SAI 497(E) TOTAL RETURN FUND 2002

EX-99 4 sai420497e2002.htm SAI - 497E TOTAL RETURN FUND, INC. 2002 SAI 497(E) TOTAL RETURN FUND 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.......................................................................................... 32
Brokerage Policies of the Fund............................................................................ 35
Distribution and Service Plans............................................................................ 37
Performance of the Fund................................................................................... 41

About Your Account
How To Buy Shares......................................................................................... 45
How To Sell Shares........................................................................................ 54
How To Exchange Shares.................................................................................... 59
Dividends, Capital Gains and Taxes........................................................................ 62
Additional Information About the Fund..................................................................... 65

Financial Information About the Fund
Independent Auditors' Report.............................................................................. 66
Financial Statements...................................................................................... 67

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

---------------------------------------- ---------------------------------------------------------------------------
---------------------------------------- ---------------------------------------------------------------------------
2001 $19,035,604
---------------------------------------- ---------------------------------------------------------------------------

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

--------------------------------------- ---------------------------------------------------------------------------
--------------------------------------- ---------------------------------------------------------------------------
2001 $10,980,2762
--------------------------------------- ---------------------------------------------------------------------------
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%

------------------- --------------------- ---------------------- ---------------------------- ------------------------
------------------- --------------------- ---------------------- ---------------------------- ------------------------
Class N Plan               $2,468                $2,448                    $28,936                     2.12%
------------------- --------------------- ---------------------- ---------------------------- ------------------------

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 shares by Lipper, Inc. 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 categories based on investment styles. The Lipper performance rankings
are based on total returns that include the reinvestment of capital gain distributions and income dividends but
do not take sales charges or taxes into consideration. Lipper also publishes "peer-group" indices of the
performance of all mutual funds in a category that it monitors and averages of the performance of the funds in
particular categories.

|X| Morningstar Ratings 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 categories: domestic stock funds,
international stock funds, taxable bond funds and municipal bond funds. The Fund is included in the domestic
stock funds category.

Morningstar proprietary star ratings reflect historical risk-adjusted total investment return.
For each fund with at least a three-year history, Morningstar calculates a Morningstar RatingTM metric each month
by subtracting the return on a 90-day U.S.Treasury Bill for the load-adjusted return for the same period, and then
adjuxting this excess return for risk. The top 10% of funds in each broad asset class receive 5 stars, the next 22.5%
receive 4 stars, the next35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The
Overall Morningstar Ratingfor 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 classes of shares may be compared in publications to the performance
of various market indices or other investments, and averages, performance rankings or other benchmarks prepared
by recognized mutual fund statistical services.

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

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

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

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

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

How to Buy Shares

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

AccountLink. When shares are purchased through AccountLink, each purchase must be at least $25. Shares will be
purchased on the regular business day 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 charge rate may be obtained for Class A
shares under Right of Accumulation and Letters of Intent because of the economies of sales efforts and reduction
in expenses realized by the Distributor, dealers and brokers making such sales. No sales charge is imposed in
certain other circumstances described in Appendix

C to this Statement of Additional Information because the Distributor or dealer or broker incurs little or no
selling expenses.

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, theDistributor, 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


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.

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.

--------
1 Messrs. Bowen, Cameron, Marshall and Murphy are not Directors of Panorama Series Fund, Inc. Messrs. Armstrong, Bowen, Cameron,
Fossel and Marshall are not Managing General Partners of Centennial America Fund, L.P. Mr. Murphy is not a Trustee or Managing
General Partner of any of the Centennial trusts.
2 The address of each Director is 6803 S. Tucson Way, Englewood, CO 80112-3924.
3 Each Director serves for an indefinite term, until his resignation, death or removal.
4 The address of Mr. Murphy is 498 Seventh Avenue, New York, NY 10018.
5 Mr. Murphy serves for an indefinite term, until his resignation, death or removal.
6 Includes shares owned by Mr. Murphy in other Oppenheimer Funds for which he serves as director or trustee.
7 The address of each Officer is 498 Seventh Avenue, New York, NY 10018 except for Mr. Wixted and Ms. Ives, whose address is 6803 S.
Tucson Way, Englewood, CO 80112-3924.
8 Each Officer serves for an annual term, or until his or her earlier resignation, death or removal.
9. The term "Independent Directors" used in reference to plans adopted under Rule 12b-1 of the Investment Company Act means those
Directors who are not "interested persons" of the Fund and who do not have any direct or indirect financial interest in the operation
of the distribution plan or any agreement under the plan.
1 Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund.
2 In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered closed-end fund, references to contingent deferred
sales charges mean the Fund's Early Withdrawal Charges and references to "redemptions" mean "repurchases" of shares.
3 An "employee benefit plan" means any plan or arrangement, whether or not it is "qualified" under the Internal Revenue Code, under
which Class N shares of an Oppenheimer fund or funds are purchased by a fiduciary or other administrator for the account of
participants who are employees of a single employer or of affiliated employers. These may include, for example, medical savings
accounts, payroll deduction plans or similar plans. The fund accounts must be registered in the name of the fiduciary or
administrator purchasing the shares for the benefit of participants in the plan.
4 The term "Group Retirement Plan" means any qualified or non-qualified retirement plan for employees of a corporation or sole
proprietorship, members and employees of a partnership or association or other organized group of persons (the members of which may
include other groups), if the group has made special arrangements with the Distributor and all members of the group participating in
(or who are eligible to participate in) the plan purchase shares of an Oppenheimer fund or funds through a single investment dealer,
broker or other financial institution designated by the group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and
403(b) plans other than plans for public school employees. The term "Group Retirement Plan" also includes qualified retirement plans
and non-qualified deferred compensation plans and IRAs that purchase shares of an Oppenheimer fund or funds through a single
investment dealer, broker or other financial institution that has made special arrangements with the Distributor.
5 However, that concession will not be paid on purchases of shares in amounts of $1 million or more (including any right of
accumulation) by a Retirement Plan that pays for the purchase with the redemption proceeds of Class C shares of one or more
Oppenheimer funds held by the Plan for more than one year.
6 This provision does not apply to IRAs.
7 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.
8 The distribution must be requested prior to Plan termination or the elimination of the Oppenheimer funds as an investment option
under the Plan.
9 This provision does not apply to IRAs.
10 This provision does not apply to loans from 403(b)(7) custodial plans.
11 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.

Appendix B

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Industry Classifications
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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.
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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
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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

890
PX420.0402