)                                                                        $11.03
----------------------------------------------------------------------------------------------
 Class B Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of
 $570,714,620 and 55,415,341 shares of capital stock outstanding)                       $10.30
----------------------------------------------------------------------------------------------
 Class C Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of
 $90,440,450 and 8,777,318 shares of capital stock outstanding)                         $10.30
----------------------------------------------------------------------------------------------
 Class N Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $1,367,975
 and 132,039 shares of capital stock outstanding)                                       $10.36
----------------------------------------------------------------------------------------------
 Class Y Shares:
 Net asset value, redemption price and offering price per share (based on net
 assets of $49,222,657 and 4,734,063 shares of capital stock outstanding)               $10.40



SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                   18 | OPPENHEIMER TOTAL RETURN FUND, INC.



STATEMENT OF OPERATIONS  For the Year Ended December 31, 2001
-------------------------------------------------------------------------------



===================================================================================
 INVESTMENT INCOME
 Dividends (net of foreign withholding taxes of $70,802)             $  28,781,243
-----------------------------------------------------------------------------------
 Interest                                                               28,130,153
                                                                     --------------
 Total income                                                           56,911,396

===================================================================================
 EXPENSES

 Management fees                                                        19,035,604
-----------------------------------------------------------------------------------
 Distribution and service plan fees:
 Class A                                                                 5,874,198
 Class B                                                                 6,589,597
 Class C                                                                   981,520
 Class N                                                                     2,468
-----------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Class A                                                                 3,483,497
 Class B                                                                   791,333
 Class C                                                                   119,611
 Class N                                                                       820
 Class Y                                                                   113,566
-----------------------------------------------------------------------------------
 Shareholder reports                                                     1,199,673
-----------------------------------------------------------------------------------
 Custodian fees and expenses                                                53,304
-----------------------------------------------------------------------------------
 Directors' compensation                                                    34,070
-----------------------------------------------------------------------------------
 Other                                                                     379,483
                                                                     --------------
 Total expenses                                                         38,658,744
 Less reduction to  custodian expenses                                     (39,745)
 Less voluntary waiver of transfer and shareholder
 servicing agent fees--Class Y                                             (17,816)
                                                                     --------------
 Net expenses                                                           38,601,183

===================================================================================
 NET INVESTMENT INCOME                                                  18,310,213

===================================================================================
 REALIZED AND UNREALIZED GAIN (LOSS)
 Net realized gain (loss) on:
 Investments                                                           (29,939,805)
 Foreign currency transactions                                            (303,549)
                                                                     --------------
 Net realized gain (loss)                                              (30,243,354)

-----------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation) on investments  (428,414,948)
                                                                     --------------
 Net realized and unrealized gain (loss)                              (458,658,302)

===================================================================================
 NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS                $(440,348,089)
                                                                     --------------


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                   19 | OPPENHEIMER TOTAL RETURN FUND, INC.


STATEMENTS OF CHANGES IN NET ASSETS



YEAR ENDED DECEMBER 31,                                     2001               2000
=======================================================================================

 OPERATIONS
 Net investment income (loss)                         $   18,310,213    $   44,265,063
---------------------------------------------------------------------------------------
 Net realized gain (loss)                                (30,243,354)      201,493,747
---------------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation)   (428,414,948)     (499,499,123)
                                                      ---------------------------------
 Net increase (decrease) in net
 assets resulting from operations                       (440,348,089)     (253,740,313)

=======================================================================================
 DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS

 Dividends from net investment income:
 Class A                                                 (26,633,769)      (38,745,036)
 Class B                                                    (454,728)       (2,237,780)
 Class C                                                    (134,455)         (384,905)
 Class N                                                     (14,619)               --
 Class Y                                                    (559,748)         (760,857)
---------------------------------------------------------------------------------------
 Distributions from net realized gain:
 Class A                                                 (10,525,742)     (160,994,379)
 Class B                                                  (2,290,986)      (41,193,590)
 Class C                                                    (361,434)       (5,319,033)
 Class N                                                      (5,226)               --
 Class Y                                                    (191,858)       (2,808,984)

=======================================================================================
 CAPITAL STOCK TRANSACTIONS

 Net increase (decrease) in net assets
 resulting from capital stock transactions:
 Class A                                                (123,242,709)      401,342,499
 Class B                                                (140,382,969)     (265,112,323)
 Class C                                                  (4,858,928)       47,057,472
 Class N                                                   1,362,136                --
 Class Y                                                     332,876        10,799,844

=======================================================================================
 NET ASSETS

 Total decrease                                         (748,310,248)     (312,097,385)
---------------------------------------------------------------------------------------
 Beginning of period                                   4,125,669,450     4,437,766,835
                                                      ---------------------------------
 End of period [including undistributed
 (overdistributed) net investment income
 of $8,845,974 for the year ended December
 31, 2000]                                            $3,377,359,202    $4,125,669,450
                                                      =================================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                   20 | OPPENHEIMER TOTAL RETURN FUND, INC.

FINANCIAL HIGHLIGHTS



CLASS A                 YEAR ENDED DECEMBER 31,                   2001          2000           1999
1998            1997
====================================================================================================================================

 PER SHARE OPERATING DATA

 Net asset value, beginning of period                           $ 11.78       $ 13.25        $ 12.23      $
11.00         $ 9.77
------------------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                              .08           .15            .14
..16            .16
 Net realized and unrealized gain (loss)                          (1.31)         (.84)          2.01
2.09           2.49

--------------------------------------------------------------------
 Total income (loss) from
 investment operations                                            (1.23)         (.69)          2.15
2.25           2.65
------------------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                              (.11)         (.15)          (.12)
(.15)          (.14)
 Distributions from net realized gain                              (.04)         (.63)         (1.01)
(.87)         (1.28)

--------------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                   (.15)         (.78)         (1.13)
(1.02)         (1.42)
------------------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $    10.40    $    11.78     $    13.25   $
12.23     $    11.00

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

====================================================================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(1)                             (10.43)%       (5.62)%        18.34%
21.16%         27.39%

====================================================================================================================================
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                    $2,665,614    $3,161,399     $3,157,204
$2,594,324     $2,237,603
------------------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                           $2,847,999    $3,382,139     $2,756,760
$2,387,815     $2,045,166
------------------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                                             0.66%         1.17%          1.12%
1.31%          1.43%
 Expenses                                                          0.90%         0.87%          0.87%
0.86%(3)       0.89%(3)
------------------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                            116%           61%            34%
38%            92%



1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns. Total returns are not
annualized for periods less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                   21 | OPPENHEIMER TOTAL RETURN FUND, INC.



FINANCIAL HIGHLIGHTS Continued



CLASS B     YEAR ENDED DECEMBER 31,                       2001       2000         1999        1998           1997
====================================================================================================================

 PER SHARE OPERATING DATA

 Net asset value, beginning of period                  $  11.65   $  13.10   $    12.10    $    10.89     $   9.70
--------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                              (.01)       .05          .04           .06          .07
 Net realized and unrealized gain (loss)                  (1.29)      (.84)        1.98          2.08         2.45

-------------------------------------------------------------
 Total income (loss) from
 investment operations                                    (1.30)      (.79)        2.02          2.14         2.52
--------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                      (.01)      (.03)        (.01)         (.06)
(.05)
 Distributions from net realized gain                      (.04)      (.63)       (1.01)         (.87)
(1.28)

-------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                           (.05)      (.66)       (1.02)         (.93)
(1.33)
--------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                        $  10.30   $  11.65   $    13.10    $    12.10     $  10.89

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

====================================================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(1)                     (11.15)%    (6.36)%      17.37%        20.25%
26.17%

====================================================================================================================
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)              $570,715   $800,063   $1,152,235    $1,201,741     $986,713
--------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                     $658,336   $964,967   $1,196,118    $1,080,395     $877,911
--------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income (loss)                             (0.13)%     0.37%        0.32%         0.50%      0.62%
 Expenses                                                  1.69%      1.66%        1.67%         1.67%(3)
1.71%(3)
--------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                    116%        61%          34%           38%        92%


1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns. Total returns are not
annualized for periods less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                   22 | OPPENHEIMER TOTAL RETURN FUND, INC.





CLASS C   YEAR ENDED DECEMBER 31,                2001      2000      1999      1998         1997
====================================================================================================

 PER SHARE OPERATING DATA

 Net asset value, beginning of period          $ 11.67   $ 13.13   $ 12.13   $ 10.92      $ 9.72
----------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                     (.01)      .04       .04       .06         .07
 Net realized and unrealized gain (loss)         (1.30)     (.82)     1.98      2.08        2.46
                                              ------------------------------------------------------
 Total income (loss) from
 investment operations                           (1.31)     (.78)     2.02      2.14        2.53
----------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income             (.02)     (.05)     (.02)     (.06)       (.05)
 Distributions from net realized gain             (.04)     (.63)    (1.00)     (.87)      (1.28)
                                              ------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                  (.06)     (.68)    (1.02)     (.93)      (1.33)
----------------------------------------------------------------------------------------------------
 Net asset value, end of period                $ 10.30    $11.67    $13.13    $12.13      $10.92
                                              ======================================================

====================================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(1)            (11.24)%   (6.33)%   17.37%    20.20%      26.23%

====================================================================================================
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)      $90,440  $108,522   $75,886   $58,082     $36,657
----------------------------------------------------------------------------------------------------
 Average net assets (in thousands)             $98,104  $ 97,172   $66,185   $46,558     $27,349
----------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income (loss)                    (0.13)%    0.37%     0.31%     0.50%       0.63%
 Expenses                                         1.69%     1.67%     1.68%     1.67%(3)    1.72%(3)
----------------------------------------------------------------------------------------------------
 Portfolio turnover rate                           116%       61%       34%       38%         92%



1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns. Total returns are not
annualized for periods less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                   23 | OPPENHEIMER TOTAL RETURN FUND, INC.



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



                                                                     PERIOD ENDED
 CLASS N                                                     DECEMBER 31, 2001(1)
=================================================================================

 PER SHARE OPERATING DATA

 Net asset value, beginning of period                                   $ 11.38
---------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                                      .02
 Net realized and unrealized gain (loss)                                   (.88)
                                                                        ---------
 Total income (loss) from investment operations                            (.86)
---------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                                      (.12)
 Distributions from net realized gain                                      (.04)
                                                                        ---------

 Total dividends and/or distributions to shareholders                      (.16)
---------------------------------------------------------------------------------
 Net asset value, end of period                                         $ 10.36
                                                                        =========

=================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(2)                                      (7.54)%

=================================================================================
 RATIOS/SUPPLEMENTAL DATA

 Net assets, end of period (in thousands)                               $ 1,368
---------------------------------------------------------------------------------
 Average net assets (in thousands)                                      $   593
---------------------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                                                     0.20%
 Expenses                                                                  1.23%
---------------------------------------------------------------------------------
 Portfolio turnover rate                                                    116%



1. For the period from March 1, 2001 (inception of offering) to December 31,
2001.
2. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period (or inception of offering), with all
dividends and distributions reinvested in additional shares on the
reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods less than one full
year.
3. Annualized for periods of less than one full year.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                   24 | OPPENHEIMER TOTAL RETURN FUND, INC.


|


CLASS Y YEAR ENDED DECEMEBR 31,                   2001      2000        1999       1998         1997

=============================================================================================================
 PER SHARE OPERATING DATA

 Net asset value, beginning of period           $ 11.78   $ 13.26     $ 12.24    $ 11.00       $ 9.77
-------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                              .09       .17         .17        .17          .18
 Net realized and unrealized gain (loss)          (1.31)     (.84)       2.00       2.10         2.48
                                               --------------------------------------------------------------
 Total income (loss) from
 investment operations                            (1.22)     (.67)       2.17       2.27         2.66
-------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income              (.12)     (.18)       (.14)      (.16)        (.15)
 Distributions from net realized gain              (.04)     (.63)      (1.01)      (.87)       (1.28)
                                               --------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                   (.16)     (.81)      (1.15)     (1.03)       (1.43)
-------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                 $ 10.40   $ 11.78     $ 13.26    $ 12.24      $ 11.00
                                               ==============================================================

=============================================================================================================
 TOTAL RETURN, AT NET ASSET VALUE(1)             (10.29)%   (5.54)%     18.53%     21.33%       27.53%

=============================================================================================================
 RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)       $49,223   $55,685     $52,442    $38,874      $26,546
-------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)              $50,147   $57,358     $47,152    $33,687      $21,977
-------------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                             0.80%     1.29%       1.32%      1.39%        1.60%
 Expenses                                          0.80%     0.75%       0.67%      0.80%(3)     0.74%(3)
 Expenses, net of reduction to custodian
 expenses and voluntary waiver of
 transfer agent fees                               0.76%      N/A         N/A        N/A          N/A
-------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                            116%       61%         34%        38%          92%



1. Assumes a $1,000 hypothetical initial investment on the business day before
the first day of the fiscal period, with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at
the net asset value calculated on the last business day of the fiscal period.
Sales charges are not reflected in the total returns. Total returns are not
annualized for periods less than one full year.
2. Annualized for periods of less than one full year.
3. Expense ratio has been calculated without adjustment for the reduction to
custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                   25 | OPPENHEIMER TOTAL RETURN FUND, INC.

NOTES TO FINANCIAL STATEMENTS

================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES

Oppenheimer Total Return Fund, Inc. (the Fund) is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund's investment objective is to seek high total return. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).

        The Fund offers Class A, Class B, Class C, Class N and Class Y shares.
Class A shares are sold at their offering price, which is normally net asset
value plus a front-end sales charge. Class B, Class C and Class N shares are
sold without a front-end sales charge but may be subject to a contingent
deferred sales charge (CDSC). Class N shares are sold only through retirement
plans. Retirement plans that offer Class N shares may impose charges on those
accounts. Class Y shares are sold to certain institutional investors without
either a front-end sales charge or a CDSC. All classes of shares have identical
rights to earnings, assets and voting privileges, except that each class has its
own expenses directly attributable to that class and exclusive voting rights
with respect to matters affecting that class. Classes A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase. The following is a summary of significant
accounting policies consistently followed by the Fund.

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

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

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


                     26 OPPENHEIMER TOTAL RETURN FUND, INC.



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

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

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

As of December 31, 2001, the Fund had available for federal income tax purposes
an unused capital loss carryover as follows:

              EXPIRING
              ------------------------------
                  2009           $28,070,048

--------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date.

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


                     27 OPPENHEIMER TOTAL RETURN FUND, INC.



NOTES TO FINANCIAL STATEMENTS CONTINUED

================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES Continued

        The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended December 31, 2001, amounts have been reclassified to reflect a
decrease in paid-in capital of $739,754, a decrease in overdistributed net
investment income of $641,132, and a decrease in accumulated net realized loss
on investments of $98,622. Net assets of the Fund were unaffected by the
reclassifications.

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

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

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


                     28 OPPENHEIMER TOTAL RETURN FUND, INC.



================================================================================
2. CAPITAL STOCK

The Fund has authorized 860 million shares of $.10 par value capital stock.
Transactions in shares of capital stock were as follows:



                                YEAR ENDED DECEMBER 31, 2001(1)      YEAR ENDED DECEMBER 31, 2000
                                     SHARES           AMOUNT           SHARES            AMOUNT
-------------------------------------------------------------------------------------------------

CLASS A
Sold                             25,921,086    $ 283,703,176       52,538,720     $ 715,601,836
Dividends and/or
distributions reinvested          3,278,140       33,076,415       14,167,538       181,713,861

Redeemed                        (41,129,301)    (440,022,300)     (36,694,069)     (495,973,198)

                              -------------------------------------------------------------------
Net increase (decrease)         (11,930,075)   $(123,242,709)      30,012,189     $ 401,342,499
                              ===================================================================

-------------------------------------------------------------------------------------------------
CLASS B
Sold                              7,471,668      $81,063,268       15,632,508     $ 209,389,301
Dividends and/or
distributions reinvested            259,417        2,594,550        3,264,416        41,130,740
Redeemed                        (20,966,189)    (224,040,787)     (38,201,952)     (515,632,364)

                              -------------------------------------------------------------------
Net increase (decrease)         (13,235,104)   $(140,382,969)     (19,305,028)    $(265,112,323)
                              ===================================================================

-------------------------------------------------------------------------------------------------
CLASS C
Sold                              1,980,889    $  21,586,341        4,643,388     $  62,234,552
Dividends and/or
distributions reinvested             46,377          464,379          427,388         5,379,883
Redeemed                         (2,550,987)     (26,909,648)      (1,550,593)      (20,556,963)

                              -------------------------------------------------------------------
Net increase (decrease)            (523,721)   $  (4,858,928)       3,520,183     $  47,057,472
                              ===================================================================

-------------------------------------------------------------------------------------------------
CLASS N
Sold                                136,100    $   1,403,002               --     $          --
Dividends and/or
distributions reinvested              1,972           19,831               --                --
Redeemed                             (6,033)         (60,697)              --                --

                              -------------------------------------------------------------------
Net increase (decrease)             132,039    $   1,362,136               --     $          --
                              ===================================================================

-------------------------------------------------------------------------------------------------
CLASS Y
Sold                              2,157,290    $  23,718,885        3,392,579     $  46,423,509
Dividends and/or
distributions reinvested             74,490          751,606          278,327         3,569,841
Redeemed                         (2,222,825)     (24,137,615)      (2,902,041)      (39,193,506)

                              -------------------------------------------------------------------
Net increase (decrease)               8,955         $332,876          768,865     $  10,799,844
                              ===================================================================



1. For the year ended December 31, 2001, for Class A, B, C and Y shares and for
the period from March 1, 2001 (inception of offering) to December 31, 2001, for
Class N shares.


                     29 OPPENHEIMER TOTAL RETURN FUND, INC.



NOTES TO FINANCIAL STATEMENTS CONTINUED

================================================================================
3. PURCHASES AND SALES OF SECURITIES

The aggregate cost of purchases and proceeds from sales of securities, other
than short-term obligations, for the year ended December 31, 2001, were
$3,777,337,896 and $3,845,839,696, respectively.

As of December 31, 2001, unrealized appreciation (depreciation) based on cost of
securities for federal income tax purposes of $2,831,199,315 was:

        Gross unrealized appreciation                 $602,735,935
        Gross unrealized depreciation                  (64,470,094)
                                                      ------------
        Net unrealized appreciation (depreciation)    $538,265,841
                                                      ============

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

MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.75% of
the first $100 million of average annual net assets of the Fund, 0.70% of the
next $100 million, 0.65% of the next $100 million, 0.60% of the next $100
million, 0.55% of the next $100 million and 0.50% of average annual net assets
in excess of $500 million. The Fund's management fee for the year ended December
31, 2001, was an annualized rate of 0.52%.

--------------------------------------------------------------------------------
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 an agreed upon per-account fee. Additionally, Class Y shares are subject to
minimum fees of $5,000 for assets of less than $10 million and $10,000 for
assets of $10 million or more. The Class Y shares are subject to the minimum fee
in the event that the per-account fee does not equal or exceed the applicable
minimum fee.

        OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees to 0.25% per annum of Class Y shares, effective January 1, 2001, and
for all other classes, 0.35% per annum, effective October 1, 2001. This
undertaking may be amended or withdrawn at any time.

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FEES. Under its General Distributor's Agreement
with the Manager, the Distributor acts as the Fund's principal underwriter in
the continuous public offering of the different classes of shares of the Fund.


                     30 OPPENHEIMER TOTAL RETURN FUND, INC.



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



                      AGGREGATE         CLASS A     CONCESSIONS     CONCESSIONS      CONCESSIONS     CONCESSIONS
                      FRONT-END       FRONT-END      ON CLASS A      ON CLASS B       ON CLASS C      ON CLASS N
                  SALES CHARGES   SALES CHARGES          SHARES          SHARES           SHARES          SHARES
                     ON CLASS A     RETAINED BY     ADVANCED BY     ADVANCED BY      ADVANCED BY     ADVANCED BY
YEAR ENDED               SHARES     DISTRIBUTOR  DISTRIBUTOR(1)  DISTRIBUTOR(1)   DISTRIBUTOR(1)  DISTRIBUTOR(1)
----------------------------------------------------------------------------------------------------------------

December 31, 2001    $2,368,023        $814,864        $135,377      $2,511,141         $165,947         $13,855


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



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

December 31, 2001        $18,737            $1,087,714              $31,088                   $--


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

--------------------------------------------------------------------------------
CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to a specified percent of average annual net
assets of Class A shares purchased. The Distributor makes payments to plan
recipients quarterly at an annual rate not to exceed a specified percent of the
average annual net assets consisting of Class A shares of the Fund. For the year
ended December 31, 2001, payments under the Class A plan totaled $5,874,198, all
of which were paid by the Distributor to recipients, and included $463,144 paid
to an affiliate of the Manager. Any unreimbursed expenses the Distributor incurs
with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years.

--------------------------------------------------------------------------------
CLASS B, CLASS C AND CLASS N DISTRIBUTION AND SERVICE PLAN FEES. Under each
plan, service fees and distribution fees are computed on the average of the net
asset value of shares in the respective class, determined as of the close of
each regular business day during the period. The Class B, Class C and Class N
plans provide for the Distributor to be compensated at a flat rate, whether the
Distributor's distribution expenses are more or less than the amounts paid by
the Fund under the plan during the period for which the fee is paid.


                     31 OPPENHEIMER TOTAL RETURN FUND, INC.



NOTES TO FINANCIAL STATEMENTS CONTINUED

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

        The Distributor retains the asset-based sales charge on Class B shares.
The Distributor retains the asset-based sales charge on Class C shares during
the first year the shares are outstanding. The Distributor retains the
asset-based sales charge on Class N shares. The asset-based sales charges on
Class B, Class C and Class N shares allow investors to buy shares without a
front-end sales charge while allowing the Distributor to compensate dealers that
sell those shares.

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

Distribution fees paid to the Distributor for the year ended December 31, 2001,
were as follows:



                                                                                  DISTRIBUTOR'S
                                                                DISTRIBUTOR'S         AGGREGATE
                                                                    AGGREGATE      UNREIMBURSED
                                                                 UNREIMBURSED     EXPENSES AS %
                             TOTAL PAYMENTS  AMOUNT RETAINED         EXPENSES     OF NET ASSETS
                                 UNDER PLAN   BY DISTRIBUTOR       UNDER PLAN          OF CLASS
------------------------------------------------------------------------------------------------

Class B Plan                     $6,589,597       $5,178,726       $4,175,971              0.73%
Class C Plan                        981,520          273,800        1,407,235              1.56
Class N Plan                          2,468            2,448           28,936              2.12


================================================================================
5. FOREIGN CURRENCY CONTRACTS

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

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

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


                     32 OPPENHEIMER TOTAL RETURN FUND, INC.



================================================================================
6. ILLIQUID SECURITIES

As of December 31, 2001, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of December
31, 2001 was zero.

================================================================================
7. BANK BORROWINGS

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

        The Fund had no borrowings outstanding during the year ended or at
December 31, 2001.


                     33 OPPENHEIMER TOTAL RETURN FUND, INC.









                                                    Appendix A

                                                RATINGS DEFINITIONS

Below are summaries of the rating  definitions  used by the  nationally-recognized  rating  agencies  listed below.
Those  ratings  represent  the  opinion  of the  agency as to the credit  quality  of issues  that they  rate.  The
summaries below are based upon publicly-available information provided by the rating organizations.

Moody's Investors Service, Inc. ("Moody's")

LONG-TERM (TAXABLE) BOND RATINGS

Aaa:  Bonds rated "Aaa" are judged to be the best  quality.  They carry the  smallest  degree of  investment  risk.
Interest  payments are protected by a large or by an  exceptionally  stable  margin and principal is secure.  While
the various  protective  elements  are likely to change,  the changes  that can be  expected  are most  unlikely to
impair the fundamentally strong position of such issues.

Aa:  Bonds  rated "Aa" are judged to be of high  quality by all  standards.  Together  with the "Aaa"  group,  they
comprise what are generally  known as high-grade  bonds.  They are rated lower than the best bonds because  margins
of  protection  may not be as large as with "Aaa"  securities  or  fluctuation  of  protective  elements  may be of
greater  amplitude or there may be other  elements  present which make the long-term  risk appear  somewhat  larger
than that of "Aaa" securities.

A: Bonds rated "A" possess many  favorable  investment  attributes and are to be considered as  upper-medium  grade
obligations.  Factors  giving  security to  principal  and  interest  are  considered  adequate but elements may be
present which suggest a susceptibility to impairment some time in the future.

Baa:  Bonds rated "Baa" are considered  medium-grade  obligations;  that is, they are neither highly  protected nor
poorly secured.  Interest  payments and principal  security appear adequate for the present but certain  protective
elements may be lacking or may be  characteristically  unreliable  over any great  length of time.  Such bonds lack
outstanding investment characteristics and have speculative characteristics as well.

Ba: Bonds rated "Ba" are judged to have  speculative  elements.  Their future  cannot be  considered  well-assured.
Often the  protection  of interest and  principal  payments may be very  moderate and thereby not well  safeguarded
during both good and bad times over the future.  Uncertainty of position characterizes bonds in this class.

B: Bonds  rated "B"  generally  lack  characteristics  of the  desirable  investment.  Assurance  of  interest  and
principal payments or of maintenance of other terms of the contract over any long period of time may be small.

Caa:  Bonds rated  "Caa" are of poor  standing.  Such issues may be in default or there may be present  elements of
danger with respect to principal or interest.

Ca:  Bonds rated "Ca"  represent  obligations  which are  speculative  in a high  degree.  Such issues are often in
default or have other marked shortcomings.

C: Bonds rated "C" are the lowest class of rated bonds and can be regarded as having  extremely  poor  prospects of
ever attaining any real investment standing.

Con. (...): Bonds for which the security  depends on the completion of some act or the  fulfillment of some condition
are rated  conditionally.  These bonds are secured by (a) earnings of projects under construction,  (b) earnings of
projects  unseasoned  in  operating  experience,  (c) rentals  that begin when  facilities  are  completed,  or (d)
payments to which some other  limiting  condition  attaches.  The  parenthetical  rating  denotes  probable  credit
stature upon completion of construction or elimination of the basis of the condition.
Moody's  applies  numerical  modifiers 1, 2, and 3 in each generic rating  classification  from "Aa" through "Caa."
The  modifier  "1"  indicates  that the  obligation  ranks in the higher end of its generic  rating  category;  the
modifier "2"  indicates a mid-range  ranking;  and the  modifier  "3"  indicates a ranking in the lower end of that
generic rating  category.  Advanced  refunded  issues that are secured by certain  assets are  identified  with a #
symbol.

Short-Term Ratings - Taxable Debt

These  ratings  apply to the ability of issuers to honor senior debt  obligations  having an original  maturity not
exceeding one year:

Prime-1: Issuer has a superior ability for repayment of senior short-term debt obligations.

Prime-2:  Issuer has a strong ability for repayment of senior  short-term  debt  obligations.  Earnings  trends and
coverage  ratios,  while  sound,  may  be  more  subject  to  variation.   Capitalization  characteristics,   while
appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.

Prime-3:  Issuer has an acceptable ability for repayment of senior short-term  obligations.  The effect of industry
characteristics  and market  compositions may be more  pronounced.  Variability in earnings and  profitability  may
result  in  changes  in the  level of debt  protection  measurements  and may  require  relatively  high  financial
leverage. Adequate alternate liquidity is maintained.

Not Prime: Issuer does not fall within any Prime rating category.

Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's")

LONG-TERM CREDIT RATINGS

AAA: Bonds rated "AAA" have the highest rating  assigned by Standard & Poor's.  The obligor's  capacity to meet its
financial commitment on the obligation is extremely strong.

AA:  Bonds rated "AA" differ from the highest  rated bonds only in small  degree.  The  obligor's  capacity to meet
its financial commitment on the obligation is very strong.

A: Bonds rated "A" are somewhat more  susceptible to the adverse effects of changes in  circumstances  and economic
conditions  than  obligations in higher-rated  categories.  However,  the obligor's  capacity to meet its financial
commitment on the obligation is still strong.

BBB: Bonds rated "BBB" exhibit adequate  protection  parameters.  However,  adverse economic conditions or changing
circumstances  are more likely to lead to a weakened  capacity of the obligor to meet its  financial  commitment on
the obligation.

BB, B, CCC, CC, and C

Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as having significant  speculative  characteristics.
`BB' indicates the least degree of speculation and `C' the highest.  While such  obligations  will likely have some
quality and  protective  characteristics,  these may be outweighed  by large  uncertainties  or major  exposures to
adverse conditions.

BB: Bonds rated "BB" are less  vulnerable to nonpayment than other  speculative  issues.  However,  they face major
ongoing  uncertainties or exposure to adverse business,  financial,  or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the obligation.

B: Bonds rated "B" are more  vulnerable  to  nonpayment  than bonds rated "BB",  but the obligor  currently has the
capacity to meet its financial commitment on the obligation.  Adverse business,  financial,  or economic conditions
will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

CCC:  Bonds rated "CCC" are  currently  vulnerable  to  nonpayment,  and are  dependent  upon  favorable  business,
financial,  and economic  conditions  for the obligor to meet its financial  commitment on the  obligation.  In the
event of adverse business,  financial,  or economic  conditions,  the obligor is not likely to have the capacity to
meet its financial commitment on the obligation.

CC: Bonds rated "CC" are currently highly vulnerable to nonpayment.

C: Subordinated  debt or preferred stock  obligations rated "C" are currently highly vulnerable to nonpayment.  The
"C" rating may be used to cover a situation  where a bankruptcy  petition has been filed or similar  action  taken,
but payments on this  obligation  are being  continued.  A "C" also will be assigned to a preferred  stock issue in
arrears on dividends or sinking fund payments, but that is currently paying.

D: Bonds rated "D" are in payment  default.  The "D" rating category is used when payments on an obligation are not
made on the date due even if the applicable  grace period has not expired,  unless  Standard & Poor's believes that
such  payments  will be made  during  such  grace  period.  The "D"  rating  also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

The ratings  from "AA" to "CCC" may be modified  by the  addition of a plus (+) or minus (-) sign to show  relative
standing  within the major  rating  categories.  The "r" symbol is  attached  to the  ratings of  instruments  with
significant noncredit risks.

SHORT-TERM ISSUE CREDIT RATINGS

A-1: A short-term bond rated "A-1" is rated in the highest  category by Standard & Poor's.  The obligor's  capacity
to meet its financial  commitment on the  obligation  is strong.  Within this  category,  certain  obligations  are
designated  with a plus sign (+). This  indicates that the obligor's  capacity to meet its financial  commitment on
these obligations is extremely strong.

A-2:  A  short-term  bond  rated  "A-2"  is  somewhat  more  susceptible  to the  adverse  effects  of  changes  in
circumstances  and economic  conditions  than  obligations  in higher  rating  categories.  However,  the obligor's
capacity to meet its financial commitment on the obligation is satisfactory.

A-3: A short-term bond rated "A-3" exhibits adequate protection  parameters.  However,  adverse economic conditions
or  changing  circumstances  are more likely to lead to a weakened  capacity  of the obligor to meet its  financial
commitment on the obligation.

B: A  short-term  bond  rated "B" is  regarded  as having  significant  speculative  characteristics.  The  obligor
currently has the capacity to meet its  financial  commitment on the  obligation;  however,  it faces major ongoing
uncertainties  which could lead to the  obligor's  inadequate  capacity  to meet its  financial  commitment  on the
obligation.

C: A short-term  bond rated "C" is currently  vulnerable to nonpayment and is dependent  upon  favorable  business,
financial, and economic conditions for the obligor to meet its financial commitment on the obligation.

D: A  short-term  bond rated "D" is in  payment  default.  The "D"  rating  category  is used when  payments  on an
obligation  are not made on the date due even if the  applicable  grace period has not expired,  unless  Standard &
Poor's  believes that such  payments  will be made during such grace period.  The "D" rating also will be used upon
the  filing  of a  bankruptcy  petition  or the  taking  of a  similar  action if  payments  on an  obligation  are
jeopardized.

Fitch, Inc.

INTERNATIONAL LONG-TERM CREDIT RATINGS

Investment Grade:

AAA:  Highest Credit  Quality.  "AAA" ratings denote the lowest  expectation of credit risk. They are assigned only
in the case of exceptionally strong capacity for timely payment of financial  commitments.  This capacity is highly
unlikely to be adversely affected by foreseeable events.

AA: Very High Credit  Quality.  "AA" ratings  denote a very low  expectation  of credit risk.  They indicate a very
strong  capacity for timely  payment of financial  commitments.  This capacity is not  significantly  vulnerable to
foreseeable events.

A: High Credit  Quality.  "A" ratings  denote a low  expectation of credit risk. The capacity for timely payment of
financial  commitments is considered  strong.  This capacity may,  nevertheless,  be more  vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB: Good Credit  Quality.  "BBB" ratings  indicate that there is currently a low  expectation  of credit risk. The
capacity for timely payment of financial  commitments is considered adequate,  but adverse changes in circumstances
and in economic conditions are more likely to impair this capacity. This is the lowest investment-grade category.

Speculative Grade:

BB: Speculative.  "BB" ratings indicate that there is a possibility of credit risk developing,  particularly as the
result of adverse  economic  change over time.  However,  business or  financial  alternatives  may be available to
allow financial commitments to be met. Securities rated in this category are not investment grade.

B: Highly  Speculative.  "B" ratings  indicate that  significant  credit risk is present,  but a limited  margin of
safety  remains.  Financial  commitments  are  currently  being met.  However,  capacity for  continued  payment is
contingent upon a sustained, favorable business and economic environment.

CCC, CC C: High  Default  Risk.  Default is a real  possibility.  Capacity  for meeting  financial  commitments  is
solely reliant upon sustained,  favorable business or economic  developments.  A "CC" rating indicates that default
of some kind appears probable. "C" ratings signal imminent default.

DDD, DD, and D: Default.  The ratings of  obligations  in this category are based on their  prospects for achieving
partial or full recovery in a  reorganization  or liquidation of the obligor.  While expected  recovery  values are
highly  speculative and cannot be estimated with any precision,  the following serve as general  guidelines.  "DDD"
obligations have the highest potential for recovery,  around 90%-100% of outstanding  amounts and accrued interest.
"DD" indicates potential  recoveries in the range of 50%-90%,  and "D" the lowest recovery  potential,  i.e., below
50%.

Entities rated in this category have defaulted on some or all of their  obligations.  Entities rated "DDD" have the
highest  prospect for  resumption of performance  or continued  operation  with or without a formal  reorganization
process.  Entities rated "DD" and "D" are generally  undergoing a formal  reorganization  or  liquidation  process;
those rated "DD" are likely to satisfy a higher  portion of their  outstanding  obligations,  while  entities rated
"D" have a poor prospect for repaying all obligations.
Plus (+) and minus (-) signs may be appended to a rating symbol to denote  relative  status within the major rating
categories.  Plus and minus  signs are not  added to the  "AAA"  category  or to  categories  below  "CCC,"  nor to
short-term ratings other than "F1" (see below).

INTERNATIONAL SHORT-TERM CREDIT RATINGS

F1: Highest credit  quality.  Strongest  capacity for timely  payment of financial  commitments.  May have an added
"+" to denote any exceptionally strong credit feature.

F2: Good credit quality.  A satisfactory  capacity for timely payment of financial  commitments,  but the margin of
safety is not as great as in the case of higher ratings.

F3: Fair credit  quality.  Capacity for timely  payment of financial  commitments is adequate.  However,  near-term
adverse changes could result in a reduction to non-investment grade.

B:  Speculative.  Minimal  capacity for timely payment of financial  commitments,  plus  vulnerability to near-term
adverse changes in financial and economic conditions.

C: High  default  risk.  Default is a real  possibility.  Capacity  for  meeting  financial  commitments  is solely
reliant upon a sustained, favorable business and economic environment.

D:     Default. Denotes actual or imminent payment default.






                                                        B-1
                                                    Appendix B

-------------------------------------------------------------------------------------------------------------------
                                              Industry Classifications
-------------------------------------------------------------------------------------------------------------------

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









                                                    Appendix C

OppenheimerFunds Special Sales Charge Arrangements and Waivers
--------------------------------------------------------------

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

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

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

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

Waivers that apply at the time shares are redeemed must be requested by the shareholder and/or dealer in the
redemption request.
I.





                    Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
-------------------------------------------------------------------------------------------------------------------

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

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





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

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

Class A shares purchased by the following investors are not subject to any Class A sales charges (and no
concessions are paid by the Distributor on such purchases):
|_|      The Manager or its affiliates.
|_|      Present or former officers, directors, trustees and employees (and their "immediate families") of the
              Fund, the Manager and its affiliates, and retirement plans established by them for their employees.
              The term "immediate family" refers to one's spouse, children, grandchildren, grandparents, parents,
              parents-in-law, brothers and sisters, sons- and daughters-in-law, a sibling's spouse, a spouse's
              siblings, aunts, uncles, nieces and nephews; relatives by virtue of a remarriage (step-children,
              step-parents, etc.) are included.
|_|      Registered management investment companies, or separate accounts of insurance companies having an
              agreement with the Manager or the Distributor for that purpose.
|_|      Dealers or brokers that have a sales agreement with the Distributor, if they purchase shares for their
              own accounts or for retirement plans for their employees.
|_|      Employees and registered representatives (and their spouses) of dealers or brokers described above or
              financial institutions that have entered into sales arrangements with such dealers or brokers (and
              which are identified as such to the Distributor) or with the Distributor. The purchaser must
              certify to the Distributor at the time of purchase that the purchase is for the purchaser's own
              account (or for the benefit of such employee's spouse or minor children).
|_|      Dealers, brokers, banks or registered investment advisors that have entered into an agreement with the
              Distributor providing specifically for the use of shares of the Fund in particular investment
              products made available to their clients. Those clients may be charged a transaction fee by their
              dealer, broker, bank or advisor for the purchase or sale of Fund shares.
|_|      Investment advisors and financial planners who have entered into an agreement for this purpose with the
              Distributor and who charge an advisory, consulting or other fee for their services and buy shares
              for their own accounts or the accounts of their clients.
|_|      "Rabbi trusts" that buy shares for their own accounts, if the purchases are made through a broker or
              agent or other financial intermediary that has made special arrangements with the Distributor for
              those purchases.
|_|      Clients of investment advisors or financial planners (that have entered into an agreement for this
              purpose with the Distributor) who buy shares for their own accounts may also purchase shares
              without sales charge but only if their accounts are linked to a master account of their investment
              advisor or financial planner on the books and records of the broker, agent or financial
              intermediary with which the Distributor has made such special arrangements . Each of these
              investors may be charged a fee by the broker, agent or financial intermediary for purchasing shares.
|_|      Directors, trustees, officers or full-time employees of OpCap Advisors or its affiliates, their
              relatives or any trust, pension, profit sharing or other benefit plan which beneficially owns
              shares for those persons.
|_|      Accounts for which Oppenheimer Capital (or its successor) is the investment advisor (the Distributor
              must be advised of this arrangement) and persons who are directors or trustees of the company or
              trust which is the beneficial owner of such accounts.
|_|      A unit investment trust that has entered into an appropriate agreement with the Distributor.
|_|      Dealers, brokers, banks, or registered investment advisers that have entered into an agreement with the
              Distributor to sell shares to defined contribution employee retirement plans for which the dealer,
              broker or investment adviser provides administration services.
|-|




         Retirement Plans and deferred compensation plans and trusts used to fund those plans (including, for
              example, plans qualified or created under sections 401(a), 401(k), 403(b) or 457 of the Internal
              Revenue Code), in each case if those purchases are made through a broker, agent or other financial
              intermediary that has made special arrangements with the Distributor for those purchases.
|_|      A TRAC-2000 401(k) plan (sponsored by the former Quest for Value Advisors) whose Class B or Class C
              shares of a Former Quest for Value Fund were exchanged for Class A shares of that Fund due to the
              termination of the Class B and Class C TRAC-2000 program on November 24, 1995.
|_|      A qualified Retirement Plan that had agreed with the former Quest for Value Advisors to purchase shares
              of any of the Former Quest for Value Funds at net asset value, with such shares to be held through
              DCXchange, a sub-transfer agency mutual fund clearinghouse, if that arrangement was consummated and
              share purchases commenced by December 31, 1996.

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

Class A shares issued or purchased in the following transactions are not subject to sales charges (and no
concessions are paid by the Distributor on such purchases):
|_|      Shares issued in plans of reorganization, such as mergers, asset acquisitions and exchange offers, to
              which the Fund is a party.
|_|      Shares purchased by the reinvestment of dividends or other distributions reinvested from the Fund or
              other Oppenheimer funds (other than Oppenheimer Cash Reserves) or unit investment trusts for which
              reinvestment arrangements have been made with the Distributor.
|_|      Shares purchased through a broker-dealer that has entered into a special agreement with the Distributor
              to allow the broker's customers to purchase and pay for shares of Oppenheimer funds using the
              proceeds of shares redeemed in the prior 30 days from a mutual fund (other than a fund managed by
              the Manager or any of its subsidiaries) on which an initial sales charge or contingent deferred
              sales charge was paid. This waiver also applies to shares purchased by exchange of shares of
              Oppenheimer Money Market Fund, Inc. that were purchased and paid for in this manner. This waiver
              must be requested when the purchase order is placed for shares of the Fund, and the Distributor may
              require evidence of qualification for this waiver.
|_|      Shares purchased with the proceeds of maturing principal units of any Qualified Unit Investment Liquid
              Trust Series.
|_|      Shares purchased by the reinvestment of loan repayments by a participant in a Retirement Plan for which
              the Manager or an affiliate acts as sponsor.

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

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

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

A.   Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be waived for redemptions of shares in
the following cases:
|_|      Shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," in the
              applicable Prospectus.
|_|      Redemptions from accounts other than Retirement Plans following the death or disability of the last
              surviving shareholder, including a trustee of a grantor trust or revocable living trust for which
              the trustee is also the sole beneficiary. The death or disability must have occurred after the
              account was established, and for disability you must provide evidence of a determination of
              disability by the Social Security Administration.
|_|      Distributions from accounts for which the broker-dealer of record has entered into a special agreement
              with the Distributor allowing this waiver.
|_|      Redemptions of Class B shares held by Retirement Plans whose records are maintained on a daily valuation
              basis by Merrill Lynch or an independent record keeper under a contract with Merrill Lynch.
|_|      Redemptions of Class C shares of Oppenheimer U.S. Government Trust from accounts of clients of financial
              institutions that have entered into a special arrangement with the Distributor for this purpose.
|_|      Redemptions requested in writing by a Retirement Plan sponsor of Class C shares of an Oppenheimer fund
              in amounts of $500,000 or more and made more than 12 months after the Retirement Plan's first
              purchase of Class C shares, if the redemption proceeds are invested in Class N shares of one or
              more Oppenheimer funds.
|_|      Distributions8 from Retirement Plans or other employee benefit plans for any of the following purposes:
              1)  Following the death or disability (as defined in the Internal Revenue Code) of the participant
                  or beneficiary. The death or disability must occur after the participant's account was
                  established in an Oppenheimer fund.
              2)  To return excess contributions made to a participant's account.
              3)  To return contributions made due to a mistake of fact.
              4)  To make hardship withdrawals, as defined in the plan.9
              5)  To make distributions required under a Qualified Domestic Relations Order or, in the case of an
                  IRA, a divorce or separation agreement described in Section 71(b) of the Internal Revenue Code.
              6)  To meet the minimum distribution requirements of the Internal Revenue Code.
              7)  To make "substantially equal periodic payments" as described in Section 72(t) of the Internal
                  Revenue Code.
              8)  For loans to participants or beneficiaries.10
              9)  On account of the participant's separation from service.11
              10) Participant-directed redemptions to purchase shares of a mutual fund (other than a fund managed
                  by the Manager or a subsidiary of the Manager) offered as an investment option in a Retirement
                  Plan if the plan has made special arrangements with the Distributor.
              11) Distributions made on account of a plan termination or "in-service" distributions, if the
                  redemption proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.
              12) For distributions from a participant's account under an Automatic Withdrawal Plan after the
                  participant reaches age 59 1/2, as long as the aggregate value of the distributions does not
                  exceed 10% of the account's value, adjusted annually.
              13) Redemptions of Class B shares under an Automatic Withdrawal Plan for an account other than a
                  Retirement Plan, if the aggregate value of the redeemed shares does not exceed 10% of the
                  account's value, adjusted annually.
              14) For distributions from 401(k) plans sponsored by broker-dealers that have entered into a
                  special arrangement with the Distributor allowing this waiver.
|_|      Redemptions of Class B shares or Class C shares under an Automatic Withdrawal Plan from an account other
              than a Retirement Plan if the aggregate value of the redeemed shares does not exceed 10% of the
              account's value annually.

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

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

IV.





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

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

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

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

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

A.   Reductions or Waivers of Class A Sales Charges.

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

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

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

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






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

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

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

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

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

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

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





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

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

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

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

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

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

|X|




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

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

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

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

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

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

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



Oppenheimer Total Return Fund, Inc.

Internet Web Site:
         WWW.OPPENHEIMERFUNDS.COM
         ------------------------

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

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

Transfer Agent
         OppenheimerFunds Services
         P.O. Box 5270
         Denver, Colorado 80217
         1-800-525-7048

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

Independent Auditors
         Deloitte & Touche LLP
         555 Seventeenth Street, Suite 3600
         Denver, Colorado 80202-3942

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



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