OPPENHEIMER QUEST BALANCED FUND

497 1 sai.htm REVISED SAI, FINANCIALS OPPENHEIMER QUEST BALANCED FUND

Oppenheimer Quest Balanced FundSM
(A series of Oppenheimer Quest for Value Funds)

6803 South Tucson Way, Centennial, Colorado 80112-3924
1.800.CALL OPP (225.5677)

Statement of Additional Information dated December 26, 2006 revised January
31, 2007

This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated December 26, 2006. It should be read together with the
Prospectus. You can obtain the Prospectus by writing to the Fund's Transfer
Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217,
or by calling the Transfer Agent at the toll-free number shown above, or by
downloading it from the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

Contents Page

About the Fund
Additional Information About the Fund's Investment Policies and Risks... 2
The Fund's Investment Policies...................................... 2
Other Investment Techniques and Strategies.......................... 9
Other Investment Restrictions....................................... 29
Disclosure of Portfolio Holdings.................................... 30
How the Fund is Managed ................................................ 34
Organization and History............................................ 34
Board of Trustees and Audit Committee............................... 36
Trustees and Officers of the Fund................................... 37
The Manager......................................................... 47
The Sub-Advisor..................................................... 50
Brokerage Policies of the Fund...................................... 53
Distribution and Service Plans.......................................... 56
Payments to Fund Intermediaries......................................... 61
Performance of the Fund................................................. 65

About Your Account
How To Buy Shares....................................................... 70
How To Sell Shares...................................................... 81
How To Exchange Shares.................................................. 86
Dividends, Capital Gains and Taxes...................................... 90
Additional Information About the Fund................................... 95

Financial Information About the Fund
Report of Independent Registered Public Accounting Firm................. 96
Financial Statements.................................................... 97

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

ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

The investment objective, the principal investment policies and the
main risks of the Fund are described in the Prospectus. This Statement of
Additional Information ("SAI") contains supplemental information about those
policies and risks and the types of securities that the Fund's investment
manager, OppenheimerFunds, Inc., (the "Manager") and sub-advisor, Oppenheimer
Capital LLC (the "Sub-Advisor"), can select for the Fund. Additional
information is also provided about the strategies that the Fund might 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 Sub-Advisor may use in
selecting portfolio securities will vary over time. The Fund is not required
to use all of the investment techniques and strategies described below at all
times in seeking its goal. It may use some of the special investment
techniques and strategies at some times or not at all.

In selecting securities for the Fund's portfolio, the Sub-Advisor
evaluates the merits of particular securities primarily through the exercise
of its own investment analysis. In the case of corporate issuers, that
process may include, among other things, evaluation of the issuer's
historical operations, prospects for the industry of which the issuer is
part, the issuer's financial condition, its pending product developments and
business (and those of competitors), the effect of general market and
economic conditions on the issuer's business, and legislative proposals that
might affect the issuer. In the case of foreign securities, when evaluating
the securities of issuers in a particular country, the Sub-Advisor may also
consider the conditions of a particular country's economy in relation to the
U.S. economy or other foreign economies, general political conditions in a
country or region, the effect of taxes, the efficiencies and costs of
particular markets and other factors.

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

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

Using value investing requires research as to the issuer's underlying
financial condition and prospects. While there are a variety of measures that
can be used to identify these securities, the portfolio managers look
primarily at the issuer's price/earnings ratio, which is the stock's price
divided by its earnings per share. A stock having a price/earnings ratio
lower than its historical range, or the market as a whole or that of similar
companies, may offer attractive investment opportunities.

o Preferred Stocks. Preferred stocks are equity securities but have
certain attributes of debt securities. Preferred stock, unlike common stock,
has a stated dividend rate payable from the corporation's earnings. Preferred
stock dividends may be cumulative or non-cumulative, participating, or
auction rate. "Cumulative" dividend provisions require all or a portion of
prior unpaid dividends to be paid before the issuer can pay dividends on
common shares.

If interest rates rise, the fixed dividend on preferred stocks may be
less attractive, causing the price of preferred stocks to decline. Preferred
stock may have mandatory sinking fund provisions, as well as provisions for
their call or redemption prior to maturity which can have a negative effect
on their prices when interest prior to maturity rates decline. Preferred
stock may be "participating" stock, which means that it may be entitled to a
dividend exceeding the stated dividend in certain cases.

Preferred stocks are equity securities because they do not constitute a
liability of the issuer and therefore do not offer the same degree of
protection of capital as debt securities and may not offer the same degree of
assurance of continued income as debt securities. The rights of preferred
stock on distribution of a corporation's assets in the event of its
liquidation are generally subordinate to the rights associated with a
corporation's debt securities. Preferred stock generally has a preference
over common stock on the distribution of a corporation's assets in the event
of its liquidation.

o Rights and Warrants. The Fund can invest up to 5% of its total assets
in warrants and rights. Warrants basically are options to purchase equity
securities at specific prices valid for a specific period of time. The market
for them maybe very limited and they may be difficult for the Fund to dispose
of promptly at an acceptable price. Their prices do not necessarily move
parallel to the prices of the underlying securities. Rights are similar to
warrants, but normally have a short duration and are distributed directly by
the issuer to its shareholders. Rights and warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer.

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

The value of a convertible security is a function of its "investment
value" and its "conversion value." If the investment value exceeds the
conversion value, the security will behave more like a debt security, and the
security's price will likely increase when interest rates fall and decrease
when interest rates rise. If the conversion value exceeds the investment
value, the security will behave more like an equity security: it will likely
sell at a premium over its conversion value, and its price will tend to
fluctuate directly with the price of the underlying security. Convertible
securities are subject to credit risks and interest rate risk as discussed
below under "Investments in Debt Securities."

While some convertible securities are a form of debt security in many
cases, their conversion feature (allowing conversion into equity securities)
causes them to be regarded by the Manager more as "equity equivalents." In
those cases, the credit rating assigned to the security has less impact on
the Manager's investment decision than in the case of non-convertible
fixed-income securities. To determine whether convertible securities should
be regarded as "equity equivalents," the Manager examines the following
factors:
(1) whether, at the option of the investor, the convertible security can be
exchanged for a fixed number of shares of common stock of the
issuer,
(2) whether the issuer of the convertible securities has restated its
earnings per share of common stock on a fully diluted basis
(considering the effect of conversion of the convertible
securities), and
(3) the extent to which the convertible security may be a defensive "equity
substitute," providing the ability to participate in any
appreciation in the price of the issuer's common stock.

|X| Investments in Debt Securities. The Fund invests in a variety of
domestic and foreign debt securities, including corporate bonds, debentures
and other debt securities, and foreign and U.S. government securities
including mortgage-related securities, to seek investment income as part of
its investment objectives. It might invest in them also to seek capital
growth or for liquidity or defensive purposes. Although the Fund will invest
at least 25% of its total assets in fixed-income senior securities, the Fund
emphasizes investments in equity securities. Foreign debt securities are
subject to the risks of foreign investing described below. In general,
domestic and foreign debt securities are also subject to credit risk and
interest rate risk.

o Credit Risk. Credit risk relates to the ability of the issuer of a debt
security to meet interest and principal payment obligations as they become
due. In making investments in debt securities, the Sub-Advisor may rely to
some extent on the ratings of ratings organizations or it may use its own
research to evaluate a security's creditworthiness. The Fund's debt
investments can include investment-grade bonds and non-investment grade bonds
(commonly referred to as "junk bonds"). Investment-grade bonds are bonds
rated at least "Baa" by Moody's Investors Service, Inc. ("Moody's"), at least
"BBB" by Standard & Poor's Rating Services ("Standard & Poor's") or Fitch,
Inc. ("Fitch"), or that have comparable ratings by another nationally
recognized rating organization. If securities the Fund buys are unrated, to
be considered part of the Fund's holdings of investment-grade securities,
they must be judged by the Sub-Advisor to be of comparable quality to bonds
rated as investment grade by a rating organization. The debt securities
rating definitions of the Moody's, Standard & Poor's and Fitch are included
in Appendix A to this SAI.

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

Fluctuations in the market value of fixed-income securities after the
Fund buys them will not affect the interest income payable on those
securities (unless the security pays interest at a variable rate pegged to
interest rate changes). However, those price fluctuations will be reflected
in the valuations of the securities, and therefore the Fund's net asset
values will be affected by those fluctuations.

o Special Risks of Lower-Grade Securities. The Fund can invest up to 25%
of its total assets in lower-grade debt securities. Because lower-grade
securities tend to offer higher yields than investment-grade securities, the
Fund may invest in lower-grade securities if the Sub-Advisor is trying to
achieve greater income. In some cases, the appreciation possibilities of
lower-grade securities may be a reason they are selected for the Fund's
portfolio.

"Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than
"BBB" by Standard & Poor's or Fitch, or similar ratings by other nationally
recognized rating organizations. If they are unrated, and are determined by
the Sub-Advisor to be of comparable quality to debt securities rated below
investment grade, they are included in determining the maximum amount of the
Fund's assets that can be invested in lower-grade securities under the 25%
limitation. The Fund can invest in securities rated as low as "Caa" by
Moody's or "CCC" by Standard and Poor's, although it does not intend to
invest in securities in those ratings categories.

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

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

While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's
or Fitch are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics.

o 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 entities 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.

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. Therefore, 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. Therefore, 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.

If interest rates rise rapidly, prepayments may occur at a slower rate
than expected and the expected maturity of long-term or medium-term
securities could lengthen as a result. Generally, that would cause their
value and the prices of the Fund's share to fluctuate more widely in response
to changes in interest rates.

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 reverse
direction to 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 Securities. These are securities issued or guaranteed
by the U.S. Treasury or other U.S. government agencies or federally-chartered
entities referred to as "instrumentalities." The obligations of U.S.
government agencies or instrumentalities in which the Fund can 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
Sub-Advisor is satisfied that the credit risk with respect to the agency or
instrumentality is minimal.

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

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

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

o 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.

|X| Money Market Instruments. The following is a brief description of the
types of money market securities the Fund can invest in. Those money market
securities are high-quality, short-term debt instruments that are issued by
the U.S. government, corporations, banks or other entities. They may have
fixed, variable or floating interest rates.

o U.S. Government Securities. These include obligations issued or
guaranteed by the U.S. government or any of its agencies or
instrumentalities, as described above.

o Bank Obligations. The Fund can buy time deposits, certificates of
deposit and bankers' acceptances. Time deposits, other than overnight
deposits, may be subject to withdrawal penalties, and if so, they are deemed
to be "illiquid" investments.

The Fund can purchase bank obligations that are fully insured by the
Federal Deposit Insurance Corporation. The FDIC insures the deposits of
member banks up to $100,000 per account. Insured bank obligations may have a
limited market and a particular investment of this type may be deemed
"illiquid" unless the Board of Trustees of the Fund determines that a
readily-available market exists for that particular obligation, or unless the
obligation is payable at principal amount plus accrued interest on demand or
within seven days after demand.

o Commercial Paper. The Fund can invest in commercial paper if it is
rated within the top two rating categories of Standard & Poor's and Moody's.
If the paper is not rated, it may be purchased if issued by a company having
a credit rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.

The Fund can buy commercial paper, including U.S. dollar-denominated
securities of foreign branches of U.S. banks, issued by other entities if the
commercial paper is guaranteed as to principal and interest by a bank,
government or corporation whose certificates of deposit or commercial paper
may otherwise be purchased by the Fund.

o Variable Amount Master Demand Notes. Master demand notes are corporate
obligations that permit the investment of fluctuating amounts by the Fund at
varying rates of interest under direct arrangements between the Fund, as
lender, and the borrower. They permit daily changes in the amounts borrowed.
The Fund has the right to increase the amount under the note at any time up
to the full amount provided by the note agreement, or to decrease the
amount. The borrower may prepay up to the full amount of the note without
penalty. These notes may or may not be backed by bank letters of credit.

Because these notes are direct lending arrangements between the lender
and borrower, it is not expected that there will be a trading market for
them. There is no secondary market for these notes, although they are
redeemable (and thus are immediately repayable by the borrower) at principal
amount, plus accrued interest, at any time. Accordingly, the Fund's right to
redeem such notes is dependent upon the ability of the borrower to pay
principal and interest on demand.

The Fund has no limitations on the type of issuer from whom these notes
will be purchased. However, in connection with such purchases and on an
ongoing basis, the Sub-Advisor will consider the earning power, cash flow and
other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
made demand simultaneously. Investments in master demand notes are subject to
the limitation on investments by the Fund in illiquid securities, described
in the Prospectus. The Fund does not intend that its investments in variable
amount master demand notes will exceed 5% of its total assets.

|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% annually. The Fund's portfolio turnover
rate will fluctuate from year to year, and may be in excess of 100% annually.
Increased portfolio turnover creates higher brokerage and transaction costs
for the Fund, which may reduce its overall performance. Additionally, the
realization of capital gains from selling portfolio securities may result in
distributions of taxable long-term capital gains to shareholders, since the
Fund will normally distribute all of its capital gains realized each year, to
avoid excise taxes under the Internal Revenue Code.

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

|X| Foreign Securities. The Fund can purchase equity and debt securities
issued by foreign companies or foreign governments or their agencies.
"Foreign securities" include equity and debt securities of companies
organized under the laws of countries other than the United States and debt
securities of foreign governments and their agencies and instrumentalities.
Those securities may be traded on foreign securities exchanges or in the
foreign over-the-counter markets.

Securities of foreign issuers that are represented by American
Depository Receipts or that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are considered "foreign
securities" for the purpose of the Fund's investment allocations. That is
because they are subject to many of the special considerations and risks,
discussed below, that apply to foreign securities traded and held abroad.

Because the Fund can purchase securities denominated in foreign
currencies, a change in the value of a foreign currency against the U.S.
dollar could result in a change in the amount of income the Fund has
available for distribution. Because a portion of the Fund's investment income
may be received in foreign currencies, the Fund will be required to compute
its income in U.S. dollars for distribution to shareholders, and therefore
the Fund will absorb the cost of currency fluctuations. After the Fund has
distributed income, subsequent foreign currency losses may result in the
Fund's having distributed more income in a particular fiscal period than was
available from investment income, which could result in a return of capital
to shareholders.

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

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

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

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

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

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

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

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

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

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

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

|X| Investing in Small, Unseasoned Companies. The Fund can invest in
securities of small, unseasoned companies. These are companies that have been
in operation for less than three years, including the operations of any
predecessors. Securities of these companies may be subject to volatility in
their prices. They may have a limited trading market, which may adversely
affect the Fund's ability to dispose of them and can reduce the price the
Fund might be able to obtain for them. Other investors that own a security
issued by a small, unseasoned issuer for which there is limited liquidity
might trade the security when the Fund is attempting to dispose of its
holdings of that security. In that case the Fund might receive a lower price
for its holdings than might otherwise be obtained. These are more speculative
securities and can increase the Fund's overall portfolio risks.

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

When such transactions are negotiated, the price (which is generally
expressed in yield terms) is fixed at the time the commitment is made.
Delivery and payment for the securities take place at a later date. The
securities are subject to change in value from market fluctuations during the
period until settlement. The value at delivery may be less than the purchase
price. For example, changes in interest rates in a direction other than that
expected by the Sub-Advisor before settlement will affect the value of such
securities and may cause a loss to the Fund. During the period between
purchase and settlement, no payment is made by the Fund to the issuer and no
interest accrues to the Fund from the investment. No income begins to accrue
to the Fund on a when-issued security until the Fund receives the security at
settlement of the trade. 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 can engage in when-issued transactions to secure what the
Sub-Advisor considers to be an advantageous price and yield at the time of
entering into the obligation. When the Fund enters into a when-issued or
delayed-delivery transaction, it relies on the other party to complete the
transaction. Its failure to do so may cause the Fund to lose the opportunity
to obtain the security at a price and yield the Sub-Advisor considers to be
advantageous.

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

At the time the Fund makes the commitment to purchase or sell a
security on a when-issued or delayed-delivery basis, it records the
transaction on its books and reflects the value of the security purchased in
determining the Fund's net asset value. In a sale transaction, it records the
proceeds to be received. The Fund will identify on its books liquid assets at
least equal in value to the value of the Fund's purchase commitments until
the Fund pays for the investment. The Fund will not enter into when-issued
commitments if more than 15% of the Fund's net assets would be committed
under these transactions.

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

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

The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the
purchase. Repurchase agreements having a maturity beyond seven days are
subject to the Fund's limits on holding illiquid investments. There is no
limit on the amount of the Fund's net assets that may be subject to
repurchase agreements having maturities of seven days or less.

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

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

o Reverse Repurchase Agreements. The Fund can use reverse repurchase
agreements on debt obligations it owns. Under a reverse repurchase agreement,
the Fund sells an underlying debt obligation and simultaneously agrees to
repurchase the same security at an agreed-upon price at an agreed-upon date.
The Fund will identify on its books liquid assets in an amount sufficient to
cover its obligations under reverse repurchase agreements, including
interest, until payment is made to the seller.

These transactions involve the risk that the market value of the
securities sold by the Fund under a reverse repurchase agreement could
decline below the price at which the Fund is obligated to repurchase them.
These agreements are considered borrowings by the Fund and will be subject to
the asset coverage requirement under the Fund's policy on borrowing discussed
below.

|X| Illiquid and Restricted Securities. To enable the Fund to sell its
holdings of a restricted security not registered under applicable securities
law, the Fund may have to cause those securities to be registered. The
expenses of registering restricted securities may be negotiated by the Fund
with the issuer at the time the Fund buys the securities. When the Fund must
arrange registration because the Fund wishes to sell the security, a
considerable period may elapse between the time the decision is made to sell
the security and the time the security is registered so that the Fund could
sell it. The Fund would bear the risks of any downward price fluctuation
during that period.

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

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

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

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

|X| Loans of Portfolio Securities. The Fund may lend its portfolio
securities pursuant to the Securities Lending Agreement (the "Securities
Lending Agreement") with JP Morgan Chase, subject to the restrictions stated
in the Prospectus. The Fund will lend such portfolio securities to attempt to
increase the Fund's income. Under the Securities Lending Agreement and
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the value of the
loaned securities and 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 to JP
Morgan Chase, as agent, amounts demanded by the Fund if the demand meets the
terms of the letter. Such terms of the letter of credit and the issuing bank
must be satisfactory to JP Morgan Chase and the Fund. The Fund will receive,
pursuant to the Securities Lending Agreement, 80% of all annual net income
(i.e., net of rebates to the Borrower) from securities lending transactions.
JP Morgan Chase has agreed, in general, to guarantee the obligations of
borrowers to return loaned securities and to be responsible for expenses
relating to securities lending. The Fund will be responsible, however, for
risks associated with the investment of cash collateral, including the risk
that the issuer of the security in which the cash collateral has been
invested defaults. The Securities Lending Agreement may be terminated by
either JP Morgan Chase or the Fund on 30 days' written notice. The terms of
the Fund's loans must also meet applicable tests under the Internal Revenue
Code and permit the Fund to reacquire loaned securities on five business
days' notice or in time to vote on any important matter.

|X| Hedging. Although the Fund can use hedging instruments, it is not
obligated to use them in seeking its objective. It does not currently
contemplate using them to any significant degree. 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 that
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 could also
be used to increase the Fund's income, but the Sub-Advisor does
not expect to engage extensively in that practice.

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

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

o Futures. The Fund can buy and sell futures contracts that relate to (1)
broadly-based stock indices (these are referred to as "stock index futures"),
(2) foreign currencies (these are referred to as "forward contracts"), (3) an
individual stock ("single stock futures") and (4) commodities (these are
referred to as "commodity futures").

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

A single stock future obligates the seller to deliver (and the
purchaser to take) cash or a specified equity security to settle the futures
transaction. Either party could also enter into an offsetting contract to
close out the position. Single stock futures trade on a very limited number
of exchanges, with contracts typically not fungible among the exchanges.

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

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

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

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 options
on broadly-based indices, securities, foreign currencies and stock index
futures.

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. For
options on securities, that means the Fund must own the security subject to
the call while the call is outstanding. For stock index options, that means
the call must be covered by segregating liquid assets to enable the Fund to
satisfy its obligations if the call is exercised. The Trustees have adopted
an operating policy that the Fund may not write covered call options (or
write put options) with respect to more than 5% of the value of the Fund's
total assets.

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

Settlement of puts and calls on broadly-based stock indices is in cash.
Gain or loss on options on stock indices depends on changes in the index in
question (and thus on price movements in the stock market generally).

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.

If 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"). If 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 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 escrowed assets in escrow 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 on stock indices,
foreign currencies or stock index futures. A put option on securities gives
the purchaser the right to sell, and the writer the obligation to buy, the
underlying investment of the exercise price during the option period. If the
Fund writes a put, the put must be covered by liquid assets identified on the
Fund's books in an amount at least equal to the exercise price of the
underlying securities. The Fund therefore forgoes the opportunity of
investing the segregated assets or writing calls against those assets.

The premium the Fund receives from writing a put represents a profit,
as long as the price of the underlying investment remains equal to or above
the exercise price of the put. However, the Fund also assumes the obligation
during the option period to settle the transaction in cash with the buyer of
the put at the exercise price, even if the value of the underlying 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 settle in cash at the exercise price. That price will
usually exceed the market value of the investment at that time. In that case,
the fund might 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.

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 settle the transaction in cash at
the exercise price. The Fund has no control over when it may be required to
settle the transaction, 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. 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 Puts and Calls. The Fund can buy 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. Buying a call on
a security or future gives the Fund 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.

In the case of a purchase of a call on a stock index, if the Fund
exercises the call during the call period, a seller of a corresponding call
on the same index will pay the Fund an amount of cash to settle the call if
the closing level of the stock index upon which the call is based is greater
than the exercise price of the call. That cash payment is equal to the
difference between the closing price of the call and the exercise price of
the call times a specified multiple (the "multiplier") which determines the
total dollar value for each point of difference.

When the Fund buys a put, it pays a premium. It has the right during
the put period to require a seller of a corresponding put, upon the Fund's
exercise of its put, to buy the underlying security (in the case of puts on
securities or futures) or in the case of puts on stock indices, to deliver
cash to the Fund to settle the put if the closing level of the stock index
upon which the put is based is less than the exercise price of the put. That
cash payment is determined by the multiplier, in the same manner as described
above as to calls.

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

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

When the Fund purchases a put on a stock index, the put protects the
Fund to the extent that the index moves in a similar pattern to the
securities the Fund holds. The Fund can resell the put. The resale price of
the put will vary inversely with the price of the underlying investment. If
the market price of the underlying investment is above the exercise price,
and as a result the put is not exercised, the put will become worthless on
the expiration date. In the event of a decline in price of the underlying
investment, the Fund could exercise or sell the put at a profit to attempt to
offset some or all of its loss on its portfolio securities. 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.

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

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

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

The Fund could write a call on a foreign currency to provide a hedge
against a decline in the U.S. dollar value of a security which the Fund owns
or has the right to acquire and which is denominated in the currency
underlying the option. That decline might be one that occurs due to an
expected adverse change in the exchange rate. This is known as a
"cross-hedging" strategy. In those circumstances, the Fund covers the option
by identifying on its books cash, U.S. government securities or other liquid
securities in an amount equal to the exercise price of the option.

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 Sub-Advisor 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 may affect its costs.

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 may advance and the value of the securities held in the
Fund's portfolio might decline. If that occurred, the Fund would lose money
on the hedging instruments and also experience a decline in the value of its
portfolio securities. However, while this could occur for a very brief period
or to a very small degree, over time the value of a diversified portfolio of
securities will tend to move in the same direction as the indices upon which
the hedging instruments are based.

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

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

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

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

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

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

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

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

The Fund will cover its short positions in these cases by identifying
on its books liquid assets having a value equal to the aggregate amount of
the Fund's commitment under forward contracts. The Fund will not enter into
forward contracts or maintain a net exposure to such contracts if the
consummation of the contracts would obligate the Fund to deliver an amount of
foreign currency in excess of the value of the Fund's portfolio securities or
other assets denominated in that currency or another currency that is the
subject of the hedge. However, to avoid excess transactions and transaction
costs, the Fund may maintain a net exposure to forward contracts in excess of
the value of the Fund's portfolio securities or other assets denominated in
foreign currencies if the excess amount is "covered" by liquid securities
denominated in any currency. The cover must be at least equal at all times to
the amount of that excess.

As one alternative, the Fund may purchase a call option permitting the
Fund to purchase the amount of foreign currency being hedged by a forward
sale contract at a price no higher than the forward contract price. As
another alternative, the Fund may purchase a put option permitting the Fund
to sell the amount of foreign currency subject to a forward purchase contract
at a price as high or higher than the forward contact price.

The precise matching of the amounts under forward contracts and the
value of the securities involved generally will not be possible because the
future value of securities denominated in foreign currencies will change as a
consequence of market movements between the date the forward contract is
entered into and the date it is sold. In some cases, the Sub-Advisor might
decide to sell the security and deliver foreign currency to settle the
original purchase obligation. If the market value of the security is less
than the amount of foreign currency the Fund is obligated to deliver, the
Fund might have to purchase additional foreign currency on the "spot" (that
is, cash) market to settle the security trade. If the market value of the
security instead exceeds the amount of foreign currency the Fund is obligated
to deliver to settle the trade, the Fund might have to sell on the spot
market some of the foreign currency received upon the sale of the security.
There will be additional transaction costs on the spot market in those cases.

The projection of short-term currency market movements is extremely
difficult, and the successful execution of a short-term hedging strategy is
highly uncertain. Forward contracts involve the risk that anticipated
currency movements will not be accurately predicted, causing the Fund to
sustain losses on these contracts and to pay additional transaction costs.
The use of forward contracts in this manner might reduce the Fund's
performance if there are unanticipated changes in currency prices to a
greater degree than if the Fund had not entered into such contracts.

At or before the maturity of a forward contract requiring the Fund to
sell a currency, the Fund might sell a portfolio security and use the sale
proceeds to make delivery of the currency. In the alternative the Fund might
retain the security and offset its contractual obligation to deliver the
currency by purchasing a second contract. Under that contract the Fund will
obtain, on the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund might close out a forward contract
requiring it to purchase a specified currency by entering into a second
contract entitling it to sell the same amount of the same currency on the
maturity date of the first contract. The Fund would realize a gain or loss as
a result of entering into such an offsetting forward contract under either
circumstance. The gain or loss will depend on the extent to which the
exchange rate or rates between the currencies involved moved between the
execution dates of the first contract and offsetting contract.

The costs to the Fund of engaging in forward contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward contracts are
usually entered into on a principal basis, no brokerage fees or commissions
are involved. Because these contracts are not traded on an exchange, the Fund
must evaluate the credit and performance risk of the counterparty under each
forward contract.

Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on
a daily basis. The Fund may convert foreign currency from time to time, and
will incur costs in doing so. Foreign exchange dealers do not charge a fee
for conversion, but they do seek to realize a profit based on the difference
between the prices at which they buy and sell various currencies. Thus, a
dealer might offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange if the Fund desires to resell that
currency to the dealer.

o Asset Coverage for Forward Contracts, Options, and Futures. The Fund
will comply with guidelines established by the Securities and Exchange
Commission and other applicable regulatory bodies with respect to coverage of
options written by the Fund on securities and indexes, currency, interest
rate and security index futures contracts and options on these futures
contracts, and forward currency contracts. These guidelines may, in certain
instances, require segregation by the Fund of cash or liquid securities with
its custodian or a designated sub-custodian to the extent the Fund's
obligations with respect to these strategies are not otherwise "covered"
through ownership of the underlying security or financial instrument or by
other portfolio positions, or by other means consistent with applicable
regulatory policies. Segregation of a large percentage of the Fund's assets
could impede the Sub Advisor's ability to manage the Fund's portfolio.
Except under circumstances where a segregated account is not required under
the Investment Company Act or the rules adopted thereunder, the Fund will
earmark cash or liquid assets or place them in a segregated account in an
amount necessary to cover the Fund's obligations under such derivative
transactions.

Most swap agreements entered into by the Fund would calculate the
obligations of the parties to the agreement on a "net basis" (i.e., the two
payment streams are netted out with the Fund receiving or paying, as the case
may be, only the net amount of the two payments). Consequently the Fund's
current obligations (or rights) under a swap agreement will generally be
equal only to the net amount to be paid or received under the agreement based
on the relative values of the positions held by each party to the agreement
(the "net amount"). The Fund's current obligations under a swap agreement
will be accrued daily (offset against any amounts owed to the Fund) and any
accrued but unpaid net amounts owed to a swap counterparty will be covered by
the segregation of liquid assets having an aggregate net asset value at least
equal to the accrued unpaid net amounts owed.

To the extent that the Fund enters into swaps on other than a net
basis, the amount maintained in a segregated account will be the full amount
of the Fund's obligations, if any, with respect to such swaps, accrued on a
daily basis in an amount equal to or greater than the market value of the
liabilities under the swap agreement or the amount it would have cost the
Fund initially to make an equivalent direct investment, plus or minus any
amount the Fund is obligated to pay or is to receive under the swap
agreement. Inasmuch as segregated accounts are established for these hedging
transactions, the Manager and the Fund believe such obligations do not
constitute senior securities and, accordingly, will not treat them as being
subject to its borrowing restrictions. If there is a default by the other
party to such a transaction, the Fund will have contractual remedies pursuant
to the agreement related to the transaction. Since swaps are individually
negotiated, the Fund expects to achieve an acceptable degree of correlation
between its rights to receive a return on its portfolio securities and its
rights and obligations to receive and pay a return pursuant to swaps.

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

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

Under interpretations of staff members of the SEC regarding applicable
provisions of the Investment Company Act, when the Fund purchases a future,
it must segregate cash or readily marketable short-term debt instruments in
an amount equal to the securities purchase price of the future, less the
margin deposit applicable to it. The account must be a segregated account or
accounts held by the Fund's custodian bank.

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

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

Under the Internal Revenue Code, the following gains or losses are
treated as ordinary income or loss:
1. gains or losses attributable to fluctuations in exchange rates that
occur between the time the Fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in
a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities, and
2. gains or losses attributable to fluctuations in the value of a foreign
currency between the date of acquisition of a debt security
denominated in a foreign currency or foreign currency forward
contracts and the date of disposition.

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

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

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

|X| Temporary Defensive and Interim Investments. When market, economic or
political conditions are unstable, or the Sub-Advisor believes it is
otherwise appropriate to reduce holdings in stocks, the Fund can invest in a
variety of debt securities for defensive purposes and the types of money
market instruments described above. The Fund can also purchase these
securities for liquidity purposes to meet cash needs due to the redemption of
Fund shares, or to hold while waiting to reinvest cash received from the sale
of other portfolio securities. The Fund can buy:
o obligations issued or guaranteed by the U. S. government or its
instrumentalities or agencies,
o commercial paper (short-term, unsecured, promissory notes of domestic
or foreign companies) rated in the top two rating categories of a
nationally-recognized rating organization,
o short-term debt obligations of corporate issuers, rated investment
grade (rated at least Baa by Moody's or at least BBB by Standard
& Poor's, or a comparable rating by another rating organization),
or unrated securities judged by the Sub-Advisor to have a
comparable quality to rated securities in those categories,
o certificates of deposit and bankers' acceptances of domestic and
foreign banks having total assets in excess of $1 billion, and
o repurchase agreements.

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

Other Investment Restrictions

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

The Fund's investment objective is a fundamental policy. Other policies
described in the Prospectus or this SAI 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 SAI, as appropriate. The Fund's principal 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 invest in real estate, physical commodities or
commodity contracts, except to the extent permitted under the Investment
Company Act, the rules or regulations thereunder or any exemption therefrom,
as such statute, rules or regulations may be amended or interpreted from time
to time.

o The Fund may not underwrite securities issued by others, except to the
extent that a Fund may be considered an underwriter within the meaning of the
Securities Act of 1933, as amended, when reselling securities held in its own
portfolio.

o The Fund cannot issue senior securities, except to the extent permitted
under the Investment Company Act, the rules or regulations thereunder or any
exemption therefrom, as such statute, rules or regulations may be amended or
interpreted from time to time.

o The Fund cannot make loans, except to the extent permitted under the
Investment Company Act, the rules or regulations thereunder or any exemption
therefrom that is applicable to the Fund, as such statute, rules or
regulations may be amended or interpreted from time to time.

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

o The Fund cannot invest 25% or more of its total assets in any one
industry. That limit does not apply to securities issued or guaranteed by the
U.S. government or its agencies and instrumentalities or securities issued by
investment companies.

o The Fund may not borrow money, except to the extent permitted under the
Investment Company Act, the rules or regulations thereunder or any exemption
therefrom that is applicable to the Fund, as such statute, rules or
regulations may be amended or interpreted from time to time.

|X| Does the Fund Have Any Restrictions That Are Not Fundamental? The Fund
has a number of other investment restrictions that are not fundamental
policies, which means that they can be changed by the Board of Trustees
without shareholder approval.

o The Fund cannot make short sales or purchase securities on margin.
However, the Fund can make short-term borrowings when necessary for the
clearance of purchases of portfolio securities. Collateral arrangements in
connection with futures and options transactions are not deemed to be margin
transactions under this restriction.

o The Fund cannot invest in interests in oil, gas or other mineral
exploration or development programs or leases.

o The Fund cannot invest in the securities of other registered investment
companies or registered unit investment trusts in reliance on sub-paragraph
(F) or (G) of section 12(d)(1) of the Investment Company Act.

Unless the Prospectus or this SAI states that a percentage restriction
applies on an ongoing basis, it applies only at the time the Fund makes an
investment (except in the case of borrowing and investments in illiquid
securities). The Fund need not sell securities to meet the percentage limits
if the value of the investment increases in proportion to the size of the
Fund.

For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth
in Appendix B to this SAI. This is not a fundamental policy.

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

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

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

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

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

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

o The third-party recipient must first submit a request for release of
Fund portfolio holdings, explaining the business reason for the
request;
o Senior officers (a Senior Vice President or above) in the Manager's
Portfolio and Legal departments must approve the completed
request for release of Fund portfolio holdings; and
o The third-party recipient must sign the Manager's portfolio holdings
non-disclosure agreement before receiving the data, agreeing to
keep information that is not publicly available regarding the
Fund's holdings confidential and agreeing not to trade directly
or indirectly based on the information.
The Fund's complete portfolio holdings positions may be released to the
following categories of entities or individuals on an ongoing basis,
provided that such entity or individual either (1) has signed an
agreement to keep such information confidential and not trade on the
basis of such information or (2) is subject to fiduciary obligations, as
a member of the Fund's Board, or as an employee, officer and/or director
of the Manager, Sub-Advisor, Distributor, or Transfer Agent, or their
respective legal counsel, not to disclose such information except in
conformity with these policies and procedures and not to trade for
his/her personal account on the basis of such information:

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

Portfolio holdings information of the Fund may be provided, under limited
circumstances, to brokers and/or dealers with whom the Fund trades and/or
entities that provide investment coverage and/or analytical information
regarding the Fund's portfolio, provided that there is a legitimate
investment reason for providing the information to the broker, dealer or
other entity. Month-end portfolio holdings information may, under this
procedure, be provided to vendors providing research information and/or
analytics to the fund, with at least a 15-day delay after the month end,
but in certain cases may be provided to a broker or analytical vendor
with a 1-2 day lag to facilitate the provision of requested investment
information to the manager to facilitate a particular trade or the
portfolio managers' investment process for the Fund. Any third party
receiving such information must first sign the Manager's portfolio
holdings non-disclosure agreement as a pre-condition to receiving this
information.

Portfolio holdings information (which may include information on
individual securities positions or multiple securities) may be provided
to the entities listed below (1) by portfolio traders employed by the
Manager in connection with portfolio trading, and (2) by the members of
the Manager's Security Valuation Group and Accounting Departments in
connection with portfolio pricing or other portfolio evaluation purposes:

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

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

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

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

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

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

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

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

How the Fund is Managed

Organization and History. The Fund, a series of Oppenheimer Quest for Value
Funds (referred to as the "Trust"), 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 April 1987. Prior to February 2004, the Fund's name was "Oppenheimer Quest
Balanced Value Fund." Prior to May 1998, the Fund's name was "Oppenheimer
Quest Growth & Income Value Fund."

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

The Fund currently has five classes of shares: Class A, Class B, Class
C, Class N and Class Y. All classes invest in the same investment portfolio.
Only retirement plans may purchase Class N shares. Only certain institutional
investors may purchase Class Y shares. Each class of shares:
o has its own dividends and distributions,
o pays certain expenses which may be different for the different classes,
o will generally have a different net asset value,
o will generally have separate voting rights on matters in which
interests of one class are different from interests of another
class, and
o votes as a class on matters that affect that class alone.

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

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

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

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

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

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

The Board of Trustees has an Audit Committee comprised solely of
Trustees who are not "interested persons" under the Investment Company Act
(the "Independent Trustees"). The members of the Audit Committee are David K.
Downes (Chairman), Thomas W. Courtney, Robert G. Galli, Lacy B. Herrmann and
Brian Wruble. The Audit Committee held 6 meetings during the Fund's fiscal
year ended October 31, 2006. The Audit Committee furnishes the Board with
recommendations regarding the selection of the Fund's independent registered
public accounting firm (also referred to as the "independent Auditors").
Other main functions of the Audit Committee outlined in the Audit Committee
Charter, include, but are not limited to: (i) reviewing the scope and results
of financial statement audits and the audit fees charged; (ii) reviewing
reports from the Fund's independent registered public accounting firm
regarding the Fund's internal accounting procedures and controls;
(iii) reviewing reports from the Manager's Internal Audit Department;
(iv) maintaining a separate line of communication between the Fund's
independent Auditors and the Independent Trustees; (v) reviewing the
independence of the Fund's independent Auditors; (vi) pre-approving the
provision of any audit or non-audit services by the Fund's independent
Auditors, including tax services, that are not prohibited by the
Sarbanes-Oxley Act, to the Fund, the Manager and certain affiliates of the
Manager.

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

To date, the Audit Committee has been able to identify from its own
resources an ample number of qualified candidates. Nonetheless, shareholders
may submit names of individuals, accompanied by complete and properly
supported resumes, for the Audit Committee's consideration by mailing such
information to the Audit Committee. Shareholders wishing to submit a nominee
for election to the Board may do so by mailing their submission to the
offices of OppenheimerFunds, Inc., Two World Financial Center, 225 Liberty
Street, 11th Floor, New York, New York 10281-1008, to the attention of the
Board of Trustees of Oppenheimer Quest Balanced Fund, c/o the Secretary of
the Fund. Submissions should, at a minimum, be accompanied by the following:
(1) the name, address, and business, educational, and/or other pertinent
background of the person being recommended; (2) a statement concerning
whether the person is an "interested person" as defined in the Investment
Company Act; (3) any other information that the Fund would be required to
include in a proxy statement concerning the person if he or she was
nominated; and (4) the name and address of the person submitting the
recommendation and, if that person is a shareholder, the period for which
that person held Fund shares. Shareholders should note that a person who owns
securities issued by Massachusetts Mutual Life Insurance Company
("MassMutual") (the parent company of the Manager) would be deemed an
"interested person" under the Investment Company Act. In addition, certain
other relationships with MassMutual or its subsidiaries, with registered
broker-dealers, or with the Funds' outside legal counsel may cause a person
to be deemed an "interested person."

Although candidates are expected to provide a mix of attributes,
experience, perspective and skills necessary to effectively advance the
interests of shareholders, the Audit Committee has not established specific
qualifications that must be met by a trustee nominee. In evaluating trustee
nominees, the Audit Committee considers, among other things, an individual's
background, skills, and experience; whether the individual is an "interested
person" as defined in the Investment Company Act; and whether the individual
would be deemed an "audit committee financial expert" within the meaning of
applicable SEC, rules. The Audit Committee also considers whether the
individual's background, skills, and experience will complement the
background, skills, and experience of other nominees. The Audit Committee
may, upon Board approval, retain an executive search firm or use the services
of legal, financial, or other external counsel to assist in screening
potential candidates.

There are no differences in the manner in which the Audit Committee
evaluates nominees for trustees based on whether the nominee is recommended
by a shareholder.

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

Bond Fund Series
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds
Oppenheimer Quest International Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Rochester Portfolio Series

In addition to being a Board member of each of the Board III Funds,
Messrs. Galli and Wruble are also directors or trustees of 43 other
portfolios in the OppenheimerFunds complex.

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

Messrs. Gillespie, Murphy, Petersen, Szilagyi, Vandehey, Wixted and
Zack and Mss. Bloomberg and Ives, who are officers of the Fund, hold the same
offices with one or more of the other Board III Funds. As of December 1, 2006
the Trustees and officers of the Fund, as a group, owned of record or
beneficially less than 1% of any class of shares of the Fund. The foregoing
statement does not reflect ownership of shares held of record by an employee
benefit plan for employees of the Manager, other than the shares beneficially
owned under that plan by the officers of the Fund listed above. In addition,
none of the Independent Trustees (nor any of their immediate family members)
owns securities of either the Manager, the Sub-Advisor or the Distributor of
the Board III Funds or of any entity directly or indirectly controlling,
controlled by or under common control with the Manager, the Sub-Advisor or
the Distributor.

Biographical Information. The Trustees and officers, their positions
with the Fund, length of service in such position(s), and principal
occupations and business affiliations during at least the past five years are
listed in the charts below. The charts also include information about each
Trustee's beneficial share ownership in the Fund and in all of the registered
investment companies that the Trustee oversees in the Oppenheimer family of
funds ("Supervised Funds"). The address of each Trustee in the chart below is
6803 S. Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for
an indefinite term, or until his or her resignation, retirement, death or
removal.

-------------------------------------------------------------------------------------------
Independent Trustees
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During the Dollar Range Aggregate Dollar
Past 5 Years; Other of Shares Range of Shares
Held with the Trusteeships/Directorships Held; Beneficially Beneficially
Fund, Length of Number of Portfolios in the Fund Owned in the Owned in
Service, Age Complex Currently Overseen Fund Supervised Funds
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
As of December 31, 2005
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Thomas W. Courtney, Principal of Courtney Associates, None $10,001-$50,000
Chairman of the Inc. (venture capital firm) (since
Board of Trustees 1982); General Partner of Trivest
since 2001, Venture Fund (private venture capital
Trustee since 1987 fund); President of Investment
Age: 73 Counseling Federated Investors, Inc.
(1973-1982); Trustee of the following
open-end investment companies: Cash
Assets Trust (1984), Premier VIT
(formerly PIMCO Advisors VIT), Tax
Free Trust of Arizona (since 1984)
and four funds for the Hawaiian Tax
Free Trust. Oversees 11 portfolios in
the OppenheimerFunds complex.**
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
David K. Downes, President, Chief Executive Officer None None
Trustee since 2005 and Board Member of CRAFund Advisors,
Age: 66 Inc. (investment management company)
(since January 2004); President of
The Community Reinvestment Act
Qualified Investment Fund (investment
management company) (since January
2004); Independent Chairman of the
Board of Trustees of Quaker
Investment Trust (registered
investment company) (since January
2004); Director of Internet Capital
Group (information technology
company) (since October 2003); Chief
Operating Officer and Chief Financial
Officer of Lincoln National
Investment Companies, Inc.
(subsidiary of Lincoln National
Corporation, a publicly traded
company) and Delaware Investments
U.S., Inc. (investment management
subsidiary of Lincoln National
Corporation) (1995-2003); President,
Chief Executive Officer and Trustee
of Delaware Investment Family of
Funds (1995-2003); President and
Board Member of Lincoln National
Convertible Securities Funds, Inc.
and the Lincoln National Income
Funds, TDC (1995-2003); Chairman and
Chief Executive Officer of Retirement
Financial Services, Inc. (registered
transfer agent and investment adviser
and subsidiary of Delaware
Investments U.S., Inc.) (1995-2003);
President and Chief Executive Officer
of Delaware Service Company, Inc.
(1995-2003); Chief Administrative
Officer, Chief Financial Officer,
Vice Chairman and Director of
Equitable Capital Management
Corporation (investment subsidiary of
Equitable Life Assurance Society)
(1985-1992); Corporate Controller of
Merrill Lynch & Company (financial
services holding company)
(1977-1985); held the following
positions at the Colonial Penn Group,
Inc. (insurance company): Corporate
Budget Director (1974-1977),
Assistant Treasurer (1972-1974) and
Director of Corporate Taxes
(1969-1972); held the following
positions at Price Waterhouse &
Company (financial services firm):
Tax Manager (1967-1969), Tax Senior
(1965-1967) and Staff Accountant
(1963-1965); United States Marine
Corps (1957-1959). Oversees 10
portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Robert G. Galli, A director or trustee of other None Over $100,000
Trustee since 1998 Oppenheimer funds. Oversees 53
Age: 73 portfolios in the OppenheimerFunds
complex.*
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Lacy B. Herrmann, Founder and Chairman Emeritus of None $10,001-$50,000
Trustee since 1987 Aquila Group of Funds (open-end
Age: 77 investment company) (since December
2004); Chairman of Aquila Management
Corporation and Aquila Investment
Management LLC (since August 1984);
Chief Executive Officer and President
of Aquila Management Corporation
(August 1984-December 1994); Vice
President, Director and Secretary of
Aquila Distributors, Inc.
(distributor of Aquila Management
Corporation); Treasurer of Aquila
Distributors, Inc.; President and
Chairman of the Board of Trustees of
Capital Cash Management Trust
("CCMT"); President and Director of
STCM Management Company, Inc.
(sponsor and adviser to CCMT);
Chairman, President and Director of
InCap Management Corporation;
Sub-Advisor and Administrator of
Prime Cash Fund & Short Term Asset
Reserves; Director of OCC Cash
Reserves, Inc. (open-end investment
company) (June 2003-December 2004);
Trustee of Premier VIT (formerly
PIMCO Advisors VIT) (investment
company) (since 1994); Trustee of OCC
Accumulation Trust (open-end
investment company) (until December
2004); Trustee Emeritus of Brown
University (since June 1983).
Oversees11portfolios in the
OppenheimerFunds complex.**
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Brian F. Wruble, General Partner of Odyssey Partners, $1-$10,000 Over $100,000
Trustee since 2001 L.P. (hedge fund) (since September
Age: 63 1995); Director of Special Value
Opportunities Fund, LLC (registered
investment company) (since September
2004); Member, Zurich Financial
Investment Advisory Board (insurance)
(affiliate of the Manager's parent
company) (since October 2004); Board
of Governing Trustees of The Jackson
Laboratory (non-profit) (since August
1990); Trustee of the Institute for
Advanced Study (non-profit
educational institute) (since May
1992); Special Limited Partner of
Odyssey Investment Partners, LLC
(private equity investment) (January
1999-September 2004); Trustee of
Research Foundation of AIMR
(2000-2002) (investment research,
non-profit); Governor, Jerome Levy
Economics Institute of Bard College
(August 1990-September 2001)
(economics research); Director of Ray
& Berendtson, Inc. (May 2000-April
2002) (executive search firm);
President and Chief Executive Officer
of the Delaware Group of Mutual Funds
(1992-1995); Chairman, President and
Chief Executive Officer of Equitable
Capital Management Corporation
(1985-1992); Executive Vice President
and Chief Investment Officer at The
Equitable Life Assurance Society of
the U.S. (1979-1992); Vice President
and Co-manager at Smith Barney,
Harris Upham and Company (1970-1979);
Engineer, Sperry Gyroscope Company
(1966-1970); former governor of the
Association for Investment Management
and Research; former chairman of the
Institute of Chartered Financial
Analysts; Chartered Financial
Analyst. Oversees 53 portfolios in
the OppenheimerFunds complex.*
-------------------------------------------------------------------------------------------
* In addition to serving as Director or Trustee of all of the Board III
Funds, Messrs. Galli and Wruble also serve one the boards of 38 other
Oppenheimer funds that are not Board III Funds.
** Includes one open-end investment company, Premier VIT (formerly PIMCO
Advisors VIT) for which the Fund's Sub-Adviser acts as the investment adviser. In
accordance with the instructions for Form N-1A, for purposes of this section
only, Premier VIT is included in the "Fund Complex." The Manager does not
consider Premier VIT to be part of the OppenheimerFunds "Fund Complex" as that
term may be otherwise interpreted.

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

-------------------------------------------------------------------------------------------
Interested Trustee and Officer
-------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Name, Position(s) Principal Occupation(s) During the Past 5 Dollar Aggregate
Dollar Range
Range of Of Shares
Shares Beneficially
Held with Fund, Years; Other Trusteeships/Directorships Beneficially Owned in
Length of Held; Number of Portfolios in the Fund Owned in Supervised
Service, Age Complex Currently Overseen the Fund Funds
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
As of December 31, 2005
------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and $10,001-$50,Over $100,000
Trustee since Director (since June 2001) and President
2005 and (since September 2000) of the Manager;
President and President and director or trustee of other
Principal Oppenheimer funds; President and Director
Executive Officer of Oppenheimer Acquisition Corp. ("OAC")
since 2001 (the Manager's parent holding company) and
Age: 57 of Oppenheimer Partnership Holdings, Inc.
(holding company subsidiary of the Manager)
(since July 2001); Director of
OppenheimerFunds Distributor, Inc.
(subsidiary of the Manager) (since November
2001); Chairman and Director of Shareholder
Services, Inc. and of Shareholder Financial
Services, Inc. (transfer agent subsidiaries
of the Manager) (since July 2001);
President and Director of OppenheimerFunds
Legacy Program (charitable trust program
established by the Manager) (since July
2001); Director of the following investment
advisory subsidiaries of the Manager: OFI
Institutional Asset Management, Inc.,
Centennial Asset Management Corporation,
Trinity Investment Management Corporation
and Tremont Capital Management, Inc. (since
November 2001), HarbourView Asset
Management Corporation and OFI Private
Investments, Inc. (since July 2001);
President (since November 1, 2001) and
Director (since July 2001) of Oppenheimer
Real Asset Management, Inc.; Executive Vice
President of Massachusetts Mutual Life
Insurance Company (OAC's parent company)
(since February 1997); Director of DLB
Acquisition Corporation (holding company
parent of Babson Capital Management LLC)
(since June 1995); Member of the Investment
Company Institute's Board of Governors
(since October 3, 2003); Chief Operating
Officer of the Manager (September 2000-June
2001); President and Trustee of MML Series
Investment Fund and MassMutual Select Funds
(open-end investment companies) (November
1999-November 2001); Director of C.M. Life
Insurance Company (September 1999-August
2000); President, Chief Executive Officer
and Director of MML Bay State Life
Insurance Company (September 1999-August
2000); Director of Emerald Isle Bancorp and
Hibernia Savings Bank (wholly-owned
subsidiary of Emerald Isle Bancorp) (June
1989-June 1998). Oversees 91 portfolios in
the OppenheimerFunds complex.
-------------------------------------------------------------------------------------------

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

------------------------------------------------------------------------------------------
Other Officers of the Fund
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Name, Position(s) Held Principal Occupation(s) During Past 5 Years
with Fund, Length of
Service, Age
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Mark S. Vandehey, Senior Vice President and Chief Compliance Officer of the
Vice President and Manager (since March 2004); Vice President of OppenheimerFunds
Chief Compliance Distributor, Inc., Centennial Asset Management Corporation and
Officer since 2004 Shareholder Services, Inc. (since June 1983). Former Vice
Age: 56 President and Director of Internal Audit of the Manager
(1997-February 2004). An officer of 91portfolios in the
OppenheimerFunds complex.
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer of the Manager (since March
Treasurer and 1999); Treasurer of the following: HarbourView Asset Management
Principal Financial & Corporation, Shareholder Financial Services, Inc., Shareholder
Accounting Officer Services, Inc., Oppenheimer Real Asset Management Corporation,
since1999 and Oppenheimer Partnership Holdings, Inc. (since March 1999),
Age: 47 OFI Private Investments, Inc. (since March 2000),
OppenheimerFunds International Ltd. (since May 2000),
OppenheimerFunds plc (since May 2000), OFI Institutional Asset
Management, Inc. (since November 2000), and OppenheimerFunds
Legacy Program (charitable trust program established by the
Manager) (since June 2003); Treasurer and Chief Financial
Officer of OFI Trust Company (trust company subsidiary of the
Manager) (since May 2000); Assistant Treasurer of the following:
OAC (since March 1999),Centennial Asset Management Corporation
(March 1999-October 2003) and OppenheimerFunds Legacy Program
(April 2000-June 2003); Principal and Chief Operating Officer of
Bankers Trust Company-Mutual Fund Services Division (March
1995-March 1999). An officer of 91 portfolios in the
OppenheimerFunds complex.
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Brian Petersen, Assistant Vice President of the Manager (since August 2002);
Assistant Treasurer Manager/Financial Product Accounting of the Manager (November
since 2004 1998-July 2002). An officer of 91 portfolios in the
Age: 36 OppenheimerFunds complex.

------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Brian C. Szilagyi, Assistant Vice President of the Manager (since July 2004);
Assistant Treasurer Director of Financial Reporting and Compliance of First Data
since 2005 Corporation (April 2003-July 2004); Manager of Compliance of
Age: 36 Berger Financial Group LLC (May 2001-March 2003); Director of
Mutual Fund Operations at American Data Services, Inc.
(September 2000-May 2001). An officer of 91 portfolios in the
OppenheimerFunds complex.
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Robert G. Zack, Executive Vice President (since January 2004) and General
Secretary since 2001 Counsel (since March 2002) of the Manager; General Counsel and
Age: 58 Director of the Distributor (since December 2001); General
Counsel of Centennial Asset Management Corporation (since
December 2001); Senior Vice President and General Counsel of
HarbourView Asset Management Corporation (since December 2001);
Secretary and General Counsel of OAC (since November 2001);
Assistant Secretary (since September 1997) and Director (since
November 2001) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and Director of Oppenheimer
Partnership Holdings, Inc. (since December 2002); Director of
Oppenheimer Real Asset Management, Inc. (since November 2001);
Senior Vice President, General Counsel and Director of
Shareholder Financial Services, Inc. and Shareholder Services,
Inc. (since December 2001); Senior Vice President, General
Counsel and Director of OFI Private Investments, Inc. and OFI
Trust Company (since November 2001); Vice President of
OppenheimerFunds Legacy Program (since June 2003); Senior Vice
President and General Counsel of OFI Institutional Asset
Management, Inc. (since November 2001); Director of
OppenheimerFunds (Asia) Limited (since December 2003); Senior
Vice President (May 1985-December 2003), Acting General Counsel
(November 2001-February 2002) and Associate General Counsel (May
1981-October 2001) of the Manager; Assistant Secretary of the
following: Shareholder Services, Inc. (May 1985-November 2001),
Shareholder Financial Services, Inc. (November 1989-November
2001), and OppenheimerFunds International Ltd. (September
1997-November 2001). An officer of 91 portfolios in the
OppenheimerFunds complex.
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel and
Assistant Secretary Assistant Secretary (since October 2003) of the Manager; Vice
since 2001 President (since 1999) and Assistant Secretary (since October
Age: 41 2003) of the Distributor; Assistant Secretary of Centennial
Asset Management Corporation (since October 2003); Vice
President and Assistant Secretary of Shareholder Services, Inc.
(since 1999); Assistant Secretary of OppenheimerFunds Legacy
Program and Shareholder Financial Services, Inc. (since December
2001); Assistant Counsel of the Manager (August 1994-October
2003). An officer of 91 portfolios in the OppenheimerFunds
complex.
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Lisa I. Bloomberg, Vice President and Associate Counsel of the Manager (since May
Assistant Secretary 2004); First Vice President (April 2001-April 2004), Associate
since 2004 General Counsel (December 2000-April 2004), Corporate Vice
Age: 38 President (May 1999-April 2001) and Assistant General Counsel
(May 1999-December 2000) of UBS Financial Services Inc.
(formerly, PaineWebber Incorporated). An officer of 91
portfolios in the OppenheimerFunds complex.
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Phillip S. Gillespie, Senior Vice President and Deputy General Counsel of the Manager
Assistant Secretary (since September 2004); Mr. Gillespie held the following
since 2004 positions at Merrill Lynch Investment Management: First Vice
Age: 42 President (2001-September 2004); Director (2000-September 2004)
and Vice President (1998-2000). An officer of 91 portfolios in
the OppenheimerFunds complex.
------------------------------------------------------------------------------------------

|X| Remuneration of the Officers and Trustees. The officers and the
interested Trustee of the Fund, who are affiliated with the Manager, receive
no salary or fee from the Fund. The Independent Trustees' compensation from
the Fund, shown below, is for serving as a Trustee and member of a committee
(if applicable), with respect to the Fund's fiscal year ended October 31,
2006. The total compensation from the Fund and fund complex represents
compensation, including accrued retirement benefits, for serving as a Trustee
and member of a committee (if applicable) of the Boards of the Fund and other
funds in the OppenheimerFunds complex during the calendar year ended
December 31, 2005.

----------------------------------------------------------------------------------------
Aggregate Retirement Total
Benefits
Trustee Name and Other Accrued as Estimated Compensation
Fund Position(s) Compensation Part of Annual Benefits From the Fund
(as applicable) From the Fund Upon and Fund Complex
Fund(1) Expenses Retirement(2) (3)
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Fiscal year ended October Year ended
31, 2006 December 31, 2005
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Thomas W. Courtney $46,451 $5,342 $100,284 $207,746(4)
Chairman of the Board
and Audit Committee
Member
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Paul Y. Clinton(5) $18,516 $2,742 $85,662 $189,746(6)
Audit Committee Chairman
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
David K. Downes(7) $35,105 $1,005 $4,391 $6,860
Audit Committee Member
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Robert G. Galli $38,374 $4,552 $107,096(8) $264,812(9)
Audit Committee Member
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Lacy B. Herrmann $37,944 $1,208 $88,150 $171,621(10)
Audit Committee Member
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
Brian F. Wruble $39,369 $2,530 $49,899(11) $159,354(12)
Audit Committee Member
----------------------------------------------------------------------------------------
1. "Aggregate Compensation From the Fund" includes fees and deferred
compensation, if any, for a Trustee.
2. "Estimated Annual Benefits Upon Retirement" is based on a straight life
payment plan election with the assumption that a Trustee will retire at
the age of 75 and is eligible (after 7 years of service) to receive
retirement plan benefits as described below under "Retirement Plan for
Trustees." Actual benefits upon retirement may vary based on retirement
age, years of service and benefit payment elections of the Trustee.
3. "Total Compensation From the Fund and Fund Complex" includes fees,
deferred compensation (if any) and accrued retirement benefits (if any).
For purposes of this section only, in accordance with the instructions
for Form N-1A, "Fund Complex" includes the Oppenheimer funds and one
open-end investment company, Premiere VIT for which the Sub-Adviser acts
as the investment adviser. The Manager does not consider Premiere VIT to
be part of the OppenheimerFunds "Fund Complex" as that term may be
otherwise interpreted.
4. Includes $47,246 ($34,646 compensation and $12,600 accrued retirement
benefits) from Premier VIT, with respect to Mr. Courtney's service as a
trustee of that fund.
5. Mr. Clinton retired from the Board III funds effective March 31, 2006
6. Includes $46,246 ($33,646 compensation and $12,600 accrued retirement
benefits) from Premier VIT, with respect to Mr. Clinton's service as a
trustee of that fund.
7. Mr. Downes was appointed as Trustee of the Board III Funds on December
16, 2005.
8. Includes $57,285 estimated benefits to be paid to Mr. Galli for serving
as a director or trustee of 38 other Oppenheimer funds (at December 31,
2005) that are not Board III funds.
9. Includes $129,312 for serving as a director or trustee of 38 other
Oppenheimer funds (at December 31, 2005) that are not Board III Funds.
10. Includes $43,121 ($30,521 compensation and $12,600 accrued retirement
benefits) from Premier VIT, with respect to Mr. Herrmann's service as a
trustee of that fund.
12. Includes $4,355 estimated benefits to be paid to Mr. Wruble for serving
as a director or trustee of 44 other Oppenheimer funds that are not board
III funds.
11. Includes $23,854 for serving as a director or trustee of 38 other
Oppenheimer funds (at December 31, 2005) that are not Board III Funds.

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

|X| Compensation Deferral Plan for Trustees. The Board of Trustees has
adopted a Compensation Deferral Plan for Independent Trustees that enables
them to elect to defer receipt of all or a portion of the annual fees they
are entitled to receive from 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 amount of compensation deferred and the performance of the
selected funds.

Deferral of Trustees' fees under the plan will not materially affect
the Fund's assets, liabilities or 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 SEC 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 compensation account.

|X| Major Shareholders. As of December 1, 2006, the only persons or
entities who owned of record or were known by the Fund to own beneficially 5%
or more of any class of the Fund's outstanding shares were:

Mass Mutual Life Insurance Co, 1295 State Street, Springfield, MA
01111, which owned 6,784,991.357 Class Y shares (representing 46.49% of the
Class Y shares then outstanding).

Vanguard Fiduciary Trust Co, P.O. Box 2600, Valley Forge, PA
19482-2600, which owned 3,199,419.234 Class Y shares (representing 21.92% of
the Class Y shares then outstanding).

Merrill Lynch Pierce Fenner & Smith for the Sole Benefit of Customers,
4800 Deer Lake Drive, E. Fl 3, Jacksonville, FL 32246-6484, which owned
3,040,404.231 Class Y shares (representing 20.83% of the Class Y shares then
outstanding).

Taynik & Co, C/O Investors Bank & Trust, P.O. Box 9130, Boston, MA
02117, which owned 1,42,627.975 Class Y shares (representing 9.19% of the
Class Y shares then outstanding).

Merrill Lynch Pierce Fenner & Smith for the Sole Benefit of its
Customers, 4800 Deer Lake Drive, E. Fl 3, Jacksonville, FL 32246-6484, which
owned 8,866,830.752 Class A shares (representing 5.56% of the Class A shares
then outstanding).

Merrill Lynch Pierce Fenner & Smith for the Sole Benefit of its
Customers, 4800 Deer Lake Drive E. Fl 3, Jacksonville, FL 32246-6484, which
owned 13,914,240.326 Class B shares (representing 14.17% of the Class B
shares then outstanding).

Merrill Lynch Pierce Fenner & Smith for the Sole Benefit of its
Customers, 4800 Deer Lake Drive E. Fl 3, Jacksonville, FL 32246-6484, which
owned 7,490,736.124 Class C shares (representing 13.84% of the Class C shares
then outstanding).

Citigroup Global Markets Inc., 333 West 34th Street, New York, NY
10001-2483, which owned 3,381,666.524 Class C shares (representing 6.24% of
the Class C shares then outstanding).

Merrill Lynch Pierce Fenner & Smith for the Sole Benefit of its
Customers, 4800 Deer Lake Drive E. Fl 3 Jacksonville, FL 32246-6484, which
owned 584,922.636 Class N shares (representing 5.29% of the Class N shares
then outstanding).

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

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

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

|X| Portfolio Proxy Voting. The Fund has adopted Portfolio Proxy Voting
Policies and Procedures under which the Fund votes proxies relating to
securities ("portfolio proxies") held by the Fund. The Fund's primary
consideration in voting portfolio proxies is the financial interests of the
Fund and its shareholders. The Fund has retained an unaffiliated third-party
as its agent to vote portfolio proxies in accordance with the Fund's
Portfolio Proxy Voting Guidelines and to maintain records of such portfolio
proxy voting. The Portfolio Proxy Voting Policies and Procedures include
provisions to address conflicts of interest that may arise between the Fund
and the Manager or the Manager's affiliates or business relationships. Such a
conflict of interest may arise, for example, where the Manager or an
affiliate of the Manager manages or administers the assets of a pension plan
or other investment account of the portfolio company soliciting the proxy or
seeks to serve in that capacity. The Manager and its affiliates generally
seek to avoid such conflicts by maintaining separate investment decision
making processes to prevent the sharing of business objectives with respect
to proposed or actual actions regarding portfolio proxy voting decisions.
Additionally, the Manager employs the following two procedures: (1) if the
proposal that gives rise to the conflict is specifically addressed in the
Guidelines, the Manager will vote the portfolio proxy in accordance with the
Guidelines, provided that they do not provide discretion to the Manager on
how to vote on the matter; and (2) if such proposal is not specifically
addressed in the Guidelines or the Guidelines provide discretion to the
Manager on how to vote, the Manager will vote in accordance with the
third-party proxy voting agent's general recommended guidelines on the
proposal provided that the Manager has reasonably determined that there is no
conflict of interest on the part of the proxy voting agent. If neither of the
previous two procedures provides an appropriate voting recommendation, the
Manager may retain an independent fiduciary to advise the Manager on how to
vote the proposal or may abstain from voting. The Guidelines' provisions with
respect to certain routine and non-routine proxy proposals are summarized
below:
o The Fund generally votes with the recommendation of the issuer's
management on routine matters, including ratification of the
independent registered public accounting firm, unless circumstances
indicate otherwise.
o The Fund evaluates nominees for director nominated by management on a
case-by-case basis, examining the following factors, among others:
Composition of the board and key board committees, attendance at
board meetings, corporate governance provisions and takeover
activity, long-term company performance and the nominee's investment
in the company.
o In general, the Fund opposes anti-takeover proposals and supports the
elimination, or the ability of shareholders to vote on the
preservation or elimination, of anti-takeover proposals, absent
unusual circumstances.
o The Fund supports shareholder proposals to reduce a super-majority vote
requirement, and opposes management proposals to add a
super-majority vote requirement.
o The Fund opposes proposals to classify the board of directors or
trustees.
o The Fund supports proposals to eliminate cumulative voting.
o The Fund opposes re-pricing of stock options without shareholder
approval.

The Fund generally considers executive compensation questions such as
stock option plans and bonus plans to be ordinary business activity.
The Fund analyzes stock option plans, paying particular attention to
their dilutive effect. While the Fund generally supports management
proposals, the Fund opposes plans it considers to be excessive.

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

|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and Fund's parent Trust. The Manager handles
the Fund's day-to-day business, and the agreement permits the Manager to
enter into sub-advisory agreements with other registered investment advisers
to obtain specialized services for the Fund, as long as the Fund is not
obligated to pay any additional fees for those services. The Manager has
retained the Sub-Advisor pursuant to a separate Sub-Advisory Agreement,
described below, under which the Sub-Advisor buys and sells portfolio
securities for the Fund. The portfolio managers of the Fund is employed by
the Sub-Advisor and is the person who is principally responsible for the
day-to-day management of the Fund's portfolio, as described below.

The investment advisory agreement between the Fund and the Manager
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. Expenses for the Trust's three series are allocated to
the series in proportion to their net assets, unless allocations of expenses
can be made directly to a series. The investment advisory agreement lists
examples of expenses paid by the Fund. The major categories relate to
calculation of the Fund's net asset values per share, interest, taxes,
brokerage commissions, fees to certain Trustees, legal and audit expenses,
custodian and transfer agent expenses, share issuance costs, certain printing
and registration costs and non-recurring expenses, including litigation
costs. The management fees paid by the Fund to the Manager are calculated at
the rates described in the Prospectus, which are applied to the assets of the
Fund as a whole. The fees are allocated to each class of shares based upon
the relative proportion of the Fund's net assets represented by that class.
The management fees paid by the Fund to the Manager during its last three
fiscal years were:

---------------------------------------------------------------
Fiscal Year ended Management Fees Paid to
10/31: OppenheimerFunds, Inc.
---------------------------------------------------------------
---------------------------------------------------------------
2004 $50,570,841
---------------------------------------------------------------
---------------------------------------------------------------
2005 $51,385,949
---------------------------------------------------------------
---------------------------------------------------------------
2006 $47,511,106
---------------------------------------------------------------
1.
The Manager, not the Fund, pays the Sub-Advisor an annual
sub-advisory fee. For fiscal year 2004, 2005 and 2006, this
sub-advisory fee was $15,004,710, $15,518,985, and $14,352,743,
respectively.

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
in connection with matters to which the agreement relates.

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

The Sub-Advisor. The Fund's Sub-Advisor is Oppenheimer Capital LLC, a
registered investment advisor. The Sub-Advisor is a Delaware limited
liability company with one member, Allianz Global Investors U.S. Equities
LLC. Allianz Global Investors U.S. Equities LLC is a wholly-owned subsidiary
of Allianz Global Investors of America L.P. ("AGI LP"). AGI LP is a Delaware
limited partnership whose sole general partner is Allianz-PacLife Partners
LLC. Allianz-PacLife Partners LLC is a Delaware limited liability company
with three members, ADAM U.S. Holding LLC, a Delaware limited liability
company, Pacific Asset Management LLC, a Delaware limited liability company
and Pacific Life Insurance Company, a California stock life insurance
company. The sole member of ADAM U.S. Holding LLC is Allianz Dresdner Asset
Management of America LLC. Allianz Global Investors of America LLC has two
members, Allianz of America, Inc., a Delaware corporation which owns 99.9%
non-managing interest and Allianz Global Investors of America Holding Inc., a
Delaware corporation which owns a 0.01% managing interest. Allianz Global
Investors of America Holding Inc. is a wholly-owned subsidiary of ADAM GmbH,
which is wholly owned by Allianz Societas Europaea ("Allianz SE"). Allianz of
America, Inc. is wholly-owned by Allianz SE. Pacific Asset Management LLC is
a wholly-owned subsidiary of Pacific Life Insurance Company, a wholly-owned
subsidiary of Pacific Mutual Holding Company. Allianz SE indirectly holds a
controlling interest in Allianz Global Investors of America LP. Allianz SE is
a European-based, multinational insurance and financial services holding
company. Pacific Life Insurance Company owns an indirect minority equity
interest in AGI LP and is a California-based insurance company.

The Sub-Advisor has operated as an investment advisor to investment
companies and other investors since its organization in 1969. As of September
30, 2005, the Sub-Advisor advised accounts having assets in excess of $22.9
billion. The Sub-Advisor is located at 1345 Avenue of the Americas, 49th
Floor, New York, New York 10105-4800.

From November 22, 1995 to January 1, 2005, the Fund's sub-advisor was
OpCap Advisors ("OpCap"), a wholly-owned subsidiary of the Sub-Advisor. From
the Fund's inception on April 30, 1980 until November 22, 1995, OpCap
Advisors (which was then named Quest for Value Advisors) served as the Fund's
investment advisor.

|X| The Sub-Advisor's Code of Ethics. Each employee of the Sub-Advisor is
subject to a Code of Ethics which has been adopted by the Sub-Advisor to
comply with the provisions of Rule 17j-1 under the Investment Company Act.
The Codes of Ethics are designed to detect and prevent improper personal
trading. The Codes of Ethics permit personnel subject to the Codes to invest
in securities, including securities that may be purchased, sold or held by
the Fund, subject to a number of restrictions and controls including
prohibitions against purchases of securities in an Initial Public Offering
and a preclearance requirement with respect to certain personal securities
transactions.

|X| The Sub-Advisory Agreement. Under the Sub-Advisory Agreement between
the Manager and the Sub-Advisor, the Sub-Advisor shall regularly provide
investment advice with respect to the Fund and invest and reinvest cash,
securities and the property comprising the assets of the Fund. Under the
Sub-Advisory Agreement, the Sub-Advisor agrees not to change the portfolio
managers of the Fund without the written approval of the Manager. The
Sub-Advisor also agrees to provide assistance in the distribution and
marketing of the Fund.

Under the Sub-Advisory Agreement, the Manager pays the Sub-Advisor an
annual fee in monthly installments, based on the average daily net assets of
the Fund. The fee paid to the Sub-Advisor under the Sub-Advisory agreement is
paid by the Manager, not by the Fund. The fee is equal to 40% of the
investment advisory fee collected by the Manager from the Fund based on the
total net assets of the Fund as of November 22, 1995 (the "Base Amount") plus
30% of the investment advisory fee collected by the Manager based on the
total net assets of the Fund that exceed the Base Amount.

The Sub-Advisory Agreement states that in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations, the Sub-Advisor shall not be liable to the Manager for any act
or omission in the course of or connected with rendering services under the
Sub-Advisory Agreement or for any losses that may be sustained in the
purchase, holding or sale of any security.

Portfolio Managers. The Fund's portfolio is managed by Colin Glinsman and
Matthew Greenwald (referred to as the "Portfolio Managers"). They are the
persons responsible for the day-to-day management of the Fund's investments.

|X| Other Accounts Managed. In addition to managing the Fund's investment
portfolio, Mr. Glinsman and Mr. Greenwald also manage other investment
portfolios and accounts on behalf of the Sub-Advisor or its affiliates. The
following table provides information regarding those portfolios and accounts
as of October 31, 2006:

Portfolio Manager Registered Other Pooled Other
Investment Investment
Companies Vehicles
Managed Managed Accounts Managed
-------------------------------------------------------------------------------
Colin Glinsman 7 None 9
-------------------------------------------------------------------------------
Total Assets Managed $5,132.57 None $2,413.30
-------------------------------------------------------------------------------
Accounts with
Performance- Based None None 2
Advisory Fees
-------------------------------------------------------------------------------
Total Assets in
Accounts with
Performance-Based None None $151.25
Advisory Fees1,2
-------------------------------------------------------------------------------
Matthew Greenwald 5 None 29
-------------------------------------------------------------------------------
Total Assets Managed $310.06 None $1,236.23
-------------------------------------------------------------------------------
Accounts with
Performance- Based None None None
Advisory Fees
-------------------------------------------------------------------------------
Total Assets in None None None
Accounts with
Performance-Based
Advisory Fees1,2
-------------------------------------------------------------------------------
1. In millions.
2. Does not include personal accounts of portfolio managers and their
families, which are subject to the Code

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

|X| Compensation of the Portfolio Managers. The Fund's Portfolio Managers
are employed and compensated by the Sub-Advisor, not the Fund. The
Sub-Advisor believes that its compensation program is competitively
positioned to attract and retain high-caliber investment professionals. The
portfolio managers receive a base salary, a variable bonus opportunity, and
participation in a Long Term Incentive Plan and group retirement plans. Total
cash compensation is set for each portfolio manager relative to his or her
performance and the market. Portfolio manager compensation is reviewed and
modified each year as appropriate to reflect changes in the market, as well
as to adjust drivers of compensation to promote good sustained fund
performance. The Sub-Advisor attempts to keep its compensation levels at or
above the median for similar positions in its local area.

Each portfolio manager's compensation consists of the following elements:

o Base Salary. Each portfolio manager is paid a fixed base salary that
is set at a level determined by the Sub-Advisor. In setting the
base salary, the firm's intentions are to be competitive in light of
the portfolio manager's experience and responsibilities. Firm
management evaluates competitive market compensation by reviewing
compensation survey results conducted by an independent third party
of investment industry compensation.

o Annual Bonus and Long Term Incentive Plan. Each portfolio manager is
eligible for an annual bonus in addition to a base salary. The
bonus typically forms the majority of the individual's cash
compensation and is based in part on pre-tax performance against the
Fund's relevant benchmark over on and three year periods, with some
consideration for longer time periods. In addition to any bonus,
Allianz Global Investors of America L.P. ("AGI LP") has established
a Long Term Incentive Plan for certain employees including portfolio
managers. The plan provides awards that are based on operating
earnings growth of the Sub-Advisor and the collective earnings
growth of all the asset management companies of AGI LP.

o Participation in Deferred Compensation plans. The portfolio managers
are eligible to participate in a non-qualified deferred compensation
plan, which affords participating employees the tax benefits of
deferring the receipt of a portion of their cash compensation until
such time as designated under the plan.

|X| Ownership of Fund Shares. As of October 31, 2006, the Portfolio
Managers beneficially owned shares of the Fund, as follows:

Portfolio Manager Range of Shares
Beneficially
Owned in the Fund
----------------------------------------------------------
----------------------------------------------------------
Colin Glinsman $500,000-$1,000,000
----------------------------------------------------------
----------------------------------------------------------
Matthew Greenwald None
----------------------------------------------------------

Brokerage Policies of the Fund

Brokerage Provisions of the Investment Advisory and Sub-Advisory Agreements.
One of the duties of the Sub-Advisor under the Sub-Advisory Agreement is to
arrange the portfolio transactions for the Fund. The Fund's advisory
agreements contain provisions relating to the employment of broker-dealers to
effect the Fund's portfolio transactions. The Manager and the Sub-Advisor are
authorized by the advisory agreements to employ broker-dealers, including
"affiliated brokers," as that term is defined in the Investment Company Act,
that the Sub-Advisor 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 for the services provided. The Sub-Advisor need not seek
competitive commission bidding. However, it is expected to be aware of the
current rates of eligible brokers and to minimize the commissions paid to the
extent consistent with the interests and policies of the Fund as established
by its Board of Trustees.

Under the Fund's advisory agreements, in choosing brokers to execute
portfolio transactions for the Fund, the Sub-Advisor may select brokers
(other than affiliates) that provide both brokerage and research services to
the Fund. The commissions paid to those brokers may be higher than another
qualified broker would charge, if the Sub-Advisor makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided.

Brokerage Practices. The Sub-Advisor allocates brokerage for the Fund subject
to the provisions of the Fund's advisory agreements and other applicable
rules and procedures described below.

The Sub-Advisor's portfolio traders allocate brokerage based upon
recommendations from the Fund's portfolio managers, together with the
portfolio traders' judgment as to the execution capability of the broker or
dealer. In certain instances, portfolio managers may directly place trades
and allocate brokerage. In either case, the Sub-Advisor's executive officers
supervise the allocation of brokerage.

Transactions in equity securities other than those for which an
exchange is the primary market are generally done with principals or market
makers. In transactions on foreign exchanges, the Fund may be required to pay
fixed brokerage commissions and therefore would not have the benefit of
negotiated commissions that are available in U.S. markets. Brokerage
commissions are paid primarily for transactions in listed securities or for
certain fixed-income agency transactions executed 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.

Most debt obligations are purchased by the Fund 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 Sub-Advisor determines that a
better price or execution may be obtained by using the services of a broker.
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. In an option transaction, the Fund
ordinarily uses the same broker for the purchase or sale of the option and
any transaction in the investment to which the option relates.

Other accounts advised by the Sub-Advisor have investment policies
similar to those of the Fund. Those other accounts 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 accounts advised by
the Sub-Advisor or its affiliates purchase the same security on the same day
the transactions are generally executed as received, although a fund or
advisory account that does not direct trades to a specific broker (these are
called "free trades") usually will have its order executed first. Orders
placed by accounts that direct trades to a specific broker will generally be
executed after the free trades. All orders placed on behalf of the Fund are
considered free trades. However, having an order placed first in the market
does not necessarily guarantee the most favorable price. Purchases are
combined where possible for the purpose of negotiating brokerage commissions.
In some cases that practice might have a detrimental effect on the price or
volume of the security in a particular transaction for the Fund.

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

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

The Fund's advisory agreements permit the Sub-Advisor to allocate
brokerage for research services. The research services provided by a
particular broker may be useful both to the Fund and to one or more of the
other accounts advised by the Sub-Advisor or its affiliates. Investment
research may be supplied to the Sub-Advisor by the broker or 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, analytical
software and similar products and services. If a research service also
assists the Sub-Advisor or 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 Sub-Advisor in the investment
decision-making process may be paid in commission dollars.

Although the Sub-Advisor currently does not do so, the Board of
Trustees may permit the Sub-Advisor to use stated commissions on secondary
fixed-income agency trades to obtain research if the broker represents to the
Sub-Advisor 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 may also permit the Sub-Advisor to use
commissions on fixed-price offerings to obtain research, in the same manner
as is permitted for agency transactions.

The research services provided by brokers broaden the scope and
supplement the research activities of the Sub-Advisor. That research provides
additional views and comparisons for consideration, and helps the Sub-Advisor
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
Sub-Advisor provides information to the Manager and the Board about the
commissions paid to brokers furnishing such services, together with the
Sub-Advisor's representation that the amount of such commissions was
reasonably related to the value or benefit of such services.

During the fiscal years ended October 31, 2004, 2005 and 2006, the Fund
paid the total brokerage commissions indicated in the chart below. During the
fiscal year ended October 31, 2006, the Fund paid $8,018,681 in commissions
to firms that provide brokerage and research services to the Fund with
respect to $7,472,893,279 of aggregate portfolio transactions. All such
transactions were on a "best execution" basis, as described above. The
provision of research services was not necessarily a factor in the placement
of all such transactions.

-------------------------------------------------------------------------
Fiscal Year Ended 10/31: Total Brokerage Commissions Paid by the
Fund*
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2004 $11,883,706
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2005 $11,975,060
-------------------------------------------------------------------------
-------------------------------------------------------------------------
2006 $8,435,889
-------------------------------------------------------------------------
* Amounts do not include spreads or commissions on principal
transactions on a net trade basis.

Distribution and Service Plans

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

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

----------------------------------------------
Fiscal Aggregate Class A
Front-End Sales
Year Ended Front-End Sales Charges
10/31: Charges on Retained by
Class A Shares Distributor(1)
----------------------------------------------
----------------------------------------------
2004 $12,316,772 $3,479,343
----------------------------------------------
----------------------------------------------
2005 $9,327,134 $2,603,918
----------------------------------------------
----------------------------------------------
2006 $4,709,951 $1,563,338
----------------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a
parent of the Distributor.

-------------------------------------------------------------------------------
Fiscal Concessions on Concessions on Concessions on Concessions on
Year Ended Class A Shares Class B Shares Class C Shares Class N Shares
10/31: Advanced by Advanced by Advanced by Advanced by
Distributor(1) Distributor(1) Distributor(1) Distributor(1)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2004 $792,990 $10,578,513 $2,508,475 $858,034
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2005 $555,285 $6,421,638 $1,661,836 $535,118
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
2006 $311,413 $3,574,067 $708,400 $97,532
-------------------------------------------------------------------------------
1. The Distributor advances concession payments to financial
intermediaries for certain sales of Class A shares and for sales of Class
B, Class C and Class N shares from its own resources at the time of sale.

--------------------------------------------------------------------------------
Fiscal Class A Class B Class C Class N
Contingent Contingent Contingent
Deferred Sales Deferred Sales Contingent Deferred Sales
Year Ended Charges Charges Deferred Sales Charges
10/31: Retained by Retained by Charges Retained Retained by
Distributor Distributor by Distributor Distributor
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2004 $55,427 $4,944,985 $146,159 $276,218
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2005 $14,046 $4,832,174 $260,003 $227,030
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2006 $23,321 $4,345,241 $97,932 $84,485
--------------------------------------------------------------------------------

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

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

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

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

material amendment to the Class A plan that would materially increase
payments under the plan. That approval must be by a majority of the shares of
each class, voting separately by class.

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

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

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

|X| Class A Distribution and Service Plan Fees. Under the Class A
distribution and service plan, the Distributor currently uses the fees it
receives from the Fund to pay brokers, dealers and other financial
institutions 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 compensation to the
Distributor at a rate of 0.25% of average annual net assets of Class A
shares. The Distributor does not receive or retain the service fee on Class A
shares in accounts for which the Distributor has been listed as the
broker-dealer of record. While the plan permits the Board to authorize
payments to the Distributor to reimburse itself for services under the plan,
the Board has not yet done so, except in the case of the special arrangement
described below, regarding grandfathered retirement accounts. The Distributor
makes payments to plan recipients periodically at an annual rate not to
exceed 0.25% of the average annual net assets consisting of Class A shares
held in the accounts of the recipients or their customers.

Under the Class A distribution plan, the plan provides for the Fund to
pay an asset-based sales charge to the Distributor at an annual rate of up to
0.15% of average annual net assets of Class A shares of the Fund. Effective
January 1, 2003, the Board set that rate to zero. When the asset-based sales
charge was assessed, the Distributor paid the entire asset-based sales charge
to brokers, dealers and financial institutions.

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

For the fiscal year ended October 31, 2006 payments under the Class A
distribution and service plan totaled $7,961,750, of which $61,096 was
service fee payments retained by the Distributor in connection with the
grandfathered retirement accounts, described above, and included $565,416
paid to an affiliate of the Distributor's parent company. Any unreimbursed
expenses the Distributor incurs with respect to Class A shares in any fiscal
year cannot be recovered in subsequent years. The Distributor may not use
payments received under the Class A plan to pay any of its interest expenses,
carrying charges, or other financial costs, or allocation of overhead.

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

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

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

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

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

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 and Service Fees Paid to the Distributor for the Fiscal Year
Ended 10/31/06
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class: Total Payments Amount Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Retained by Expenses Under of Net Assets
Under Plan Distributor Plan of Class
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Plan $20,145,494 $14,311,038(1) $40,675,885 2.20%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Plan $11,219,336 $1,183,987(2) $24,746,634 2.42%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class N Plan $1,077,365 $517,581(3) $4,991,460 2.41%
--------------------------------------------------------------------------------
1. Includes $171,940 paid to an affiliate of the Distributor's parent
company.
2. Includes $299,329 paid to an affiliate of the Distributor's parent
company.
3. Includes $32,056 paid to an affiliate of the Distributor's parent
company.

All payments under the plans are subject to the limitations imposed by
the Conduct Rules of the NASD on payments of asset-based sales charges and
service fees.

Payments to Fund Intermediaries

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

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

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

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

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

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

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

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

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

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

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

For the year ended December 31, 2005, the following financial
intermediaries that are broker-dealers offering shares of the Oppenheimer
funds, and/or their respective affiliates, received revenue sharing or
similar distribution-related payments from the Manager or Distributor for
marketing or program support:

Advantage Capital Corp./Financial Advest, Inc.
Services Corp.
Aegon USA Aetna Retirement Services, Inc.
A.G. Edwards & Sons, Inc. AIG Life
Allianz Life Insurance Company Allmerica Financial Life Insurance
and Annuity Co.
Allstate Financial Advisors American Enterprise Life Insurance
American General Securities, Inc. American General Annuity
Ameriprise Financial Services, Inc. American Portfolio Financial
Services, Inc.
Ameritas Life Insurance Corporation Annuity Investors Life
Associated Securities AXA Advisors
Banc One Securities Corp. BNY Investment Center, Inc.
Cadaret Grant & Co. Inc. Charles Schwab - Great West Life
Chase Investment Services Corp. CitiCorp Investment Services, Inc.
Citigroup Global Markets, Inc. (SSB) CitiStreet
Citizens Bank of Rhode Island CJM Planning Corp.
Columbus Life Insurance Company Commonwealth Financial Network
CUNA Brokerage Services, Inc. CUSO Financial Services, L.P.
Federal Kemper Life Assurance Company Financial Network (ING)
First Global Capital GE Financial Assurance - GE Life &
Annuity
Glenbrook Life and Annuity Co. Hartford
HD Vest HSBC Brokerage (USA) Inc.
ING Financial Advisers ING Financial Partners
Jefferson Pilot Life Insurance Company Jefferson Pilot Securities Corp.
John Hancock Life Insurance Co. Kemper Investors Life Insurance Co.
Legend Equities Corp. Legg Mason
Lincoln Benefit Life Lincoln Financial
Lincoln Investment Planning, Inc. Lincoln National Life
Linsco Private Ledger MassMutual Financial Group and
affiliates
McDonald Investments, Inc. Merrill Lynch & Co. and affiliates
MetLife and affiliates Minnesota Life Insurance Company
Mony Life Insurance Co. Morgan Stanley Dean Witter, Inc.
Multi-Financial (ING) Mutual Service Corporation
National Planning Holdings, Inc. Nationwide and affiliates
NFP New York Life Securities, Inc.
Park Avenue Securities LLC PFS Investments, Inc.
Prime Capital Services, Inc. Primevest Financial Services, Inc.
(ING)
Protective Life Insurance Co. Prudential Investment Management
Services LLC
Raymond James & Associates Raymond James Financial Services
RBC Dain Rauscher Inc. Royal Alliance
Securities America Inc. Security Benefit Life Insurance Co.
Sentra Securities Signator Investments
Sun Life Assurance Company of Canada SunAmerica Securities, Inc.
SunTrust Securities Thrivent
Travelers Life & Annuity Co., Inc. UBS Financial Services Inc.
Union Central Life Insurance Company United Planners
Valic Financial Advisors, Inc. Wachovia Securities LLC
Walnut Street Securities (Met Life Waterstone Financial Group
Network)
Wells Fargo Investments, LLC

For the year ended December 31, 2005, the following firms, which in
some cases are broker-dealers, received payments from the Manager or
Distributor for administrative or other services provided (other than revenue
sharing arrangements), as described above:

ABN AMRO Financial Services Inc. ACS HR Solutions LLC
Administrative Management Group ADP Broker/Dealer Inc.
Aetna Financial Services Alliance Benefit Group
American Stock Transfer & Trust Co Ameriprise Financial Services, Inc.
Baden Retirement Plan Services LLC Banc One Securities Corp.
BCG Securities Benefit Administration Company LLC
Benefit Administration Inc. Benefit Plans Administrative
Services
Benetech Inc. Bisys Retirement Services
Boston Financial Data Services Inc. Ceridian Retirement Plan Services
Charles Schwab & Co Inc. Charles Schwab Trust Company
Circle Trust Company Citigroup Global Markets Inc.
CitiStreet City National Bank
Columbia Funds Distributor Inc. CPI Qualified Plan Consultants Inc.
Daily Access.Com Inc. Digital Retirement Solutions
DST Systems Inc. Dyatech LLC
Edgewood/Federated Investments ERISA Administrative Services Inc.
Expert Plan Inc. FASCorp
FBD Consulting Inc. Fidelity Institutional Operations
Co.
Fidelity Investments First National Bank of Omaha
First Trust Corp. First Trust-Datalynx
Franklin Templeton Geller Group LTD
GoldK Inc. Great West Life & Annuity Ins Co.
Hartford Life Insurance Co Hewitt Associates LLC
ICMA-RC Services LLC Independent Plan Coordinators Inc.
ING Ingham Group
Interactive Retirement Systems Invesco Retirement Plans
Invesmart InWest Pension Management
John Hancock Life Insurance Co. JPMorgan Chase & Co
JPMorgan Chase Bank July Business Services
Kaufman & Goble Leggette & Company Inc.
Lincoln National Life MassMutual Financial Group and
affiliates
Matrix Settlement & Clearance Services Mellon HR Solutions
Mercer HR Services Merrill Lynch & Co., Inc.
Metavante 401(k) Services Metlife Securities Inc.
MFS Investment Management Mid Atlantic Capital Corp.
Milliman Inc. Morgan Stanley Dean Witter Inc.
National City Bank National Financial Services Corp.
Nationwide Investment Service Corp. New York Life Investment Management
Northeast Retirement Services Northwest Plan Services Inc.
Pension Administration and Consulting PFPC Inc.
Plan Administrators Inc. PlanMember Services Corporation
Princeton Retirement Group Inc. Principal Life Insurance Co
Programs for Benefit Plans Inc. Prudential Retirement Insurance &
Annuity Co.
Prudential Retirement Services PSMI Group
Putnam Investments Quads Trust Company
RSM McGladrey Retirement Resources SAFECO
Standard Insurance Co Stanley Hunt DuPree Rhine
Stanton Group Inc. State Street Bank & Trust
Strong Capital Management Inc. Symetra Investment Services Inc.
T Rowe Price Associates Taylor Perky & Parker LLC
Texas Pension Consultants The 401(K) Company
The Chicago Trust Company The Retirement Plan Company LLC
The Vanguard Group TruSource
Unified Fund Services Inc. Union Bank & Trust Co. (Nebraska)
USI Consulting Group (CT) Valic Retirement Services Co
Wachovia Bank NA Web401k.com
Wells Fargo Bank NA Wilmington Trust Company
WySTAR Global Retirement Solutions

Performance of the Fund

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

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

Use of standardized performance calculations enables an investor to
compare the Fund's performance to the performance of other funds for the same
periods. However, a number of factors should be considered before using the
Fund's performance information as a basis for comparison with other
investments:
o Total returns measure the performance of a hypothetical account in the
Fund over various periods and do not show the performance of each
shareholder's account. Your account's performance will vary from the
model performance data if your dividends are received in cash, or
you buy or sell shares during the period, or you bought your shares
at a different time and price than the shares used in the model.
o The Fund's performance returns may not reflect the effect of taxes on
dividends and capital gains distributions.
o An investment in the Fund is not insured by the FDIC or any other
government agency.
o The principal value of the Fund's shares, and total returns are not
guaranteed and normally will fluctuate on a daily basis.
o When an investor's shares are redeemed, they may be worth more or less
than their original cost.
o Total returns for any given past period represent historical
performance information and are not, and should not be considered, a
prediction of future returns.

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

|X| Total Return Information. There are different types of "total
returns" to measure the Fund's performance. Total return is the change in
value of a hypothetical investment in the Fund over a given period, assuming
that all dividends and capital gains distributions are reinvested in
additional shares and that the investment is redeemed at the end of the
period. Because of differences in expenses for each class of shares, the
total returns for each class are separately measured. The cumulative total
return measures the change in value over the entire period (for example, ten
years). An average annual total return shows the average rate of return for
each year in a period that would produce the cumulative total return over the
entire period. However, average annual total returns do not show actual
year-by-year performance. The Fund uses standardized calculations for its
total returns as prescribed by the SEC. The methodology is discussed below.

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

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

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

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

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

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

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

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

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

---------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 10/31/06
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Returns (10
years or
Shares life-of-class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
1-Year 5-Years 10-Years
(or life of (or life of
class if less) class if less)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class 155.57% 171.16% 4.40% 10.77% 4.09% 5.33% 9.84% 10.49%
A(1)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class 161.84% 161.84% 4.90% 9.90% 4.21% 4.55% 10.10% 10.10%
B(2)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class 154.36% 154.36% 8.97% 9.97% 4.61% 4.61% 9.79% 9.79%
C(3)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class 23.16% 23.16% 9.45% 10.45% 5.04% 5.04% 3.74% 3.74%
N(4)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class 44.80% 44.80% 11.11% 11.11% 5.72% 5.72% 5.86% 5.86%
Y(5)
---------------------------------------------------------------------------------
1. Inception of Class A: 11/01/91
2. Inception of Class B: 09/01/93
3. Inception of Class C: 09/01/93
4. Inception of Class N: 03/01/01
5. Inception of Class Y: 05/01/00

--------------------------------------------------------------------------------
Average Annual Total Returns for Class A(1) Shares (After Sales Charge)
For the Periods Ended 10/31/06
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1-Year 5-Years 10-Years
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
After Taxes on Distributions 3.61% 3.62% 7.84%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
After Taxes on 3.65% 3.31% 7.38%
Distributions and
Redemption of Fund Shares
--------------------------------------------------------------------------------
1. Inception of Class A: 11/01/91

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 SAI.
The Fund may also compare its performance to that of other investments,
including other mutual funds, or use rankings of its performance by
independent ranking entities. Examples of these performance comparisons are
set forth below.

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

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

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

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

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

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

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

ABOUT YOUR ACCOUNT

How to Buy Shares

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

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

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

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

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

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

And the following money market funds:
Oppenheimer Cash Reserves Centennial Government Trust
Oppenheimer Money Market Fund, Inc. Centennial Money Market Trust
Oppenheimer Institutional Money Market
Fund Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charges or at reduced sales charge rates, as
described in Appendix C to this SAI. Certain special sales charge
arrangements described in that Appendix apply to retirement plans whose
records are maintained on a daily valuation basis by Merrill Lynch Pierce
Fenner & Smith, Inc. ("Merrill Lynch") or an independent record keeper that
has a contract or special arrangement with Merrill Lynch. If on the date the
plan sponsor signed the Merrill Lynch record keeping service agreement the
plan has less than $1 million in assets invested in applicable investments
(other than assets invested in money market funds), then the retirement plan
may purchase only Class C shares of the Oppenheimer funds. If on the date
the plan sponsor signed the Merrill Lynch record keeping service agreement
the plan has $1 million or more in assets but less than $5 million in assets
invested in applicable investments (other than assets invested in money
market funds), then the retirement plan may purchase only Class N shares of
the Oppenheimer funds. If on the date the plan sponsor signed the Merrill
Lynch record keeping service agreement the plan has $5 million or more in
assets invested in applicable investments (other than assets invested in
money market funds), then the retirement plan may purchase only Class A
shares of the Oppenheimer funds.

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

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

Classes of Shares. Each class of shares of the Fund represents an interest in
the same portfolio of investments of the Fund. However, each class has
different shareholder privileges and features. The net income attributable to
Class B, Class C or Class N shares and the dividends payable on these classes
of shares will be reduced by incremental expenses borne solely by those
classes. Those expenses include the asset-based sales charges to which those
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 those shares is the
same as that of the initial sales charge on Class A shares - to compensate
the Distributor and brokers, dealers and financial institutions that sell
shares of the Fund. A salesperson who is entitled to receive compensation
from his or her firm for selling Fund shares may receive different levels of
compensation for selling one class of shares rather than another.

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

Class B, Class C or Class N shares may not be purchased by a new investor
directly from the Distributor without the investor designating another
registered broker-dealer. Class Y shares are offered only to certain
institutional investors that have a special agreement with the Distributor.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

|X| Securities Valuation. The Fund's Board of Trustees has
established procedures for the valuation of the Fund's securities. In general
those procedures are as follows:
o Equity securities traded on a U.S. securities exchange 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, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they are
valued at the last reported sale price preceding the valuation
date if it is within the spread of the closing "bid" and
"asked" prices on the valuation date or, if not, at the
closing "bid" price on the valuation date.
o Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:
(1) at the last sale price available to the pricing service approved by the
Board of Trustees, or

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

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

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

Puts, calls, and futures are valued at the last sale price on the
principal exchange on which they are traded, 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 on the valuation date. If not, the
value shall be the closing bid price on the principal exchange on the
valuation date. If the put, call or future is not traded on an exchange, it
shall be valued by the mean between "bid" and "asked" prices obtained by the
Manager from two active market makers. In certain cases that may be at the
"bid" price if no "asked" price is available.

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

How to Sell Shares

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The following funds do not offer Class Y shares:
Limited Term New York Municipal Fund Oppenheimer Principal Protected Main
Street Fund
Oppenheimer AMT-Free Municipals Oppenheimer Principal Protected Main
Street Fund II
Oppenheimer AMT-Free New York Municipals Oppenheimer Principal Protected Main
Street Fund III
Oppenheimer Balanced Fund Oppenheimer Quest Capital Value Fund,
Inc.
Oppenheimer California Municipal Fund Oppenheimer Quest International Value
Fund, Inc.
Oppenheimer Capital Income Fund Oppenheimer Rochester Arizona Municipal
Fund
Oppenheimer Cash Reserves Oppenheimer Rochester Maryland
Municipal Fund
Oppenheimer Convertible Securities Fund Oppenheimer Rochester Massachusetts
Municipal Fund
Oppenheimer Dividend Growth Fund Oppenheimer Rochester Michigan
Municipal Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Rochester Minnesota
Municipal Fund
Oppenheimer Institutional Money Market Oppenheimer Rochester National
Fund Municipals
Oppenheimer Limited Term California Oppenheimer Rochester North Carolina
Municipal Fund Municipal Fund
Oppenheimer Limited Term Municipal Fund Oppenheimer Rochester Ohio Municipal
Fund
Oppenheimer New Jersey Municipal Fund Oppenheimer Rochester Virginia
Municipal Fund
Oppenheimer Pennsylvania Municipal Fund

o Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y
shares.
o Class B and Class C shares of Oppenheimer Cash Reserves are generally
available only by exchange from the same class of shares of other
Oppenheimer funds or through OppenheimerFunds-sponsored 401(k) plans.
o Class M shares of Oppenheimer Convertible Securities Fund may be
exchanged only for Class A shares of other Oppenheimer funds. They may
not be acquired by exchange of shares of any class of any other
Oppenheimer funds except Class A shares of Oppenheimer Money Market
Fund, Inc. or Oppenheimer Cash Reserves acquired by exchange of Class M
shares.
o Class A shares of Oppenheimer funds may be exchanged at net asset value
for shares of any money market fund offered by the Distributor. Shares
of any money market fund purchased without a sales charge may be
exchanged for shares of Oppenheimer funds offered with a sales charge
upon payment of the sales charge.
o Shares of the Fund acquired by reinvestment of dividends or
distributions from any of the other Oppenheimer funds or from any unit
investment trust for which reinvestment arrangements have been made
with the Distributor may be exchanged at net asset value for shares of
the same class of any of the other Oppenheimer funds into which you may
exchange shares.
o Shares of Oppenheimer Principal Protected Main Street Fund may be
exchanged at net asset value for shares of the same class of any of the
other Oppenheimer funds into which you may exchange shares. However,
shareholders are not permitted to exchange shares of other Oppenheimer
funds for shares of Oppenheimer Principal Protected Main Street Fund
until after the expiration of the warranty period (8/5/2010).
o Shares of Oppenheimer Principal Protected Main Street Fund II may be
exchanged at net asset value for shares of the same class of any of the
other Oppenheimer funds into which you may exchange shares. However,
shareholders are not permitted to exchange shares of other Oppenheimer
funds for shares of Oppenheimer Principal Protected Main Street Fund II
until after the expiration of the warranty period (3/3/2011).
o Shares of Oppenheimer Principal Protected Main Street Fund III may be
exchanged at net asset value for shares of the same class of any of the
other Oppenheimer funds into which you may exchange shares. However,
shareholders are not permitted to exchange shares of other Oppenheimer
funds for shares of Oppenheimer Principal Protected Main Street Fund
III until after the expiration of the warranty period (12/16/2011).
o Shares of each of Oppenheimer Developing Markets Fund and Oppenheimer
International Small Company Fund may be acquired by exchange only with
a minimum initial investment of $50,000. An existing shareholder of
each fund may make additional exchanges into that fund with as little
as $50.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

When you exchange some or all of your shares from one fund to another,
any special account features that are available in the new fund (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
SAI, or would include shares covered by a share certificate that is not
tendered with the request. In those cases, only the shares available for
exchange without restriction will be exchanged.

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

Dividends, Capital Gains and Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Additional Information About the Fund

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

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

The Custodian. 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 is the practice of the Fund to deal with the custodian in a
manner uninfluenced by any banking relationship the custodian may have with
the Manager and its affiliates. The Fund's cash balances with the custodian
in excess of $100,000 are not protected by federal deposit insurance. Those
uninsured balances at times may be substantial.

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

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

--------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER QUEST FOR VALUE FUNDS:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Quest Balanced Fund (one of the portfolios constituting the
Oppenheimer Quest For Value Funds), including the statement of investments, as
of October 31, 2006, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the five-year 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 the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of October 31, 2006, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. 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 Quest Balanced Fund as of October 31, 2006, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended, in conformity with U.S.
generally accepted accounting principles.


KPMG LLP

Denver, Colorado
December 12, 2006









STATEMENT OF INVESTMENTS  October 31, 2006
--------------------------------------------------------------------------------

                                                                                                         VALUE
                                                                                       SHARES       SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
COMMON STOCKS--72.7%
---------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--15.2%
---------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS &amp; LEISURE--8.0%
Carnival Corp.                                                                      1,500,000   $   73,230,000
---------------------------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 1                                                      7,300,000      295,650,000
---------------------------------------------------------------------------------------------------------------
Yum! Brands, Inc.                                                                   2,400,000      142,704,000
                                                                                                ---------------
                                                                                                   511,584,000

---------------------------------------------------------------------------------------------------------------
HOUSEHOLD DURABLES--3.5%
Centex Corp.                                                                        4,250,000      222,275,000
---------------------------------------------------------------------------------------------------------------
MULTILINE RETAIL--3.7%
Federated Department Stores, Inc.                                                   5,400,000      237,114,000
---------------------------------------------------------------------------------------------------------------
ENERGY--6.4%
---------------------------------------------------------------------------------------------------------------
ENERGY EQUIPMENT &amp; SERVICES--1.2%
GlobalSantaFe Corp.                                                                 1,500,000       77,850,000
---------------------------------------------------------------------------------------------------------------
OIL &amp; GAS--5.2%
ConocoPhillips                                                                      5,500,000      331,320,000
---------------------------------------------------------------------------------------------------------------
FINANCIALS--12.9%
---------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--3.0%
Merrill Lynch &amp; Co., Inc.                                                           2,200,000      192,324,000
---------------------------------------------------------------------------------------------------------------
INSURANCE--4.6%
AMBAC Financial Group, Inc.                                                         2,540,000      212,064,600
---------------------------------------------------------------------------------------------------------------
American International Group, Inc.                                                  1,200,000       80,604,000
                                                                                                ---------------
                                                                                                   292,668,600

---------------------------------------------------------------------------------------------------------------
THRIFTS &amp; MORTGAGE FINANCE--5.3%
Countrywide Financial Corp.                                                         9,000,000      343,080,000
---------------------------------------------------------------------------------------------------------------
HEALTH CARE--16.2%
---------------------------------------------------------------------------------------------------------------
HEALTH CARE PROVIDERS &amp; SERVICES--6.3%
Aetna, Inc.                                                                         5,000,000      206,100,000
---------------------------------------------------------------------------------------------------------------
UnitedHealth Group, Inc.                                                            4,000,000      195,120,000
                                                                                                ---------------
                                                                                                   401,220,000

---------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--9.9%
Kos Pharmaceuticals, Inc. 2                                                           750,000       37,312,500
---------------------------------------------------------------------------------------------------------------
Pfizer, Inc.                                                                       12,000,000      319,800,000
---------------------------------------------------------------------------------------------------------------
Roche Holding Ltd., Sponsored ADR                                                   3,187,000      279,977,950
                                                                                                ---------------
                                                                                                   637,090,450


                      20 | OPPENHEIMER QUEST BALANCED FUND

                                                                                                         VALUE
                                                                                       SHARES       SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
INDUSTRIALS--3.6%
---------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES &amp; SUPPLIES--1.4%
ChoicePoint, Inc. 2                                                                 2,430,000   $   88,427,700
---------------------------------------------------------------------------------------------------------------
MACHINERY--2.2%
Eaton Corp.                                                                         2,000,000      144,860,000
---------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--12.7%
---------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--2.9%
Motorola, Inc.                                                                      8,000,000      184,480,000
---------------------------------------------------------------------------------------------------------------
COMPUTERS &amp; PERIPHERALS--8.3%
Apple Computer, Inc. 2                                                              3,000,000      243,240,000
---------------------------------------------------------------------------------------------------------------
Dell, Inc. 2                                                                        5,000,000      121,650,000
---------------------------------------------------------------------------------------------------------------
EMC Corp. 2                                                                        10,000,000      122,500,000
---------------------------------------------------------------------------------------------------------------
Hewlett-Packard Co.                                                                 1,200,000       46,488,000
                                                                                                ---------------
                                                                                                   533,878,000

---------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS &amp; SEMICONDUCTOR EQUIPMENT--1.5%
Taiwan Semiconductor Manufacturing Co. Ltd., ADR                                   10,000,007       97,000,068
---------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--5.7%
---------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--3.2%
AT&amp;T, Inc.                                                                          6,000,000      205,500,000
---------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--2.5%
NII Holdings, Inc. 2                                                                2,500,000      162,575,001
                                                                                                ---------------
Total Common Stocks (Cost $4,163,040,809)                                                        4,663,246,819

                                                                                        UNITS
---------------------------------------------------------------------------------------------------------------
RIGHTS, WARRANTS AND CERTIFICATES--0.0%
---------------------------------------------------------------------------------------------------------------
Raytheon Co. Wts., Exp. 6/16/11 2 (Cost $0)                                            97,453        1,531,961

                                                                                    PRINCIPAL
                                                                                       AMOUNT
---------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--25.9%
---------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--2.0%
---------------------------------------------------------------------------------------------------------------
AUTOMOBILES--0.5%
DaimlerChrysler North America Holding Corp., 4.75% Unsec. Nts., 1/15/08          $ 34,360,000       34,044,300
---------------------------------------------------------------------------------------------------------------
MEDIA--1.5%
CBS Corp., 5.625% Sr. Unsec. Nts., 5/1/07                                          19,560,000       19,576,841
---------------------------------------------------------------------------------------------------------------
News America Holdings, Inc., 9.25% Sr. Debs., 2/1/13                                8,500,000       10,073,784
---------------------------------------------------------------------------------------------------------------
Time Warner Entertainment Co. LP, 7.25% Sr. Unsec. Debs., 9/1/08                   19,640,000       20,278,830
---------------------------------------------------------------------------------------------------------------
Walt Disney Co. (The), 5.70% Nts., 7/15/11                                         41,285,000       42,175,683
                                                                                                ---------------
                                                                                                    92,105,138


                      21 | OPPENHEIMER QUEST BALANCED FUND

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

                                                                                    PRINCIPAL            VALUE
                                                                                       AMOUNT       SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--3.3%
---------------------------------------------------------------------------------------------------------------
FOOD &amp; STAPLES RETAILING--1.2%
CVS Corp., 3.875% Unsec. Nts., 11/1/07                                           $ 42,080,000   $   41,378,106
---------------------------------------------------------------------------------------------------------------
Safeway, Inc., 4.80% Sr. Unsec. Nts., 7/16/07                                      39,130,000       38,941,785
                                                                                                ---------------
                                                                                                    80,319,891

---------------------------------------------------------------------------------------------------------------
FOOD PRODUCTS--1.4%
General Mills, Inc., 6% Unsec. Nts., 2/15/12                                       44,190,000       45,514,772
---------------------------------------------------------------------------------------------------------------
Kellogg Co., 2.875% Nts., 6/1/08                                                   43,500,000       41,943,614
---------------------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 4.625% Nts., 11/1/06                                             3,750,000        3,750,000
                                                                                                ---------------
                                                                                                    91,208,386

---------------------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--0.7%
Proctor &amp; Gamble Co. (The), 3.50% Nts., 12/15/08                                   43,230,000       41,907,378
---------------------------------------------------------------------------------------------------------------
ENERGY--1.8%
---------------------------------------------------------------------------------------------------------------
OIL &amp; GAS--1.8%
ChevronTexaco Capital Co., 3.50% Nts., 9/17/07                                     43,790,000       43,159,424
---------------------------------------------------------------------------------------------------------------
Marathon Oil Corp., 5.375% Unsec. Nts., 6/1/07                                     40,515,000       40,538,175
---------------------------------------------------------------------------------------------------------------
Valero Energy Corp., 6.125% Unsec. Nts., 4/15/07                                   28,750,000       28,816,901
                                                                                                ---------------
                                                                                                   112,514,500

---------------------------------------------------------------------------------------------------------------
FINANCIALS--10.3%
---------------------------------------------------------------------------------------------------------------
CAPITAL MARKETS--3.1%
Ameriprise Financial, Inc., 5.35% Sr. Unsec. Nts., 11/15/10                        39,120,000       39,345,018
---------------------------------------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The), 7.80% Nts., 8/15/07                                 39,130,000       39,870,653
---------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Inc., (USA), 5.75% Unsec. Nts., 4/15/07                47,410,000       47,475,568
---------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), 5.70% Sr. Unsec. Nts., 9/1/12                     29,880,000       30,479,990
---------------------------------------------------------------------------------------------------------------
Merrill Lynch &amp; Co., Inc., 3.70% Nts., Series B, 4/21/08                           43,990,000       43,078,923
                                                                                                ---------------
                                                                                                   200,250,152

---------------------------------------------------------------------------------------------------------------
COMMERCIAL BANKS--2.6%
Household Finance Corp., 7% Sr. Unsec. Unsub. Nts., 5/15/12                        20,000,000       21,674,840
---------------------------------------------------------------------------------------------------------------
KeyCorp, 2.75% Sr. Nts., Series G, 2/27/07                                         43,615,000       43,182,121
---------------------------------------------------------------------------------------------------------------
U.S. Bancorp:
4.50% Sr. Nts., Series P, 7/29/10                                                  15,610,000       15,310,663
5.30% Nts., 4/28/09                                                                14,800,000       14,873,837
---------------------------------------------------------------------------------------------------------------
Wachovia Corp., 4.375% Nts., 6/1/10                                                39,280,000       38,426,838
---------------------------------------------------------------------------------------------------------------
World Savings Bank FSB, 4.125% Sr. Nts., 3/10/08                                   30,080,000       29,572,400
                                                                                                ---------------
                                                                                                   163,040,699


                      22 | OPPENHEIMER QUEST BALANCED FUND

                                                                                    PRINCIPAL            VALUE
                                                                                       AMOUNT       SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
CONSUMER FINANCE--1.4%
American Express Credit Corp.:
3% Nts., 5/16/08                                                                 $ 19,460,000   $   18,849,559
5% Nts., Series B, 12/2/10                                                         34,230,000       34,209,633
---------------------------------------------------------------------------------------------------------------
SLM Corp., 4.50% Nts., Series A, 7/26/10                                           39,250,000       38,315,340
                                                                                                ---------------
                                                                                                    91,374,532

---------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--1.9%
CIT Group, Inc.:
4.75% Sr. Nts., 12/15/10                                                           24,575,000       24,140,907
7.75% Sr. Unsec. Unsub. Nts., 4/2/12                                               15,000,000       16,647,795
---------------------------------------------------------------------------------------------------------------
Citigroup, Inc.:
5% Nts., 3/6/07                                                                    20,776,000       20,748,804
6% Nts., 2/21/12                                                                   15,000,000       15,589,185
---------------------------------------------------------------------------------------------------------------
JPMorgan Chase &amp; Co., 5.25% Nts., 5/30/07                                          46,725,000       46,705,796
                                                                                                ---------------
                                                                                                   123,832,487

---------------------------------------------------------------------------------------------------------------
INSURANCE--1.3%
Berkshire Hathaway Finance Corp., 3.375% Nts., 10/15/08                            43,940,000       42,526,494
---------------------------------------------------------------------------------------------------------------
International Lease Finance Corp., 5.625% Sr. Unsec. Unsub. Nts., 6/1/07           41,960,000       42,007,373
                                                                                                ---------------
                                                                                                    84,533,867

---------------------------------------------------------------------------------------------------------------
INDUSTRIALS--4.4%
---------------------------------------------------------------------------------------------------------------
AEROSPACE &amp; DEFENSE--2.3%
Boeing Capital Corp., 6.50% Nts., 2/15/12                                          27,625,000       29,357,143
---------------------------------------------------------------------------------------------------------------
General Dynamics Corp., 4.50% Sr. Unsec. Nts., 8/15/10                             31,940,000       31,292,959
---------------------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 4.079% Nts., 11/16/06                                      43,840,000       43,817,817
---------------------------------------------------------------------------------------------------------------
Raytheon Co., 6.75% Nts., 8/15/07                                                  43,810,000       44,225,976
                                                                                                ---------------
                                                                                                   148,693,895

---------------------------------------------------------------------------------------------------------------
AIR FREIGHT &amp; LOGISTICS--0.7%
FedEx Corp., 2.65% Unsec. Nts., 4/1/07                                             43,830,000       43,331,653
---------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES &amp; SUPPLIES--0.1%
Waste Management, Inc., 6.50% Sr. Unsub. Nts., 11/15/08                             8,740,000        8,948,047
---------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--0.7%
General Electric Capital Corp.:
4.875% Nts., Series A, 10/21/10                                                    24,450,000       24,286,967
6% Nts., 6/15/12                                                                   19,700,000       20,516,230
                                                                                                ---------------
                                                                                                    44,803,197


                      23 | OPPENHEIMER QUEST BALANCED FUND

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

                                                                                    PRINCIPAL            VALUE
                                                                                       AMOUNT       SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
MACHINERY--0.6%
John Deere Capital Corp., 3.875% Nts., Series D, 3/7/07                          $ 39,120,000   $   38,914,151
---------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--0.7%
---------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.7%
Motorola, Inc., 4.608% Nts., 11/16/07                                              43,850,000       43,566,641
---------------------------------------------------------------------------------------------------------------
MATERIALS--1.2%
---------------------------------------------------------------------------------------------------------------
CHEMICALS--0.5%
E.I. du Pont de Nemours &amp; Co., 4.125% Nts., 4/30/10                                34,225,000       33,185,895
---------------------------------------------------------------------------------------------------------------
METALS &amp; MINING--0.7%
Alcoa, Inc., 4.25% Sr. Unsec. Nts., 8/15/07                                        44,705,000       44,188,344
---------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.1%
---------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.1%
AT&amp;T Wireless Services, Inc., 7.50% Sr. Unsec. Nts., 5/1/07                        29,370,000       29,672,129
---------------------------------------------------------------------------------------------------------------
Verizon Global Funding Corp.:
7.25% Sr. Unsec. Unsub. Nts., 12/1/10                                              24,450,000       26,266,293
7.375% Sr. Nts., 9/1/12                                                            15,000,000       16,499,730
                                                                                                ---------------
                                                                                                    72,438,152

---------------------------------------------------------------------------------------------------------------
UTILITIES--1.1%
---------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES &amp; UNREGULATED POWER--1.1%
Dominion Resources, Inc., 3.66% Sr. Nts., Series A, 11/15/06                       36,545,000       36,522,452
---------------------------------------------------------------------------------------------------------------
Duke Capital Corp., 7.50% Bonds, 10/1/09                                           30,455,000       32,141,567
                                                                                                ---------------
                                                                                                    68,664,019
                                                                                                ---------------
Total Non-Convertible Corporate Bonds and Notes (Cost $1,664,507,921)                            1,661,865,324

---------------------------------------------------------------------------------------------------------------
SHORT-TERM NOTES--1.3%
---------------------------------------------------------------------------------------------------------------
American Express Credit Corp., 5.23%, 11/22/06                                     25,000,000       24,923,729
---------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 4.98%, 11/1/06                                             54,919,000       54,919,000
                                                                                                ---------------
Total Short-Term Notes (Cost $79,842,729)                                                           79,842,729

---------------------------------------------------------------------------------------------------------------
Total Investments, at Value (excluding Investments Purchased with
Cash Collateral from Securities Loaned) (Cost $5,907,391,459)                                    6,406,486,833


                      24 | OPPENHEIMER QUEST BALANCED FUND

                                                                                    PRINCIPAL            VALUE
                                                                                       AMOUNT       SEE NOTE 1
---------------------------------------------------------------------------------------------------------------
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED--0.2% 3
---------------------------------------------------------------------------------------------------------------
ASSET BACKED FLOATING NOTE--0.2%
Whitehawk CDO Funding Corp.                                                      $ 10,000,000   $   10,000,000
---------------------------------------------------------------------------------------------------------------
FUNDING AGREEMENT/GUARANTEED INVESTMENT CONTRACT--0.0%
Protective Life Insurance Co.                                                         500,000          500,000
---------------------------------------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--0.0%
Undivided interest of 0.03% in joint repurchase agreement (Principal Amount/
Value $3,450,000,000, with a maturity value of $3,450,510,792) with Nomura
Securities, 5.33%, dated 10/31/06, to be repurchased at $1,124,416 on 11/1/06,
collateralized by U.S. Agency Mortgages, 0.00%-7.439%, 3/15/14-6/25/43,
with a value of $3,519,000,000                                                      1,124,250        1,124,250
                                                                                                ---------------
Total Investments Purchased with Cash Collateral from Securities Loaned
(Cost $11,624,250)                                                                                  11,624,250

---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $5,919,015,709)                                       100.1%   6,418,111,083
---------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS                                                    (0.1)      (5,995,990)
                                                                                 ------------------------------
NET ASSETS                                                                              100.0%  $6,412,115,093
                                                                                 ==============================

FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Partial or fully-loaned security. See Note 5 of accompanying Notes.

2. Non-income producing security.

3. The security/securities have been segregated to satisfy the forward
commitment to return the cash collateral received in securities lending
transactions upon the borrower's return of the securities loaned. See Note 5 of
accompanying Notes.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      25 | OPPENHEIMER QUEST BALANCED FUND

STATEMENT OF ASSETS AND LIABILITIES  October 31, 2006
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------------------------------------
Investments, at value (cost $5,919,015,709)--see accompanying statement of investments          $6,418,111,083
--------------------------------------------------------------------------------------------------------------
Cash                                                                                                 2,034,729
--------------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold                                                                                    80,355,561
Interest and dividends                                                                              25,492,974
Shares of beneficial interest sold                                                                   1,744,526
Other                                                                                                  105,050
                                                                                                --------------
Total assets                                                                                     6,527,843,923

--------------------------------------------------------------------------------------------------------------
LIABILITIES
--------------------------------------------------------------------------------------------------------------
Return of collateral for securities loaned                                                          11,624,250
--------------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased                                                                               83,419,675
Shares of beneficial interest redeemed                                                              16,719,953
Distribution and service plan fees                                                                   1,304,665
Transfer and shareholder servicing agent fees                                                        1,181,248
Trustees' compensation                                                                                 871,879
Shareholder communications                                                                             513,944
Other                                                                                                   93,216
                                                                                                --------------
Total liabilities                                                                                  115,728,830

--------------------------------------------------------------------------------------------------------------
NET ASSETS                                                                                      $6,412,115,093
                                                                                                ==============

--------------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
--------------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest                                                      $    3,437,534
--------------------------------------------------------------------------------------------------------------
Additional paid-in capital                                                                       5,692,739,546
--------------------------------------------------------------------------------------------------------------
Accumulated net investment income                                                                   10,660,967
--------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments                                                       206,181,672
--------------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments                                                         499,095,374
                                                                                                --------------
NET ASSETS                                                                                      $6,412,115,093
                                                                                                ==============


                      26 | OPPENHEIMER QUEST BALANCED FUND

--------------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
--------------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of
$3,058,131,254 and 162,498,412 shares of beneficial interest outstanding)                               $18.82
Maximum offering price per share (net asset value plus sales charge of
5.75% of offering price)                                                                                $19.97
--------------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $1,847,651,161
and 100,073,017 shares of beneficial interest outstanding)                                              $18.46
--------------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $1,022,881,298
and 55,356,859 shares of beneficial interest outstanding)                                               $18.48
--------------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of $207,129,539
and 11,140,689 shares of beneficial interest outstanding)                                               $18.59
--------------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $276,321,841 and 14,684,387 shares of beneficial interest outstanding)                        $18.82

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      27 | OPPENHEIMER QUEST BALANCED FUND

STATEMENT OF OPERATIONS  For the Year Ended October 31, 2006
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INVESTMENT INCOME
--------------------------------------------------------------------------------
Interest                                                        $    78,583,813
--------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $2,721,370)           78,340,970
--------------------------------------------------------------------------------
Portfolio lending fees                                                  467,162
--------------------------------------------------------------------------------
Other income                                                            124,216
                                                                ----------------
Total investment income                                             157,516,161

--------------------------------------------------------------------------------
EXPENSES
--------------------------------------------------------------------------------
Management fees                                                      47,511,106
--------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                               7,961,750
Class B                                                              20,145,494
Class C                                                              11,219,336
Class N                                                               1,077,365
--------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                               6,430,938
Class B                                                               4,464,645
Class C                                                               1,922,282
Class N                                                                 576,634
Class Y                                                                 473,341
--------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                 519,942
Class B                                                                 399,666
Class C                                                                 184,682
Class N                                                                  13,303
--------------------------------------------------------------------------------
Trustees' compensation                                                  338,000
--------------------------------------------------------------------------------
Custodian fees and expenses                                              75,663
--------------------------------------------------------------------------------
Administration service fees                                               1,500
--------------------------------------------------------------------------------
Other                                                                   319,458
                                                                ----------------
Total expenses                                                      103,635,105
Less reduction to custodian expenses                                    (42,705)
                                                                ----------------
Net expenses                                                        103,592,400

--------------------------------------------------------------------------------
NET INVESTMENT INCOME                                                53,923,761

--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
--------------------------------------------------------------------------------
Net realized gain on investments                                    251,310,872
--------------------------------------------------------------------------------
Net change in unrealized appreciation on investments                371,082,120

--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS            $   676,316,753
                                                                ================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      28 | OPPENHEIMER QUEST BALANCED FUND

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

YEAR ENDED OCTOBER 31,                                                   2006             2005
-----------------------------------------------------------------------------------------------
OPERATIONS
-----------------------------------------------------------------------------------------------
Net investment income                                          $   53,923,761   $   17,470,480
-----------------------------------------------------------------------------------------------
Net realized gain                                                 251,310,872      455,092,227
-----------------------------------------------------------------------------------------------
Net change in unrealized appreciation                             371,082,120     (246,170,891)
                                                               --------------------------------
Net increase in net assets resulting from operations              676,316,753      226,391,816

-----------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
-----------------------------------------------------------------------------------------------
Dividends from net investment income:
Class A                                                           (40,353,835)              --
Class B                                                            (9,442,976)              --
Class C                                                            (6,062,238)              --
Class N                                                            (2,103,130)              --
Class Y                                                            (4,313,806)              --
-----------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A                                                          (112,335,599)              --
Class B                                                           (74,130,785)              --
Class C                                                           (40,907,900)              --
Class N                                                            (7,470,626)              --
Class Y                                                            (9,186,316)              --

-----------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
-----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A                                                          (393,883,632)     116,753,759
Class B                                                          (467,003,506)    (416,333,424)
Class C                                                          (227,815,940)     (49,767,516)
Class N                                                           (21,452,884)       2,797,923
Class Y                                                            (9,256,183)      23,891,848

-----------------------------------------------------------------------------------------------
NET ASSETS
-----------------------------------------------------------------------------------------------
Total decrease                                                   (749,402,603)     (96,265,594)
-----------------------------------------------------------------------------------------------
Beginning of period                                             7,161,517,696    7,257,783,290
                                                               --------------------------------
End of period (including accumulated net investment income
of $10,660,967 and $19,013,191, respectively)                  $6,412,115,093   $7,161,517,696
                                                               ===============================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      29 | OPPENHEIMER QUEST BALANCED FUND

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

CLASS A            YEAR ENDED OCTOBER 31,              2006           2005           2004             2003             2002
--------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $    17.79     $    17.19     $    15.69       $    12.02       $    16.09
--------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .21 1          .11 1          .07              .16              .17
Net realized and unrealized gain (loss)                1.66            .49           1.46             3.64            (3.53)
                                                 -------------------------------------------------------------------------------
Total from investment operations                       1.87            .60           1.53             3.80            (3.36)
--------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.23)            --           (.03)            (.13)            (.27)
Distributions from net realized gain                   (.61)            --             --               --             (.44)
                                                 -------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                        (.84)            --           (.03)            (.13)            (.71)
--------------------------------------------------------------------------------------------------------------------------------

Net asset value, end of period                   $    18.82     $    17.79     $    17.19       $    15.69       $    12.02
                                                 ===============================================================================

--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                    10.77%          3.49%          9.79%           31.87%          (21.88)%
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $3,058,131     $3,277,261     $3,054,761       $2,287,707       $1,667,143
--------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $3,215,973     $3,285,181     $2,759,594       $1,902,499       $1,960,568
--------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                  1.13%          0.61%          0.38%            1.60%            1.20%
Total expenses                                         1.17% 4        1.17% 4        1.21% 4,5        1.38% 4,5        1.51% 4,5
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  63%            89%           106%              92%             108%

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

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

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

4. Reduction to custodian expenses less than 0.01%.

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      30 | OPPENHEIMER QUEST BALANCED FUND

CLASS B            YEAR ENDED OCTOBER 31,              2006           2005           2004             2003             2002
--------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $    17.46     $    17.01     $    15.61       $    11.98       $    16.00
--------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                            .06 1         (.03) 1        (.07)             .06              .07
Net realized and unrealized gain (loss)                1.63            .48           1.47             3.63            (3.52)
                                                 -------------------------------------------------------------------------------
Total from investment operations                       1.69            .45           1.40             3.69            (3.45)
--------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.08)            --             --             (.06)            (.13)
Distributions from net realized gain                   (.61)            --             --               --             (.44)
                                                 -------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                        (.69)            --             --             (.06)            (.57)
--------------------------------------------------------------------------------------------------------------------------------

Net asset value, end of period                   $    18.46     $    17.46     $    17.01       $    15.61       $    11.98
                                                 ===============================================================================

--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                     9.90%          2.65%          8.97%           30.89%          (22.38)%
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $1,847,651     $2,205,679     $2,549,069       $2,306,366       $1,759,167
--------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $2,014,712     $2,470,464     $2,495,872       $1,985,215       $2,068,300
--------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss)                           0.35%         (0.17)%        (0.40)%           0.84%            0.56%
Total expenses                                         1.95% 4        1.96% 4        2.00% 4,5        2.15% 4,5        2.15% 4,5
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  63%            89%           106%              92%             108%

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

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

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

4. Reduction to custodian expenses less than 0.01%.

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      31 | OPPENHEIMER QUEST BALANCED FUND

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

CLASS C            YEAR ENDED OCTOBER 31,              2006           2005           2004             2003             2002
--------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $    17.48     $    17.02     $    15.60       $    11.97       $    16.00
--------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                            .07 1         (.02) 1        (.06)             .07              .07
Net realized and unrealized gain (loss)                1.64            .48           1.48             3.62            (3.52)
                                                 -------------------------------------------------------------------------------
Total from investment operations                       1.71            .46           1.42             3.69            (3.45)
--------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.10)            --             --             (.06)            (.14)
Distributions from net realized gain                   (.61)            --             --               --             (.44)
                                                 -------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                        (.71)            --             --             (.06)            (.58)
--------------------------------------------------------------------------------------------------------------------------------

Net asset value, end of period                   $    18.48     $    17.48     $    17.02       $    15.60       $    11.97
                                                 ===============================================================================

--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                     9.97%          2.70%          9.10%           30.99%          (22.40)%
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $1,022,881     $1,191,400     $1,207,729       $  982,288         $763,338
--------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $1,122,088     $1,248,447     $1,129,522       $  835,198         $903,426
--------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income (loss)                           0.41%         (0.11)%        (0.34)%           0.92%            0.58%
Total expenses                                         1.89% 4        1.89% 4        1.94% 4,5        2.08% 4,5        2.13% 4,5
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  63%            89%           106%              92%             108%

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

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

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

4. Reduction to custodian expenses less than 0.01%.

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      32 | OPPENHEIMER QUEST BALANCED FUND

CLASS N            YEAR ENDED OCTOBER 31,              2006           2005           2004             2003             2002
-----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $    17.58     $    17.05     $    15.58       $    11.94       $    16.05
-----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .15 1          .05 1          .03              .11              .20
Net realized and unrealized gain (loss)                1.64            .48           1.45             3.63            (3.56)
                                                 ----------------------------------------------------------------------------
Total from investment operations                       1.79            .53           1.48             3.74            (3.36)
-----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.17)            --           (.01)            (.10)            (.31)
Distributions from net realized gain                   (.61)            --             --               --             (.44)
                                                 ----------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                        (.78)            --           (.01)            (.10)            (.75)
-----------------------------------------------------------------------------------------------------------------------------

Net asset value, end of period                   $    18.59     $    17.58     $    17.05       $    15.58       $    11.94
                                                 ============================================================================

-----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                    10.45%          3.11%          9.47%           31.50%          (21.99)%
-----------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $  207,130     $  216,843     $  207,450       $  142,866       $   85,744
-----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $  215,652     $  219,040     $  180,201       $  112,416       $   70,477
-----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                  0.83%          0.30%          0.04%            1.23%            1.07%
Total expenses                                         1.48%          1.49%          1.55%            1.74%            1.67%
Expenses after payments and waivers and
reduction to custodian expenses                        1.48%          1.49%          1.55%            1.70%            1.67%
-----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  63%            89%           106%              92%             108%

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

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

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      33 | OPPENHEIMER QUEST BALANCED FUND

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

CLASS Y            YEAR ENDED OCTOBER 31,              2006           2005           2004             2003             2002
--------------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period             $    17.79     $    17.14     $    15.62       $    11.96       $    16.05
--------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                   .26 1          .17 1          .12              .20              .25
Net realized and unrealized gain (loss)                1.66            .48           1.46             3.64            (3.52)
                                                 -------------------------------------------------------------------------------
Total from investment operations                       1.92            .65           1.58             3.84            (3.27)
--------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                   (.28)            --           (.06)            (.18)            (.38)
Distributions from net realized gain                   (.61)            --             --               --             (.44)
                                                 -------------------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                        (.89)            --           (.06)            (.18)            (.82)
--------------------------------------------------------------------------------------------------------------------------------

Net asset value, end of period                   $    18.82     $    17.79     $    17.14       $    15.62       $    11.96
                                                 ===============================================================================

--------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                    11.11%          3.79%         10.17%           32.40%          (21.48)%
--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)         $  276,322     $  270,335     $  238,775       $  182,409       $  118,068
--------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $  276,812     $  253,220     $  216,973       $  145,793       $  137,322
--------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                  1.43%          0.93%          0.70%            1.89%            1.75%
Total expenses                                         0.87% 4        0.85% 4        0.90% 4          1.05% 4          0.96% 4,5
--------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  63%            89%           106%              92%             108%

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

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

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

4. Reduction to custodian expenses less than 0.01%.

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                      34 | OPPENHEIMER QUEST BALANCED FUND

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

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

Oppenheimer Quest Balanced Fund (the Fund), a series of Oppenheimer Quest For
Value Funds, is an open-end management investment company registered under the
Investment Company Act of 1940, as amended. The Fund's investment objective is
to seek a combination of growth of capital and investment income. The Fund's
primary objective is growth of capital. The Fund's investment advisor is
OppenheimerFunds, Inc. (the Manager). The Manager has entered into a subadvisory
agreement with Oppenheimer Capital LLC.

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

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

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


                      35 | OPPENHEIMER QUEST BALANCED FUND

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

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

principal exchange as reported by such principal exchange at its trading session
ending at, or most recently prior to, the time when the Fund's assets are
valued. Securities (including restricted securities) for which market quotations
are not readily available are valued at their fair value. Foreign and domestic
securities whose values have been materially affected by what the Manager
identifies as a significant event occurring before the Fund's assets are valued
but after the close of their respective exchanges will be fair valued. Fair
value is determined in good faith using consistently applied procedures under
the supervision of the Board of Trustees. Investments in open-end registered
investment companies are valued at that fund's net asset value. Short-term
"money market type" debt securities with remaining maturities of sixty days or
less are valued at amortized cost (which approximates market value).

--------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. The values of securities denominated in foreign currencies and
amounts related to the purchase and sale of foreign securities and foreign
investment income are translated into U.S. dollars as of the close of the New
York Stock Exchange (the "Exchange"), normally 4:00 P.M. Eastern time, on each
day the Exchange is open for business. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Trustees.

      Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in the
values of assets and liabilities, including investments in securities at fiscal
period end, resulting from changes in exchange rates.

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

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


                      36 | OPPENHEIMER QUEST BALANCED FUND

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

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

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

                                                                 NET UNREALIZED
                                                                   APPRECIATION
                                                               BASED ON COST OF
                                                                 SECURITIES AND
  UNDISTRIBUTED      UNDISTRIBUTED            ACCUMULATED     OTHER INVESTMENTS
  NET INVESTMENT         LONG-TERM                   LOSS    FOR FEDERAL INCOME
  INCOME                      GAIN       CARRYFORWARD 1,2          TAX PURPOSES
  -----------------------------------------------------------------------------
  $11,564,181         $228,739,812                    $--          $476,537,238

1. During the fiscal year ended October 31, 2006, the Fund did not utilize any
capital loss carryforward.

2. During the fiscal year ended October 31, 2005, the Fund utilized $181,820,457
of capital loss carryforward to offset capital gains realized in that fiscal
year.

Net investment income (loss) and net realized gain (loss) may differ for
financial statement and tax purposes. The character of dividends and
distributions made during the fiscal year from net investment income or net
realized gains may differ from their ultimate characterization for federal
income tax purposes. Also, due to timing of dividends and distributions, the
fiscal year in which amounts are distributed may differ from the fiscal year in
which the income or net realized gain was recorded by the Fund. Accordingly, the
following amounts have been reclassified for October 31, 2006. Net assets of the
Fund were unaffected by the reclassifications.

                                          REDUCTION TO
                                       ACCUMULATED NET
                INCREASE TO              REALIZED GAIN
                PAID-IN CAPITAL       ON INVESTMENTS 3
                --------------------------------------
                $40,884,919                $40,884,919

3. $40,884,919, all of which was long-term capital gain, was distributed in
connection with Fund share redemptions.


                      37 | OPPENHEIMER QUEST BALANCED FUND

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

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

The tax character of distributions paid during the years ended October 31, 2006
and October 31, 2005 was as follows:

                                             YEAR ENDED          YEAR ENDED
                                       OCTOBER 31, 2006    OCTOBER 31, 2005
        -------------------------------------------------------------------
        Distributions paid from:
        Ordinary income                  $   62,275,985                 $--
        Long-term capital gain              244,031,226                  --
                                         ----------------------------------
        Total                            $  306,307,211                 $--
                                         ==================================

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of October 31, 2006 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.

        Federal tax cost of securities     $ 5,941,573,845
                                           ================
        Gross unrealized appreciation      $   519,896,415
        Gross unrealized depreciation          (43,359,177)
                                           ----------------
        Net unrealized appreciation        $   476,537,238
                                           ================

--------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent trustees. Benefits are based on years of service and fees
paid to each trustee during the years of service. During the year ended October
31, 2006, the Fund's projected benefit obligations were increased by $179,802
and payments of $25,409 were made to retired trustees, resulting in an
accumulated liability of $869,842 as of October 31, 2006.

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

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


                      38 | OPPENHEIMER QUEST BALANCED FUND

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

--------------------------------------------------------------------------------
CUSTODIAN FEES. "Custodian fees and expenses" in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. Such cash overdrafts may result from the
effects of failed trades in portfolio securities and from cash outflows
resulting from unanticipated shareholder redemption activity. The Fund pays
interest to its custodian on such cash overdrafts, to the extent they are not
offset by positive cash balances maintained by the Fund, at a rate equal to the
Federal Funds Rate plus 0.50%. The "Reduction to custodian expenses" line item,
if applicable, represents earnings on cash balances maintained by the Fund
during the period. Such interest expense and other custodian fees may be paid
with these earnings.

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

--------------------------------------------------------------------------------
INDEMNIFICATIONS. The Fund's organizational documents provide current and former
trustees and officers with a limited indemnification against liabilities arising
in connection with the performance of their duties to the Fund. In the normal
course of business, the Fund may also enter into contracts that provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown as this would be dependent on future claims that may be made against the
Fund. The risk of material loss from such claims is considered remote.

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

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

      The Fund has authorized an unlimited number of $0.01 par value shares of
beneficial interest of each class. Transactions in shares of beneficial interest
were as follows:

                            YEAR ENDED OCTOBER 31, 2006     YEAR ENDED OCTOBER 31, 2005
                                SHARES            AMOUNT        SHARES            AMOUNT
-----------------------------------------------------------------------------------------
CLASS A
Sold                        31,500,972   $   570,267,687    52,209,952    $  933,780,734
Dividends and/or
distributions reinvested     7,682,670       137,709,558            --                --
Redeemed                   (60,923,880)   (1,101,860,877)  (45,627,925)     (817,026,975)
                           --------------------------------------------------------------
Net increase (decrease)    (21,740,238)  $  (393,883,632)    6,582,027    $  116,753,759
                           ==============================================================


                      39 | OPPENHEIMER QUEST BALANCED FUND

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

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

                            YEAR ENDED OCTOBER 31, 2006      YEAR ENDED OCTOBER 31, 2005
                                SHARES            AMOUNT        SHARES            AMOUNT
-----------------------------------------------------------------------------------------
CLASS B
Sold                         8,581,552   $   152,390,833    14,527,626    $  255,243,732
Dividends and/or
distributions reinvested     3,911,374        68,946,474            --                --
Redeemed                   (38,752,535)     (688,340,813)  (38,046,508)     (671,577,156)
                           --------------------------------------------------------------
Net decrease               (26,259,609)  $  (467,003,506)  (23,518,882)   $ (416,333,424)
                           ==============================================================

-----------------------------------------------------------------------------------------
CLASS C
Sold                         6,246,846   $   111,066,770    11,673,588    $  205,356,257
Dividends and/or
distributions reinvested     2,171,851        38,302,739            --                --
Redeemed                   (21,234,631)     (377,185,449)  (14,475,489)     (255,123,773)
                           --------------------------------------------------------------
Net decrease               (12,815,934)  $  (227,815,940)   (2,801,901)   $  (49,767,516)
                           ==============================================================

-----------------------------------------------------------------------------------------
CLASS N
Sold                         3,181,896   $    56,868,554     4,902,473    $   86,592,098
Dividends and/or
distributions reinvested       516,842         9,162,505            --                --
Redeemed                    (4,889,445)      (87,483,943)   (4,736,733)      (83,794,175)
                           --------------------------------------------------------------
Net increase (decrease)     (1,190,707)  $   (21,452,884)      165,740    $    2,797,923
                           ==============================================================

-----------------------------------------------------------------------------------------
CLASS Y
Sold                         3,658,168   $    66,104,385     6,145,175    $  110,749,121
Dividends and/or
distributions reinvested       628,190        11,251,180            --                --
Redeemed                    (4,798,899)      (86,611,748)   (4,878,597)      (86,857,273)
                           --------------------------------------------------------------
Net increase (decrease)       (512,541)  $    (9,256,183)    1,266,578    $   23,891,848
                           ==============================================================

--------------------------------------------------------------------------------
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 October 31, 2006, were as
follows:

                                                 PURCHASES               SALES
------------------------------------------------------------------------------
Investment securities                       $4,231,637,096      $5,570,102,847
U.S. government and
government agency obligations                           --          14,191,086

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

MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee at an
annual rate of average net assets as shown in the following table:


                      40 | OPPENHEIMER QUEST BALANCED FUND

FEE SCHEDULE EFFECTIVE APRIL 4, 2006     FEE SCHEDULE NOVEMBER 1, 2005 TO APRIL 3, 2006
---------------------------------------------------------------------------------------
Up to $1.0 billion             0.80%     Up to $1.0 billion                0.80%
Next $2.0 billion              0.76      Next $2.0 billion                 0.76
Next $1.0 billion              0.71      Next $1.0 billion                 0.71
Next $1.0 billion              0.66      Next $1.0 billion                 0.66
Next $1.0 billion              0.60      Next $1.0 billion                 0.60
Next $1.0 billion              0.55      Next $1.0 billion                 0.55
Next $2.0 billion              0.50      Over $7.0 billion                 0.50
Over $9.0 billion              0.48

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

--------------------------------------------------------------------------------
SUB-ADVISOR FEES. The Manager retains Oppenheimer Capital LLC (the
"Sub-Advisor") to provide the day-to-day portfolio management of the Fund. Under
the Sub-Advisory Agreement, the Manager, not the Fund, pays the Sub-Advisor an
annual fee in monthly installments, based on the average daily net assets of the
Fund. The fee is calculated as a percentage of the fee the Fund pays the
Manager. The rate is 40% of the advisory fee collected by the Manager based on
the net assets of the Fund as of November 22, 1995, and 30% of the fee collected
by the Manager on assets in excess of that amount. For the year ended October
31, 2006, the Manager paid $14,352,743 to the Sub-Advisor for its services to
the Fund.

--------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund. The Fund pays
OFS a per account fee. For the year ended October 31, 2006, the Fund paid
$14,003,793 to OFS for services to the Fund.

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

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

--------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a
Distribution and Service Plan for Class A shares. Under the plan, the Fund pays
a service fee to the Distributor of up to 0.25% of the average annual net assets
of Class A shares. The Distributor currently uses all of those fees to pay
dealers, brokers, banks and other financial institutions periodically for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Under the plan, the Fund may also pay an asset-based sales
charge to the Distributor. Beginning January 1, 2003, the Board of Trustees set
the annual asset-based sales charge rate at zero. Fees incurred by the Fund
under the plan are detailed in the Statement of Operations.


                      41 | OPPENHEIMER QUEST BALANCED FUND

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

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

DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% on Class B and
Class C shares and 0.25% on Class N shares. The Distributor also receives a
service fee of up to 0.25% per year under each plan. If either the Class B,
Class C or Class N plan is terminated by the Fund or by the shareholders of a
class, the Board of Trustees and its independent trustees must determine whether
the Distributor shall be entitled to payment from the Fund of all or a portion
of the service fee and/or asset-based sales charge in respect to shares sold
prior to the effective date of such termination. The Distributor determines its
uncompensated expenses under the plan at calendar quarter ends. The
Distributor's aggregate uncompensated expenses under the plan at September 30,
2006 for Class B, Class C and Class N shares were $41,536,235, $24,579,996 and
$4,966,026, respectively. Fees incurred by the Fund under the plans are detailed
in the Statement of Operations.

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

                                                CLASS A            CLASS B            CLASS C          CLASS N
                             CLASS A         CONTINGENT         CONTINGENT         CONTINGENT       CONTINGENT
                           FRONT-END           DEFERRED           DEFERRED           DEFERRED         DEFERRED
                       SALES CHARGES      SALES CHARGES      SALES CHARGES      SALES CHARGES    SALES CHARGES
                         RETAINED BY        RETAINED BY        RETAINED BY        RETAINED BY      RETAINED BY
 YEAR ENDED              DISTRIBUTOR        DISTRIBUTOR        DISTRIBUTOR        DISTRIBUTOR      DISTRIBUTOR
---------------------------------------------------------------------------------------------------------------
October 31, 2006          $1,563,338            $23,321         $4,345,241            $97,932          $84,485

--------------------------------------------------------------------------------
WAIVERS AND REIMBURSEMENTS OF EXPENSES. OFS has voluntarily agreed to limit
transfer and shareholder servicing agent fees for all classes to 0.35% of
average annual net assets per class. This undertaking may be amended or
withdrawn at any time.

--------------------------------------------------------------------------------
5. SECURITIES LENDING

The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of
securities, letters of credit or cash, against the loaned securities and
maintains collateral in an amount not less than 100% of the market value of the
loaned securities during the period of the loan. The market value of the loaned
securities is determined at the close of business each day. If the Fund is
undercollateralized at the close of business due to an increase in market value
of securities on loan, additional collateral is requested from the borrowing
counterparty and is


                      42 | OPPENHEIMER QUEST BALANCED FUND

delivered to the Fund on the next business day. Cash collateral may be invested
in approved investments and the Fund bears the risk of any loss in value of
these investments. The Fund retains a portion of the interest earned from the
collateral. If the borrower defaults on its obligation to return the securities
loaned because of insolvency or other reasons, the Fund could experience delays
and cost in recovering the securities loaned or in gaining access to the
collateral. The Fund continues to receive the economic benefit of interest or
dividends paid on the securities loaned in the form of a substitute payment
received from the borrower. As of October 31, 2006, the Fund had on loan
securities valued at $11,412,900, which are included in the Statement of Assets
and Liabilities as "Investments, at value" and, when applicable, as "Receivable
for Investments sold." Collateral of $11,624,250 was received for the loans, all
of which was received in cash and subsequently invested in approved investments
or held as cash.

--------------------------------------------------------------------------------
6. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2006, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 48 ("FIN 48"), ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
ACCOUNTING FOR INCOME TAXES. FIN 48 requires the evaluation of tax positions
taken in the course of preparing the Fund's tax returns to determine whether it
is "more-likely-than-not" that tax positions taken in the Fund's tax return will
be ultimately sustained. A tax liability and expense must be recorded in respect
of any tax position that, in Management's judgment, will not be fully realized.
FIN 48 is effective for fiscal years beginning after December 15, 2006. As of
October 31, 2006, the Manager is evaluating the implications of FIN 48. Its
impact in the Fund's financial statements has not yet been determined.

      In September 2006, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 157, FAIR VALUE
MEASUREMENTS. This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 applies to fair value
measurements already required or permitted by existing standards. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. As of October
31, 2006, the Manager does not believe the adoption of SFAS No. 157 will
materially impact the financial statement amounts; however, additional
disclosures may be required about the inputs used to develop the measurements
and the effect of certain of the measurements on changes in net assets for the
period.

--------------------------------------------------------------------------------
7. LITIGATION

A consolidated amended complaint was filed as a putative class action against
the Manager and the Transfer Agent and other defendants (including 51 of the
Oppenheimer funds including the Fund) in the U.S. District Court for the
Southern District of New York


                      43 | OPPENHEIMER QUEST BALANCED FUND

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

--------------------------------------------------------------------------------
7. LITIGATION Continued

on January 10, 2005 and was amended on March 4, 2005. The complaint alleged,
among other things, that the Manager charged excessive fees for distribution and
other costs, and that by permitting and/or participating in those actions, the
Directors/Trustees and the Officers of the funds breached their fiduciary duties
to fund shareholders under the Investment Company Act of 1940 and at common law.
The plaintiffs sought unspecified damages, an accounting of all fees paid, and
an award of attorneys' fees and litigation expenses.

      In response to the defendants' motions to dismiss the suit, seven of the
eight counts in the complaint, including the claims against certain of the
Oppenheimer funds, as nominal defendants, and against certain present and former
Directors, Trustees and Officers of the funds, and the Distributor, as
defendants, were dismissed with prejudice, by court order dated March 10, 2006,
and the remaining count against the Manager and the Transfer Agent was dismissed
with prejudice by court order dated April 5, 2006. The plaintiffs filed an
appeal of those dismissals on May 11, 2006.

      The Manager believes that the allegations contained in the complaint are
without merit and that there are substantial grounds to sustain the district
court's rulings. The Manager also believes that it is premature to render any
opinion as to the likelihood of an outcome unfavorable to it, the funds, the
Directors/Trustees or the Officers on the appeal of the decisions of the
district court, and that no estimate can yet be made with any degree of
certainty as to the amount or range of any potential loss.


                      44 | OPPENHEIMER QUEST BALANCED FUND




                                  Appendix A

                             RATINGS DEFINITIONS

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

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

LONG-TERM RATINGS: BONDS AND PREFERRED STOCK ISSUER RATINGS

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

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

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

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

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

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

Caa: Bonds and preferred stock rated "Caa" are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds and preferred stock rated "Ca" represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

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

Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from "Aa" through "Caa." The modifier "1" indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a
ranking in the lower end of that generic rating category. Advanced refunded
issues that are secured by certain assets are identified with a # symbol.

PRIME RATING SYSTEM (SHORT-TERM RATINGS - TAXABLE DEBT)
These ratings are opinions of the ability of issuers to honor senior
financial obligations and contracts. Such obligations generally have an
original maturity not exceeding one year, unless explicitly noted.

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

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

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

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

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

LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based in varying degrees, on the following
considerations:
o     Likelihood of payment-capacity and willingness of the obligor to meet
      its financial commitment on an obligation in accordance with the terms
      of the obligation;
o     Nature of and provisions of the obligation; and
o     Protection afforded by, and relative position of, the obligation in the
      event of bankruptcy, reorganization, or other arrangement under the
      laws of bankruptcy and other laws affecting creditors' rights.
   The issue ratings definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority
in bankruptcy, as noted above.

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

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

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

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

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

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

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

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

CC: An obligation rated "CC" are currently highly vulnerable to nonpayment.

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

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

The ratings from "AA" to "CCC" may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within the major rating
categories.

c: The `c' subscript is used to provide additional information to investors
that the bank may terminate its obligation to purchase tendered bonds if the
long-term credit rating of the issuer is below an investment-grade level
and/or the issuer's bonds are deemed taxable.


p: The letter `p' indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by the debt
being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the risk
of default upon failure of such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.

Continuance of the ratings is contingent upon Standard & Poor's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.

r: The `r' highlights derivative, hybrid, and certain other obligations that
Standard & Poor's believes may experience high volatility or high variability
in expected returns as a result of noncredit risks. Examples of such
obligations are securities with principal or interest return indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an `r'
symbol should not be taken as an indication that an obligation will exhibit
no volatility or variability in total return.

N.R. Not rated.

Debt obligations of issuers outside the United States and its territories are
rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.

Bond Investment Quality Standards

Under present commercial bank regulations issued by the Comptroller of the
Currency, bonds rated in the top four categories (`AAA', `AA', `A', `BBB',
commonly known as investment-grade ratings) generally are regarded as
eligible for bank investment. Also, the laws of various states governing
legal investments impose certain rating or other standards for obligations
eligible for investment by savings banks, trust companies, insurance
companies, and fiduciaries in general

SHORT-TERM ISSUE CREDIT RATINGS
Short-term ratings are generally assigned to those obligations considered
short-term in the relevant market. In the U.S., for example, that means
obligations with an original maturity of no more than 365 days-including
commercial paper.

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

A-2: A short-term obligation rated "A-2" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated "A-3" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor to meet its
financial commitment on the obligation.


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

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

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

NOTES:
A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in
making that assessment:
o     Amortization schedule-the larger the final maturity relative to other
      maturities, the more likely it will
      be treated as a note; and
o     Source of payment-the more dependent the issue is on the market for its
      refinancing, the more likely
      it will be treated as a note.

SP-1: Strong capacity to pay principal and interest. An issue with a very
strong capacity to pay debt service is given a (+) designation.

SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

SP-3: Speculative capacity to pay principal and interest.

Fitch, Inc.
International credit ratings assess the capacity to meet foreign currency or
local currency commitments. Both "foreign currency" and "local currency"
ratings are internationally comparable assessments. The local currency rating
measures the probability of payment within the relevant sovereign state's
currency and jurisdiction and therefore, unlike the foreign currency rating,
does not take account of the possibility of foreign exchange controls
limiting transfer into foreign currency.

INTERNATIONAL LONG-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings.

Investment Grade:

AAA: Highest Credit Quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is highly
unlikely to be adversely affected by foreseeable events.
AA: Very High Credit Quality. "AA" ratings denote a very low expectation of
credit risk. They indicate a very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.


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

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

Speculative Grade:

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

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

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

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

Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy
a higher portion of their outstanding obligations, while entities rated "D"
have a poor prospect for repaying all obligations.

Plus (+) and minus (-) signs may be appended to a rating symbol to denote
relative status within the major rating categories.  Plus and minus signs are
not added to the "AAA" category or to categories below "CCC," nor to
short-term ratings other than "F1" (see below).

INTERNATIONAL SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency
ratings. A short-term rating has a time horizon of less than 12 months for
most obligations, or up to three years for U.S. public finance securities,
and thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.

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

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

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

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

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

D: Default. Denotes actual or imminent payment default.









                                     B-1
                                  Appendix B

                           Industry Classifications

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










                                     C-12
                                  Appendix C

        OppenheimerFunds Special Sales Charge Arrangements and Waivers

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

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

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

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






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

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

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






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

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

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

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

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

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

The Class A contingent deferred sales charge is also waived if shares that
would otherwise be subject to the contingent deferred sales charge are
redeemed in the following cases:
|_|   To make Automatic Withdrawal Plan payments that are limited annually to
         no more than 12% of the account value adjusted annually.
|_|   Involuntary redemptions of shares by operation of law or involuntary
         redemptions of small accounts (please refer to "Shareholder Account
         Rules and Policies," in the applicable fund Prospectus).
|_|   For distributions from Retirement Plans, deferred compensation plans or
         other employee benefit plans for any of the following purposes:
         1) Following the death or disability (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established.
         2) To return excess contributions.
         3) To return contributions made due to a mistake of fact.
4)    Hardship withdrawals, as defined in the plan.(7)
         5) Under a Qualified Domestic Relations Order, as defined in the
            Internal Revenue Code, or, in the case of an IRA, a divorce or
            separation agreement described in Section 71(b) of the Internal
            Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
            Revenue Code.
         7) To make "substantially equal periodic payments" as described in
            Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.
         9) Separation from service.(8)
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) if the plan has made special
            arrangements with the Distributor.
         11)      Plan termination or "in-service distributions," if the
            redemption proceeds are rolled over directly to an
            OppenheimerFunds-sponsored IRA.
|_|   For distributions from 401(k) plans sponsored by broker-dealers that
         have entered into a special agreement with the Distributor allowing
         this waiver.
|_|   For distributions from retirement plans that have $10 million or more
         in plan assets and that have entered into a special agreement with
         the Distributor.
|_|   For distributions from retirement plans which are part of a retirement
         plan product or platform offered by certain banks, broker-dealers,
         financial advisors, insurance companies or record keepers which have
         entered into a special agreement with the Distributor.
|_|   At the sole discretion of the Distributor, the contingent deferred
         sales charge may be waived for redemptions of shares requested by
         the shareholder of record within 60 days following the termination
         by the Distributor of the selling agreement between the Distributor
         and the shareholder of record's broker-dealer of record for the
         account.
III.  Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer
      Funds
---------------------------------------------------------------------------------

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

|_|   A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_|   Shares redeemed involuntarily, as described in "Shareholder Account
         Rules and Policies," in the applicable Prospectus.
|_|   Redemptions from accounts other than Retirement Plans following the
         death or disability of the last surviving shareholder. The death or
         disability must have occurred after the account was established, and
         for disability you must provide evidence of a determination of
         disability by the Social Security Administration.
|_|   The contingent deferred sales charges are generally not waived
         following the death or disability of a grantor or trustee for a
         trust account. The contingent deferred sales charges will only be
         waived in the limited case of the death of the trustee of a grantor
         trust or revocable living trust for which the trustee is also the
         sole beneficiary. The death or disability must have occurred after
         the account was established, and for disability you must provide
         evidence of a determination of disability (as defined in the
         Internal Revenue Code).
|_|   Distributions from accounts for which the broker-dealer of record has
         entered into a special agreement with the Distributor allowing this
         waiver.
|_|   Redemptions of Class B shares held by Retirement Plans whose records
         are maintained on a daily valuation basis by Merrill Lynch or an
         independent record keeper under a contract with Merrill Lynch.
|_|   Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
         accounts of clients of financial institutions that have entered into
         a special arrangement with the Distributor for this purpose.
|_|   Redemptions of Class C shares of an Oppenheimer fund in amounts of $1
         million or more requested in writing by a Retirement Plan sponsor
         and submitted more than 12 months after the Retirement Plan's first
         purchase of Class C shares, if the redemption proceeds are invested
         to purchase Class N shares of one or more Oppenheimer funds.
|_|   Distributions(9) from Retirement Plans or other employee benefit plans
         for any of the following purposes:
         1) Following the death or disability (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established in an Oppenheimer fund.
         2) To return excess contributions made to a participant's account.
         3) To return contributions made due to a mistake of fact.
         4) To make hardship withdrawals, as defined in the plan.(10)
         5) To make distributions required under a Qualified Domestic
            Relations Order or, in the case of an IRA, a divorce or
            separation agreement described in Section 71(b) of the Internal
            Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
            Revenue Code.
         7) To make "substantially equal periodic payments" as described in
            Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.(11)
         9) On account of the participant's separation from service.(12)
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) offered as an investment option in a
            Retirement Plan if the plan has made special arrangements with
            the Distributor.
         11)      Distributions made on account of a plan termination or
            "in-service" distributions, if the redemption proceeds are rolled
            over directly to an OppenheimerFunds-sponsored IRA.
         12)      For distributions from a participant's account under an
            Automatic Withdrawal Plan after the participant reaches age 59 1/2,
            as long as the aggregate value of the distributions does not
            exceed 10% of the account's value, adjusted annually.
         13)      Redemptions of Class B shares under an Automatic Withdrawal
            Plan for an account other than a Retirement Plan, if the
            aggregate value of the redeemed shares does not exceed 10% of the
            account's value, adjusted annually.
         14)      For distributions from 401(k) plans sponsored by
            broker-dealers that have entered into a special arrangement with
            the Distributor allowing this waiver.
|_|   Redemptions of Class B shares or Class C shares under an Automatic
         Withdrawal Plan from an account other than a Retirement Plan if the
         aggregate value of the redeemed shares does not exceed 10% of the
         account's value annually.
|_|   At the sole discretion of the Distributor, the contingent deferred
         sales charge may be waived for redemptions of shares requested by
         the shareholder of record within 60 days following the termination
         by the Distributor of the selling agreement between the Distributor
         and the shareholder of record's broker-dealer of record for the
         account.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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








Oppenheimer Quest Balanced FundSM

Internet Website
      www.oppenheimerfunds.com

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

Sub-Advisor
      Oppenheimer Capital LLP
      1345 Avenue of the Americas, 49th Floor
      New York, New York 10105-4800

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

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

Custodian Bank
      Citibank, N.A.
      111 Wall Street
      New York, New York 10005

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

Legal Counsel
      Mayer, Brown, Rowe & Maw LLP
      1675 Broadway
      New York, New York 10019
1234
PX0257.001.1206



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