OppenheimerFunds Limited-Term Government

497 1 body.htm BODY OppenheimerFunds Limited-Term Government

Oppenheimer Limited-Term Government Fund
Supplement dated July 31, 2001 to the
Prospectus dated January 26, 2001

The Prospectus is changed as follows:

1. The supplement dated May 23, 2001 is replaced with this supplement.

2. The footnotes on the bottom of pages 11 and 12 are removed.

3. The section entitled "Repurchase Agreements" on page 11 is replaced by
the following:

Repurchase Agreements. The Fund can enter into repurchase
agreements for cash management and liquidity purposes. In a
repurchase transaction, the Fund buys a U.S. government
security and simultaneously agrees to sell it back later at a
higher price in the future. While the Fund's repurchase
agreements must be fully collateralized, delays or losses
could occur if the other party to the agreement defaults or
becomes insolvent.

4. The third sentence of the section entitled "Illiquid and Restricted
Securities" on page 12 is replaced by the following sentences:

The Fund will not invest more than 10% of its net assets in
illiquid or restricted securities (including repurchase
agreements maturing beyond seven (7) days). The Fund's Board of
Trustees can increase that limit to 15%. Certain restricted
securities that are eligible for resale to qualified
institutional purchasers may not be subject to that limit.

5. The paragraph captioned "Class N Shares" under the heading "What
Classes of Shares Does the Fund Offer?" on page 16 is revised by deleting the
first three sentences of that section and replacing it with the following
sentence:

If you buy Class N shares (available only through certain
retirement plans), you pay no sales charge at the time of
purchase, but you will pay an annual asset-based sales charge.

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6. The first and second sentences of the section captioned "Class A
Contingent Deferred Sales Charge" on page 19 are deleted and replaced with
the following:

There is no initial sales charge on non-retirement plan purchases
of Class A shares of any one or more of the Oppenheimer funds
aggregating $1 million or more, or for certain purchases by
particular types of retirement plans that were permitted to
purchase such shares prior to March 1, 2001. (After March 1,
2001, retirement plans are not permitted to make initial
purchases of Class A shares subject to a contingent deferred
sales charge.) The Distributor pays dealers of record
concessions in an amount equal to 1.0% of purchases of $1 million
or more other than by those grandfathered retirement accounts.

7. The following sentence, which is the last sentence of the first
paragraph in the section captioned "Class A Contingent Deferred Sales Charge"
on page 19, is deleted:

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.

8. The following paragraph is added after "Can You Reduce Class A Sales
Charges?" on page 19:

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

9. The heading entitled "Who Can Buy Class N Shares?" on page 20 is
changed to read, "How Can You Buy Class N Shares?"

10. The first paragraph in "How Can You Buy Class N Shares?" on page 20 is
revised to read as follows:

Class N shares are offered only through retirement plans
(including IRAs and 403(b) plans) that purchase $500,000 or more
of Class N shares of one or more Oppenheimer funds or through
retirement plans (not including IRAs and 403(b) plans) that have
assets of $500,000 or more or 100 or more eligible participants.
See "Availability of Class N Shares" in the Statement of
Additional Information for other circumstances where Class N
shares are available for purchase.

11. The following is added to the end of the last paragraph under
"Distribution and Service Plans for Class B, Class C and Class N Shares" on
page 22:

That sales concession on the sale of Class N shares will not be
paid on (i) 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), (ii)
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), and (iii) 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.

12. The third sentence in the section entitled "OppenheimerFunds Internet
Web Site" on page 23 is revised to read as follows:

To perform account transaction or obtain account information
online, you must first obtain a user I.D. and password on that
website.

13. The first sentence of the last paragraph under the heading "Shareholder
Account Rules and Policies" on page 30 is revised by adding the words "and
annual notice of the Fund's privacy policy" after the phrase, "annual and
semi-annual report."

[over]
14. The last sentence of the last paragraph under the heading "Shareholder
Account Rules and Policies" on page 30 is revised to read as follows:

Individual copies of prospectuses, reports and privacy notices
will be sent to you commencing 30 days after the Transfer Agent
receives your request to stop householding.

15. The first sentence under "How to Get More Information" on the
Prospectus back cover is revised to read as follows:

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

July 31, 2001 PS0855.022
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Oppenheimer Limited-Term Government Fund
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6803 South Tucson Way, Englewood, Colorado 80112
1.800.525.7048

Statement of Additional Information dated January 26, 2001, Revised July 31,

2001

This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and supplements
information in the Prospectus dated January 26, 2001, as supplemented from
time to time. It should be read together with the Prospectus. You can obtain
the Prospectus by writing to the Fund's Transfer Agent, OppenheimerFunds
Services, at P.O. Box 5270, Denver, Colorado 80217, or by calling the
Transfer Agent at the toll-free number shown above, or by downloading it from
the OppenheimerFunds Internet web site at www.oppenheimerfunds.com.

Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.. 1
The Fund's Investment Policies..................................... 1
Other Investment Techniques and Strategies......................... 7
Investment Restrictions............................................ 17
How the Fund is Managed ............................................... 19
Organization and History........................................... 19
Trustees and Officers of the Fund.................................. 20
The Manager........................................................ 26

Brokerage Policies of the Fund......................................... 27
Distribution and Service Plans......................................... 29
Performance of the Fund................................................ 33

About Your Account
How To Buy Shares...................................................... 38
How To Sell Shares..................................................... 47
How To Exchange Shares................................................. 52
Dividends, Capital Gains and Taxes..................................... 55
Additional Information About the Fund.................................. 57

Financial Information About the Fund
Independent Auditors' Report........................................... 58
Financial Statements................................................... 59

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

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

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

With its objective of seeking high current return and safety of
principal, the Fund may purchase or sell securities without regard to the
length of time the security has been held, to take advantage of short-term
differentials in yields. While short-term trading increases the portfolio
turnover, the execution cost for U.S. Government Securities is substantially
less than for equivalent dollar values of equity securities (see "Brokerage
Provisions of the Investment Advisory Agreement," below).

|X| Duration of the Fund's Portfolio. The Fund can invest in
debt securities of any maturity or duration but currently has an operating
policy to maintain a dollar-weighted average effective portfolio duration of
not more than 3 years. The goal is to try to manage the sensitivity of the
Fund's portfolio to changes in interest rates, and in doing so to manage the
volatility of the Fund's share prices in response to those changes. However,
unanticipated events may change the effective duration of a security after
the Fund buys it, and there can be no assurance that the Fund will achieve
its targeted duration at all times.

The Manager determines the effective duration of debt obligations
purchased by the Fund considering various factors that apply to a particular
type of debt obligation, including those described below. Duration is a
measure of the expected life of a security on a current-value basis expressed
in years, using calculations that consider the security's yield, coupon
interest payments, final maturity and call features.

While a debt security's maturity can be used to measure the sensitivity
of the security's price to changes in interest rates, the term to maturity of
a security does not take into account the pattern (or expected pattern) of
the security's payments of interest or principal prior to maturity. Duration,
on the other hand, measures the length of the time interval from the present
to the time when the interest and principal payments are scheduled to be
received (or, in the case of a mortgage-related security, when the interest
payments are expected to be received). Duration calculations weigh them by
the present value of the cash to be received at each future point in time. If
the interest payments on a debt security occur prior to the repayment of
principal, the duration of the security is less than its stated maturity. For
zero-coupon securities, duration and term to maturity are equal.

Absent other factors, the lower the stated or coupon rate of interest
on a debt security or the longer the maturity or the lower the
yield-to-maturity of the debt security, the longer the duration of the
security. Conversely, the higher the stated or coupon rate of interest, the
shorter the maturity or the higher the yield-to-maturity of a debt security,
the shorter the duration of the security.

Futures, options and options on futures in general have durations that
are closely related to the duration of the securities that underlie them.
Holding long futures positions or call option positions (backed by liquid
assets) will tend to lengthen the portfolio's duration.

In some cases the standard effective duration calculation does not
properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or
more years. However, their exposure to interest rate changes corresponds to
the frequency of the times at which their interest coupon rate is reset. In
the case of mortgage pass-through securities, the stated final maturity of
the security is typically 30 years, but current rates or prepayments are more
important to determine the security's interest rate exposure. In these and
other similar situations, the Manager will use other analytical techniques
that consider the economic life of the security as well as relevant
macroeconomic factors (such as historical prepayment rates) in determining
the Fund's effective duration.

|X| Mortgage-Related Securities. Mortgage-related securities are a form of
derivative investment collateralized by pools of commercial or residential
mortgages. Pools of mortgage loans are assembled as securities for sale to
investors by government agencies or instrumentalities or by private issuers.
These securities include collateralized mortgage obligations ("CMOs"),
mortgage pass-through securities, stripped mortgage pass-through securities,
interests in real estate mortgage investment conduits ("REMICs") and other
real estate-related securities.

Mortgage-related securities that are issued or guaranteed by agencies
or instrumentalities of the U.S. government have relatively little credit
risk (depending on the nature of the issuer) but are subject to interest rate
risks and prepayment risks, as described in the Prospectus. Mortgage-related
securities issued by private issuers have greater credit risk.

As with other debt securities, the prices of mortgage-related
securities tend to move inversely to changes in interest rates. The Fund can
buy mortgage-related securities that have interest rates that move inversely
to changes in general interest rates, based on a multiple of a specific
index. Although the value of a mortgage-related security may decline when
interest rates rise, the converse is not always the case.
In periods of declining interest rates, mortgages are more likely to be
prepaid. Therefore, a mortgage-related security's maturity can be shortened
by unscheduled prepayments on the underlying mortgages, and it is not
possible to predict accurately the security's yield. The principal that is
returned earlier than expected may have to be reinvested in other investments
having a lower yield than the prepaid security. As a result, these securities
may be less effective as a means of "locking in" attractive long-term
interest rates, and they may have less potential for appreciation during
periods of declining interest rates, than conventional bonds with comparable
stated maturities.

Prepayment risks can lead to substantial fluctuations in the value of a
mortgage-related security. In turn, this can affect the value of the Fund's
shares. If a mortgage-related security has been purchased at a premium, all
or part of the premium the Fund paid may be lost if there is a decline in the
market value of the security, whether that results from interest rate changes
or prepayments on the underlying mortgages. In the case of stripped
mortgage-related securities, if they experience greater rates of prepayment
than were anticipated, the Fund may fail to recoup its initial investment on
the security.

During periods of rapidly rising interest rates, prepayments of
mortgage-related securities may occur at slower than expected rates. Slower
prepayments effectively may lengthen a mortgage-related security's expected
maturity. Generally, that would cause the value of the security to fluctuate
more widely in responses to changes in interest rates. If the prepayments on
the Fund's mortgage-related securities were to decrease broadly, the Fund's
effective duration, and therefore its sensitivity to interest rate changes,
would increase.

As with other debt securities, the values of mortgage-related
securities may be affected by changes in the market's perception of the
creditworthiness of the entity issuing the securities or guaranteeing them.
Their values may also be affected by changes in government regulations and
tax policies.

o Collateralized Mortgage Obligations. CMOs are multi-class bonds that
are backed by pools of mortgage loans or mortgage pass-through certificates.
They may be collateralized by:
(1) pass-through certificates issued or guaranteed by Ginnie Mae, Fannie
Mae, or Freddie Mac,
(2) unsecuritized mortgage loans insured by the Federal Housing
Administration or guaranteed by the Department of
Veterans' Affairs,
(3) unsecuritized conventional mortgages,
(4) other mortgage-related securities, or
(5) any combination of these.

Each class of CMO, referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on the underlying mortgages may cause the CMO to be retired much
earlier than the stated maturity or final distribution date. The principal
and interest on the underlying mortgages may be allocated among the several
classes of a series of a CMO in different ways. One or more tranches may have
coupon rates that reset periodically at a specified increase over an index.
These are floating rate CMOs, and typically have a cap on the coupon rate.
Inverse floating rate CMOs have a coupon rate that moves in the opposite
direction of an applicable index. The coupon rate on these CMOs will increase
as general interest rates decrease. These are usually much more volatile than
fixed rate CMOs or floating rate CMOs.
|X| U.S. Government Mortgage-Related Securities. The Fund can invest
in a variety of mortgage-related securities that are issued by U.S.
government agencies or instrumentalities, some of which are described below.

o GNMA Certificates. The Government National Mortgage Association
("GNMA") is a wholly-owned corporate instrumentality of the United States
within the U.S. Department of Housing and Urban Development. GNMA's
principal programs involve its guarantees of privately-issued securities
backed by pools of mortgages. Ginnie Maes are debt securities representing
an interest in one mortgage or a pool of mortgages that are insured by the
Federal Housing Administration or the Farmers Home Administration or
guaranteed by the Veterans Administration

The Ginnie Maes in which the Fund invests are of the "fully modified
pass-through" type. They provide that the registered holders of the Ginnie
Maes will receive timely monthly payments of the pro-rata share of the
scheduled principal payments on the underlying mortgages, whether or not
those amounts are collected by the issuers. Amounts paid include, on a pro
rata basis, any prepayment of principal of such mortgages and interest (net
of servicing and other charges) on the aggregate unpaid principal balance of
the Ginnie Maes, whether or not the interest on the underlying mortgages has
been collected by the issuers.

The Ginnie Maes purchased by the Fund are guaranteed as to timely
payment of principal and interest by GNMA. In giving that guaranty, GNMA
expects that payments received by the issuers of Ginnie Maes on account of
the mortgages backing the Ginnie Maes will be sufficient to make the required
payments of principal of and interest on those Ginnie Maes. However, if those
payments are insufficient, the guaranty agreements between the issuers of the
Ginnie Maes and GNMA require the issuers to make advances sufficient for the
payments. If the issuers fail to make those payments, GNMA will do so.

Under Federal law, the full faith and credit of the United States is
pledged to the payment of all amounts that may be required to be paid under
any guaranty issued by GNMA as to such mortgage pools. An opinion of an
Assistant Attorney General of the United States, dated December 9, 1969,
states that such guaranties "constitute general obligations of the United
States backed by its full faith and credit." GNMA is empowered to borrow
from the United States Treasury to the extent necessary to make any payments
of principal and interest required under those guaranties.

Ginnie Maes are backed by the aggregate indebtedness secured by the
underlying FHA-insured, FMHA-insured or VA-guaranteed mortgages. Except to
the extent of payments received by the issuers on account of such mortgages,
Ginnie Maes do not constitute a liability of those issuers, nor do they
evidence any recourse against those issuers. Recourse is solely against
GNMA. Holders of Ginnie Maes (such as the Fund) have no security interest in
or lien on the underlying mortgages.

Monthly payments of principal will be made, and additional prepayments
of principal may be made, to the Fund with respect to the mortgages
underlying the Ginnie Maes owned by the Fund. All of the mortgages in the
pools relating to the Ginnie Maes in the Fund are subject to prepayment
without any significant premium or penalty, at the option of the mortgagors.
While the mortgages on 1-to-4-family dwellings underlying certain Ginnie Maes
have a stated maturity

of up to 30 years, it has been the experience of the mortgage industry that
the average life of comparable mortgages, as a result of prepayments,
refinancing and payments from foreclosures, is considerably less.

o Federal Home Loan Mortgage Corporation ("FHLMC") Certificates. FHLMC,
a corporate instrumentality of the United States, issues FHLMC Certificates
representing interests in mortgage loans. FHLMC guarantees to each
registered holder of a FHLMC Certificate timely payment of the amounts
representing a holder's proportionate share in:
(i) interest payments less servicing and guarantee fees,
(ii) principal prepayments, and
(iii) the ultimate collection of amounts representing the holder's
proportionate interest in principal payments on the mortgage
loans in the pool represented by the FHLMC Certificate, in
each case whether or not such amounts are actually received.

The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States or
any of its agencies or instrumentalities other than FHLMC.

o Federal National Mortgage Association (Fannie Mae) Certificates.
Fannie Mae, a federally-chartered and privately-owned corporation, issues
Fannie Mae Certificates which are backed by a pool of mortgage loans. Fannie
Mae guarantees to each registered holder of a Fannie Mae Certificate that the
holder will receive amounts representing the holder's proportionate interest
in scheduled principal and interest payments, and any principal prepayments,
on the mortgage loans in the pool represented by such Certificate, less
servicing and guarantee fees, and the holder's proportionate interest in the
full principal amount of any foreclosed or other liquidated mortgage loan. In
each case the guarantee applies whether or not those amounts are actually
received. The obligations of Fannie Mae under its guarantees are obligations
solely of Fannie Mae and are not backed by the full faith and credit of the
United States or any of its agencies or instrumentalities other than Fannie
Mae.

|X| Treasury Inflation-Protection Securities. The Fund can buy U.S.
Treasury securities, called "TIPS," which 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.

|X| Zero-Coupon U.S. Government Securities. The Fund may buy
zero-coupon U.S. government securities. These will typically be U.S. Treasury
Notes and Bonds that have been stripped of their unmatured interest coupons,
the coupons themselves, or certificates representing interests in those
stripped debt obligations and coupons.

Zero-coupon securities do not make periodic interest payments and are
sold at a deep discount from their face value at maturity. 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. The discount typically decreases as the maturity date approaches.

Because zero-coupon securities pay no interest and compound
semi-annually at the rate fixed at the time of their issuance, their value is
generally more volatile than the value of other debt securities that pay
interest. 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| 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. Increased portfolio turnover could
create higher transaction costs for the Fund, which may reduce its overall
performance. Additionally, the realization of capital gains from selling
portfolio securities may result in distributions of taxable long-term capital
gains to shareholders, since the Fund will normally distribute all of its
capital gains realized each year, to avoid excise taxes under the Internal
Revenue Code.

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

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

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

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

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

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

The yields to maturity of I/Os and P/Os are very sensitive to principal
repayments (including prepayments) on the underlying mortgages. If the
underlying mortgages experience greater than anticipated prepayments of
principal, the Fund might not fully recoup its investment in an I/O based on
those assets. If underlying mortgages experience less than anticipated
prepayments of principal, the yield on the P/Os based on them could decline
substantially.

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

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

Repurchase agreements, 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. As a fundamental policy, the
Fund requires that the ownership and control of the securities subject to a
repurchase agreement must be transferred to the Fund. 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
monitor the collateral's value on an ongoing basis.

The Fund's investments in repurchase agreements maturing in more than
seven (7) days are limited to the Fund's restriction on illiquid and
restricted securities as stated in the Prospectus. The Fund has no limit on
investments in repurchase agreements maturing in less than 7 days.

|X| Reverse Repurchase Agreements. The Fund can use reverse
repurchase agreements as a cash management tool, but not as a source of
leverage for investing. It does not currently use reverse repurchase
agreements, but may do so in the future. When the Fund enters into a reverse
repurchase agreement, it segregates on its books an amount of cash or U.S.
government securities equal in value to the purchase price of the securities
it has committed to buy, plus accrued interest, until the payment is made to
the seller. As a fundamental policy, the Fund will not enter into a reverse
repurchase agreement unless the securities that collateralize the transaction
have a maturity date not later than the settlement date of the transaction.
Before the Fund enters into a reverse repurchase agreement, the Manager
evaluates the creditworthiness of the seller, typically a bank or
broker-dealer.

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

When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made.
Delivery and payment for the securities take place at a later date. As a
fundamental policy, the Fund will not enter into such transactions unless the
settlement date is within 120 days of the trade date and is settled in cash
on the settlement date. The securities are subject to change in value from
market fluctuations during the period until settlement. The value at
delivery may be less than the purchase price. For example, changes in
interest rates in a direction other than that expected by the Manager before
settlement will affect the value of such securities and may cause a loss to
the Fund. During the period between purchase and settlement, the Fund makes
no payment to the issuer and no interest accrues to the Fund from the
investment until it receives the security at settlement. There is a risk of
loss to the Fund if the value of the security changes prior to the settlement
date, and there is the risk that the other party may not perform.

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
obligation is entered into. When the Fund enters into a when-issued or
delayed-delivery transaction, it relies on the other party to complete the
transaction. Its failure to do so may cause the Fund to lose the opportunity
to obtain the security at a price and yield the Manager considers to be
advantageous.

When the Fund engages in when-issued and delayed-delivery transactions,
it does so for the purpose of acquiring or selling securities consistent with
its investment objective and policies for its portfolio or for delivery
pursuant to options contracts it has entered into, and not for the purposes
of investment leverage. Although the Fund will enter into when-issued or
delayed-delivery purchase transactions to acquire securities, the Fund 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 deliver 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| Loans of Portfolio Securities. To raise cash for liquidity
purposes or income, the Fund can lend its portfolio securities to brokers,
dealers and other types of financial institutions approved by the Fund's
Board of Trustees. These loans are limited to not more than 25% of the value
of the Fund's total assets. The Fund currently does not intend to engage in
loans of securities in the coming year, but if it does so, such loans will
not likely exceed 5% of the Fund's total assets. A policy of the Fund's
Board of Trustees limits these loans to 10% 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 if the borrower defaults. The
Fund must receive collateral for a loan. Under current applicable regulatory
requirements (which are subject to change), on each business day the loan
collateral must be at least equal to the value of the loaned securities. It
must consist of cash, bank letters of credit or 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 finders', custodian and administrative fees in
connection with these loans. The terms of the Fund's loans must meet
applicable tests under the Internal Revenue Code and must permit the Fund to
reacquire loaned securities on five days' notice or in time to vote on any
important matter.

|X| Borrowing. The Fund has the ability to borrow from banks on an
unsecured basis to invest the borrowed funds in portfolio securities. If the
Fund does borrow, it must do so consistent with its fundamental policy on
borrowing below. Currently, the Fund does not anticipate that its borrowing
would exceed 5% of its net assets.

|X| Derivatives. The Fund can invest in a variety of derivative
investments to seek income or for hedging purposes. A number of these
derivative investments, such as "interest-only" and "principal-only"
securities, have been described above. Some other derivative investments the
Fund may use are the hedging instruments described below in this Statement of
Additional Information.

|X| Hedging. Although the Fund does not anticipate the extensive use
of hedging instruments, the Fund can use hedging instruments. 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. To attempt to protect
against declines in the market value of the Fund's portfolio, to permit the
Fund to retain unrealized gains in the value of portfolio securities which
have appreciated, or to facilitate selling securities for investment reasons,
the Fund could:
o sell futures contracts,
o buy puts on such futures or on securities, or
o write covered calls on securities or futures. Covered calls may also
be used to increase the Fund's income, but the Manager does not
expect to engage extensively in that practice.

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

The Fund 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.

o Futures. The Fund can buy and sell futures contracts that relate to
debt securities (these are referred to as "interest rate futures"). 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 at a specified future date. Either party could also enter into an
offsetting contract to close out the position.

No money is paid or received by the Fund on the purchase or sale of a
future. Upon entering into a futures transaction, the Fund will be required
to deposit an initial margin payment with the futures commission merchant
(the "futures broker"). Initial margin payments will be deposited with the
Fund's Custodian bank in an account registered in the futures broker's name.
However, the futures broker can gain access to that account only under
specified conditions. As the future is marked to market (that is, its value
on the Fund's books is changed) to reflect changes in its market value,
subsequent margin payments, called variation margin, will be paid to or by
the futures broker daily.

At any time prior to expiration of the future, the Fund may elect to
close out its position by taking an opposite position, at which time a final
determination of variation margin is made and any additional cash must be
paid by or released to the Fund. Any loss or gain on the future is then
realized by the Fund for tax purposes. All futures transactions are effected
through a clearinghouse associated with the exchange on which the contracts
are traded.

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

o Writing Covered Call Options. The Fund can write (that is, sell)
covered calls. If the Fund sells a call option, it must be covered. That
means the Fund must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may be covered by
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 on a security, it receives cash (a
premium). The Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed
exercise price regardless of market price changes during the call period. The
call period is usually not more than nine months. The exercise price may
differ from the market price of the underlying security. The Fund has the
risk of loss that the price of the underlying security may decline during the
call period. That risk may be offset to some extent by the premium the Fund
receives. If the value of the investment does not rise above the call price,
it is likely that the call will lapse without being exercised. In that case
the Fund would keep the cash premium and the investment.

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

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

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

To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction." The Fund
will then realize a profit or loss, depending upon whether the net of the
amount of the option transaction costs and the premium received on the call
the Fund wrote is more or less than the price of the call the Fund purchases
to close out the transaction. The Fund may realize a profit if the call
expires unexercised, because the Fund will retain the underlying security and
the premium it received when it wrote the call. Any such profits are
considered short-term capital gains for federal income tax purposes, as are
the premiums on lapsed calls. When distributed by the Fund they are taxable
as ordinary income. If the Fund cannot effect a closing purchase transaction
due to the lack of a market, it will have to hold the callable securities
until the call expires or is exercised.
The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at
the time the call is written, the Fund must cover the call by segregating an
equivalent dollar amount of liquid assets. The Fund will segregate
additional liquid assets if the value of the segregated assets drops below
100% of the current value of the future. Because of this segregation
requirement, in no circumstances would the Fund's receipt of an exercise
notice as to that future require the Fund to deliver a futures contract. It
would simply put the Fund in a short futures position, which is permitted by
the Fund's hedging policies.

o Writing Put Options. The Fund can sell put options. 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 total assets would be required to be segregated to cover such
put options.

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

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

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

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

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

o Purchasing Calls and Puts. The Fund can purchase calls 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. The Fund can buy puts on securities or interest rate
futures, whether or not it owns them. 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 a future, it pays a premium,
but settlement is in cash rather than by delivery of the underlying
investment to the Fund. Gain or loss depends on changes in the index in
question (and thus on price movements in the securities market generally)
rather than on price movements in individual securities or futures contracts.

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

o 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.

o Interest Rate Swap Transactions. The Fund can enter into interest rate
swap agreements. In an interest rate swap, the Fund and another party
exchange their right to receive or their obligation to pay interest on a
security. For example, they might swap the right to receive floating rate
payments for fixed rate payments. The Fund can enter into swaps only on
securities that it owns. The Fund will not enter into swaps with respect to
more than 25% of its total assets. Also, the Fund will identify on its books
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."

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

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

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

Investment Restrictions

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

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

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

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

o The Fund cannot buy securities issued or guaranteed by any one issuer
if more than 5% of its total assets would be invested in securities or other
instruments of that issuer or if it would then own more than 10% of that
issuer's voting securities. This limitation applies to 75% of the Fund's
total assets. The limit does not apply to securities issued by the U.S.
government or any of its agencies or instrumentalities, or securities of
other investment companies.
o The Fund cannot invest 25% or more of its total assets in any one
industry. That limit does not apply to securities issued or guaranteed by
the U.S. government or its agencies and instrumentalities.

o The Fund cannot deviate from any of its other investment policies that
are described as fundamental policies in the Prospectus or this Statement of
Additional Information.

o The Fund cannot make loans except (a) through lending of securities,
(b) through the purchase of debt instruments or similar evidences of
indebtedness, (c) through an inter-fund lending program with other affiliated
funds,1 and (d) through repurchase agreements.

o The Fund cannot borrow money in excess of 331/3% of the value of its
total assets (including the amount borrowed). The Fund may borrow only from
banks and/or affiliated investment companies.1 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.

o The Fund cannot purchase or sell real estate, commodities or commodity
contracts. However, the Fund may use hedging instruments approved by its
Board of Trustees whether or not those hedging instruments are considered
commodities or commodity contracts.

o The Fund cannot underwrite securities. A permitted exception is in case
it is deemed to be an underwriter under the Securities Act of 1933 when
reselling any securities held in its own portfolio.

o The Fund cannot issue "senior securities," but this does not prohibit
certain investment activities for which assets of the Fund are designated as
segregated, or margin, collateral or escrow arrangements are established, to
cover the related obligations. Examples of those activities include
borrowing money, reverse repurchase agreements, delayed-delivery and
when-issued arrangements for portfolio securities transactions, contracts to
buy or sell derivatives, hedging instruments, options, or futures.

|X| Does the Fund Have Additional Restrictions That Are Not "Fundamental"
Policies?

The Fund has additional operating policies that are not
"fundamental," and which can be changed by the Board of Trustees
without shareholder approval.

o The Fund cannot invest in securities of other investment companies,
except if it acquires them as part of a merger, consolidation or acquisition
of assets.

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

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

This Statement of Additional Information and the Prospectus have been
revised and supplemented, respectively, to reflect changes to various
fundamental policies as approved by shareholders at a meeting of the Fund
held on March 30, 2001.

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares of
beneficial interest. The Fund was organized as a Massachusetts business trust
in 1986. Prior to April 7, 1990, the Fund was managed by a different
investment advisor than the Manager.

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

|X| Classes of Shares. The Board of Trustees has the power, without
shareholder approval, to divide unissued shares of the Fund into two or more
classes. The Board has done so, and the Fund currently has five classes of
shares: Class A, Class B, Class C, Class N and Class Y. All classes invest
in the same investment portfolio. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o may have a different net asset value,
o may have separate voting rights on matters in which interests of one
class are different from interests of another class, and
o votes as a class on matters that affect that class alone.

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

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

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

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

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

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

Trustees and Officers of the Fund. The Fund's Trustees and officers and
their principal occupations and business affiliations during the past five
years are listed below. Trustees denoted with an asterisk (*) below are
deemed to be "interested persons" of the Fund under the Investment Company
Act. All of the Trustees are also trustees, directors or managing general
partner of the following Denver-based Oppenheimer funds: 2

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. Swain, Bishop, Wixted, Donohue, Farrar, Wixted and Zack, who
are officers of the Fund, respectively hold the same offices with the other
Denver-based Oppenheimer funds as with the Fund. As of January 8, 2001, the
Trustees and officers of the Fund as a group owned less than 1% of the
outstanding shares of the Fund. The foregoing statement does not reflect
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 below. Mr. Donohue is a trustee of that plan.

James C. Swain*, Chairman, Chief Executive Officer and Trustee, Age: 67.
6803 South Tucson Way, Englewood, Colorado 80112
Vice Chairman of the Manager (since September 1988); formerly President and a
director of Centennial Asset Management Corporation, an investment advisor
subsidiary of the Manager and Chairman of the Board of Shareholder Services,
Inc.

Bridget A. Macaskill*, President and Trustee, Age: 52.
Two World Trade Center, New York, New York 10048-0203
Formerly Ms. Macaskill held the following positions: Chairman (August
2000-June 2001), Chief Executive Officer (September 1995-June 2001) and a
director (December 1994-June 2001) of the Manager; President (September
1995-June 2001) and a director (October 1990-June 2001) of Oppenheimer
Acquisition Corp., the Manager's parent holding company; President, Chief
Executive Officer and a director (March 2000-June 2001) of OFI Private
Investments, Inc., an investment adviser subsidiary of the Manager; Chairman
and a director of Shareholder Services, Inc. (August 1994-June 2001) and
Shareholder Financial Services, Inc. (September 1995-June 2001), transfer
agent subsidiaries of the Manager; President (September 1995-June 2001) and a
director (November 1989-June 2001) of Oppenheimer Partnership Holdings, Inc.,
a holding company subsidiary of the Manager; President and a director
(October 1997-June 2001) of OppenheimerFunds International Ltd., an offshore
fund management subsidiary of the Manager and of Oppenheimer Millennium Funds
plc; a director of HarbourView Asset Management Corporation (July 1991-June
2001) and of Oppenheimer Real Asset Management, Inc. (July 1996-June 2001),
investment adviser subsidiaries of the Manager; a director (April 2000-June
2001) of OppenheimerFunds Legacy Program, a charitable trust program
established by the Manager; President of the Manager (June 1991 - August
2000); and a director (until March 2001) of Prudential Corporation plc (a
U.K. financial service company).

William L. Armstrong, Trustee, Age: 63.
6803 S. Tucson Way, Englewood, CO 80112
Chairman of the following private mortgage banking companies: Cherry Creek
Mortgage Company (since 1991), Centennial State Mortgage Company (since
1994), The El Paso Mortgage Company (since 1993), Transland Financial
Services, Inc. (since 1997), and Ambassador Media Corporation (since 1984);
Chairman of the following private companies: Frontier Real Estate, Inc.
(residential real estate brokerage) (since 1994), Frontier Title (title
insurance agency) (since 1995) and Great Frontier Insurance (insurance
agency) (since 1995); Director of the following public companies: Storage
Technology Corporation (computer equipment company) (since 1991), Helmerich &
Payne, Inc. (oil and gas drilling/production company) (since 1992),
UNUMProvident (insurance company) (since 1991); formerly Director of the
following public companies: International Family Entertainment (television
channel) (1991 - 1997) and Natec Resources, Inc. (air pollution control
equipment and services company) (1991 - 1995).

Robert G. Avis*, Trustee, Age: 69.
6803 S. Tucson Way, Englewood, CO 80112
Director and President of A.G. Edwards Capital, Inc. (General Partner of
private equity funds), formerly, until March 2000, Chairman, President and
Chief Executive Officer of A.G. Edwards Capital, Inc.; formerly, until March
1999, Vice Chairman and Director of A.G. Edwards and Vice Chairman of A.G.
Edwards & Sons, Inc. (its brokerage company subsidiary); until March 1999,
Chairman of A.G. Edwards Trust Company and A.G.E. Asset Management
(investment advisor); until March 2000, a Director of A.G. Edwards & Sons and
A.G. Edwards Trust Company.

George C. Bowen, Trustee, Age: 64.
6803 S. Tucson Way, Englewood, CO 80112
Formerly (until April 1999) Mr. Bowen held the following positions: Senior
Vice President (from September 1987) and Treasurer (from March 1985) of the
Manager; Vice President (from June 1983) and Treasurer (from March 1985) of
OppenheimerFunds, Distributor, Inc., a subsidiary of the Manager and the
Fund's Distributor; Senior Vice President (from February 1992), Treasurer
(from July 1991) Assistant Secretary and a director (from December 1991) of
Centennial Asset Management Corporation; Vice President (from October 1989)
and Treasurer (from April 1986) of HarbourView Asset Management Corporation;
President, Treasurer and a director of Centennial Capital Corporation (from
June 1989); Vice President and Treasurer (from August 1978) and Secretary
(from April 1981) of Shareholder Services, Inc.; Vice President, Treasurer
and Secretary of Shareholder Financial Services, Inc. (from November 1989);
Assistant Treasurer of Oppenheimer Acquisition Corp. (from March 1998);
Treasurer of Oppenheimer Partnership Holdings, Inc. (from November 1989);
Vice President and Treasurer of Oppenheimer Real Asset Management, Inc. (from
July 1996); Treasurer of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (from October 1997).

Edward L. Cameron, Trustee, Age: 62.
6803 S. Tucson Way, Englewood, CO 80112
Formerly (from 1974-1999) a partner with PricewaterhouseCoopers LLC (an
accounting firm) and Chairman, Price Waterhouse LLP Global Investment
Management Industry Services Group (from 1994-1998).

Jon S. Fossel, Trustee, Age: 58.
6803 S. Tucson Way, Englewood, CO 80112
Formerly (until October 1990) Chairman and a director of the Manager,
President and a director of Oppenheimer Acquisition Corp., the Manager's
parent holding company, and Shareholder Services, Inc. and Shareholder
Financial Services, Inc., transfer agent subsidiaries of the Manager.

Sam Freedman, Trustee, Age: 59.
6803 S. Tucson Way, Englewood, CO 80112
Formerly (until October 1994) Chairman and Chief Executive Officer of
OppenheimerFunds Services, Chairman, Chief Executive Officer and a director
of Shareholder Services, Inc., Chairman, Chief Executive Officer and director
of Shareholder Financial Services, Inc., Vice President and director of
Oppenheimer Acquisition Corp. and a director of OppenheimerFunds, Inc.

C. Howard Kast, Trustee, Age: 78.
6803 S. Tucson Way, Englewood, CO 80112
Formerly Managing Partner of Deloitte, Haskins & Sells (an accounting firm).

Robert M. Kirchner, Trustee, Age: 79.
6803 S. Tucson Way, Englewood, CO 80112
President of The Kirchner Company (management consultants).

F. William Marshall, Jr., Trustee, Age: 59.
6803 S. Tucson Way, Englewood, CO 80112
Formerly (until 1999) Chairman of SIS & Family Bank, F.S.B. (formerly SIS
Bank); President, Chief Executive Officer and Director of SIS Bankcorp., Inc.
and SIS Bank (formerly Springfield Institution for Savings) (1993-1999);
Executive Vice President (until 1999) of Peoples Heritage Financial Group,
Inc.; Chairman and Chief Executive Office of Bank of Ireland First Holdings,
Inc. and First New Hampshire Banks (1990-1993); Trustee (since 1996) of
MassMutual Institutional Funds and of MML Series Investment Fund (open-end
investment companies).

John S. Kowalik, Vice President and Portfolio Manager, Age: 43.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President of the Manager (since July 1998) and of HarbourView
Asset Management Corporation (since April 2000); an officer and portfolio
manager of other Oppenheimer funds; formerly Managing Director and Senior
Portfolio Manager at Prudential Global Advisors (June 1989 - June 1998).

Andrew J. Donohue, Vice President and Secretary, Age: 50.
Two World Trade Center, New York, New York 10048-0203
Executive Vice President (since January 1993), General Counsel (since October
1991) and a director (since September 1995) of the Manager; Executive Vice
President and General Counsel (since September 1993) and a director (since
January 1992) of the Distributor; Executive Vice President, General Counsel
and a director (since September 1995) of HarbourView Asset Management
Corporation, Shareholder Services, Inc., Shareholder Financial Services, Inc.
and Oppenheimer Partnership Holdings, Inc., and of OFI Private Investments,
Inc. (since March 2000), and of Oppenheimer Trust Company (since May 2000);
President and a director of Centennial Asset Management Corporation (since
September 1995) and of Oppenheimer Real Asset Management, Inc. (since July
1996); General Counsel (since May 1996) and Secretary (since April 1997) of
Oppenheimer Acquisition Corporation; Vice President and a director (since
September 1997) of OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc; a director (since April 2000) of OppenheimerFunds
Legacy Program, a charitable trust program sponsored by the Manager and of
Trinity Investment Management Corporation (since March 2000); an officer of
other Oppenheimer funds.

Brian W. Wixted, Treasurer, Principal Financial and Accounting Officer, Age:
41.
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice President and Treasurer (since March 1999) of the Manager;
Treasurer (since March 1999) of HarbourView Asset Management Corporation,
Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation,
Shareholder Financial Services, Inc. and Oppenheimer Partnership Holdings,
Inc., and of OFI Private Investments, Inc. (since March 2000) and of
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc
(since May 2000); Treasurer (since May 2000) of Oppenheimer Trust Company;
Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corporation
and of Centennial Asset Management Corporation; an officer of other
Oppenheimer funds; formerly Principal and Chief Operating Officer, Bankers
Trust Company - Mutual Fund Services Division (March 1995 - March 1999); Vice
President and Chief Financial Officer of CS First Boston Investment
Management Corp. (September 1991 - March 1995).

Robert G. Zack, Assistant Secretary, Age: 52.
Two World Trade Center, New York, New York 10048-0203
Senior Vice President (since May 1985) and Associate General Counsel (since
May 1981) of the Manager, Assistant Secretary of Shareholder Services, Inc.
(since May 1985), Shareholder Financial Services, Inc. (since November 1989);
OppenheimerFunds International Ltd. and Oppenheimer Millennium Funds plc
(since October 1997); an officer of other Oppenheimer funds.

Robert J. Bishop, Assistant Treasurer, Age: 42.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); an
officer of other Oppenheimer funds; formerly an Assistant Vice President of
the Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund
Controller for the Manager.

Scott T. Farrar, Assistant Treasurer, Age: 35.
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996);
Assistant Treasurer of Oppenheimer Millennium Funds plc (since October 1997);
an officer of other Oppenheimer Funds; formerly an Assistant Vice President
of the Manager/Mutual Fund Accounting (April 1994 - May 1996), and a Fund
Controller for the Manager.

o Remuneration of Trustees The officers of the Fund and Mr. Swain are
affiliated with the Manager and receive no salary or fee from the Fund. Ms.
Macaskill, who was affiliated with the Manager until June 2001 also received
no salary or fee from the Fund during its fiscal year ended September 30,
2000. The remaining Trustees of the Fund received the compensation shown
below. The compensation from the Fund was paid during its fiscal year ended
September 30, 2000. The compensation from all of the Denver-based
Oppenheimer funds includes the Fund and is compensation received as a
director, trustee, managing general partner, or member of a committee of the
Board during the calendar year 2000.

-----------------------------------------------------------------------------
Total Compensation
Aggregate from all Denver-Based
Compensation Oppenheimer Funds
Trustee's Name and Position* from Fund (39 Funds)1
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
William L. Armstrong2 $1,122 $49,270
Review Committee Member
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Robert G. Avis $2,144 $72,000
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
George Bowen3 $1,409 $55,948
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Jon. S. Fossel4
Review Committee Member $2,258 $77,880
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Sam Freedman
Chairman, Review Committee $2,334 $80,100
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Raymond J. Kalinowski5 $2,258 $73,500
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
C. Howard Kast $2,548 $86,150
Chairman, Audit Committee
and Review Committee Member
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Robert M. Kirchner $2,224 $76,950
Audit Committee Member
-----------------------------------------------------------------------------
* Effective July 1, 2000, William A. Baker and Ned M. Steel resigned as
Trustees of the Fund and subsequently became Trustees Emeritus of the Fund.
For the fiscal year ended September 30, 2000, Messrs. Baker and Steel each
received $2,144 aggregate compensation from the Fund and for the calendar
year ended December 31, 2000, they each received $63,999 total compensation
from all Denver-based Oppenheimer funds. In addition, at a meeting of
shareholders of the Fund held March 30, 2001, Edward Cameron and F. William
Marshall were elected as Trustees of the Fund; however since they were not
Trustees for the fiscal year ended September 30, 2000 nor for the calendar
year ended December 31, 2000 they are not included in the above chart.
1. For the 2000 calendar year.
2. Total Compensation for the 2000 calendar year includes compensation
received for serving as a Trustee or Director of 31 of the Denver-based
Oppenheimer funds.
3. Total Compensation for the 2000 calendar year includes compensation
received for serving as a Trustee or Director of 29 of the Denver-based
Oppenheimer funds.
4. Total Compensation for the 2000 calendar year includes compensation
received for serving as a Trustee or Director of 37 of the Denver-based
Oppenheimer funds.
5. Mr. Kalinowski resigned as Trustee of the Denver funds effective April
5, 2001 and therefore his biographical information has been removed from
the applicable section above.

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

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

|X| Major Shareholders. As of January 08, 2001, the only persons who owned
of record or were known by the Fund to own beneficially 5% or more of the
Fund's outstanding securities of any class were:

Merrill Lynch Pierce Fenner & Smith, 4800 Deer Lake Drive E., 3rd
Floor, Jacksonville, Florida 32246, which owned 1,610,268.333 Class C
shares (representing approximately 9.33% of the Fund's then-outstanding
Class C shares), for the benefit of its customers.

Oppenheimer Capital Preservation Fund, 6803 South Tucson Way,
Englewood, CO 80112-3924, which owned 1,459,209.194 Class Y shares
(representing approximately 99.99% of the Fund's then-outstanding Class
Y shares), for the benefit of its shareholders.

The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a
holding company controlled by Massachusetts Mutual Life Insurance Company.
The Manager and the Fund 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. Compliance with the Code of Ethics is carefully monitored and
enforced by the Manager.

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

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

|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities
for the Fund's portfolio and handles its day-to-day business. The portfolio
manager and associate 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
Fixed Income Portfolio Team provide counsel and support in managing the
Fund's portfolio.

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

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

--------------------------------------------------------------------------
Fiscal Year ended 9/30: Management Fees Paid to OppenheimerFunds, Inc.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1998 $3,815,048
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1999 $5,173,945
--------------------------------------------------------------------------
--------------------------------------------------------------------------
2000 $5,131,589
--------------------------------------------------------------------------

The investment advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence in the performance of its duties or
reckless disregard of its obligations and duties under the investment
advisory agreement, the Manager is not liable for any loss the Fund sustains
by reason of good faith errors or omissions on its part with respect to any
of its duties under the agreement.

The investment advisory agreement provides that the Manager's
compensation for any fiscal year of the Fund shall be reduced by the amount,
if any, by which the Fund's expenses for that fiscal year exceed the most
stringent applicable expense limitation prescribed by any statute or
regulatory authority of any jurisdiction in which the Fund's shares are
qualified for sale. As a result of changes in federal securities laws after
the investment advisory agreement was entered into, state mutual fund
regulations no longer limit mutual fund expenses. Therefore that contractual
provision is not currently applicable.

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

Brokerage Policies of the Fund

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

Under the investment advisory agreement, the Manager may select brokers
(other than affiliates) that provide brokerage and/or research services for
the Fund and/or the other accounts over which the Manager or its affiliates
have investment discretion. The concessions paid to such brokers may be
higher than another qualified broker would charge, if the Manager makes a
good faith determination that the concession 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. Most securities purchases made
by the Fund are in principal transactions at net prices. The Fund usually
deals directly with the selling or purchasing principal or market maker
without incurring charges for the services of a broker on its behalf unless
the Manager determines that a better price or execution may be obtained by
using the services of a broker. Therefore, the Fund does not incur
substantial brokerage costs. Portfolio securities purchased from underwriters
include a commission or concession paid by the issuer to the underwriter in
the price of the security. Portfolio securities purchased from dealers
include a spread between the bid and asked price. The Fund seeks to obtain
prompt execution of these orders at the most favorable net price.

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.
Brokerage commissions are paid primarily for effecting 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.

The investment advisory agreement permits the Manager to allocate
brokerage for research services. The investment 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 concession dollars.

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

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

------------------------------------------------------------------------------
Fiscal Year Ended 9/30: Total Brokerage Concessions Paid by the Fund1
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1998 $332,3252
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1999 $464,410
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2000 $461,900
------------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions
on a net trade basis.
2. In the fiscal year ended 9/30/98, the amount of transactions directed
to brokers for research services was $2,935,262 and the amount of the
concessions paid to broker-dealers for those services was $300.

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 compensation paid to (or retained by) the Distributor from the sale
of shares or on the redemption of shares during the Fund's three most recent
fiscal years is shown in the table below. Class N shares were not publicly
offered during the Fund's fiscal year's depicted and therefore are not
included in any of the charts located in this section of the Statement of
Additional Information.

------------------------------------------------------------------------------
Fiscal Aggregate Class A Concessions Concessions Concessions
Front-End Front-End
Sales Sales on Class A on Class B on Class C
Year Charges on Charges Shares Shares Shares
Ended Class A Retained by Advanced by Advanced by Advanced by
9/30: Shares Distributor Distributor1 Distributor1 Distributor1
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1998 $3,307,408 $713,814 $-0- $2,706,222 $870,358
------------------------------------------------------------------------------
------------------------------------------------------------------------------
1999 $4,286,718 $1,064,430 $1,286,163 $4,932,789 $1,269,945
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2000 $1,550,393 $441,210 $344,902 $1,874,987 $511,748
------------------------------------------------------------------------------
1. The Distributor advances concession payments to dealers for certain
sales of Class A shares and for sales of Class B and Class C shares from
its own resources at the time of sale.

------------------------------------------------------------------------------
Fiscal Class A Contingent Class B Contingent Class C Contingent
Year Deferred Sales Deferred Sales
Ended Charges Retained by Charges Retained by Deferred Sales Charges
9/30: Distributor Distributor Retained by Distributor
------------------------------------------------------------------------------
------------------------------------------------------------------------------
2000 $190,871 $1,171,049 $124,480
------------------------------------------------------------------------------

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

Each plan has been approved by a vote of the Board of Trustees, including
a majority of the Independent Trustees3, cast in person at a meeting called
for the purpose of voting on that plan.

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

Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of Trustees and its
Independent Trustees specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose
of voting on continuing the plan. A plan may be terminated at any time by the
vote of a majority of the Independent Trustees or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the outstanding
shares of that class.
The Board of Trustees and the Independent Trustees must approve all
material amendments to a plan. An amendment to increase materially the amount
of payments to be made under a plan must be approved by shareholders of the
class affected by the amendment. Because Class B shares of the Fund
automatically convert into Class A shares after six years, the Fund must
obtain the approval of both Class A and Class B shareholders for a proposed
material amendment to the Class A Plan that would materially increase
payments under the Plan. That approval must be by a "majority" (as defined
in the Investment Company Act) of the shares of each Class, voting separately
by class.

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

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

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

|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions (they are referred to as
"recipients") for personal services and account maintenance services they
provide for their customers who hold Class A shares. The services include,
among others, answering customer inquiries about the Fund, assisting in
establishing and maintaining accounts in the Fund, making the Fund's
investment plans available and providing other services at the request of the
Fund or the Distributor. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of
Class A shares. The Board has set the rate at that level. 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 September 30, 2000 payments under the Class A
Plan totaled $1,611,727, all of which was paid by the Distributor to
recipients. That included $108,622 paid to an affiliate of the Distributor's
parent company. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. The Distributor may not use payments received under the
Class A Plan to pay any of its interest expenses, carrying charges, or other
financial costs, or allocation of overhead.

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

Each Plan permits the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a
quarterly basis, without payment in advance. However, the Distributor
currently intends to pay the service fee to recipients in advance for the
first year after Class B and Class C shares are purchased. After the first
year Class B or Class C shares are outstanding, after their purchase, 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 increases Class N
expenses by 0.25% of the net assets per year of the respective class.

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

The asset-based sales charges on Class B, Class C and Class N shares
allow investors to buy shares without a front-end sales charge while allowing
the Distributor to compensate dealers that sell those shares. The Fund pays
the asset-based sales charges to the Distributor for its services rendered in
distributing each class of shares. The payments are made to the Distributor
in recognition that the Distributor:
o pays sales concessions to authorized brokers and dealers at the time of
sale and pays service fees as described above,
o may finance payment of sales concessions and/or the advance of the
service fee payment to recipients under the plans, or may provide
such financing from its own resources or from the resources of an
affiliate,
o employs personnel to support distribution of Class B, Class C and Class
N shares, and
o bears the costs of sales literature, advertising and prospectuses
(other than those furnished to current shareholders) and state "blue
sky" registration fees and certain other distribution expenses.

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

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

Distribution Fees Paid to the Distributor for the Year Ended 9/30/00*

---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class: Total Amount Distributor's Distributor's
Unreimbursed
Aggregate Expenses as %
Payments Retained by Unreimbursed of Net Assets
Under Plan Distributor Expenses Under Plan of Class
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B Plan $3,604,644 $2,987,4901 $6,908,611 2.09%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C Plan $1,847,004 $685,0032 $3,873,792 2.30%
---------------------------------------------------------------------------------
1. Includes $22,220 paid to an affiliate of the Distributor's parent
company.
2. Includes $27,288 paid to an affiliate of the Distributor's parent
company.
* The Fund did not offer Class N Shares during its fiscal year ended
September 30, 2000.

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

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to
illustrate its performance. These terms include "standardized yield,"
"dividend yield," "average annual total return," "cumulative total return,"
"average annual total return at net asset value" and "total return at net
asset value." An explanation of how yields and total returns are calculated
is set forth below. The charts below show the Fund's performance as of the
Fund's most recent fiscal year end. You can obtain current performance
information by calling the Fund's Transfer Agent at 1.800.525.7048 or by
visiting the OppenheimerFunds Internet web site at
http://www.oppenheimerfunds.com.

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

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

o Yields and total returns measure the performance of a hypothetical
account in the Fund over various periods and do not show the performance of
each shareholder's account. Your account's performance will vary from the
model performance data if your dividends are received in cash, or you buy or
sell shares during the period, or you bought your shares at a different time
and price than the shares used in the model.
o The Fund's performance returns do not reflect the effect of taxes on
dividends and capital gains distributions.
o An investment in the Fund is not insured by the FDIC or any other
government agency.
o The principal value of the Fund's shares, and its yields and total
returns are not guaranteed and normally will fluctuate on a daily basis.

o When an investor's shares are redeemed, they may be worth more or less
than their original cost.
o Yields and total returns for any given past period represent historical
performance information and are not, and should not be considered, a
prediction of future yields or returns.

The performance of each class of shares is shown separately, because
the performance of each class of shares will usually be different. That is
because of the different kinds of expenses each class bears. The yields and
total returns of each class of shares of the Fund are affected by market
conditions, the quality of the Fund's investments, the maturity of those
investments, the types of investments the Fund holds, and its operating
expenses that are allocated to the particular class.

|X| Yields. The Fund uses a variety of different yields to illustrate
its current returns. Each class of shares calculates its yield separately
because of the different expenses that affect each class.

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

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

The symbols above represent the following factors:

a = dividends and interest earned during the 30-day period.
b = expenses accrued for the period (net of any expense
assumptions).
c = the average daily number of shares of that class
outstanding during the 30-day period that were entitled to
receive dividends.
d = the maximum offering price per share of that class on the
last day of the period, adjusted for undistributed net
investment income.

The standardized yield for a particular 30-day period may differ from
the yield for other periods. The SEC formula assumes that the standardized
yield for a 30-day period occurs at a constant rate for a six-month period
and is annualized at the end of the six-month period. Additionally, because
each class of shares is subject to different expenses, it is likely that the
standardized yields of the Fund's classes of shares will differ for any
30-day period.
o Dividend Yield. The Fund may quote a "dividend yield" for each
class of its shares. Dividend yield is based on the dividends paid on a class
of shares during the actual dividend period. To calculate dividend yield, the
dividends of a class declared during a stated period are added together, and
the sum is multiplied by 12 (to annualize the yield) and divided by the
maximum offering price on the last day of the dividend period. The formula
is shown below:

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

The maximum offering price for Class A shares includes the current
maximum initial sales charge. The maximum offering price for Class B, Class
C and Class N shares is the net asset value per share, without considering
the effect of contingent deferred sales charges. There is no sales charge on
Class Y shares. The Class A dividend yield may also be quoted without
deducting the maximum initial sales charge.

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

The Fund's Yields for the 30-Day Periods Ended 9/30/00*

-------------------------------------------------------------------------
-------------------------------------------------------------------------
Class of Standardized Yield Dividend Yield
Shares
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Without After Without After
Sales Sales Sales Sales
Charge Charge Charge Charge
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Class A 6.04% 5.82% 6.19% 5.97%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Class B 5.27% N/A 5.42% N/A
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Class C 5.27% N/A 5.42% N/A
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Class Y 5.27% N/A 6.42% N/A
-------------------------------------------------------------------------
* The Fund did not offer Class N Shares during its fiscal year ended
September 30, 2000.

|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 3.50% (as a percentage of the offering price) is deducted from the
initial investment ("P" in the formula below) (unless the return is shown
without sales charge, as described below). For Class B shares, payment of
the applicable contingent deferred sales charge is applied, depending on the
period for which the return is shown: 4.0% in the first year, 3.0% in the
second year, 2.0% in the third and fourth years, 1.0% in the fifth 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 1-year and
life-of-class periods as applicable. There is no sales charge for Class Y
shares.

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

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

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

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

The Fund's Total Returns for the Periods Ended 9/30/00*

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class of Cumulative Average Annual Total Returns
Total Returns
Shares (10 years or
Life of Class)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1-Year 5-Year 10-Year
(or life of (or (or
class) life-of-class) 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 88.60% 95.43% 1.64% 5.33% 5.03% 5.78% 6.55% 6.93%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B 41.83%2 41.83%2 0.68% 4.64% 4.83% 4.99% 4.83%2 4.83%2
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C 34.52%3 34.52%3 3.66% 4.65% 4.99% 4.99% 5.38%3 5.38%3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class Y 14.82%4 14.82%4 5.71% 5.71% 5.30%4 5.30%4 N/A N/A
--------------------------------------------------------------------------------

1. Inception of Class A: 3/10/86
2. Inception of Class B: 5/3/93. Because Class B shares convert to Class
A shares 72 months after purchase, Class B "life-of-class" performance
does not include any contingent deferred sales charge and uses Class A
performance for the period after conversion.
3. Inception of Class C: 2/1/95
4. Inception of Class Y: 1/26/98
* The Fund did not offer Class N Shares during its fiscal year ended
September 30, 2000.

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 Analytical
Services, 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 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 intermediate government
fund category.

Morningstar proprietary star ratings reflect historical risk-adjusted
total investment return. Investment return measures a fund's (or class's)
one-, three-, five- and ten-year average annual total returns (depending on
the inception of the fund or class) in excess of 90-day U.S. Treasury bill
returns after considering the fund's sales charges and expenses. Risk is
measured by a fund's (or class's) performance below 90-day U.S. Treasury bill
returns. Risk and investment return are combined to produce star ratings
reflecting performance relative to the other funds in the fund's category.
Five stars is the "highest" ranking (top 10% of funds in a category), four
stars is "above average" (next 22.5%), three stars is "average" (next 35%),
two stars is "below average" (next 22.5%) and one star is "lowest" (bottom
10%). The current star rating is the fund's (or class's) overall rating,
which is the fund's 3-year rating or its combined 3- and 5-year ranking
(weighted 60%/40% respectively), or its combined 3-, 5-, and 10-year rating
(weighted 40%/30%/30%, respectively), depending on the inception date of the
fund (or class). Ratings are subject to change monthly.

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.
o 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 B contains more information about the
special sales charge arrangements offered by the Fund, and the circumstances
in which sales charges may be reduced or waived for certain classes of
investors.

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

|X| Right of Accumulation. To qualify for the lower sales charge
rates that apply to larger purchases of Class A shares, you and your spouse
can add together:
o Class A, 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 Bond Fund Oppenheimer Main Street Growth & Income
Fund

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

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

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

A Letter of Intent is an investor's statement in writing to the
Distributor of the intention to purchase Class A shares or Class A and Class
B shares of the Fund (and other Oppenheimer funds) during a 13-month period
(the "Letter of Intent period"). At the investor's request, this may include
purchases made up to 90 days prior to the date of the Letter. The Letter
states the investor's intention to make the aggregate amount of purchases of
shares which, when added to the investor's holdings of shares of those funds,
will equal or exceed the amount specified in the Letter. Purchases made by
reinvestment of dividends or distributions of capital gains and purchases
made at net asset value without sales charge do not count toward satisfying
the amount of the Letter.
A Letter enables an investor to count the Class A and Class B shares
purchased under the Letter to obtain the reduced sales charge rate on
purchases of Class A shares of the Fund (and other Oppenheimer funds) that
applies under the Right of Accumulation to current purchases of Class A
shares. Each purchase of Class A shares under the Letter will be made at the
offering price (including the sales charge) that applies to a single lump-sum
purchase of shares in the amount intended to be purchased under the Letter.

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

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

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

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

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

1. Out of the initial purchase (or subsequent purchases if necessary) made
pursuant to a Letter, shares of the Fund equal in value up to 5% of the
intended purchase amount specified in the Letter shall be held in escrow by
the Transfer Agent. For example, if the intended purchase amount is $50,000,
the escrow shall be shares valued in the amount of $2,500 (computed at the
offering price adjusted for a $50,000 purchase). Any dividends and capital
gains distributions on the escrowed shares will be credited to the investor's
account.
2. If the total minimum investment specified under the Letter is
completed within the thirteen-month Letter of Intent period, the escrowed
shares will be promptly released to the investor.
3. If, at the end of the 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 on
your Application. Neither the Distributor, the Transfer Agent or 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 B to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to
retirement plans whose records are maintained on a daily valuation basis by
Merrill Lynch Pierce Fenner & Smith, Inc. 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 and Class N shares and the dividends payable on Class B,
Class C shares and 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 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 five years is not treated as a taxable
event for the shareholder. If those laws or the IRS interpretation of those
laws should change, the automatic conversion feature may be suspended. In
that event, no further conversions of Class B shares would occur while that
suspension remained in effect. Although Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the
two classes, without the imposition of a sales charge or fee, such exchange
could constitute a taxable event for the shareholder, and absent such
exchange, Class B shares might continue to be subject to the asset-based
sales charge for longer than six years.

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

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

The methodology for calculating the net asset value, dividends and
distributions of the Fund's share classes recognizes two types of expenses.
General expenses that do not pertain specifically to any one class are
allocated pro rata to the shares of all classes. The allocation is based on
the percentage of the Fund's total assets that is represented by the assets
of each class, and then equally to each outstanding share within a given
class. Such general expenses include management fees, legal, bookkeeping and
audit fees, printing and mailing costs of shareholder reports, Prospectuses,
Statements of Additional Information and other materials for current
shareholders, fees to unaffiliated Trustees, custodian expenses, share
issuance costs, organization and start-up costs, interest, taxes and
brokerage concessions, and non-recurring expenses, such as litigation costs.
Other expenses that are directly attributable to a particular class are
allocated equally to each outstanding share within that class. Examples of
such expenses include distribution and service plan (12b-1) fees, transfer
and shareholder servicing agent fees and expenses, and shareholder meeting
expenses (to the extent that such expenses pertain only to a specific class).

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

Dealers other than Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and
U.S. holidays) or after 4:00 P.M. on a regular business day. Because the
Fund's net asset values will not be calculated on those days, the Fund's net
asset values per share may be significantly affected on such days when
shareholders may not purchase or redeem shares.

|X| Securities Valuation. The Fund's Board of Trustees has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
o Equity securities traded on a U.S. securities exchange or on NASDAQ are
valued as follows:
(1) if last sale information is regularly reported, they are valued at the
last reported sale price on the principal exchange on which
they are traded or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they are
valued at the last reported sale price preceding the
valuation date if it is within the
(3) spread of the closing "bid" and "asked" prices on the
valuation date or, if not, at the closing "bid" price on
the valuation date.
o Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Trustees, or
(2) at the last sale price obtained by the Manager from the report of the
principal exchange on which the security is traded at its
last trading session on or immediately before the valuation
date, or
(3) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on
the basis of reasonable inquiry, from two market makers in
the security.
o Long-term debt securities having a remaining maturity in excess of 60
days are valued based on the mean between the "bid" and "asked" prices
determined by a portfolio pricing service approved by the Fund's Board of
Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry.
o The following securities are valued at the mean between the "bid" and
"asked" prices determined by a pricing service approved by the Fund's Board
of Trustees or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:

(1) debt instruments that have a maturity of more than 397 days when
issued,
(2) debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and
non-money market debt instruments that had a maturity of 397 days
or less when issued and which have a remaining maturity of
60 days or less.
o The following securities are valued at cost, adjusted for amortization
of premiums and accretion of discounts:
(1) money market debt securities held by a non-money market fund that had a
maturity of less than 397 days when issued that have a
remaining maturity of 60 days or less, and
(2) debt instruments held by a money market fund that have a remaining
maturity of 397 days or less.
o Securities (including restricted securities) not having
readily-available market quotations are valued at fair value determined under
the Board's procedures. If the Manager is unable to locate two market makers
willing to give quotes, a security may be priced at the mean between the
"bid" and "asked" prices provided by a single active market maker (which in
certain cases may be the "bid" price if no "asked" price is available).

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

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

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

How to Sell Shares

Information on how to sell shares of the Fund is stated in the
Prospectus. The information below provides additional information about the
procedures and conditions for redeeming shares.

Checkwriting. When a check is presented to the Bank for clearance, the Bank
will ask the Fund to redeem a sufficient number of full and fractional shares
in the shareholder's account to cover the amount of the check. This enables
the shareholder to continue receiving dividends on those shares until the
check is presented to the Fund. Checks may not be presented for payment at
the offices of the Bank or the Fund's Custodian. This limitation does not
affect the use of checks for the payment of bills or to obtain cash at other
banks. The Fund reserves the right to amend, suspend or discontinue offering
checkwriting privileges at any time without prior notice.

In choosing to take advantage of the Checkwriting privilege, by signing
the Account Application or by completing a Checkwriting card, each individual
who signs:
(1) for individual accounts, represents that they are the registered
owner(s) of the shares of the Fund in that account;
(2) for accounts for corporations, partnerships, trusts and other entities,
represents that they are an officer, general partner, trustee or
other fiduciary or agent, as applicable, duly authorized to act on
behalf of the registered owner(s);
(3) authorizes the Fund, its Transfer Agent and any bank through which the
Fund's drafts (checks) are payable to pay all checks drawn on the
Fund account of such person(s) and to redeem a sufficient amount
of shares from that account to cover payment of each check;
(4) specifically acknowledges that if they choose to permit checks to be
honored if there is a single signature on checks drawn against
joint accounts, or accounts for corporations, partnerships, trusts
or other entities, the signature of any one signatory on a check
will be sufficient to authorize payment of that check and
redemption from the account, even if that account is registered in
the names of more than one person or more than one authorized
signature appears on the Checkwriting card or the Application, as
applicable;
(5) understands that the Checkwriting privilege may be terminated or
amended at any time by the Fund and/or the Fund's bank; and
(6) acknowledges and agrees that neither the Fund nor its bank shall incur
any liability for that amendment or termination of checkwriting
privileges or for redeeming shares to pay checks reasonably
believed by them to be genuine, or for returning or not paying
checks that have not been accepted for any reason.

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

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

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

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

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

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

Involuntary Redemptions. The Fund's Board of Trustees has the right to cause
the involuntary redemption of the shares held in any account if the aggregate
net asset value of those shares is less than $200 or such lesser amount as
the Board may fix. The Board will not cause the involuntary redemption of
shares in an account if the aggregate net asset value of such shares has
fallen below the stated minimum solely as a result of market fluctuations.
If the Board exercises this right, it may also fix the requirements for any
notice to be given to the shareholders in question (not less than 30 days).
The Board may alternatively set requirements for the shareholder to increase
the investment, or set other terms and conditions so that the shares would
not be involuntarily redeemed.
Transfers of Shares. A transfer of shares to a different registration is not
an event that triggers the payment of sales charges. Therefore, shares are
not subject to the payment of a contingent deferred sales charge of any class
at the time of transfer to the name of another person or entity. It does not
matter whether the transfer occurs by absolute assignment, gift or bequest,
as long as it does not involve, directly or indirectly, a public sale of the
shares. When shares subject to a contingent deferred sales charge are
transferred, the transferred shares will remain subject to the contingent
deferred sales charge. It will be calculated as if the transferee shareholder
had acquired the transferred shares in the same manner and at the same time
as the transferring shareholder.

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

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

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

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

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

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

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

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

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

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 A shares of Senior Floating Rate Fund are not available by
exchange of Class A shares of other Oppenheimer funds. Class A shares
of Senior Floating Rate Fund that are exchanged for shares of the other
Oppenheimer funds may not be exchanged back for Class A shares of
Senior Floating Rate Fund.
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.
Shares of Oppenheimer Capital Preservation Fund may not be exchanged for
shares of Oppenheimer Money Market Fund, Inc., Oppenheimer Cash
Reserves or Oppenheimer Limited-Term Government Fund. Only
participants in certain retirement plans may purchase shares of
Oppenheimer Capital Preservation Fund, and only those participants may
exchange shares of other Oppenheimer funds for shares of Oppenheimer
Capital Preservation Fund.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not
available by exchange of shares of Oppenheimer Money Market Fund or
Class A shares of Oppenheimer Cash Reserves. If any Class A shares of
another Oppenheimer fund that are exchanged for Class A shares of
Oppenheimer Senior Floating Rate Fund are subject to the Class A
contingent deferred sales charge of the other Oppenheimer fund at the
time of exchange, the holding period for that Class A contingent
deferred sales charge will carry over to the Class A shares of
Oppenheimer Senior Floating Rate Fund acquired in the exchange. The
Class A shares of Oppenheimer Senior Floating Rate Fund acquired in
that exchange will be subject to the Class A Early Withdrawal Charge of
Oppenheimer Senior Floating Rate Fund if they are repurchased before
the expiration of the holding period.
o Class A, Class B, Class C and Class Y Shares of Oppenheimer Select
Managers Mercury Advisors S&P Index Fund and Oppenheimer Select
Managers QM Active Balanced Fund are only available to retirement plans
and are available only by exchange from the same class of shares of
other Oppenheimer funds held by retirement plans.

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

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

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

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

|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 5 years of the initial purchase of the exchanged
Class B shares. The Class C contingent deferred sales charge is imposed on
Class C shares acquired by exchange if they are redeemed within 12 months of
the initial purchase of the exchanged Class C shares. With respect to class N
shares, a 1% contingent deferred sales charge will be imposed if the
retirement plan (not including IRAs and 403(b) plans) is terminated or Class
N shares of all Oppenheimer funds are terminated as an investment option of
the plan and Class N shares are redeemed within 18 months after the plan's
first purchase of Class N shares of any Oppenheimer fund or with respect to
an individual retirement plan or 403(b) plan, Class N shares are redeemed
within 18 months of the plan's first purchase of Class N shares of any
Oppenheimer fund.

When Class B or Class C 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 or the Class C 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.

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

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

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

Dividends, Capital Gains and Taxes

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

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

The Fund's practice of attempting to pay dividends on Class A shares at
a constant level requires the Manager to monitor the Fund's portfolio and, if
necessary, to select higher-yielding securities when it is deemed appropriate
to seek income at the level needed to meet the target. Those securities must
be within the Fund's investment parameters, however. The Fund expects to pay
dividends at a targeted level from its net investment income and other
distributable income without any impact on the net asset values per share.

The Fund has no fixed dividend rate for Class B, Class C and Class N
shares, and the rate can change for Class A 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 shares.
That is because of the effect of the asset-based sales charge on Class B,
Class C and Class N shares. Those dividends will also differ in amount as a
consequence of any difference in the net asset values of the different
classes of shares.

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

Tax Status of the Fund's Dividends and Distributions. The federal tax
treatment of the Fund's dividends and capital gains distributions is briefly
highlighted in the Prospectus.

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. It is unlikely that the
Fund's dividends will qualify for the deduction.

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. However, the Board of Trustees and the Manager might determine
in a particular year that it would be in the best interests of shareholders
for the Fund not to make such distributions at the required levels and to pay
the excise tax on the undistributed amounts. That would reduce the amount of
income or capital gains available for distribution to shareholders.
The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code (although it reserves the right not to qualify).
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 the Fund's shares are held in a retirement account or the shareholder
is otherwise exempt from tax). If the Fund qualifies as a "regulated
investment company" under the Internal Revenue Code, it will not be liable
for Federal income taxes on amounts paid by it as dividends and
distributions. The Fund qualified as a regulated investment company in its
last fiscal year. The Internal Revenue Code contains a number of complex
tests relating to qualification which the Fund might not meet in any
particular year. If it did not so qualify, the Fund would be treated for tax
purposes as an ordinary corporation and receive no tax deduction for payments
made to shareholders.

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.

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

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

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

================================================================================
The Board of Trustees and Shareholders of Oppenheimer Limited-Term Government
Fund:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Limited-Term Government Fund, including the statement of
investments, as of September 30, 2000, 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 each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2000, 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 Limited-Term Government Fund as of September 30, 2000, 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
each of the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.

Deloitte & Touche LLP

Denver, Colorado
October 20, 2000

STATEMENT OF INVESTMENTS September 30, 2000

Principal Market Value
Amount See Note 1
===========================================================================================================================
Mortgage-Backed Obligations--49.6%
---------------------------------------------------------------------------------------------------------------------------
Government Agency--49.6%
---------------------------------------------------------------------------------------------------------------------------
FHLMC/FNMA/Sponsored--42.7%
Federal Home Loan Mortgage Corp., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates:

8%, 10/15/30/1/ $ 15,000,000 $ 15,215,700
12%, 6/1/15 576,137 635,342
Series 151, Cl. F, 9%, 5/15/21 1,119,008 1,167,607
Series 1451, Cl. G, 7%, 9/15/06 1,032,946 1,031,325
Series 1541, Cl. H, 7%, 10/15/22 6,500,000 6,467,500
Series 1561, Cl. H, 6.50%, 5/15/08 10,000,000 9,896,800
Series 1585, Cl. J, 6.50%, 10/15/22 12,500,000 12,312,500
Series 1625, Cl. G, 5.75%, 1/15/08 5,000,000 4,932,800
Series 1673, Cl. H, 6%, 11/15/22 5,000,000 4,773,400
Series 1702-A, Cl. PD, 6.50%, 4/15/22 6,250,000 6,162,062
Series 1722, Cl. PJ, 6.50%, 7/15/23 7,000,000 6,726,510
Series 2132, Cl. GA, 6.15%, 2/15/27 3,434,542 3,303,584
Series 2198, Cl. PG, 7%, 12/15/28 5,000,000 4,875,000
Series 2228, Cl. PQ, 7.50%, 8/15/25 8,579,000 8,737,111
Series 2257, Cl. B, 7%, 9/15/30 5,200,000 5,039,125
------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg.
Participation Certificates:
9.25%, 11/1/08 210,318 214,691
10%, 12/25/10-8/1/21 3,673,352 3,894,932
11.50%, 6/1/20-2/1/16 977,893 1,072,303
11.75%, 1/1/16-4/1/19 887,922 975,298
12.50%, 7/1/19 1,099,038 1,229,120
13%, 8/1/15 1,399,993 1,581,544
------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Series 2250,
Cl. A, 7%, 12/15/27 5,966,470 5,895,589
------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only Stripped
Mtg.-Backed Security:
Series 164, Cl. A, 7.35%, 3/1/24/2 9,079,708 2,908,344
Series 192, Cl. IO, 8.37%, 2/1/28/2 32,807,559 9,893,530
Series 194, Cl. IO, 10.09%, 4/1/28/2 19,964,141 6,160,809
Series 197, Cl. IO, 9.35%, 4/1/28/2 31,175,515 9,571,857
Series 199, Cl. IO, 21.69%, 8/1/28/2 42,080,442 13,334,240
Series 1991, Cl. PJ, 10.88%, 9/15/27/2 5,542,653 2,371,216
Series 202, Cl. IO, 11.57%, 4/1/29/2 20,260,095 6,464,237
Series 203, Cl. IO, 9.93%, 6/15/29/2 23,212,138 7,558,453
Series 2030, Cl. PE, 10.59%, 2/15/28/2 2,000,000 733,750
Series 2052, Cl. IB, 10.68%, 4/15/28/2 4,000,000 2,001,250
Series 206, Cl. IO, 10.49%, 12/15/29/2 4,803,228 1,525,775
Series 2197, Cl. PL, 11.66%, 6/15/24/2 3,000,000 545,625
Series 2220, Cl. PI, 14.28%, 1/15/26/2 4,724,470 1,029,049
------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.--Government National
Mortgage Assn., Gtd. Multiclass Mtg. Participation Certificates,
Series 28, Cl. PG, 6.875%, 2/25/23 5,500,000 5,348,750

12 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND


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

FHLMC/FNMA/Sponsored Continued
Federal National Mortgage Assn.:
6.50%, 10/25/13/1/                                                               $       32,900,000    $           32,252,199
6.50%, 1/1/29-5/1/29                                                                     52,034,691                49,974,638
7%, 10/25/27/1/                                                                          65,000,000                63,659,700
7%, 7/1/13-4/1/30                                                                        58,119,106                57,109,342
7.50%, 10/1/29/1/                                                                        25,000,000                24,937,500
7.50%, 9/1/29-1/1/30                                                                     21,563,786                21,520,164
9%, 8/1/19                                                                                  204,703                   211,909
9.50%, 11/1/21                                                                              149,403                   155,092
10.50%, 12/1/14                                                                             744,568                   801,225
11%, 11/1/15-7/20/19                                                                      9,726,116                10,614,524
11.25%, 6/1/14-2/15/16                                                                    1,409,862                 1,523,187
11.50%, 10/25/29                                                                          1,487,897                 1,608,789
11.75%, 7/1/11-10/1/14                                                                      113,466                   124,609
12%, 1/1/16-4/15/19                                                                       6,306,947                 7,010,576
12.50%, 8/1/15                                                                              410,307                   469,031
13%, 8/1/10-8/1/26                                                                        2,527,912                 2,869,604
-------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1992-34, Cl. G, 8%, 3/25/22                                                         2,940,000                 3,019,909
Trust 1994-27, Cl. PH, 6.50%, 9/25/22                                                     4,000,000                 3,933,720
-------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Gtd. Real Estate Mtg. Investment
Conduit Pass-Through Certificates:
8%, 1/1/23                                                                                  102,874                   104,804
12.50%, 12/1/15                                                                           1,008,328                 1,133,734
Trust 1991-169, Cl. PK, 8%, 10/25/21                                                        476,118                   485,046
Trust 1994-56, Cl. H, 6%, 7/25/22                                                         6,000,000                 5,782,500
-------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security:
Trust 294, Cl. 2, 9.46%, 2/1/28/2/                                                        3,856,991                 1,168,548
Trust 302, Cl. 2, 9.18%, 6/2/29/2/                                                       48,833,159                15,565,570
Trust G93-15, Cl. JA, 10.67%, 4/25/23/2/                                                  2,617,128                   701,705
-------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Stripped Mtg.-Backed Security,
Trust G, Cl. 2, 11.50%, 3/1/09                                                              968,848                 1,066,334
                                                                                                       ------------------------
                                                                                                                  483,390,687

-------------------------------------------------------------------------------------------------------------------------------
GNMA/Guaranteed--6.9%
Government National Mortgage Assn.:
6.50%, 1/15/24-2/20/29                                                                   19,104,948                18,342,589
7%, 1/15/28-8/15/28                                                                       7,444,659                 7,335,675
7.50%, 1/15/28-9/15/28                                                                   22,135,321                22,220,487
8%, 9/15/07-10/15/28                                                                      7,766,085                 7,908,844
8.50%, 8/15/17-9/15/21                                                                   17,980,812                18,620,123
9.50%, 9/15/17                                                                               53,836                    56,105
10.50%, 2/15/16-7/15/21                                                                     995,318                 1,079,240
11%, 11/15/00-10/20/19                                                                    1,853,901                 1,993,875
11.50%, 1/15/13-5/15/13                                                                     198,031                   207,375
13%, 2/15/11-9/15/14                                                                         26,867                    30,523
                                                                                                       ------------------------
                                                                                                                   77,794,836
                                                                                                       ------------------------
Total Mortgage-Backed Obligations (Cost $559,659,121)                                                             561,185,523

13 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- STATEMENT OF INVESTMENTS Continued --------------------------------------------------------------------------------


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

U.S. Government Obligations--51.7%
Federal Home Loan Bank, Unsec. Nts., Series 110, 4.87%, 1/22/02                 $        30,000,000   $        29,413,170
---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
6.25%, 5/15/30                                                                           12,220,000            12,850,100
6.75%, 8/15/26                                                                            4,100,000             4,461,312
8.75%, 5/15/20-8/15/20                                                                    9,100,000            11,807,127
8.875%, 2/15/19                                                                           7,235,000             9,405,500
11.25%, 2/15/15                                                                           1,450,000             2,155,516
STRIPS, 6.53%, 11/15/183                                                                 29,650,000             9,841,784
---------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.50%, 5/31/03                                                                           50,000,000            49,453,150
5.625%, 2/15/06-5/15/08                                                                  56,400,000            55,452,500
5.75%, 4/30/03-8/15/10                                                                   90,610,000            90,158,277
5.875%, 11/15/04                                                                         17,500,000            17,489,063

6.125%, 12/31/01                                                                        115,600,000           115,491,683
6.375%, 6/30/02                                                                           2,400,000             2,412,751
6.50%, 8/31/01                                                                           43,000,000            43,094,084
6.625%, 5/31/02                                                                          15,900,000            16,039,125
6.75%, 5/15/05                                                                           10,000,000            10,362,500
7%, 7/15/06                                                                              16,500,000            17,355,938
7.50%, 2/15/054                                                                          34,500,000            36,613,125
7.875%, 11/15/044                                                                        37,550,000            40,190,253
8.50%, 11/15/00                                                                           7,800,000             7,819,500
STRIPS, 6.88%, 5/15/093                                                                   6,800,000             4,071,500
                                                                                                      ---------------------
Total U.S. Government Obligations (Cost $585,070,242)                                                         585,937,958
===========================================================================================================================

                                                 Date              Strike                 Contracts
===========================================================================================================================
Options Purchased--0.0%
U.S. Treasury Nts. Futures, 10 yr.,

12/19/00 Call (Cost $98,119)                 10/20/00                102%                       583                36,438

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

Repurchase Agreements--7.1%
Repurchase agreement with Banc One Capital Markets, Inc., 6.45%,
dated 9/29/00, to be repurchased at $80,518,255 on 10/2/00,
collateralized by U.S. Treasury Nts., 5.625%-6.875%, 5/15/01-2/15/07,
with a value of $82,127,997 (Cost $80,475,000)                                  $        80,475,000            80,475,000
---------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost $1,225,302,482)                                            108.4%         1,227,634,919
---------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets                                                         (8.4)          (95,198,680)
                                                                                -------------------------------------------
Net Assets                                                                                   100.0%   $     1,132,436,239
                                                                                ===========================================

14 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND Footnotes to Statement of Investments 1. When-issued security to be delivered and settled after September 30, 2000. 2. Interest-Only Strips represent the right to receive the monthly interest payments on an underlying pool of mortgage loans. These securities typically decline in price as interest rates decline. Most other fixed income securities increase in price when interest rates decline. The principal amount of the underlying pool represents the notional amount on which current interest is calculated. The price of these securities is typically more sensitive to changes in prepayment rates than traditional mortgage-backed securities (for example, GNMA pass-throughs). Interest rates disclosed represent current yields based upon the current cost basis and estimated timing and amount of future cash flows. These securities amount to $81,533,958 or 7.20% of the Fund's net assets as of September 30, 2000. 3. For zero coupon bonds, the interest rate shown is the effective yield on the date of purchase. 4. Securities with an aggregate market value of $23,907,305 are held in collateralized accounts to cover initial margin requirements on open futures sales contracts. See Note 5 of Notes to Financial Statements. See accompanying Notes to Financial Statements. 15 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES September 30, 2000 --------------------------------------------------------------------------------


==========================================================================================================================
Assets

Investments, at value (cost $1,225,302,482)--see accompanying statement                           $         1,227,634,919
--------------------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold (including $91,602,052 sold on a when-issued basis)                                          118,407,099
Interest and principal paydowns                                                                                13,292,877
Shares of beneficial interest sold                                                                              6,889,451
Other                                                                                                              52,618
                                                                                                 -------------------------
Total assets                                                                                                1,366,276,964
==========================================================================================================================
Liabilities

Bank overdraft                                                                                                    478,566
--------------------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased (including $219,185,197 purchased on a when-issued basis)                               228,340,427
Shares of beneficial interest redeemed                                                                          2,527,541
Dividends                                                                                                       1,242,846
Distribution and service plan fees                                                                                695,326
Daily variation on futures contract                                                                               217,896
Transfer and shareholder servicing agent fees                                                                      99,090
Trustees' compensation                                                                                             10,617
Other                                                                                                             228,416
                                                                                                 -------------------------
Total liabilities                                                                                             233,840,725

==========================================================================================================================
Net Assets                                                                                       $          1,132,436,239
                                                                                                 =========================

==========================================================================================================================
Composition of Net Assets
Paid-in capital                                                                                  $          1,189,165,969
--------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income                                                                             2,483,465
--------------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions                                                      (60,930,184)
--------------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                                                      1,716,989
                                                                                                 -------------------------
Net Assets                                                                                       $          1,132,436,239
                                                                                                 =========================

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

Class A Shares:
Net asset value and redemption price per share (based on net assets of
$627,494,855 and 63,160,863 shares of beneficial interest outstanding)                                        $      9.93
Maximum offering price per share (net asset value plus sales charge of
3.50% of offering price)                                                                                      $     10.29
--------------------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering price per share (based on net assets of
$329,876,559 and 33,210,183 shares of beneficial interest outstanding)                                        $      9.93
--------------------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$168,665,300 and 17,004,672 shares of beneficial interest outstanding)                                        $      9.92
--------------------------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on
net assets of $6,399,525 and 644,299 shares of beneficial interest outstanding)                               $      9.93

See accompanying Notes to Financial Statements. 16 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the Year Ended September 30, 2000 --------------------------------------------------------------------------------


===============================================================================================================
Investment Income

Interest                                                                                     $      89,061,306

===============================================================================================================
Expenses
Management fees                                                                                      5,131,589
---------------------------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                                                              1,611,727
Class B                                                                                              3,604,644
Class C                                                                                              1,847,004
---------------------------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                                                843,055
Class B                                                                                                450,649
Class C                                                                                                230,954
Class Y                                                                                                  1,928
---------------------------------------------------------------------------------------------------------------
Custodian fees and expenses                                                                             79,431
---------------------------------------------------------------------------------------------------------------
Trustees' compensation                                                                                  20,585
---------------------------------------------------------------------------------------------------------------
Accounting service fees                                                                                 12,000
---------------------------------------------------------------------------------------------------------------
Other                                                                                                  473,997
                                                                                             ------------------
Total expenses                                                                                      14,307,563
Less expenses paid indirectly                                                                          (57,076)
                                                                                             ------------------
Net expenses                                                                                        14,250,487

===============================================================================================================
Net Investment Income                                                                               74,810,819

===============================================================================================================
Realized and Unrealized Gain (Loss)
Net realized loss on:
Investments                                                                                        (34,278,909)
Closing of futures contracts                                                                        (4,057,708)
                                                                                             ------------------
Net realized loss                                                                                  (38,336,617)
---------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation on investments                                                21,608,634
                                                                                             ------------------
Net realized and unrealized loss                                                                   (16,727,983)

===============================================================================================================
Net Increase in Net Assets Resulting from Operations                                         $      58,082,836
                                                                                             ==================

See accompanying Notes to Financial Statements. 17 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------


Year Ended September 30,                                                                    2000                   1999
=======================================================================================================================

Operations

Net investment income                                                             $   74,810,819         $   72,872,844
-----------------------------------------------------------------------------------------------------------------------
Net realized loss                                                                    (38,336,617)            (9,965,241)
-----------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)                                  21,608,634            (33,958,973)
                                                                                  -------------------------------------
Net increase in net assets resulting from operations                                  58,082,836             28,948,630

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

Dividends from net investment income:
Class A                                                                              (41,661,682)           (42,378,009)
Class B                                                                              (19,543,002)           (18,660,011)
Class C                                                                              (10,037,864)            (9,960,199)
Class Y                                                                                 (274,588)                  (100)

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

Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A                                                                              (99,636,221)           123,299,873
Class B                                                                              (65,784,406)           134,345,727
Class C                                                                              (39,825,740)            73,497,654
Class Y                                                                                6,333,275                 68,029

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

Total increase (decrease)                                                           (212,347,392)           289,161,594
-----------------------------------------------------------------------------------------------------------------------
Beginning of period                                                                1,344,783,631          1,055,622,037
                                                                                  -------------------------------------
End of period (including undistributed net investment
income of $2,483,465 and $14,065, respectively)                                   $1,132,436,239         $1,344,783,631
                                                                                  =====================================

See accompanying Notes to Financial Statements. 18 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------


    Class A     Year Ended September 30,                      2000         1999          1998         1997              1996

============================================================================================================================
    Per Share Operating Data

    Net asset value, beginning of period               $     10.03   $    10.37   $     10.30  $     10.26   $         10.44
----------------------------------------------------------------------------------------------------------------------------
    Income (loss) from investment operations:
    Net investment income                                      .64          .63           .67          .73               .75
    Net realized and unrealized gain (loss)                   (.13)        (.35)          .10          .03              (.19)
                                                       ---------------------------------------------------------------------
    Total income from investment operations                    .51          .28           .77          .76               .56
    Dividends and/or distributions to shareholders:
    Dividends from net investment income                      (.61)        (.62)         (.68)        (.71)             (.71)
    Dividends in excess of net investment income                --           --          (.02)          --                --
    Tax return of capital distribution                          --           --            --         (.01)             (.03)
                                                       ---------------------------------------------------------------------
    Total dividends and/or distributions
    to shareholders                                           (.61)        (.62)         (.70)        (.72)             (.74)
----------------------------------------------------------------------------------------------------------------------------
    Net asset value, end of period                     $      9.93   $    10.03   $     10.37  $     10.30   $         10.26


============================================================================================================================
    Total Return, at Net Asset Value/1/                       5.33%        2.78%         7.70%        7.62%             5.54%

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

    Net assets, end of period (in thousands)           $   627,495   $  734,407   $   634,677  $   524,508   $       436,889
----------------------------------------------------------------------------------------------------------------------------
    Average net assets (in thousands)                  $   673,323   $  696,607   $   584,171  $   443,514   $       393,727
----------------------------------------------------------------------------------------------------------------------------
    Ratios to average net assets:/2/
    Net investment income                                     6.46%        6.23%         6.52%        7.13%             7.22%
    Expenses                                                  0.83%        0.84%         0.82%/3/     0.87%/3/          0.87%/3/
-----------------------------------------------------------------------------------------------------------------------------
    Portfolio turnover rate                                    121%         141%          161%          68%               71%

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

2. Annualized for periods of less than one full year. 3. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. See accompanying Notes to Financial Statements. 19 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------


Class B Year Ended September 30,                             2000         1999          1998          1997             1996
============================================================================================================================

Per Share Operating Data
Net asset value, beginning of period                  $     10.02   $    10.37   $     10.30   $     10.26  $         10.44
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                         .57          .56           .60           .66              .67
Net realized and unrealized gain (loss)                      (.12)        (.37)          .09           .02             (.19)
                                                      ----------------------------------------------------------------------
Total income from investment operations                       .45          .19           .69           .68              .48
----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                         (.54)        (.54)         (.60)         (.63)            (.63)
Dividends in excess of net investment income                   --           --          (.02)           --               --
Tax return of capital distribution                             --           --            --          (.01)            (.03)
                                                      ----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                              (.54)        (.54)         (.62)         (.64)            (.66)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                        $      9.93   $    10.02   $     10.37   $     10.30  $         10.26
                                                      ======================================================================

============================================================================================================================
Total Return, at Net Asset Value/1/                          4.64%        1.91%         6.90%         6.82%            4.74%

============================================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands)              $   329,877   $  399,692   $   277,381   $   183,476  $       160,572
----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                     $   360,003   $  351,099   $   210,362   $   171,496  $       147,017
----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/2/
Net investment income                                        5.70%        5.48%         5.76%         6.39%            6.46%
Expenses                                                     1.59%        1.59%         1.58%/3/      1.62%/3/         1.62%/3/
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                       121%         141%          161%           68%              71%


Class C   Year Ended September 30,                           2000         1999          19981         1997             1996
============================================================================================================================

Per Share Operating Data

Net asset value, beginning of period                  $     10.01   $    10.35   $      10.29   $    10.25       $    10.43
----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                         .57          .56            .59          .66              .66
Net realized and unrealized gain (loss)                      (.12)        (.36)           .09          .02             (.18)
                                                      ----------------------------------------------------------------------
Total income from investment operations                       .45          .20            .68          .68              .48
----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                         (.54)        (.54)          (.61)        (.63)            (.63)
Dividends in excess of net investment income                   --           --           (.01)          --               --
Tax return of capital distribution                             --           --             --         (.01)            (.03)
                                                      ----------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                              (.54)        (.54)          (.62)        (.64)            (.66)
----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                        $      9.92   $    10.01   $      10.35   $    10.29       $    10.25
                                                      ======================================================================

============================================================================================================================
Total Return, at Net Asset Value/2/                          4.65%        2.01%          6.81%        6.83%            4.71%

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

Net assets, end of period (in thousands)              $   168,665   $  210,616   $    143,563   $   73,559       $   45,356
----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                     $   184,442   $  187,226   $    100,604   $   57,506       $   32,349
----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/3/
Net investment income                                        5.70%        5.47%          5.73%        6.35%            6.34%
Expenses                                                     1.59%        1.59%          1.57%/4/     1.62%/4/         1.64%/4/
----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                       121%         141%           161%          68%              71%

1. Per share amounts calculated on the average shares outstanding during the period.

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 of less than one full year.

3. Annualized for periods of less than one full year. 4. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. See accompanying Notes to Financial Statements. 21 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND FINANCIAL HIGHLIGHTS Continued


Class Y    Year Ended September 30,                                                2000         1999            1998/1/
=======================================================================================================================

Per Share Operating Data

Net asset value, beginning of period                                       $      10.03   $    10.37       $    10.33
-----------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                                               .68          .66              .47
Net realized and unrealized gain (loss)                                            (.13)        (.34)             .06
                                                                           --------------------------------------------
Total income from investment operations                                             .55          .32              .53
-----------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                                               (.65)        (.66)            (.47)
Dividends in excess of net investment income                                         --           --             (.02)
Tax return of capital distribution                                                   --           --               --
                                                                           --------------------------------------------
Total dividends and/or distributions
to shareholders                                                                    (.65)        (.66)            (.49)
-----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                             $       9.93   $    10.03       $    10.37
                                                                           ============================================

=======================================================================================================================
Total Return, at Net Asset Value/2/                                                5.71%        3.15%            5.30%

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

Net assets, end of period (in thousands)                                   $      6,400   $       69       $        1
-----------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                                          $      4,178   $        2       $        1
-----------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:/3/
Net investment income                                                              6.78%        6.75%            6.82%
Expenses                                                                           0.51%        0.60%            0.43%/4/
-----------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                                             121%         141%             161%

1. For the period from January 26, 1998 (inception of offering) to September 30, 1998. 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 of less than one full year. 3. Annualized for periods of less than one full year. 4. Expense ratio has not been grossed up to reflect the effect of expenses paid indirectly. See accompanying Notes to Financial Statements. 22 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Oppenheimer Limited-Term Government Fund (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 current return and safety of principal. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Fund offers Class A, Class B, Class C 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 and Class C shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). 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 and C 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 Trustees, or at their fair value. Fair value is determined in good faith under consistently applied procedures under the supervision of the Board of Trustees. Short-term "money market type" debt securities with remaining maturities of sixty days or less are valued at amortized cost (which approximates market value). -------------------------------------------------------------------------------- Securities Purchased on a When-Issued Basis. Delivery and payment for securities that have been purchased by the Fund on a when-issued basis can take place a month or more after the trade date. Normally the settlement date occurs within six months after the trade date; however, the Fund may, from time to time, purchase securities whose settlement date extends beyond six months and possibly as long as two years or more beyond trade date. During this period, such securities do not earn interest, are subject to market fluctuation and may increase or decrease in value prior to their delivery. The Fund maintains segregated assets with a market value equal to or greater than the amount of its purchase commitments. The purchase of securities on a when-issued or forward commitment basis may increase the volatility of the Fund's net asset value to the extent the Fund makes such purchases while remaining substantially fully invested. As of September 30, 2000, the Fund had entered into net outstanding when-issued or forward commitments of $127,583,145. 23 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- ================================================================================ 1. Significant Accounting Policies Continued In connection with its ability to purchase securities on a when-issued basis, the Fund may enter into mortgage dollar-rolls in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. The Fund records each dollar-roll as a sale and a new purchase transaction. -------------------------------------------------------------------------------- Repurchase Agreements. The Fund requires the custodian 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 September 30, 2000, the Fund had available for federal tax purposes unused capital loss carryovers as follows: Expiring ---------------------- 2007 $10,940,944 2008 11,073,650 -------------------------------------------------------------------------------- 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. 24 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- Classification of Dividends and Distributions to Shareholders. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from its 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. The Fund adjusts the classification of distributions to shareholders to reflect the differences between financial statement amounts and distributions determined in accordance with income tax regulations. Accordingly, during the year ended September 30, 2000, amounts have been reclassified to reflect a decrease in undistributed net investment income of $824,283. Accumulated net realized loss on investments was decreased by the same amount. Net assets of the Fund were unaffected by the reclassifications. -------------------------------------------------------------------------------- Expense Offset Arrangements. Expenses paid indirectly represent a reduction of custodian fees for earnings on cash balances maintained by the Fund. -------------------------------------------------------------------------------- Other. Investment transactions are accounted for as of trade date and dividend income is recorded on the ex-dividend date. Discount on securities purchased is accreted over the life of the respective securities, in accordance with federal income tax requirements. Realized gains and losses on investments and options written and unrealized appreciation and depreciation are determined on an identified cost basis, which is the same basis used for federal income tax purposes. Dividends-in-kind are recognized as income on the ex-dividend date, at the current market value of the underlying security. Interest on payment-in-kind debt instruments is accrued as income at the coupon rate and a market adjustment is made periodically. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 25 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- ================================================================================ 2. Shares of Beneficial Interest The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:


                                                    Year Ended September 30, 2000           Year Ended September 30, 1999
                                                     Shares                Amount            Shares                Amount
--------------------------------------------------------------------------------------------------------------------------

Class A
Sold                                             70,936,140         $ 702,318,180        66,430,608         $ 677,416,403
Dividends and/or
distributions reinvested                          3,223,777            31,913,471         3,286,062            33,484,949
Redeemed                                        (84,255,468)         (833,867,872)      (57,682,659)         (587,601,479)
                                                --------------------------------------------------------------------------
Net increase (decrease)                         (10,095,551)        $ (99,636,221)       12,034,011         $ 123,299,873
                                                ==========================================================================

--------------------------------------------------------------------------------------------------------------------------
Class B
Sold                                              9,543,723         $  94,609,502        24,393,651         $ 249,346,429
Dividends and/or
distributions reinvested                          1,425,275            14,108,453         1,338,996            13,629,075
Redeemed                                        (17,633,284)         (174,502,361)      (12,618,209)         (128,629,777)
                                                --------------------------------------------------------------------------
Net increase (decrease)                          (6,664,286)        $ (65,784,406)       13,114,438         $ 134,345,727
                                                ==========================================================================

--------------------------------------------------------------------------------------------------------------------------
Class C
Sold                                              7,188,629         $  71,098,127        15,315,668         $ 156,476,570
Dividends and/or
distributions reinvested                            725,299             7,171,108           740,879             7,532,576
Redeemed                                        (11,949,056)         (118,094,975)       (8,885,658)          (90,511,492)
                                                --------------------------------------------------------------------------
Net increase (decrease)                          (4,035,128)        $ (39,825,740)        7,170,889         $  73,497,654
                                                ==========================================================================

--------------------------------------------------------------------------------------------------------------------------
Class Y
Sold                                              1,038,548         $  10,289,874             6,771         $      67,993
Dividends and/or
distributions reinvested                                 --                    --                 3                    36
Redeemed                                           (401,120)           (3,956,599)               --                    --
                                                --------------------------------------------------------------------------
Net increase                                        637,428         $   6,333,275             6,774         $      68,029
                                                ==========================================================================

================================================================================ 3. Purchases and Sales of Securities

The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended September 30, 2000, were $1,468,351,709 and $1,633,899,401, respectively.

As of September 30, 2000, unrealized appreciation (depreciation) based on cost of securities for federal income tax purposes of $1,227,699,776 was:

Gross unrealized appreciation $ 14,089,370 Gross unrealized depreciation (14,154,227)

Net unrealized depreciation $ (64,857) =============== 26 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND ================================================================================ 4. Management 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 0.50% of the first $100 million of average annual net assets of the Fund, 0.45% of the next $150 million, 0.425% of the next $250 million and 0.40% of average annual net assets in excess of $500 million. The Fund’s management fee for the year ended September 30, 2000 was an annualized rate of 0.42%, before any waiver by the Manager if applicable.

-------------------------------------------------------------------------------- Accounting Fees. The Manager acts as the accounting agent for the Fund at an annual fee of $12,000, plus out-of-pocket costs and expenses reasonably incurred. --------------------------------------------------------------------------------

Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund on an “at-cost” basis. OFS also acts as the transfer and shareholder servicing agent for the other Oppenheimer funds.

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

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


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

September 30, 2000       $1,550,393           $441,210           $344,902        $1,874,987          $511,748

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


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

September 30, 2000                    $190,871                       $1,171,049                          $124,480

The Fund has adopted a Service Plan for Class A shares and Distribution and Service Plans for Class B and Class C 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 0.25% 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 0.25% of the average annual net assets consisting of Class A shares of the Fund. For the year ended

27 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- ================================================================================

4. Management Fees and Other Transactions with Affiliates Continued September 30, 2000, payments under the Class A plan totaled $1,611,727 prior to Manager waiver if applicable, all of which were paid by the Distributor to recipients, and included $108,622 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 and Class C 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 and Class C plans provide for the Distributor to be compensated at a flat rate, whether the Distributor’s distribution expenses are more or less than the amounts paid by the Fund under the plan during the period for which the fee is paid.

The Distributor retains the asset-based sales charge on Class B shares. The Distributor retains the asset-based sales charge on Class C shares during the first year the shares are outstanding. The asset-based sales charges on Class B and Class C 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 and Class C shares may be more than the payments it receives from the contingent deferred sales charges collected on redeemed shares and asset-based sales charges from the Fund under the plans. If any plan is terminated by the Fund, the Board of Trustees may allow the Fund to continue payments of the asset-based sales charge to the Distributor for distributing shares before the plan was terminated. The plans allow for the carry-forward 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 September 30, 2000, were as follows:


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

Class B Plan                         $3,604,644             $2,987,490         $6,908,611              2.09%
Class C Plan                          1,847,004                685,003          3,873,792              2.30
============================================================================================================

5. Futures Contracts

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

28 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND

The Fund generally sells futures contracts to hedge against increases in interest rates and decreases in market value of portfolio securities. The Fund may also purchase futures contracts to gain exposure to changes in interest rates as it may be more efficient or cost effective than actually buying fixed income securities.

Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin) in an amount equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the Fund each day. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains and losses. The Fund recognizes a realized gain or loss when the contract is closed or expires.

Securities held in collateralized accounts to cover initial margin requirements on open futures contracts are noted in the Statement of Investments. The Statement of Assets and Liabilities reflects a receivable and/or payable for the daily mark to market for variation margin.

Risks of entering into futures contracts (and related options) include the possibility that there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. As of September 30, 2000, the Fund had outstanding futures contracts as follows:


                                            Expiration       Number of            Valuation as of       Unrealized
Contract Description                              Date       Contracts         September 30, 2000     Depreciation
--------------------------------------------------------------------------------------------------------------------

Contracts to Sell
U.S. Treasury Nts. Futures, 5 yr.             12/19/00             555                $55,803,516        $(277,328)
U.S. Treasury Nts. Futures, 10 yr.            12/19/00             156                 15,634,125          (12,281)
U.S. Long Bond Futures                        12/19/00             462                 45,579,188         (338,813)
                                                                                                       -------------
                                                                                                         $(628,422)
                                                                                                       =============
====================================================================================================================

6. 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 September 30, 2000.

29 OPPENHEIMER LIMITED-TERM GOVERNMENT FUND A-1 Appendix A Industry Classifications Aerospace/Defense Food and Drug Retailers Air Transportation Gas Utilities Asset-Backed Health Care/Drugs Auto Parts and Equipment Health Care/Supplies & Services Automotive Homebuilders/Real Estate Bank Holding Companies Hotel/Gaming Banks Industrial Services Beverages Information Technology Broadcasting Insurance Broker-Dealers Leasing & Factoring Building Materials Leisure Cable Television Manufacturing Chemicals Metals/Mining Commercial Finance Nondurable Household Goods Communication Equipment Office Equipment Computer Hardware Oil - Domestic Computer Software Oil - International Conglomerates Paper Consumer Finance Photography Consumer Services Publishing Containers Railroads & Truckers Convenience Stores Restaurants Department Stores Savings & Loans Diversified Financial Shipping Diversified Media Special Purpose Financial Drug Wholesalers Specialty Printing Durable Household Goods Specialty Retailing Education Steel Electric Utilities Telecommunications - Long Distance Electrical Equipment Telephone - Utility Electronics Textile, Apparel & Home Furnishings Energy Services Tobacco Entertainment/Film Trucks and Parts Environmental Wireless Services Food B-8 Appendix B OppenheimerFunds Special Sales Charge Arrangements and Waivers In certain cases, the initial sales charge that applies to purchases of Class A shares4 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.5 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 plans6 (4) Group Retirement Plans7 (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 of the end 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."8 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. - 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.9 (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.10 (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. 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. - Distributions11 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.12 (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. To make "substantially equal periodic payments" as described in Section 72(t) of the Internal Revenue Code. (8) For loans to participants or beneficiaries.13 (9) On account of the participant's separation from service.14 (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 FundOppenheimer 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. - - Reduced Class A Initial Sales Charge Rates for Certain Former Quest for Value Funds Shareholders. Purchases by Groups and Associations. The following table sets forth the initial sales charge rates for Class A shares purchased by members of "Associations" formed for any purpose other than the purchase of securities. The rates in the table apply if that Association purchased shares of any of the Former Quest for Value Funds or received a proposal to purchase such shares from OCC Distributors prior to November 24, 1995. -------------------------------------------------------------------------------- Initial Sales Initial Sales Number of Eligible Charge as a % of Charge as a % of Concession as % Employees or Members Offering Price Net Amount Invested of Offering Price -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 9 or Fewer 2.50% 2.56% 2.00% -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- At least 10 but not 2.00% 2.04% 1.60% more than 49 -------------------------------------------------------------------------------- For purchases by Associations having 50 or more eligible employees or members, there is no initial sales charge on purchases of Class A shares, but those shares are subject to the Class A contingent deferred sales charge described in the applicable fund's Prospectus. Purchases made under this arrangement qualify for the lower of either the sales charge rate in the table based on the number of members of an Association, or the sales charge rate that applies under the Right of Accumulation described in the applicable fund's Prospectus and Statement of Additional Information. Individuals who qualify under this arrangement for reduced sales charge rates as members of Associations also may purchase shares for their individual or custodial accounts at these reduced sales charge rates, upon request to the Distributor. - - 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: - 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. - Shareholders who acquired shares of any Former Quest for Value Fund by merger of any of the portfolios of the Unified Funds. - - 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. - - 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: - 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 - 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. - - 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: - 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); - 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 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. - 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. - 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; 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 (1) 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.(9) VI. Special Reduced Sales Charge for Former Shareholders of Advance America Funds, Inc. Shareholders of Oppenheimer Municipal Bond Fund, Oppenheimer U.S. Government Trust, Oppenheimer Strategic Income Fund and Oppenheimer Capital Income Fund who acquired (and still hold) shares of those funds as a result of the reorganization of series of Advance America Funds, Inc. into those Oppenheimer funds on October 18, 1991, and who held shares of Advance America Funds, Inc. on March 30, 1990, may purchase Class A shares of those four Oppenheimer funds at a maximum sales charge rate of 4.50%. VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer Convertible Securities Fund Oppenheimer Convertible Securities Fund (referred to as the "Fund" in this section) may sell Class M shares at net asset value without any initial sales charge to the classes of investors listed below who, prior to March 11, 1996, owned shares of the Fund's then-existing Class A and were permitted to purchase those shares at net asset value without sales charge: - the Manager and its affiliates, - present or former officers, directors, trustees and employees (and their "immediate families" as defined in the Fund's Statement of Additional Information) of the Fund, the Manager and its affiliates, and retirement plans established by them or the prior investment advisor of the Fund for their employees, - registered management investment companies or separate accounts of insurance companies that had an agreement with the Fund's prior investment advisor or distributor for that purpose, - dealers or brokers that have a sales agreement with the Distributor, if they purchase shares for their own accounts or for retirement plans for their employees, - employees and registered representatives (and their spouses) of dealers or brokers described in the preceding section or financial institutions that have entered into sales arrangements with those dealers or brokers (and whose identity is made known to the Distributor) or with the Distributor, but only if the purchaser certifies to the Distributor at the time of purchase that the purchaser meets these qualifications, - dealers, brokers, or registered investment advisors that had entered into an agreement with the Distributor or the prior distributor of the Fund specifically providing for the use of Class M shares of the Fund in specific investment products made available to their clients, and - dealers, brokers or registered investment advisors that had entered into an agreement with the Distributor or prior distributor of the Fund's shares to sell shares to defined contribution employee retirement plans for which the dealer, broker, or investment advisor provides administrative services. ------------------------------------------------------------------------------ Oppenheimer Limited-Term Government Fund ------------------------------------------------------------------------------ Internet Web Site: www.oppenheimerfunds.com ------------------------ Investment Advisor OppenheimerFunds, Inc. Two World Trade Center New York, New York 10048-0203 Distributor OppenheimerFunds Distributor, Inc. Two World Trade Center New York, New York 10048-0203 Transfer Agent OppenheimerFunds Services P.O. Box 5270 Denver, Colorado 80217 1.800.525.7048 Custodian Bank Citibank, N.A. 399 Park Avenue New York, New York 10043 Independent Auditors Deloitte & Touche LLP 555 Seventeenth Street Denver, Colorado 80202 Legal Counsel Myer, Swanson, Adams & Wolf, P.C. 1600 Broadway Denver, Colorado 80202 1234 PX855.004 (Rev. 7/31/01) -------- 1 An inter-fund lending/borrowing program is subject to approval by the Securities and Exchange Commission. The Fund will not engage in inter-fund lending/borrowing until such approval has been granted. 2 Ms. Macaskill and Messrs. Bowen, Cameron and Marshall. are not Directors of Panorama Series Fund, Inc. Ms. Macaskill and Messrs. Armstrong, Bowen, Cameron, Fossel and Marshall are not Managing General Partners of Centennial America Fund, L.P. Messrs. Cameron and Marshall are not Trustees of Oppenheimer Municipal Fund. 3. In accordance with Rule 12b-1 of the Investment Company Act, the term "Independent Trustees" in this Statement of Additional Information refers to those Trustees who are not "interested persons" of the Fund and who do not have any direct or indirect financial interest in the operation of the distribution plan or any agreement under the plan. 4 Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund. 5 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. 6 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. 7 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. 8 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. 9 This provision does not apply to IRAs. 10 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs. 11 The distribution must be requested prior to Plan termination or the elimination of the Oppenheimer funds as an investment option under the Plan. 12 This provision does not apply to IRAs. 13 This provision does not apply to loans from 403(b)(7) custodial plans. 14 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.