SAI

497 1 saicorrected.htm STATEMENT OF ADDITIONAL INFORMATION SAI

Oppenheimer
Quest International Value Fund, Inc.

6803 South Tucson Way, Centennial, Colorado 80112
1.800.225.5677

Statement of Additional Information dated March 30, 2005

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

------------------------------------------------------------------------------
This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated March 30, 2005. It should be read together with the
Prospectus, which may be obtained by writing to the Fund's Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217, or by
calling the Transfer Agent at the toll-free number shown above, or by
downloading it from the OppenheimerFunds Internet 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........................... 6
Other Investment Restrictions........................................ 26
Disclosure of Portfolio Holdings..................................... 28
How the Fund is Managed ................................................. 32
Organization and History............................................. 32
Board of Directors and Oversight Committees.......................... 33
Directors and Officers of the Fund................................... 33
The Manager.......................................................... 40
Brokerage Policies of the Fund........................................... 44
Distribution and Service Plans........................................... 47
Performance of the Fund.................................................. 52

About Your Account
How To Buy Shares........................................................ 56
How To Sell Shares....................................................... 66
How To Exchange Shares................................................... 71
Dividends, Capital Gains and Taxes....................................... 74
Additional Information About the Fund.................................... 79

Financial Information About the Fund
Independent Registered Public Accounting Firm's Report................... 80
Financial Statements..................................................... 81

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

43
A B O U T T H E F U N D

Additional Information About the Fund's Investment Policies and Risks

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

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

In selecting securities for the Fund's portfolio, the Manager evaluates
the merits of 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, the Manager may also consider the conditions of a particular
country's economy in relation to the U.S. economy or other foreign economies,
special political conditions in a country or region, the effect of taxes, the
efficiencies and costs of particular markets and other factors when evaluating
the securities of issuers in a particular country.

|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. At times, the Fund may increase the relative emphasis
of its equity investments in securities of one or more capitalization ranges,
based upon the Manager's judgment of where the best market opportunities are to
seek the Fund's objective. At times, the market may favor or disfavor securities
of issuers of a particular capitalization range. Securities of
small-capitalization issuers may be subject to greater price volatility in
general than securities of larger companies. Therefore, if the Fund 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.

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

Using value investing requires research as to the issuer's underlying
financial condition and prospects. Some of the measures used to identify these
securities include, among others:
o 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 Price/book value ratio, which is the stock price divided by the book
value of the company per share, which measures the company's stock
price in relation to its asset value.
o Discounted Future Value Analysis, which involves two steps: determining
the probable value of the stock at a specific point in the future by
researching the current and future prospects of the company; and then
comparing the probable value to the current stock price to determine if
the stock is sufficiently undervalued and if it offers an attractive
return over the investment horizon.
o Valuation of Assets which compares the stock price to the value of the
company's underlying assets, including their projected value in the
marketplace and liquidation value.

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

If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as provisions allowing calls
or redemptions prior to maturity, which can also have a negative impact on
prices when interest rates decline.

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
liquidation of the corporation.

|_| Rights and Warrants. Warrants basically are options to purchase equity
securities at specific prices valid for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying securities. The
Fund cannot invest more than 5% of its total assets in warrants. 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.

|_| 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. They are subject to credit risk and interest rate risk which are
described below.

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.

While some convertible securities are a form of debt security in many
cases, their conversion feature (allowing conversion into equity securities) may
cause them to be regarded by the Manager more as "equity equivalents." As a
result, the credit rating assigned to the security has less impact on the
Manager's investment decision with respect to convertible debt securities 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| Foreign Securities. The Fund can purchase equity and debt securities
issued or guaranteed by foreign companies or foreign governments and their
agencies and instrumentalities. They may be traded on foreign securities
exchanges or in the foreign over-the-counter markets.

"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 or instrumentalities.
Securities of foreign issuers that are represented by American Depository
Receipts, European Depository Receipts, Global Depository Receipts or similar
depository arrangements or that are listed on a U.S. securities exchange or
traded in the U.S. over-the-counter markets are considered "foreign securities"
for the purpose of the Fund's investment allocations. They are subject to some
of the special considerations and risks, discussed below, that apply to foreign
securities traded and held abroad.

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.

|_| 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.

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

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

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

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

Subject to the limits under 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."

|_| 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 Manager
will consider these factors when evaluating securities in these markets.

|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 annual
portfolio turnover rate would have been 100%. The Fund's portfolio turnover rate
will fluctuate from year to year. 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| Investments in Debt Securities. The Fund can invest in convertible
securities, bonds, debentures and other debt securities. It can invest in them
for capital appreciation possibilities as well as for liquidity or defensive
purposes. Because the Fund currently emphasizes investments in equity
securities, such as stocks, it does not anticipate that under normal market
conditions it will invest no more than 10% in debt securities.

|_| Credit Risk. Credit risk relates to the ability of the issuer of a
debt security to meet interest and principal payment of obligations as they
become due. The Fund's debt investments can include investment-grade 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 Service
("S&P") or by Fitch, Inc. ("Fitch"), or bonds that have comparable ratings by
another nationally recognized statistical rating organization. The debt
securities ratings definitions of the principal ratings organizations are
included in Appendix A to the Statement of Additional Information.

In making investments in debt securities, the Manager may rely to some
extent on the ratings of ratings organizations or it may use its own research to
evaluate a security's credit-worthiness. If the securities are unrated, to be
considered part of the Fund's holdings of investment-grade securities, they must
be judged by the Manager to be of comparable quality to bonds rated as
investment grade by a rating organization.

|_| 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 prevailing interest rates will tend to
reduce the market value of already-issued fixed-income investments, and a
decline in prevailing 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.

|_| 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 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.

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

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

|_| 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.

|_| U.S. Government Securities. These are securities issued or guaranteed
by the U.S. Treasury or other government agencies or federally chartered
corporate entities referred to as "instrumentalities". Obligations of U.S.
Government agencies or instrumentalities (including mortgage-backed securities)
may or may not be guaranteed or supported by the "full faith and credit" of the
United States. "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. Some obligations are backed by the right of the issuer
to borrow from the U.S. Treasury; others, by discretionary authority of the U.S.
Government to purchase the agencies' obligations; while others are supported
only by the credit of the instrumentality.

All U.S. Treasury obligations are backed by the full faith and credit of
the United States. If the securities are not backed by the full faith and credit
of the United States, the owner of the securities must look principally to the
agency issuing the obligation for repayment and may not be able to assert a
claim against the United States in the event that the issuing agency or
instrumentality does not meet its commitment. The Fund will invest in securities
of U.S. Government agencies and instrumentalities only when the Manager is
satisfied that the credit risk with respect to such agency or instrumentality is
minimal.

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

|_| 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.

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

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

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

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

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

Monthly payments of principal will be made, and additional prepayments of
principal may be made, to the Fund with respect to the mortgages underlying the
GNMA Certificates held by the Fund. All of the mortgages in the pools relating
to the GNMA Certificates in the Fund are subject to prepayment without any
significant premium or penalty, at the option of the mortgagors. While the
mortgages on 1-to-4-family dwellings underlying certain GNMA Certificates have a
stated maturity of up to 30 years, it has been the experience of the mortgage
industry that the average life of comparable mortgages, as a result of
prepayments, refinancing and payments from foreclosures, is considerably less.

|_| Federal Home Loan Mortgage Corporation Certificates. FHLMC, a
corporate instrumentality of the United States, issues FHLMC Certificates
representing interests in mortgage loans. FHLMC guarantees to each registered
holder of a FHLMC Certificate timely payment of the amounts representing a
holder's proportionate share in:

(i) interest payments less servicing and guarantee fees, (ii) principal
prepayments, and (iii) the ultimate collection of amounts representing the
holder's
proportionate interest in principal payments on the mortgage loans
in the pool represented by the FHLMC Certificate, in each case
whether or not such amounts are actually received.

The obligations of FHLMC under its guarantees are obligations solely of
FHLMC and are not backed by the full faith and credit of the United States.

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

|_| Brady Bonds. The Fund can invest in U.S. dollar-denominated "Brady
Bonds." These foreign debt obligations may be fixed-rate par bonds or
floating-rate discount bonds. They are generally collateralized in full as to
repayment of principal at maturity by U.S. Treasury zero coupon obligations that
have the same maturity as the Brady Bonds. Brady Bonds can be viewed as having
three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity. Those uncollateralized amounts constitute what is
called the "residual risk" of the bonds.

If there is a default on collateralized Brady Bonds resulting in
acceleration of the payment obligations of the issuer, the zero coupon U.S.
Treasury securities held as collateral for the payment of principal will not be
distributed to investors, nor will those obligations be sold to distribute the
proceeds. The collateral will be held by the collateral agent to the scheduled
maturity of the defaulted Brady Bonds. The defaulted bonds will continue to
remain outstanding, and the face amount of the collateral will equal the
principal payments that would have then been due on the Brady Bonds in the
normal course. Because of the residual risk of Brady Bonds and the history of
defaults with respect to commercial bank loans by public and private entities of
countries issuing Brady Bonds, they are considered speculative investments.

|_| Special Risks of Lower-Grade Securities. While the Fund currently can
invest a portion of its assets in lower-grade debt securities, the Fund
currently does not intend to invest more than 5% of its total assets in these
securities. Because lower-rated securities tend to offer higher yields than
investment grade securities, the Fund may invest in lower-grade securities if
the Manager is trying to achieve greater income (and, in some cases, the
appreciation possibilities of lower-grade securities might 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 S & P or Fitch, or similar ratings by other national-recognized rating
organizations. If they are unrated, and are determined by the Manager to be of
comparable quality to debt securities rated below investment grade, they are
subject to the limitation on the percentage of the Fund's assets that can be
invested in lower-grade securities. The Fund can invest in securities rated as
low as "C" or "D" although the Fund does not intend to invest in securities that
are in default at the time the Fund buys them.

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

However, the Fund's 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 present less 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 S & P 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.

|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, foreign governments, domestic or foreign corporations, banks or
other entities. The Fund can buy money market instruments denominated in U.S.
dollars or foreign currency. They have a maturity of one year or less and may
have fixed, variable or floating interest rates.

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

|_| Bank Obligations. The Fund may buy time deposits, certificates of
deposit and bankers' acceptances. Time deposits, other than overnight deposits,
may be subject to withdrawal notices and 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 ("FDIC"). 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 Directors 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.

|_| Commercial Paper. The Fund can invest in commercial paper, if it is
rated within the top two rating categories of S & P 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 S & P 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.

|_| 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 Manager 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| 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| Investment in Other Investment Companies. The Fund can also invest in
the securities of other investment companies, which can include open-end funds,
closed-end funds and unit investment trusts, subject to the limits set forth in
the Investment Company Act that apply to those types of investments, and the
following additional limitation: the Fund cannot invest in the securities of
other registered investment companies or registered unit investment trusts in
reliance on sub-paragraph (F) or (G) of section 12(d)(1) of the Investment
Company Act. For example, the Fund can invest in Exchange-Traded Funds, which
are typically open-end funds or unit investment trusts, listed on a stock
exchange. The Fund might do so as a way of gaining exposure to the segments of
the equity or fixed-income markets represented by the Exchange-Traded Funds'
portfolio, at times when the Fund may not be able to buy those portfolio
securities directly.

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

|X| "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 Manager before settlement will affect the value of such securities and may
cause a loss to the Fund. During the period between purchase and settlement, the
Fund makes no payment to the issuer and no interest accrues to the Fund from the
investment until it receives the security at settlement. There is a risk of loss
to the Fund if the value of the security changes prior to the settlement date,
and there is the risk that the other party may not perform.

The Fund will engage in when-issued transactions to secure what the
Manager considers to be an advantageous price and yield at the time of entering
into the obligation. When the Fund enters into a when-issued or delayed-delivery
transaction, it relies on the other party to complete the transaction. Its
failure to do so may cause the Fund to lose the opportunity to obtain the
security at a price and yield the Manager considers to be advantageous.

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

At the time the Fund makes the commitment to purchase or sell a security
on a when-issued or delayed-delivery basis, it records the transaction on its
books and reflects the value of the security purchased in determining the Fund's
net asset value. In a sale transaction, it records the proceeds to be received.
The Fund will identify on its books liquid assets at least equal in value to the
value of the Fund's purchase commitments until the Fund pays for the investment.

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

|X| Repurchase Agreements. The Fund can acquire securities subject to
repurchase agreements. It may 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 Manager will monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will continuously monitor the collateral's
value.

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

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

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

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

|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. While the Fund uses forward
contracts to hedge its exposure to foreign currency fluctuations, it does not
currently contemplate using other hedging techniques to any significant degree.
The Fund can use hedging to attempt to protect against declines in the market
value of the Fund's portfolio, to permit the Fund to retain unrealized gains in
the value of portfolio securities which have appreciated, or to facilitate
selling securities for investment reasons. To do so, the Fund could:
o sell futures contracts, o buy puts on futures or on securities, or o
write covered calls on securities or futures.

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 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.

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

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

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

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

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

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

|_| 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 a call
on a security, that means the Fund must own the security subject to the call
while the call is outstanding. For calls on futures or stock indices, that means
the call must be covered by segregating liquid assets to enable the Fund to
satisfy its obligations if the call is exercised.

When the Fund writes a call, it receives cash (a premium). The Fund agrees
to sell the underlying security to a purchaser of a corresponding call on the
same security during the call period at a fixed exercise price regardless of
market price changes during the call period. The call period is usually not more
than nine months. The exercise price may differ from the market price of the
underlying security. The Fund has the risk of loss that the price of the
underlying security may decline during the call period. That risk may be offset
to some extent by the premium the Fund receives. If the value of the investment
does not rise above the call price, it is likely that the call will lapse
without being exercised. In that case the Fund would keep the cash premium and
the investment.

When the Fund writes a call on an index, it receives cash (a premium). If
the buyer of the call exercises it, the Fund will pay an amount of cash equal to
the difference between the closing price of the call and the exercise price,
multiplied by a specified multiple that determines the total value of the call
for each point 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 for
puts and calls on broadly-based stock indices is in cash. Gain or loss depends
on changes in the index in question (and thus on price movements in the stock
market generally).

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

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

|_| Writing Put Options. The Fund can sell put options. A put option on
securities gives the purchaser the right to sell, and the writer the right to
buy, the underlying security at the exercise price during the option period. The
Fund will not write puts that require more than 50% of its net assets to be
segregated to cover the put options the Fund has written.

If the Fund writes a put, the put must be covered by segregated liquid
assets. The premium the Fund receives from writing a put represents a profit, as
long as the price of the underlying investment remains equal to or above the
exercise price of the put. However, the Fund also assumes the obligation during
the option period to 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 less 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. Effecting a closing transaction will also permit the
Fund to write another put option on the security or to sell the security and use
the proceeds from the sale for other investments. The Fund will realize a profit
or loss from a closing purchase transaction depending on whether the cost of the
transaction is less or more than the premium received from writing the put
option. Any profits from writing puts are considered short-term capital gains
for federal tax purposes, and when distributed by the Fund, are taxable as
ordinary income.

|_| Purchasing Calls and Puts. The Fund can purchase calls to protect
against the possibility that the Fund's portfolio will not participate in an
anticipated rise in the securities market. When the Fund buys a call (other than
in a closing purchase transaction), it pays a premium. The Fund then has the
right to buy the underlying investment from a seller of a corresponding call on
the same investment during the call period at a fixed exercise price. The Fund
benefits only if it sells the call at a profit or if, during the call period,
the market price of the underlying investment is above the sum of the call price
plus the transaction costs and the premium paid for the call and the Fund
exercises the call. If the Fund does not exercise the call or sell it (whether
or not at a profit), the call will become worthless at its expiration date. In
that case the Fund will have paid the premium but lost the right to buy the
underlying investment.

The Fund can buy puts whether or not it holds the underlying investment in
its portfolio. When the Fund purchases a put, it pays a premium and, except as
to puts on indices, has the right to sell the underlying investment to a seller
of a put on a corresponding investment during the put period at a fixed exercise
price.

Buying a put on 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.

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.

If the Fund exercises a call on an index during the call period, a seller
of a corresponding call on the same investment 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 on a stock index or future, 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 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.

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.

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

If the Manager anticipates a rise in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of those securities might be partially offset by purchasing calls or writing
puts on that foreign currency. If the Manager anticipates a decline in the
dollar value of a foreign currency, the decline in the dollar value of portfolio
securities denominated in that currency may 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 from liquid
assets held in a segregated account by its custodian bank and separately
identified on the Fund's books) upon conversion or exchange of other foreign
currency held in its portfolio.

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

|_| Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques that
are different than what is required for normal portfolio management. If the
Manager uses a hedging instrument at the wrong time or judges market conditions
incorrectly, hedging strategies may reduce the Fund's return. The Fund could
also experience losses if the prices of its futures and options positions were
not correlated with its other investments. The Fund's option activities 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 might have to pay a brokerage commission each time it buys a call
or put, sells a call or put, or buys or sells an underlying investment in
connection with the exercise of a call or put. Those commissions could be higher
on a relative basis than the commissions for direct purchases or sales of the
underlying investments. Premiums paid for options are small in relation to the
market value of the underlying investments. Consequently, put and call options
offer large amounts of leverage. The leverage offered by trading in options
could result in the Fund's net asset value being more sensitive to changes in
the value of the underlying investment.

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

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

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

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

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

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

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

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

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

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

The Fund could also use forward contracts to lock in the U.S. dollar value
of portfolio positions. This is called a "position hedge." When the Fund
believes that foreign currency might suffer a substantial decline against the
U.S. dollar, it could enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in that foreign currency. When the Fund believes that the
U.S. dollar might suffer a substantial decline against a foreign currency, it
could enter into a forward contract to buy that foreign currency for a fixed
dollar amount. Alternatively, the Fund 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 segregating on
its books 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 contract price.

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

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

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

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

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

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

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

Based on interpretations of staff members of the SEC regarding applicable
provisions of the Investment Company Act, when the Fund purchases a future, it
must segregate liquid assets in an amount equal to the purchase price of the
future, less the margin deposit applicable to it.

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

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

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

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

Temporary Defensive and Interim Investments. In times of adverse or unstable
market, economic or political conditions, the Fund may assume a temporary
defensive position. When assuming this temporary defensive position, the Fund
can invest up to 100% of its assets in temporary investments that are
inconsistent with the Fund's principal investment strategies. Generally they
would be short-term U.S. Government securities and the types of money market
instruments described in the prospectus. The Fund might also hold these types of
securities pending the investment of proceeds from the sale of Fund shares or to
meet anticipated redemptions of Fund shares. To the extent the Fund invests
defensively in these securities, it might not achieve its investment objective
of capital appreciation.

Other Investment Restrictions

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

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

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

o The Fund cannot invest more than 5% of the value of its total assets in
securities of any one issuer. This limitation applies to 75% of the Fund's total
assets.

o The Fund cannot purchase more than 10% of the voting securities of any
one issuer. This limitation applies to 75% of the Fund's total assets. The limit
does not apply to securities issued by the U.S. Government or any of its
agencies or instrumentalities.

o The Fund cannot lend money. However the Fund can invest in all or a
portion of an issue of bonds, debentures, commercial paper or other similar
corporate obligations. The Fund may also engage in repurchase agreements and may
make loans of portfolio securities, subject to the restrictions stated under
"Loans of Portfolio Securities."

o The Fund cannot concentrate its investments. That means it cannot invest
25% or more of its total assets in any industry. For the purposes of this
restriction a foreign government is considered to be an "industry." However,
there is no limitation on investments in U.S. Government securities. Moreover,
if deemed appropriate for seeking its investment objective, the Fund may invest
up to 25% of its total assets in any one industry classification used by the
Fund for investment purposes.

o The Fund cannot invest in real estate. However, the Fund can purchase
securities of issuers that engage in real estate operations and securities that
are secured by real estate or interests in real estate.

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.

o The Fund cannot invest in companies for the purpose of acquiring control
or management of those companies.

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

o The Fund cannot invest or hold securities of any issuer if officers and
directors of the Fund or its Manager individually beneficially own more than 1/2
of 1% of the securities of that issuer and together own more than 5% of the
securities of that issuer.

o The Fund cannot invest in physical commodities or physical commodity
contracts. However, the Fund may buy and sell hedging instruments to the extent
specified in its Prospectus and Statement of Additional Information from time to
time. The Fund can also buy and sell options, futures, securities or other
instruments backed by physical commodities or whose investment return is linked
to changes in the price of physical commodities.

o The Fund cannot borrow money in excess of one third of the value of the
Fund's total assets. The Fund can borrow only from banks and only as a temporary
measure for extraordinary or emergency purposes. It will make no additional
investments while borrowings exceed 5% of its total assets. The Fund can borrow
only if it maintains a 300% ratio of assets to borrowings at all times in the
manner set forth in the Investment Company Act of 1940.

o The Fund cannot pledge its assets or assign or otherwise encumber its
assets in excess of one-third of its net assets. It can do so only to secure
borrowings made within the limitations set forth in the Prospectus or this
Statement of Additional Information.

o The Fund cannot issue senior securities (as defined in the Investment
Company Act of 1940). However, the Fund can enter into repurchase agreements,
borrow money in accordance with the restrictions set forth in the Prospectus or
this Statement of Additional Information and lend portfolio securities, even if
those activities are deemed to involve the issuance of a senior security.

|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 Directors without
shareholder approval.

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

o The Fund cannot purchase securities on margin (except for short-term
loans that are necessary for the clearance of purchases of portfolio securities)
or make short sales. Collateral arrangements in connection with transactions in
futures and options are not deemed to be margin transactions.

o The Fund cannot invest in real estate limited partnership programs.

o The Fund cannot invest more than 5% of its assets in unseasoned issuers.

o The Fund cannot purchase warrants if more than 5% of its total assets
would be invested in warrants.

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

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

Disclosure of Portfolio Holdings. The Fund has adopted policies and procedures
concerning the dissemination by employees, officers and/or directors of the
Investment Advisor, Distributor, and Transfer Agent of information about the
portfolio securities holdings of the Fund. These policies are designed to assure
that dissemination of non-public information about portfolio securities is
distributed 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.

Until publicly disclosed, a 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, such need for transparency
must be balanced against the risk that third parties who gain access to a 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 portfolio
securities that portfolio managers are trading in on a fund's behalf.

The Investment Advisor 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 Investment Advisor or
any affiliated person of the Investment Advisor) 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 Investment
Advisor and its subsidiaries pursuant to agreements approved by the Fund's Board
shall not be deemed to be "compensation" or "consideration" for these purposes.
It is a violation of the Code of Ethics for any covered person to release
holdings in contravention of portfolio holdings disclosure policies and
procedures adopted by the Fund.

A list of the top 10 or more portfolio securities holdings (based on
invested assets), listed by security or by issuer, as of the end of each month
may be disclosed to third parties (subject to the procedures below) no sooner
than 15 days after month-end. The top 10 or more holdings also shall be posted
on the OppenheimerFunds' website at www.oppenheimerfunds.com in the "Fund
Profiles" section no sooner than 15 days after month-end. Other general
information about a Fund's portfolio investments, such as portfolio composition
by asset class, industry, country, currency, credit rating or maturity, may also
be posted with the same minimum lag time.

Except under special limited circumstances discussed below, month-end
lists of a Fund's complete portfolio holdings may be disclosed no sooner than
30-days after the relevant month-end, subject to the procedures below. If they
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 Investment
Advisor'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 Investment Advisor's portfolio
holdings non-disclosure agreement before receiving the data, agreeing to
keep confidential information that is not publicly available regarding a
Fund's holdings and agreeing not to trade directly or indirectly based on
the information.

Complete Fund 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 Investment 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 Investment 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 certified public accountants and auditors,
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 Investment Advisor to
provide portfolio security prices, and
o Dealers, to obtain bids (price quotations, because securities are not
priced by the Fund's regular pricing services).

Portfolio holdings information of a Fund may be provided, under limited
circumstances, to brokers and 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 or dealer or other entity. Month-end
portfolio holdings information may, under this procedure, be provided to vendors
providing research information and/or analytics to the fund, with at least a
15-day delay after the month end, but in certain cases may be provided to a
broker or analytical vendor with a 1-2 day lag to facilitate the provision of
requested investment information to the manager to facilitate a particular trade
or the portfolio manager's investment process for the Fund. Any third party
receiving such information must first sign the Investment Advisor'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 Investment
Advisor in connection with portfolio trading, and (2) by the members of the
Investment Advisor'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 a 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 a Fund's
entire portfolio or individual securities therein) may be provided by senior
officers of the Investment Advisor or attorneys on the legal staff of the
Investment Advisor, 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-advisors of portfolios (but only pursuant to
confidentiality agreements),
o To consultants for retirement plans for plan sponsors/discussions at due
diligence meetings (if entire portfolio holdings are provided, however, it
shall be done only pursuant to a confidentiality agreement),
o Investment bankers in connection with merger discussions (but only
pursuant to confidentiality agreements)

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

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

The Chief Compliance Officer of the Fund and the Investment Advisor,
Distributor, and Transfer Agent (the "CCO") shall oversee the compliance by the
Investment Advisor, Distributor, Transfer Agent, and their personnel with these
policies and procedures. At least annually, the CCO shall report to the Fund
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 Board any material violation of these policies and procedures during
the previous calendar quarter and shall make recommendations to the Companies
and to the Boards as to any amendments that the CCO believes are necessary and
desirable to carry out or improve these policies and procedures.

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

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management
investment company organized as a Maryland corporation in April 1990. Prior to
August 29, 2003, the Fund's name was "Oppenheimer Quest Global Value Fund, Inc."

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

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

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

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

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

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

The Board of Directors has an Audit Committee which is comprised solely of
Independent Directors. The members of the Audit Committee are Paul Y. Clinton
(Chairman), Thomas W. Courtney, Robert G. Galli, Lacy G. Herrmann and Brian
Wruble. The Audit Committee met 4 times during the Fund's fiscal year ended
November 30, 2004. The Audit Committee furnishes the Board with recommendations
regarding the selection of the Fund's independent auditor. The Audit Committee
also reviews the scope and results of audits and the audit fees charged, reviews
reports from the Fund's independent auditors concerning the Fund's internal
accounting procedures and controls, and reviews reports of the Manager's
internal auditor among other duties as set forth in the Committee's charter.

The Audit Committee's functions include selecting and nominating, to the
full Board, nominees for election as Directors and selecting and nominating
Independent Directors 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 Directors except for those
instances when a shareholder vote is required.

To date, the Committee has been able to identify from its own resources an
ample number of qualified candidates. Nonetheless, shareholders may submit names
of individuals, accompanies by complete and properly supported resumes, for the
Audit Committee's consideration by mailing such information to the Committee in
care of the Fund. The Committee may consider such persons at such time as it
meets to consider possible nominees. The Committee, however, reserves sole
discretion to determine the candidates to present to the Board and/or
shareholders when it meets for the purpose of considering potential nominees.

Directors and Officers of the Fund. Each of the Directors is an "Independent
Director" under the Investment Company Act. The Fund's Directors and officers
and their positions held with the Fund and length of service in such position(s)
and their principal occupations and business affiliations during the past five
years are listed in the chart below. The information for the Directors also
includes the dollar range of shares of the Fund as well as the aggregate dollar
range of shares beneficially owned in any of the Oppenheimer funds overseen by
the Directors. All of the Directors are also directors or trustees of the
following Oppenheimer funds (referred to as "Board III Funds"):

Bond Fund Series, a series fund having the following one series:
Oppenheimer Convertible Securities Fund
Oppenheimer MidCap Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds, a series fund having the following
three series:
Oppenheimer Small Cap Value Fund,
Oppenheimer Quest Balanced Fund and
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Quest International Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Rochester Fund Municipals
Rochester Portfolio Series, a series fund having the following one series:
Limited-Term New York Municipal Fund

In addition to being a trustee or director of the Board III Funds, Mr.
Galli is also a director or trustee of 24 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 economies of sales efforts realized by the
Distributor.

Messrs. Freud, Murphy, Vottiero, Wixted, Petersen, Miao, Gillespie,
Vandehey and Zack and Mss. Bloomberg and Ives, who are officers of the Fund,
respectively hold the same offices of one or more of the other Board III Funds
as with the Fund. As of March 2, 2005, the Directors and Officers of the Fund,
as a group, owned of record or beneficially less than 1% of each class of shares
of the Fund. The foregoing statement does not reflect ownership of shares of the
Fund held of record by an employee benefit plan for employees of the Manager,
other than the shares beneficially owned under the plan by the officers of the
Fund listed above. In addition, each Independent Director (and their immediate
family members) do not own securities of either the Manager or Distributor of
the Board III Funds or any person directly or indirectly controlling, controlled
by or under common control with the Manager or Distributor.

The address of each Director in the chart below is 6803 S. Tucson Way,
Centennial, CO 80112. Each Director serves for an indefinite term, until his or
her resignation, retirement, death or removal.

-------------------------------------------------------------------------------------
Independent Directors
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Beneficially
Owned in
Any of the
Years; Range of Oppenheimer
Other Trusteeships/Directorships Held by Shares Funds
Position(s) Held Director; BeneficiallOverseen
with Fund, Length Number of Portfolios in Fund Complex Owned in by
of Service, Age Currently Overseen by Director the Fund Director
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
As of December 31,
2004
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Thomas W. Principal of Courtney Associates, Inc. $10,001-$50$10,001-$50,000
Courtney, (1982-Present) (venture capital firm);
Chairman of the former General Partner of Trivest Venture
Board of Fund (private venture capital fund);
Directors, President of Investment Counseling
Director since Federated Investors, Inc. (1973-1982);
1990 Trustee of the following open-end
Age: 71 investment companies: Cash Assets Trust,
PIMCO Advisors VIT, Tax Free Trust of Arizona and four funds
for the Hawaiian Tax Free Trust. Oversees 10 portfolios in
the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Paul Y. Clinton, Principal of Clinton Management None Over
Director, since Associates (1996-present) (a financial $100,000
1990 and venture capital consulting firm);
Age: 74 Trustee of PIMCO Advisors VIT (open-end
investment company); former director or
trustee of the following open-end
investment companies: OCC Cash Reserves,
Inc. (1989-December 2002), Capital Cash
Management Trust (1979-December 2004),
Prime Cash Fund and Narragansett Insured
Tax-Free Income Fund (1996-December
2004). Oversees 10 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Galli, A trustee or director of other None Over
Director since Oppenheimer funds. Oversees 34 portfolios $100,000
1998 in the OppenheimerFunds complex.
Age: 71
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Lacy B. Herrmann, Chairman of the Board of Aquila $10,001-$50$10,001-$50,000
Director since Management Corporation, the sponsoring
1990 organization and parent of the manager,
Age: 75 administrator, adviser and/or sub-adviser
and Chairman or Chairman Emeritus of the Board of Trustees
and President of 11 funds in the Aquila(sm) fund complex;
Chairman of Aquila Investment Management (since 2004) and
Chief Executive Officer (1986-2004) (sub-adviser and
administrator of funds in the Aquila(sm) fund complex;
Director of Aquila Distributors, Inc., (since 1981) and
formerly President and Secretary (distributor of the above
funds); Trustee PIMCO Advisors VIT; Trustee Emeritus of Brown
University and the Hopkins School. Oversees 10 portfolios in
the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian Wruble, General Partner of Odyssey Partners, L.P. $10,001-$50Over
Director since (since September 1995) (hedge funds in $100,000
2001 distribution since January 1997);
Age: 61 Director of Special Value Opportunities
Fund, LLC (since September 2004); Investment Advisory Board
of Zurich Financial Services (since October 2004); Board of
Governing Trustees of The Jackson Laboratory (since August
1990) (non profit); Trustee of Institute for Advanced Study
(since May 1992) (educational institute); Special Limited
Partner (January 1999-September 2004) and Managing Principal
(through December 1998) of Odyssey Investment Partners, LLC
(private equity investment); Trustee of Research Foundation
of AIMR (2000-2002) (investment research, non-profit);
Governor, Jerome Levy Economics Institute of Bard College
(August 1990-September 2001) (economics research); Director
of Ray & Berendtson, Inc. (May 2000-April 2002) (executive
search firm). Oversees 10 portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------

The address of the Officers in the chart below is as follows: for
Messrs. Freud, Murphy, Zack, Gillespie and Miao and Ms. Bloomberg, Two World
Financial Center, 225 Liberty Street, New York, NY 10281-1008, for Messrs.
Vandehey, Petersen, Vottiero and Wixted and Ms. Ives, 6803 S. Tucson Way,
Centennial, CO 80112-3924. Each Officer serves for an annual term or until
his or her earlier resignation, death or removal.

-------------------------------------------------------------------------------------
Officers of the Fund
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund,
Length of Service,
Age
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Dominic Freud, Vice President of the Manager since April 2003. An
Vice President and officer of 2 portfolios in the OppenheimerFunds complex.
Portfolio Manager since Formerly, a Partner and European Equity Portfolio
2005 manager at SLS Management (January 2002 - February 2003)
Age: 47 prior to which he was head of the European equities desk
and managing director at SG Cowen (May 1994 - January
2002).
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and director (since
President and Principal June 2001) and President (since September 2000) of the
Executive Officer since Manager; President and a director or trustee of other
2001 Oppenheimer funds; President and a director (since July
Age: 55 2001) of Oppenheimer Acquisition Corp. (the Manager's
parent holding company) and of Oppenheimer
Partnership Holdings, Inc. (a holding company
subsidiary of the Manager); a director (since
November 2001) of OppenheimerFunds Distributor, Inc.
(a subsidiary of the Manager); Chairman and a
director (since July 2001) of Shareholder Services,
Inc. and of Shareholder Financial Services, Inc.
(transfer agent subsidiaries of the Manager);
President and a director (since July 2001) of
OppenheimerFunds Legacy Program (a charitable trust
program established by the Manager); a director of
the following investment advisory subsidiaries of 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 a director (since July 2001) of
Oppenheimer Real Asset Management, Inc.; Executive
Vice President (since February 1997) of Massachusetts
Mutual Life Insurance Company (the Manager's parent
company); a director (since June 1995) of DLB
Acquisition Corporation (a holding company that owns
the shares of Babson Capital Management LLC); a
member of the Investment Company Institute's Board of
Governors (elected to serve from October 3, 2003
through September 30, 2006). Formerly, Chief
Operating Officer (September 2000-June 2001) of the
Manager; President and trustee (November
1999-November 2001) of MML Series Investment Fund and
MassMutual Select Funds (open-end investment
companies); a director (September 1999-August 2000)
of C.M. Life Insurance Company; President, Chief
Executive Officer and director (September 1999-August
2000) of MML Bay State Life Insurance Company; a
director (June 1989-June 1998) of Emerald Isle
Bancorp and Hibernia Savings Bank (a wholly-owned
subsidiary of Emerald Isle Bancorp). Oversees 62
portfolios as Trustee/Director and 20 additional
portfolios as Officer in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Mark S. Vandehey, Senior Vice President and Chief Compliance Officer
Vice President and Chief (since March 2004) of the Manager; Vice President (since
Compliance Officer since June 1983) of OppenheimerFunds Distributor, Inc.,
2004 Centennial Asset Management Corporation and Shareholder
Age: 54 Services, Inc. Formerly (until February 2004) Vice
President and Director of Internal Audit of the Manager.
An officer of 82 portfolios in the Oppenheimer funds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999)
Treasurer since 1999 of the Manager; Treasurer of HarbourView Asset
Age: 45 Management Corporation, Shareholder Financial Services,
Inc., Shareholder Services, Inc., Oppenheimer Real
Asset Management Corporation, and Oppenheimer
Partnership Holdings, Inc. (since March 1999), of OFI
Private Investments, Inc. (since March 2000), of
OppenheimerFunds International Ltd. and
OppenheimerFunds plc (since May 2000), of OFI
Institutional Asset Management, Inc. (since November
2000), and of OppenheimerFunds Legacy Program (a
Colorado non-profit corporation) (since June 2003);
Treasurer and Chief Financial Officer (since May
2000) of OFI Trust Company (a trust company
subsidiary of the Manager); Assistant Treasurer
(since March 1999) of Oppenheimer Acquisition Corp.
Formerly Assistant Treasurer of Centennial Asset
Management Corporation (March 1999-October 2003) and
OppenheimerFunds Legacy Program (April 2000-June
2003); Principal and Chief Operating Officer (March
1995-March 1999) at Bankers Trust Company-Mutual Fund
Services Division. An officer of 82 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian Petersen, Assistant Vice President of the Manager since August
Assistant Treasurer since 2002; formerly Manager/Financial Product Accounting
2004 (November 1998-July 2002) of the Manager. An officer of
Age: 34 82 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip Vottiero, Vice President/Fund Accounting of the Manager since
Assistant Treasurer since March 2002. Formerly Vice President/Corporate Accounting
2002 of the Manager (July 1999-March 2002) prior to which he
Age: 41 was Chief Financial Officer at Sovlink Corporation
(April 1996-June 1999). An officer of 82 portfolios
in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack, Executive Vice President (since January 2004) and
Secretary since 2001 General Counsel (since February 2002) of the Manager;
Age: 56 General Counsel and a director (since November 2001) of
the Distributor; General Counsel (since November
2001) of Centennial Asset Management Corporation;
Senior Vice President and General Counsel (since
November 2001) of HarbourView Asset Management
Corporation; Secretary and General Counsel (since
November 2001) of Oppenheimer Acquisition Corp.;
Assistant Secretary and a director (since October
1997) of OppenheimerFunds International Ltd. and
OppenheimerFunds plc; Vice President and a director
(since November 2001) of Oppenheimer Partnership
Holdings, Inc.; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Senior Vice
President, General Counsel and a director (since
November 2001) of Shareholder Financial Services,
Inc., Shareholder Services, Inc., OFI Private
Investments, Inc. and OFI Trust Company; Vice
President (since November 2001) of OppenheimerFunds
Legacy Program; Senior Vice President and General
Counsel (since November 2001) of OFI Institutional
Asset Management, Inc.; a director (since June 2003)
of OppenheimerFunds (Asia) Limited. Formerly 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 Shareholder
Services, Inc. (May 1985-November 2001), Shareholder
Financial Services, Inc. (November 1989-November
2001); and OppenheimerFunds International Ltd.
(October 1997-November 2001). An officer of 82
portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel and
Assistant Secretary since Assistant Secretary (since October 2003) of the Manager;
2001 Vice President (since 1999) and Assistant Secretary
Age: 39 (since October 2003) of the Distributor; Assistant
Secretary (since October 2003) of Centennial Asset
Management Corporation; Vice President and Assistant
Secretary (since 1999) of Shareholder Services, Inc.;
Assistant Secretary (since December 2001) of
OppenheimerFunds Legacy Program and of Shareholder
Financial Services, Inc. Formerly an Assistant
Counsel (August 1994-October 2003) and Assistant Vice
President of the Manager (August 1997-June 1998). An
officer of 82 portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Lisa I. Bloomberg, Vice President and Associate Counsel of the Manager
Assistant Secretary since since May 2004; formerly First Vice President and
2004 Associate General Counsel of UBS Financial Services Inc.
Age: 37 (formerly, PaineWebber Incorporated) (May 1999 - April
2004) prior to which she was an Associate at Skaden,
Arps, Slate, Meagher & Flom, LLP (September 1996 -
April 1999). An officer of 82 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Phillip S. Gillespie, Senior Vice President and Deputy General Counsel of the
Assistant Secretary since Manager since September 2004. Formerly Mr. Gillespie
2004 held the following positions at Merrill Lynch Investment
Age: 41 Management: First Vice President (2001-September 2004);
Director (from 2000) and Vice President (1998-2000).
An officer of 82 portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Wayne Miao, Assistant Vice President and Assistant Counsel of the
Assistant Secretary since Manager since June 2004. Formerly an Associate with
2004 Sidley Austin Brown & Wood LLP (September 1999 - May
Age: 32 2004). An officer of 82 portfolios in the
OppenheimerFunds complex.
-------------------------------------------------------------------------------------

|X| Remuneration of Directors. The officers of the Fund who are affiliated
with the Manager receive no salary or fee from the Fund. The Directors of the
Fund received the compensation shown below from the Fund with respect to the
Fund's fiscal year ended November 30, 2004. The compensation from all 10 of the
Board III Funds (including the Fund) represents compensation received for
serving as a director or trustee and member of a committee (if applicable) of
the boards of those funds during the calendar year ended December 31, 2004.

---------------------------------------------------------------------------------
Director Name and Aggregate Retirement Estimated Total Compensation
Benefits Annual From Fund and Fund
Accrued Retirement Complex Including
Other Fund as Part Benefits to Accrued Retirement
Position(s) Compensation of Fund be Paid Upon Benefits Paid to
(as applicable) From Fund1 Expenses Retirement2 Directors*
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Thomas W. Courtney $6,011 $1,449 $78,862 $172,0713
Chairman and Audit
Committee Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Paul Y. Clinton
Audit Committee $5,932 $1,659 $76,994 $166,3894
Chairman
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Robert G. Galli
Audit Committee $5,552 $893 $80,9235 $237,3126
Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Lacy B. Herrmann
Audit Committee $5,852 $1,307 $74,648 $161,0717
Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Brian Wruble
Audit Committee $5,852 $507 $22,238 $111,000
Member
---------------------------------------------------------------------------------

1. Aggregate Compensation From Fund includes fees and deferred compensation, if
any, for a Director. 2. Estimated Annual Retirement Benefits to be Paid Upon
Retirement is based on a straight life payment plan election with the assumption
that a Director 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 Directors." 3. Includes $51,071 ($26,750 compensation and
$24,321 accrued retirement benefits) from one open-end investment company, PIMCO
Advisors VIT ("PIMCO") with respect to Mr. Courtney's service as a trustee of
that fund. The Fund's Sub-Advisor acts as the investment advisor to PIMCO. 4.
Includes $50,389 ($26,500 compensation and $23,889 accrued retirement benefits)
from PIMCO, with respect to Mr. Clinton's service as a trustee of that fund. 5.
Includes $43,933 estimated to be paid to Mr. Galli for serving as a trustee or
director of 25 other Oppenheimer funds (at December 31, 2004) that are not Board
III Funds. 6. Includes $129,312 paid to Mr. Galli for serving as trustee or
director of 25 other Oppenheimer funds (at December 31, 2004) that are not Board
III Funds. 7. Includes $50,071 ($25,7508 compensation and $24,321 accrued
retirement benefits) from PIMCO, with respect to Mr. Herrmann's service as a
trustee of that fund. * For purposes of this section only, "Fund Complex"
includes the Oppenheimer funds and PIMCO (formerly OCC Accumulation Trust) in
accordance with the instructions for Form N-1A. The Manager does not consider
PIMCO to be part of the OppenheimerFunds "Fund Complex" as that term may be
otherwise interpreted

|X| Retirement Plan for Directors. The Fund has adopted a retirement plan
that provides for payments to retired Directors. Payments are up to 80% of the
average compensation paid during a Director's five years of service in which the
highest compensation was received. A Director must serve as Director for any of
the Board III Funds listed above for at least seven years in order to be
eligible for retirement plan benefits and must serve for at least 15 years to be
eligible for the maximum payment. Each Director's retirement benefits will
depend on the amount of the Director's future compensation and length of
service.

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

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

|X| Major Shareholders. As of March 2, 2005 the only persons who owned of
record or were known by the Fund to own beneficially 5% or more of any class of
the Fund's outstanding shares, and their holdings of that class as of that date,
were the following:

State Street Bank & Trust TR, ADP MSDW Alliance, Attn. Ralph Campbell, 105
Rosemont Rd., Westwood, MA 02090-2318, which owned 2,397,672.378 Class A
shares (representing 6.47%% of the Class A shares then outstanding).

Charles Schwab & Co., Inc., Special Custody Acct. for the exclusive
benefits of customers, Attn. Mutual Funds, 101 Montgomery St., San
Francisco, CA 94104-4122, which owned 1,964,707.562 Class A shares
(representing 5.30% of the Class A shares then outstanding).

MLPF& for the sole benefit of its customers, Attn: Fund Admn#97JU5, 4800
Deer Lake Dr E, Fl 3, Jacksonville, FL 32246-6484, which owned
4,598,691.996 Class A shares (representing 12.42% of the Class C shares
then outstanding).

MLPF& for the sole benefit of its customers, Attn: Fund Admn#97JU6, 4800
Deer Lake Dr E, Fl 3, Jacksonville, FL 32246-6484, which owned
1,033,855.094 Class B shares (representing 11.29% of the Class C shares
then outstanding).

MLPF& for the sole benefit of its customers, Attn: Fund Admn#97JU7, 4800
Deer Lake Dr E, Fl 3, Jacksonville, FL 32246-6484, which owned 943,607.732
Class C shares (representing 11.39% of the Class C 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
Proxy Voting Guidelines include provisions to address conflicts of interest that
may arise between the Fund and OFI where an OFI directly-controlled affiliate
manages or administers the assets of a pension plan of a company soliciting the
proxy. The Fund's Portfolio Proxy Voting Guidelines on routine and non-routine
proxy proposals are summarized below.

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

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

|X| The Investment Advisory Agreement. The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and the Fund. The Manager selects securities for
the Fund's portfolio and handles its day-to-day business. , 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. Prior to
December 31, 2004, the Manager retained OpCap Advisors (the "Former
Sub-Advisor") pursuant to a separate Sub-Advisory Agreement, under which the
Former Sub-Advisor bought and sold portfolio securities for the Fund. The
Sub-Advisory Agreement expired on December 31, 2004. The current portfolio
manager of the Fund is employed by the Manager and is the person who is
primarily responsible for the day-to-day management of the Fund's portfolio.
Other members of the Manager's Global Equity Portfolio Team provide the
portfolio managers with counsel and support in managing the Fund's portfolio.

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. The advisory agreement lists examples of expenses paid by the Fund.
The major categories relate to interest, taxes, brokerage commissions, fees to
certain Directors, legal and audit expenses, custodian and transfer agent
expenses, share issuance costs, certain printing and registration costs and
non-recurring expenses, including litigation costs. The management fees paid by
the Fund to the Manager are calculated at the rates described in the Prospectus,
which are applied to the assets of the Fund as a whole. 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 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 resulting from a good faith
error or omission on its part with respect to any of its duties under the
agreement.

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.

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

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

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

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

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

After careful deliberation, the Board, including the Independent
Directors, concluded that it was in the best interest of shareholders to
continue the investment advisory agreement for another year. In arriving at a
decision, the Board did not single out any one factor or group of factors as
being more important than other factors, but considered all factors together.
The Board judged the terms and conditions of the investment advisory agreement,
including the investment advisory fee, in light of all of the surrounding
circumstances. After deliberating, the Board approved the following new fee
schedule effective January 1, 2005: the Fund will pay the Manager an advisory
fee at an annual rate that declines as the Fund's assets grow: 0.60% of the
first $500 million of average annual net assets of the Fund, 0.60% of the next
$500 million and 0.55% of average annual net assets in excess of $1 billion.
From January 1, 2004 through December 31, 2004, the annual advisory fee rate
was: 0.75% of the first $400 million of average annual net assets of the Fund,
0.65% of the next $400 million, 0.60% of the next $400 million and 0.55% of
average annual net assets in excess of $1.2 billion.

|X| The Administration Agreement. Under an Administration Agreement
between the Fund and the Manager, the Manager performs certain administrative
services to the Fund not covered by the investment advisory agreement. Those
services include the determination of the Fund's net assets values, the
compilation and maintenance of books and records, preparation of proxy
materials, annual and semi-annual reports, and the preparation of financial
information and other data required for the Fund's reports to the SEC.
Additionally, the Manager must respond to shareholder inquiries relating to the
Fund or refer them to the Fund's officers or transfer agents. Under the
Agreement, the Manager furnishes the Fund with office space, facilities and
equipment, and arranges for its employees to serve as officers of the Fund.

The Administration Agreement has been approved by the Fund's Board of
Directors and a vote of shareholders of the Fund and remains in effect after its
initial two-year term as long as it is annually approved by the disinterested
Directors of the Fund. Prior to November 22, 1995, the former Sub-Advisor served
as administrator to the Fund. The management fees and administrative fees paid
by the Fund to the Manager during its last three fiscal years were:

--------------------------------------------------------------------------------
Management Fees Paid to the Administrative Fees Paid
Manager under the to the Manager Under the
Fiscal Year ended 11/30: Investment Advisory Administrative Agreement
Agreement1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2002 $2,490,572 $830,191
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2003 $2,154,717 $718,239
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2004 $2,718,622 $906,232
--------------------------------------------------------------------------------
1. The Manager, not the Fund, paid the Sub-Advisor an annual sub-advisory fee.
For fiscal year 2004, this sub-advisory fee was $940,828; for fiscal year 2003,
this sub-advisory fee was $743,039; and for fiscal year 2002, this sub-advisory
fee was $899,290. The advisory fee rate was reduced as of January 1, 2005, as
described on page 42, above.

Portfolio Manager. The Fund's portfolio is managed by Dominic Freud (referred to
as the "Portfolio Manager"). He is the person 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. Freud also manages other investment portfolios on behalf of the
Manager or its affiliates. The following table provides information regarding
the other portfolios managed by Mr. Freud as of December 31, 2004. No portfolio
has a performance-based advisory fee:

---------------------------------------------------------------------------------
Registered Other Pooled Other
Investment
Companies Investment Vehicles Accounts
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Accounts Managed 2 None None
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Total Assets Managed* $437.2 None None
---------------------------------------------------------------------------------
*In millions.

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

|X| Compensation of the Portfolio Manager. The Fund's Portfolio Manager is
employed and compensated by the Manager, not the Fund. Under the Manager's
compensation program for its portfolio managers and portfolio analysts, their
compensation is based primarily on the investment performance results of the
funds and accounts they manage, rather than on the financial success of the
Manager. This is intended to align the portfolio managers' and analysts'
interests with the success of the funds and accounts and their investors. The
Manager's compensation structure is designed to attract and retain highly
qualified investment management professionals and to reward individual and team
contributions toward creating shareholder value. As of December 31, 2004, the
Portfolio Manager's compensation consisted of three elements: a base salary, an
annual discretionary bonus and eligibility to participate in long-term awards of
options and appreciation rights in regard to the common stock of the Manager's
holding company parent. Senior portfolio managers may also be eligible to
participate in the Manager's deferred compensation plan.

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

|X| Ownership of Fund Shares. As of December 31, 2004, the Portfolio
Manager did not beneficially own any shares of the Fund.

Brokerage Policies of the Fund

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

Under the investment advisory agreement, in choosing brokers to execute
portfolio transactions for the Fund, the Manager may select brokers (other than
affiliates) that provide brokerage and/or research services to the Fund and/or
the other accounts over which the Manager or its affiliates have investment
discretion. The commissions paid to those brokers may be higher than another
qualified broker would charge, if the Manager makes a good faith determination
that the commission is fair and reasonable in relation to the services provided.
Rule 12b-1 under the Investment Company Act prohibits any fund from compensating
a broker or dealer for promoting or selling the fund's shares by (1) directing
to that broker or dealer any of the fund's portfolio transactions, or (2)
directing any other remuneration to that broker or dealer, such as commissions,
mark-ups, mark downs or other fees from the fund's portfolio transactions, that
were effected by another broker or dealer (these latter arrangements are
considered to be a type of "step-out" transaction). In other words, a fund and
its investment 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 Directors has approved
those procedures) that permit the Fund to direct portfolio securities
transactions to brokers or dealers that also promote or sell shares of the Fund,
subject to the "best execution" considerations discussed above. Those procedures
are designed to prevent: (1) the Manager's personnel who effect the Fund's
portfolio transactions from taking into account a broker's or dealer's promotion
or sales of the Fund shares when allocating the Fund's portfolio transactions,
and (2) the Fund, the Manager and the Distributor from entering into agreements
or understandings under which the Manager directs or is expected to direct the
Fund's brokerage directly, or through a "step-out" arrangement, to any broker or
dealer in consideration of that broker's or dealer's promotion or sale of the
Fund's shares or the shares of any of the other Oppenheimer funds.

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

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

The Manager serves as investment manager to a number of clients, including
other investment companies, and may in the future act as investment manager or
advisor to others. It is the practice of the Manager to allocate purchase or
sale transactions among the Fund and other clients whose assets it manages in a
manner it deems equitable. In making those allocations, the Manager considers
several main factors, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and each other client's accounts.

When orders to purchase or sell the same security on identical terms are
placed by more than one of the funds and/or other advisory accounts managed by
the Manager or its affiliates, 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.

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

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

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

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

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

-------------------------------------------------------------------------------
Fiscal Yead Ended Total Brokerage Commissions Paid by the Fund1
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
11/30/02 $923,162
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
11/30/03 $1,183,340
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
11/30/04 $1,392,8772
-------------------------------------------------------------------------------
1. Amounts do not include spreads or commissions on principal transactions on a
net trade basis. 2. In the fiscal year ended 11/30/04, the amount of
transactions directed to brokers for research services was $91,897,273 and the
amount of the commissions paid to broker-dealers for those services was
$187,710.

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

---------------------------------------------
Fiscal Aggregate Class A
Front-End Sales
Year Front-End Sales Charges
Ended Charges on Retained by
11/30: Class A Shares Distributor1
---------------------------------------------
---------------------------------------------
2002 $324,601 $82,622
---------------------------------------------
---------------------------------------------
2003 $287,037 $62,411
---------------------------------------------
---------------------------------------------
2004 $581,320 146,341$
---------------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent
of the Distributor.

--------------------------------------------------------------------------------
Fiscal Concessions Concessions on Concessions on Concessions on
Year Class A Shares Class B Shares Class C Shares Class N Shares
Ended Advanced by Advanced by Advanced by Advanced by
11/30: Distributor1 Distributor1 Distributor1 Distributor1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2002 $101,387 $312,148 $61,347 $9,524
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2003 $94,479 $193,078 $41,273 $10,353
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2004 $71,606 $237,268 $80,045 $25,819
--------------------------------------------------------------------------------
1. The Distributor advances concession payments to dealers for certain sales of
Class A shares and for sales of Class B, Class C and Class N shares from its own
resources at the time of sale.

--------------------------------------------------------------------------------
Fiscal Class A Class B Class C Class N
Contingent Contingent Contingent
Deferred Sales Deferred Sales Contingent Deferred Sales
Charges Charges Deferred Sales Charges
Year Ended Retained by Retained by Charges Retained Retained by
11/30 Distributor Distributor by Distributor Distributor
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2002 $10,636 $173,198 $4,637 $1,749
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2003 $2,075 $135,211 $4,371 $5,382
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2004 $656 $97,095 $7,745 $6,075
--------------------------------------------------------------------------------

Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B, Class C and Class N
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class. Each plan has been approved by a vote of the Board of
Directors, including a majority of the Independent Directors1, 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.

Financial intermediaries, brokers and dealers may receive other payments
from the Distributor or the Manager from their own resources in connection with
the promotion and/or sale of shares of the Fund, including payments to defray
expenses incurred in connection with educational seminars and meetings. The
Manager or Distributor may share expenses incurred by financial intermediaries
in conducting training and educational meetings about aspects of the Fund for
employees of the intermediaries or for hosting client seminars or meetings at
which the Fund is discussed. In their sole discretion, the Manager and/or the
Distributor may increase or decrease the amount of payments they make from their
own resources for these purposes.

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

The Board of Directors and the Independent Directors must approve all
material amendments to a plan. An amendment to increase materially the amount of
payments to be made under a plan must be approved by shareholders of the class
affected by the amendment. Because Class B shares of the Fund automatically
convert into Class A shares 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 the 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 Directors at least
quarterly for its review. The reports shall detail the amount of all payments
made under a plan and the purpose for which the payments were made. Those
reports are subject to the review and approval of the Independent Directors.

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

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

|X| Class A Service Plan Fees. Under the Class A service plan, the
Distributor currently uses the fees it receives from the Fund to pay brokers,
dealers and other financial institutions 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 up to 0.25% of average annual net assets of Class A
shares. The Board Directors has set that rate. 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 quarterly at an
annual rate not to exceed 0.25% of the average annual net assets consisting of
Class A shares held in the accounts of the recipients or their customers.

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 0.25% of
average annual net assets of Class A shares of the Fund. Effective January 1,
2003, the Board set that rate to zero. Prior to that date, the Fund paid the
Distributor an annual asset-based sales charge equal to 0.15% of average annual
net assets representing Class A shares purchased before September 1, 1993, and
0.10% of average annual net assets representing Class A shares purchased on or
after that date. 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 quarterly on those shares.
The advance payment is based on the net asset value of shares sold. Shares
purchased by exchange do not qualify for the advance service fee payment. If
Class 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 November 30, 2004 payments under the Class A
distribution and service plan totaled $672,864, of which $10,260 was service fee
payments retained by the Distributor in connection with the grandfathered
retirement accounts, described above, and included $30,903 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 quarterly
basis, without payment in advance. However, the Distributor currently intends to
pay the service fee to recipients in advance for the first year after Class B,
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 quarterly on those shares. The advance payment is based on
the net asset value of shares sold. Shares purchased by exchange do not qualify
for the advance service fee payment. If Class B, Class C or Class N shares are
redeemed during the first year after their purchase, the recipient of the
service fees on those shares will be obligated to repay the Distributor a pro
rata portion of the advance payment of the service fee made on those shares.
Class B, Class C or Class N shares may not be purchased by an investor directly
from the Distributor without the investor designating another broker-dealer of
record. 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. The
Distributor does not receive or retain the service fee on Class B, Class C or
Class N shares in accounts for which it is listed as the dealer of record.

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 quarterly 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
the Class B, Class C or Class N plan is terminated by the Fund, the Board of
Trustees may allow the Fund to continue payments of the asset-based sales charge
to the Distributor for distributing shares before the plan was terminated.

---------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended 11/30/04
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class: Total Amount Distributor's Distributor's
Aggregate Unreimbursed
Payments Retained by Unreimbursed Expenses as % of
Under Plan Distributor Expenses Under Plan Net Assets of Class
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B Plan $481,5471 $374,097 $225,685 0.47%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C Plan $355,2472 $65,729 $1,088,989 2.71%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N Plan $20,9883 $12,757 $82,683 1.37%
---------------------------------------------------------------------------------
1. Includes $8,598 paid to an affiliate of the Distributor's parent company.
2. Includes $10,032 paid to an affiliate of the Distributor's parent company.
3. Includes $611 paid to an affiliate of the Distributor's parent company.

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

Performance of the Fund

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

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

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

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

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

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

In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a percentage of the offering price) is deducted from the
initial investment ("P" in the formula below) (unless the return is shown
without sales charge, as described below). For Class B shares, payment of the
applicable contingent deferred sales charge is applied, depending on the period
for which the return is shown: 5.0% in the first year, 4.0% in the second year,
3.0% in the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth
year and none thereafter. For Class C shares, the 1.0% contingent deferred sales
charge is deducted for returns for the one-year period. For Class N shares, the
1.0% contingent deferred sales charge is deducted for returns for the one-year
period, and total returns for the periods prior to 03/01/01 (the inception date
for Class N shares) are based on the Fund's Class A returns, adjusted to reflect
the higher Class N 12b-1 fees.

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

ERV l/n - 1 Average Annual Total
Return
P

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

- 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:

ATVDR - 1 = Average Annual Total Return (After Taxes on Distributions
---
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. 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 11/30/04
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Cumulative Total Average Annual Total Returns
Returns (10
years or Life of
Class)
Class of
Shares
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
5-Year 10-Year
1-Year (or (or
life-of-class) life-of-class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
After Without After Without After Without After Without
Sales Sales Sales Sales Sales Sales Sales Sales
Charge Charge Charge Charge Charge Charge Charge Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A 130.09%1 144.12%1 10.30% 17.03% 1.28% 2.48% 8.69%1 9.34%1
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B 136.86%2 136.86%2 10.97% 15.97% 1.45% 1.75% 9.01%2 9.01%2
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C 129.40%3 129.40%3 15.02% 16.02% 1.76% 1.76% 8.66%3 8.66%3
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N 9.17%4 9.17%4 15.62% 16.62% 2.37%4 2.37%4 N/A N/A
---------------------------------------------------------------------------------
1. Inception of Class A: 7/2/90 2. Inception of Class B: 9/1/93 3. Inception of
Class C: 9/1/93 4. Inception of Class N: 3/1/01

--------------------------------------------------------------------------
Average Annual Total Returns for Class A Shares (After Sales Charge)
For the Periods Ended 11/30/04
--------------------------------------------------------------------------
--------------------------------------------------------------------------
1-Year 5-Year 10-Year
--------------------------------------------------------------------------
--------------------------------------------------------------------------
After Taxes on Distributions 10.30% -0.20% 6.92%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
After Taxes on 6.70% 0.43% 6.68%
Distributions and
Redemption of Fund Shares
--------------------------------------------------------------------------

Other Performance Comparisons. The Fund compares its performance annually to
that of an appropriate broadly-based market index in its Annual Report to
shareholders. You can obtain that information by contacting the Transfer Agent
at the addresses or telephone numbers shown on the cover of this Statement of
Additional Information. The Fund may also compare its performance to that of
other investments, including other mutual funds, or use rankings of its
performance by independent ranking entities. Examples of these performance
comparisons are set forth below.

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

|X| Morningstar Ratings. From time to time the Fund may publish the star
rating of the performance of its classes of shares by Morningstar, Inc., an
independent mutual fund monitoring service. Morningstar rates mutual funds in
their specialized market sector. The Fund is rated among foreign stock 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 "Exchange"). The Exchange normally closes at 4:00 P.M., but may close
earlier on certain days. If Federal Funds are received on a business day after
the close of the Exchange, the shares will be purchased and dividends will begin
to accrue on the next regular business day. The proceeds of ACH transfers are
normally received by the Fund 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
Statement of Additional Information because the Distributor or dealer or broker
incurs little or no selling expenses.

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

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

And the following money market funds:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Asset Builder Plans. 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. Asset
Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use their
fund account to make monthly automatic purchases of shares of up to four other
Oppenheimer funds.

If you make payments from your bank account to purchase shares of the
Fund, your bank account will be debited automatically. Normally the debit will
be made two business days prior to the investment dates you selected on your
application. Neither the Distributor, the Transfer Agent 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 an Appendix to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily valuation basis by Merrill Lynch
Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent record keeper
that has a contract or special arrangement with Merrill Lynch. If on the date
the plan sponsor signed the Merrill Lynch record keeping service agreement the
plan has less than $1 million in assets invested in applicable investments
(other than assets invested in money market funds), then the retirement plan may
purchase only Class C shares of the Oppenheimer funds. If on the date the plan
sponsor signed the Merrill Lynch record keeping service agreement the plan has
$1 million or more in assets but less than $5 million in assets invested in
applicable investments (other than assets invested in money market funds), then
the retirement plan may purchase only Class N shares of the Oppenheimer funds.
If on the date the plan sponsor signed the Merrill Lynch record keeping service
agreement the plan has $5 million or more in assets invested in applicable
investments (other than assets invested in money market funds), then the
retirement plan may purchase only Class A shares of the Oppenheimer funds.

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

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

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

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

The Distributor will not accept purchase order of $100,000 or more 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 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 Statement
of Additional Information) which have entered into a special agreement
with the Distributor for that purpose,
o to Retirement Plans qualified under Sections 401(a) or 401(k) of the
Internal Revenue Code, the recordkeeper or the plan sponsor for which
has entered into a special agreement with the Distributor,
o to Retirement Plans of a plan sponsor where the aggregate assets of all
such plans invested in the Oppenheimer funds is $500,000 or more,
o to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the
purchase with the redemption proceeds of Class A shares of one or more
Oppenheimer funds, 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, Directors' fees, transfer agency fees, legal
fees and auditing costs. Those expenses are paid out of the Fund's assets and
are not paid directly by shareholders. However, those expenses reduce the net
asset 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
Directors, 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 on
or about the second to last business day of 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 Exchange on each day that the Exchange is open. The calculation is done by
dividing the value of the Fund's net assets attributable to a class by the
number of shares of that class that are outstanding. The Exchange normally
closes at 4:00 P.M., Eastern time, but may close earlier on some other days (for
example, in case of weather emergencies or on days falling before a U.S.
holiday). All references to time in this Statement of Additional Information
mean "Eastern time." The Exchange'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 Exchange members may conduct trading in certain
securities on days on which the Exchange is closed (including weekends and
holidays) or after 4:00 P.M. on a regular business day. Because the Fund's net
asset values will not be calculated on those days, the Fund's net asset values
per share may be significantly affected on such days when shareholders may not
purchase or redeem shares. Additionally, trading on European and Asian stock
exchanges and over-the-counter markets normally is completed before the close of
the Exchange.

Changes in the values of securities traded on foreign exchanges or markets
as a result of events that occur after the prices of those securities are
determined, but before the close of the Exchange, will not be reflected in the
Fund's calculation of its net asset values that day unless the Manager
determines that the event is likely to effect a material change in the value of
the security. 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 Directors has established
procedures for the valuation of the Fund's securities. In general those
procedures are as follows:
o Equity securities traded on a U.S. securities exchange or on Nasdaq(R)
are valued as follows: (1) if last sale information is regularly reported, they
are valued at the
last reported sale price on the principal exchange on which they are
traded or on Nasdaq(R), as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they
are valued at the last reported sale price preceding the valuation
date if it is within the spread of the closing "bid" and "asked"
prices on the valuation date or, if not, at the closing "bid" price on
the valuation date.
o Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways: (1) at the last sale price available to the
pricing service approved by the
Board of Directors, or
(2) at the last sale price obtained by the Manager from the report of the
principal exchange on which the security is traded at its last trading
session on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained from the
principal exchange on which the security is traded or, on the basis of
reasonable inquiry, from two market makers in the security.
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
Directors 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
Directors or obtained by the Manager from two active market makers in the
security on the basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when
issued,
(2) debt instruments that had a maturity of 397 days or less when issued
and have a remaining maturity of more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or
less when issued and which have a remaining maturity of 60 days or
less.
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 Directors. The pricing service may use "matrix" comparisons to the
prices for comparable instruments on the basis of quality, yield and maturity.
Other special factors may be involved (such as the tax-exempt status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing services. That monitoring may include comparing prices used for
portfolio valuation to actual sales prices of selected securities.

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

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

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

How to Sell Shares

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 Money Market Fund, Inc.
Oppenheimer AMT-Free Municipals Oppenheimer New Jersey Municipal Fund
Oppenheimer AMT-Free New York Oppenheimer Principal Protected Main
Municipals Street Fund II
Oppenheimer California Municipal Fund Oppenheimer Pennsylvania Municipal
Fund
Oppenheimer International Value Fund Oppenheimer Rochester National
Municipals
Oppenheimer Limited Term California Oppenheimer Senior Floating Rate Fund
Municipal Fund
Oppenheimer Limited Term Municipal Fund Rochester Fund Municipals

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

o Oppenheimer Money Market Fund, Inc. only offers Class A and Class Y
shares.
o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for shares
of any other fund.
o Class B, Class C and Class N shares of Oppenheimer Cash Reserves are
generally available only by exchange from the same class of shares of other
Oppenheimer funds or through OppenheimerFunds-sponsored 401(k) plans.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged
only for Class A shares of other Oppenheimer funds. They may not be acquired
by exchange of shares of any class of any other Oppenheimer funds except
Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves
acquired by exchange of Class M shares.
o Class A shares of Oppenheimer funds may be exchanged at net asset value for
shares of any money market fund offered by the Distributor. Shares of any
money market fund purchased without a sales charge may be exchanged for
shares of Oppenheimer funds offered with a sales charge upon payment of the
sales charge. They may also be used to purchase shares of Oppenheimer funds
subject to an early withdrawal charge or contingent deferred sales charge.
o Shares of the Fund acquired by reinvestment of dividends or distributions
from any of the other Oppenheimer funds or from any unit investment trust for
which reinvestment arrangements have been made with the Distributor may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
o Shares of Oppenheimer Principal Protected Main Street Fund may be exchanged
at net asset value for shares of any of the Oppenheimer funds. However,
shareholders are not permitted to exchange shares of other Oppenheimer funds
for shares of Oppenheimer Principal Protected Main Street Fund until after
the expiration of the warranty period (8/5/2010).
o Shares of Oppenheimer Principal Protected Main Street Fund II may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
However, shareholders are not permitted to exchange shares of other
Oppenheimer funds for shares of Oppenheimer Principal Protected Main Street
Fund II until after the expiration of the warranty period (2/4/2011).
o Shares of Oppenheimer Principal Protected Main Street Fund III may be
exchanged at net asset value for shares of any of the Oppenheimer funds.
However, shareholders are not permitted to exchange shares of other
Oppenheimer funds for shares of Oppenheimer Principal Protected Main Street
Fund III until after the expiration of the warranty period (12/6/2011).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dividends, Capital Gains and Taxes

Dividends and Distributions. 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 shares. That is
because of the effect of the asset-based sales charge on Class B, Class C and
Class N shares. Those dividends will also differ in amount as a consequence of
any difference in the net asset values of the different classes of shares.

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

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

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

|X| Qualification as a Regulated Investment Company. The Fund has elected
to be taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a regulated investment company, the Fund is
not subject to federal income tax on the portion of its 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.

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

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

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

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.

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.

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

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

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

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

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

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

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

Additional Information About the Fund

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

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

The Custodian. Citibank, N.A. is the custodian of the Fund's assets. The
custodian's responsibilities include safeguarding and controlling the Fund's
portfolio securities and handling the delivery of such securities to and from
the Fund. It 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 DIRECTORS AND SHAREHOLDERS OF
OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.:

We have audited the accompanying statement of assets and liabilities of
Oppenheimer Quest International Value Fund, Inc., including the statement of
investments, as of November 30, 2004, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audits in accordance with 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 November 30, 2004, by correspondence with
the custodian. 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 International Value Fund, Inc. as of November 30, 2004, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended, in conformity with U.S.
generally accepted accounting principles.

/s/ KPMG LLP
------------
KPMG LLP

Denver, Colorado
January 11, 2005

42 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

STATEMENT OF INVESTMENTS November 30, 2004
--------------------------------------------------------------------------------

VALUE
SHARES SEE NOTE 1
--------------------------------------------------------------------------------
COMMON STOCKS--97.5%
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--15.2%
--------------------------------------------------------------------------------
AUTO COMPONENTS--2.0%
Continental AG 132,000 $ 8,063,343
--------------------------------------------------------------------------------
AUTOMOBILES--1.3%
Toyota Motor Corp. 139,000 5,213,935
--------------------------------------------------------------------------------
HOTELS, RESTAURANTS &amp;amp; LEISURE--2.0%
Compass Group plc 626,300 2,743,728
--------------------------------------------------------------------------------
Royal Caribbean
Cruises Ltd. 108,800 5,407,360
------------
8,151,088

--------------------------------------------------------------------------------
MEDIA--3.1%
EMI Group plc 1,171,100 5,410,155
--------------------------------------------------------------------------------
Vivendi Universal SA 1 236,600 6,982,701
------------
12,392,856

--------------------------------------------------------------------------------
TEXTILES, APPAREL &amp;amp; LUXURY GOODS--6.8%
Christian Dior SA 114,000 7,171,422
--------------------------------------------------------------------------------
Luxottica
Group SpA 408,300 7,968,217
--------------------------------------------------------------------------------
Sanyo Shokai Ltd. 250,000 1,401,778
--------------------------------------------------------------------------------
Swatch Group
AG (The) 398,000 11,208,809
------------
27,750,226

--------------------------------------------------------------------------------
CONSUMER STAPLES--9.5%
--------------------------------------------------------------------------------
BEVERAGES--5.3%
Diageo plc 530,200 7,416,518
--------------------------------------------------------------------------------
Kinki Coca-Cola
Bottling Co. Ltd. 97,300 872,726
--------------------------------------------------------------------------------
Mikuni Coca-Cola
Bottling Co. Ltd. 135,000 1,281,716
--------------------------------------------------------------------------------
Pernod-Ricard SA 78,400 11,704,464
------------
21,275,424

--------------------------------------------------------------------------------
FOOD &amp;amp; STAPLES RETAILING--3.3%
Ito-Yokado Co. Ltd. 300 11,894
--------------------------------------------------------------------------------
Tesco plc 2,275,000 13,107,443
------------
13,119,337

--------------------------------------------------------------------------------
FOOD PRODUCTS--0.9%
Cadbury
Schweppes plc 424,600 3,789,188
--------------------------------------------------------------------------------
ENERGY--8.2%
--------------------------------------------------------------------------------
OIL &amp;amp; GAS--8.2%
BP plc 873,000 8,908,504
--------------------------------------------------------------------------------
Petro-Canada 146,000 8,345,847
--------------------------------------------------------------------------------
Total SA, B Shares 72,600 15,895,929
------------
33,150,280

--------------------------------------------------------------------------------
FINANCIALS--21.3%
--------------------------------------------------------------------------------
CAPITAL MARKETS--2.3%
Credit Suisse
Group 1 101,900 3,973,903
--------------------------------------------------------------------------------
Deutsche Bank AG 63,000 5,339,203
------------
9,313,106

--------------------------------------------------------------------------------
COMMERCIAL BANKS--11.2%
Aareal Bank AG 80,400 2,458,327
--------------------------------------------------------------------------------
Banco Popolare
di Verona e
Novara Scrl 534,100 10,217,369
--------------------------------------------------------------------------------
Bank of East
Asia Ltd. 1,413,000 4,443,168
--------------------------------------------------------------------------------
Barclays plc 563,600 5,815,861
--------------------------------------------------------------------------------
BNP Paribas SA 111,000 7,717,566
--------------------------------------------------------------------------------
Credit Agricole SA 201,800 5,977,121
--------------------------------------------------------------------------------
Joyo Bank
Ltd. (The) 674,000 3,156,970
--------------------------------------------------------------------------------
Shinsei Bank Ltd. 823,800 5,507,744
------------
45,294,126

--------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--4.1%
Deutsche
Boerse AG 208,000 12,324,283
--------------------------------------------------------------------------------
Nomura Securities
Co. Ltd. 310,000 4,359,069
------------
16,683,352

20 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

VALUE
SHARES SEE NOTE 1
--------------------------------------------------------------------------------
INSURANCE--3.7%
Aegon NV 320,000 $ 3,956,295
--------------------------------------------------------------------------------
Axa SA 239,600 5,612,397
--------------------------------------------------------------------------------
Swiss
Reinsurance Co. 80,000 5,344,797
-------------
14,913,489

--------------------------------------------------------------------------------
HEALTH CARE--8.9%
--------------------------------------------------------------------------------
PHARMACEUTICALS--8.9%
Actelion Ltd. 1 56,700 5,223,285
--------------------------------------------------------------------------------
Shire Pharmaceuticals
Group plc 1,090,000 10,924,995
--------------------------------------------------------------------------------
Takeda
Pharmaceutical
Co. Ltd. 326,000 16,029,931
--------------------------------------------------------------------------------
Yamanouchi
Pharmaceutical
Co. Ltd. 100,000 3,653,856
-------------
35,832,067

--------------------------------------------------------------------------------
INDUSTRIALS--7.2%
--------------------------------------------------------------------------------
AEROSPACE &amp;amp; DEFENSE--0.7%
Bombardier, Inc.,
Cl. B 1,564,800 3,034,860
--------------------------------------------------------------------------------
BUILDING PRODUCTS--1.7%
Wienerberger AG 154,000 6,837,902
--------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--2.0%
Siemens AG 98,500 7,889,491
--------------------------------------------------------------------------------
MACHINERY--2.8%
SKF AB, B Shares 269,000 11,452,602
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--6.6%
--------------------------------------------------------------------------------
COMPUTERS &amp;amp; PERIPHERALS--1.4%
NEC Corp. 985,000 5,446,431
--------------------------------------------------------------------------------
OFFICE ELECTRONICS--2.1%
Canon Sales Co., Inc. 346,600 4,968,029
--------------------------------------------------------------------------------
Canon, Inc. 73,800 3,700,578
-------------
8,668,607

--------------------------------------------------------------------------------
SOFTWARE--3.1%
Dassault
Systemes SA 143,300 7,427,713
--------------------------------------------------------------------------------
Sage Group
plc (The) 1,397,050 5,152,506
-------------
12,580,219
--------------------------------------------------------------------------------
MATERIALS--11.0%
--------------------------------------------------------------------------------
CONSTRUCTION MATERIALS--3.5%
Boral Ltd. 1,009,300 5,374,948
--------------------------------------------------------------------------------
Fletcher
Building Ltd. 1,947,000 8,602,609
-------------
13,977,557

--------------------------------------------------------------------------------
METALS &amp;amp; MINING--7.5%
Alcan, Inc. 78,000 3,975,968
--------------------------------------------------------------------------------
Arcelor 288,000 6,344,110
--------------------------------------------------------------------------------
Boehler-
Uddeholm AG 60,100 7,124,411
--------------------------------------------------------------------------------
Rio Tinto plc 447,426 13,107,282
-------------
30,551,771

--------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--9.6%
--------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--3.1%
Deutsche
Telekom AG 1 582,900 12,367,521
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--6.5%
NTT DoCoMo, Inc. 8,837 15,371,682
--------------------------------------------------------------------------------
Vodafone
Group plc 4,058,022 11,011,640
-------------
26,383,322
-------------
Total Common Stocks
(Cost $329,959,802) 394,132,100

PRINCIPAL
AMOUNT
--------------------------------------------------------------------------------
SHORT-TERM NOTES--1.6%
--------------------------------------------------------------------------------
Federal Home
Loan Bank,
1.85%, 12/1/04
(Cost $6,601,000) $ 6,601,000 6,601,000

--------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $336,560,802) 99.1% 400,733,100
--------------------------------------------------------------------------------
OTHER ASSETS NET
OF LIABILITIES 0.9 3,556,914
-----------------------------
NET ASSETS 100.0% $404,290,014
=============================

21 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

FOOTNOTE TO STATEMENT OF INVESTMENTS

1. Non-income producing security.

DISTRIBUTION OF INVESTMENTS REPRESENTING GEOGRAPHIC HOLDINGS, AS A PERCENTAGE OF
TOTAL INVESTMENTS AT VALUE, IS AS FOLLOWS:

GEOGRAPHIC HOLDINGS VALUE PERCENT
--------------------------------------------------------------------------------
United Kingdom $ 87,387,820 21.8%
Japan 70,976,339 17.7
France 68,489,313 17.1
Germany 48,442,168 12.1
Switzerland 25,750,794 6.4
Italy 18,185,586 4.5
Canada 15,356,675 3.8
Austria 13,962,313 3.5
Sweden 11,452,602 2.9
New Zealand 8,602,609 2.2
United States 6,601,000 1.6
Luxembourg 6,344,110 1.6
Liberia 5,407,360 1.4
Australia 5,374,948 1.3
Hong Kong 4,443,168 1.1
The Netherlands 3,956,295 1.0
-----------------------------
Total $400,733,100 100.0%
=============================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

22 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES November 30, 2004
--------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------
ASSETS
-----------------------------------------------------------------------------------------------------
Investments, at value (cost $336,560,802)--see accompanying statement of investments $ 400,733,100
-----------------------------------------------------------------------------------------------------
Cash 429,454
-----------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold 2,832,752
Interest and dividends 862,678
Shares of capital stock sold 523,004
Other 50,000
--------------
Total assets 405,430,988

-----------------------------------------------------------------------------------------------------
LIABILITIES
-----------------------------------------------------------------------------------------------------
Unrealized depreciation on foreign currency contracts 20,095
-----------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of capital stock redeemed 733,413
Distribution and service plan fees 156,805
Transfer and shareholder servicing agent fees 75,398
Directors' compensation 60,882
Shareholder communications 49,646
Other 44,735
--------------
Total liabilities 1,140,974

-----------------------------------------------------------------------------------------------------
NET ASSETS $ 404,290,014
==============

-----------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
-----------------------------------------------------------------------------------------------------
Par value of shares of capital stock $ 224,470
-----------------------------------------------------------------------------------------------------
Additional paid-in capital 350,805,811
-----------------------------------------------------------------------------------------------------
Accumulated net investment income 417,818
-----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (11,394,997)
-----------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and
liabilities denominated in foreign currencies 64,236,912
--------------
NET ASSETS $ 404,290,014
==============

23 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

---------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
---------------------------------------------------------------------------------------------------------
Class A Shares:
Net asset value and redemption price per share (based on net assets of $310,362,609 and
16,978,239 shares of capital stock outstanding) $18.28
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $19.40
---------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $47,738,522 and 2,785,837 shares of
capital stock outstanding) $17.14
---------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $40,169,333 and 2,350,311 shares of
capital stock outstanding) $17.09
---------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $6,019,550 and 332,649 shares of
capital stock outstanding) $18.10

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

24 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

STATEMENT OF OPERATIONS For the Year Ended November 30, 2004
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
INVESTMENT INCOME
-------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $806,093) $ 7,249,484
-------------------------------------------------------------------------------
Interest 73,753
------------
Total investment income 7,323,237

-------------------------------------------------------------------------------
EXPENSES
-------------------------------------------------------------------------------
Management fees 2,718,622
-------------------------------------------------------------------------------
Distribution and service plan fees:
Class A 672,864
Class B 481,547
Class C 355,247
Class N 20,988
-------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A 568,865
Class B 135,808
Class C 99,461
Class N 13,015
-------------------------------------------------------------------------------
Shareholder communications:
Class A 48,948
Class B 36,911
Class C 15,173
Class N 1,261
-------------------------------------------------------------------------------
Administrative fees 906,232
-------------------------------------------------------------------------------
Custodian fees and expenses 75,293
-------------------------------------------------------------------------------
Directors' compensation 35,936
-------------------------------------------------------------------------------
Other 138,118
------------
Total expenses 6,324,289
Less reduction to custodian expenses (1,570)
Less payments and waivers of expenses (270)
------------
Net expenses 6,322,449

-------------------------------------------------------------------------------
NET INVESTMENT INCOME 1,000,788

25 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

--------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
--------------------------------------------------------------------------------------

Net realized gain on:
Investments $15,693,102
Closing and expiration of option contracts written 81,495
Foreign currency transactions 16,059,085
Net increase from payment by affiliate 172,926
------------
Net realized gain 32,006,608
--------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments 8,477,305
Translation of assets and liabilities denominated in foreign currencies 15,009,957
------------
Net change in unrealized appreciation 23,487,262

--------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $56,494,658
============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

26 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

YEAR ENDED NOVEMBER 30, 2004 2003
----------------------------------------------------------------------------------------

OPERATIONS
----------------------------------------------------------------------------------------
Net investment income $ 1,000,788 $ 784,797
----------------------------------------------------------------------------------------
Net realized gain 32,006,608 22,332,566
----------------------------------------------------------------------------------------
Net change in unrealized appreciation 23,487,262 40,624,806
-------------------------------
Net increase in net assets resulting from operations 56,494,658 63,742,169

----------------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS
----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
capital stock transactions:
Class A 21,651,459 7,457,176
Class B (11,968,648) (23,417,899)
Class C 3,836,980 (1,075,505)
Class N 3,062,769 769,358

----------------------------------------------------------------------------------------
NET ASSETS
----------------------------------------------------------------------------------------
Total increase 73,077,218 47,475,299
----------------------------------------------------------------------------------------
Beginning of period 331,212,796 283,737,497
-------------------------------
End of period (including accumulated net investment
income (loss) of $417,818 and $(47,092), respectively) $ 404,290,014 $ 331,212,796
===============================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

27 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

CLASS A YEAR ENDED NOVEMBER 30, 2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.62 $ 12.58 $ 14.76 $ 17.93 $ 22.05
-------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income .08 1 .06 .02 .02 .10
Net realized and unrealized gain (loss) 2.58 2.98 (2.20) (1.62) .24
---------------------------------------------------------------------
Total from investment operations 2.66 3.04 (2.18) (1.60) .34
-------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income -- -- -- -- (.22)
Distributions from net realized gain -- -- -- (1.57) (4.24)
---------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- -- -- (1.57) (4.46)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.28 $ 15.62 $ 12.58 $ 14.76 $ 17.93
=====================================================================

-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 17.03% 24.17% (14.77)% (10.04)% 1.47%
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $310,363 $245,349 $191,096 $238,882 $285,836
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $274,682 $203,459 $216,977 $269,338 $325,539
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income 0.48% 0.51% 0.09% 0.12% 0.47%
Total expenses 1.54% 4 1.59% 4,5 1.66% 4,5 1.71% 4 1.70% 4
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 87% 150% 75% 71% 104%

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.

28 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

CLASS B YEAR ENDED NOVEMBER 30, 2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.78 $ 12.00 $ 14.18 $ 17.38 $ 21.50
-------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.06) 1 (.15) (.11) (.08) (.02)
Net realized and unrealized gain (loss) 2.42 2.93 (2.07) (1.55) .25
---------------------------------------------------------------------
Total from investment operations 2.36 2.78 (2.18) (1.63) .23
-------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income -- -- -- -- (.11)
Distributions from net realized gain -- -- -- (1.57) (4.24)
---------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- -- -- (1.57) (4.35)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.14 $ 14.78 $ 12.00 $ 14.18 $ 17.38
=====================================================================

-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 15.97% 23.17% (15.37)% (10.57)% 0.91%
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 47,739 $ 52,459 $ 65,144 $ 93,590 $114,765
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 48,168 $ 55,378 $ 79,996 $105,464 $128,686
-------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss (0.41)% (0.31)% (0.63)% (0.48)% (0.09)%
Total expenses 2.43% 2.47% 2.36% 2.31% 2.24%
Expenses after payments and waivers and
reduction to custodian expenses N/A 4 2.44% N/A 4,5 N/A N/A 4
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 87% 150% 75% 71% 104%

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

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.

29 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

CLASS C YEAR ENDED NOVEMBER 30, 2004 2003 2002 2001 2000
-------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 14.73 $ 11.96 $ 14.14 $ 17.33 $ 21.46
-------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (.06) 1 (.05) (.12) (.07) (.02)
Net realized and unrealized gain (loss) 2.42 2.82 (2.06) (1.55) .25
---------------------------------------------------------------------
Total from investment operations 2.36 2.77 (2.18) (1.62) .23
-------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Dividends from net investment income -- -- -- -- (.12)
Distributions from net realized gain -- -- -- (1.57) (4.24)
---------------------------------------------------------------------
Total dividends and/or distributions
to shareholders -- -- -- (1.57) (4.36)
-------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 17.09 $ 14.73 $ 11.96 $ 14.14 $ 17.33
=====================================================================

-------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2 16.02% 23.16% (15.42)% (10.54)% 0.91%
-------------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 40,169 $ 31,076 $ 26,361 $ 39,429 $ 45,179
-------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 35,555 $ 26,952 $ 33,801 $ 42,552 $ 51,539
Ratios to average net assets: 3
Net investment loss (0.36)% (0.33)% (0.63)% (0.48)% (0.10)%
Total expenses 2.39% 2.46% 2.37% 2.31% 2.24%
Expenses after payments and waivers and
reduction to custodian expenses N/A 4,5 2.43% N/A 4,5 N/A 4 N/A 4
-------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 87% 150% 75% 71% 104%

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

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 INTERNATIONAL VALUE FUND, INC.

CLASS N YEAR ENDED NOVEMBER 30, 2004 2003 2002 2001 1
-------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 15.52 $ 12.54 $ 14.76 $ 16.58
-------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss) .03 2 .01 (.01) -- 3
Net realized and unrealized gain (loss) 2.55 2.97 (2.21) (1.82)
-------------------------------------------------
Total from investment operations 2.58 2.98 (2.22) (1.82)
-------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income -- -- -- --
Distributions from net realized gain -- -- -- --
-------------------------------------------------
Total dividends and/or distributions
to shareholders -- -- -- --
-------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 18.10 $ 15.52 $ 12.54 $ 14.76
=================================================

-------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 4 16.62% 23.76% (15.04)% (10.98)%
-------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $ 6,020 $ 2,329 $ 1,137 $ 522
-------------------------------------------------------------------------------------------------------
Average net assets (in thousands) $ 4,210 $ 1,637 $ 1,058 $ 275
-------------------------------------------------------------------------------------------------------
Ratios to average net assets: 5
Net investment income (loss) 0.19% 0.17% (0.02)% (0.05)%
Total expenses 1.91% 2.04% 1.90% 1.81%
Expenses after payments and waivers and reduction
to custodian expenses N/A 6,7 1.92% N/A 6,7 N/A 6
-------------------------------------------------------------------------------------------------------
Portfolio turnover rate 87% 150% 75% 71%

1. For the period from March 1, 2001 (inception of offering) to November 30,
2001.

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

3. Less than $0.005 per share.

4. 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.

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

6. Reduction to custodian expenses less than 0.01%.

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

31 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

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

Oppenheimer Quest International Value Fund, Inc. (the Fund) is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund's investment objective is to seek long-term capital
appreciation. The Fund's investment advisor is OppenheimerFunds, Inc. (the
Manager). The Manager has entered into a sub-advisory agreement with OpCap
Advisors.

The Fund offers Class A, Class B, Class C and Class N 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. 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. Class B shares will
automatically convert to Class A shares six years after the date of purchase.
The Fund assesses a 2% fee on the proceeds of fund shares that are redeemed
(either by selling or exchanging to another Oppenheimer fund) within 30 days of
their purchase. The fee, which is retained by the Fund, is accounted for as an
addition to paid-in capital.

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

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

32 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

under the supervision of the Board of Directors. Short-term "money market type"
debt securities with remaining maturities of sixty days or less are valued at
amortized cost (which approximates market value).

--------------------------------------------------------------------------------
FOREIGN CURRENCY TRANSLATION. The Fund's accounting records are maintained in
U.S. dollars. Prices of securities denominated in foreign currencies 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. Amounts related to the purchase and sale of foreign securities and
investment income are translated at the rates of exchange prevailing on the
respective dates of such transactions. Foreign exchange rates may be valued
primarily using dealer supplied valuations or a portfolio pricing service
authorized by the Board of Directors.

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.

--------------------------------------------------------------------------------
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.

33 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

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

NET UNREALIZED
APPRECIATION
BASED ON COST OF
SECURITIES AND
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED OTHER INVESTMENTS
NET INVESTMENT LONG-TERM LOSS FOR FEDERAL INCOME
INCOME GAIN CARRYFORWARD 1,2,3,4 TAX PURPOSES
---------------------------------------------------------------------------
$454,835 $-- $10,473,589 $64,180,453

1. As of November 30, 2004, the Fund had $10,412,287 of net capital loss
carryforwards available to offset future realized capital gains, if any, and
thereby reduce future taxable gain distributions. As of November 30, 2004,
details of the capital loss carryforward was as follows:

EXPIRING
--------------------------
2010 $10,412,287

2. The Fund had $61,302 of post-October foreign currency losses which were
deferred.

3. During the fiscal year ended November 30, 2004,the Fund utilized $32,524,665
of capital loss carryforward to offset capital gains realized in that fiscal
year.

4. During the fiscal year ended November 30, 2003,the Fund utilized $20,399,474
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 November 30, 2004. Net assets of
the Fund were unaffected by the reclassifications.

REDUCTION TO REDUCTION TO
ACCUMULATED ACCUMULATED
NET INVESTMENT NET REALIZED LOSS
INCOME ON INVESTMENTS
-----------------------------------------
$535,878 $535,878

No distributions were paid during the years ended November 30, 2004 and
November 30, 2003.

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 November 30, 2004 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.

34 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

Federal tax cost of securities $ 336,617,261
Federal tax cost of other investments (2,812,814)
-------------
Total federal tax cost $ 333,804,447
=============
Gross unrealized appreciation $ 75,419,897
Gross unrealized depreciation (11,239,444)
-------------
Net unrealized appreciation $ 64,180,453
=============

--------------------------------------------------------------------------------
DIRECTORS' COMPENSATION. The Fund has adopted an unfunded retirement plan for
the Fund's independent directors. Benefits are based on years of service and
fees paid to each director during the years of service. During the year ended
November 30, 2004, the Fund's projected benefit obligations were increased by
$5,814 and payments of $1,222 were made to retired directors, resulting in an
accumulated liability of $51,685 as of November 30, 2004.

The Board of Directors has adopted a deferred compensation plan for
independent directors that enables directors 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 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 Director. The Fund
purchases shares of the funds selected for deferral by the Director 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 directors' 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 and capital gain distributions, if
any, are declared and paid annually.

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

--------------------------------------------------------------------------------
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. The Fund pays interest to its custodian on
such cash overdrafts 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.

35 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

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

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

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

--------------------------------------------------------------------------------
2. SHARES OF CAPITAL STOCK

The Fund has authorized 100 million shares of $0.01 par value capital stock in
the aggregate to be apportioned among each class of shares. Transactions in
shares of capital stock were as follows:

YEAR ENDED NOVEMBER 30, 2004 YEAR ENDED NOVEMBER 30, 2003
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------

CLASS A
Sold 4,431,949 $ 74,340,632 8,676,830 $ 110,860,888
Redeemed (3,157,872) (52,689,173) 1 (8,165,976) (103,403,712)
----------------------------------------------------------------
Net increase 1,274,077 $ 21,651,459 510,854 $ 7,457,176
================================================================

--------------------------------------------------------------------------------------------
CLASS B
Sold 743,187 $ 11,754,904 706,097 $ 8,800,023
Redeemed (1,507,809) (23,723,552) 1 (2,585,927) (32,217,922)
----------------------------------------------------------------
Net decrease (764,622) $ (11,968,648) (1,879,830) $ (23,417,899)
================================================================

--------------------------------------------------------------------------------------------
CLASS C
Sold 715,368 $ 11,265,219 499,414 $ 6,222,943
Redeemed (474,473) (7,428,239) 1 (593,850) (7,298,448)
----------------------------------------------------------------
Net increase (decrease) 240,895 $ 3,836,980 (94,436) $ (1,075,505)
================================================================

--------------------------------------------------------------------------------------------
CLASS N
Sold 243,920 $ 4,086,734 116,973 $ 1,569,327
Redeemed (61,310) (1,023,965) 1 (57,645) (799,969)
----------------------------------------------------------------
Net increase 182,610 $ 3,062,769 59,328 $ 769,358
================================================================

1. Net of redemption fees of $2,630, $461, $341 and $40 for Class A, Class B,
Class C and Class N, respectively.

--------------------------------------------------------------------------------
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 November 30, 2004, were
$320,952,570 and $309,300,758, respectively.

36 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

--------------------------------------------------------------------------------
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 0.75% of the first $400 million of average annual net assets of
the Fund, 0.65% of the next $400 million, 0.60% of the next $400 million and
0.55% of average annual net assets in excess of $1.2 billion. Prior to January
1, 2004, the annual advisory fee rate was 0.75% of the first $400 million of
average annual net assets of the Fund, 0.70% of the next $400 million, and 0.65%
of average annual net assets in excess of $800 million.

--------------------------------------------------------------------------------
ADMINISTRATION FEES. Administration fees paid to the Manager were in accordance
with the administration agreement with the Fund which provides for a fee of
0.25% of the average annual net assets of the Fund. During the year ended
November 30, 2004, the Fund paid $906,245 to the Manager for administration
services.

--------------------------------------------------------------------------------
ADMINISTRATION SERVICES. 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 OpCap Advisors (the Sub-Advisor) to
provide the day-to-day portfolio management of the Fund. The Manager pays the
Sub-Advisor a monthly fee based on the fee schedule set forth in the Fund's
prospectus. For the year ended November 30, 2004, the Manager paid $940,828 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 November 30, 2004, the Fund paid
$810,702 to OFS for services to the Fund.

--------------------------------------------------------------------------------
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 quarterly 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 Directors 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.

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

37 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

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

asset-based sales charge of 0.75% per year on Class B and Class C shares and
0.25% per year on Class N shares. The Distributor also receives a service fee of
up to 0.25% per year under each plan. If either the Class B, Class C or Class N
plan is terminated by the Fund or by the shareholders of a class, the Board of
Directors and its independent directors must determine whether the Distributor
shall be entitled to payment from the Fund of all or a portion of the service
fee and/or asset-based sales charge in respect to shares sold prior to the
effective date of such termination. The Distributor's aggregate uncompensated
expenses under the plan at November 30, 2004 for Class B, Class C and Class N
shares were $225,685, $1,088,989 and $82,683, 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 table below for the period indicated.

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

November 30, 2004 $146,341 $656 $97,095 $7,745 $6,075

--------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
commissions for sales that is permitted under its investment advisory agreement,
the Fund's Manager terminated that practice in July 2003. Subsequently, the
Manager paid the Fund $172,926, an amount equivalent to certain of such
commissions incurred in prior years.

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.
During the year ended November 30, 2004, OFS waived $53 and $217 for Class C and
Class N shares, respectively. This undertaking may be amended or withdrawn at
any time.

--------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS

A foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date, at a negotiated rate. The Fund may enter into foreign
currency contracts to settle specific purchases or sales of securities
denominated in a foreign currency and for protection from adverse exchange rate
fluctuation. Risks to the Fund include the potential inability of the
counterparty to meet the terms of the contract.

The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and

38 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

depreciation on foreign currency contracts are reported in the Statement of
Assets and Liabilities as a receivable or payable and in the Statement of
Operations with the change in unrealized appreciation or depreciation.

The Fund may realize a gain or loss upon the closing or settlement of the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized gains or losses. Such realized gains and losses are
reported with all other foreign currency gains and losses in the Statement of
Operations.

As of November 30, 2004, the Fund had outstanding foreign currency contracts as
follows:

CONTRACT VALUATION AS OF
EXPIRATION AMOUNT NOVEMBER 30, UNREALIZED
CONTRACT DESCRIPTION DATES (000S) 2004 DEPRECIATION
-------------------------------------------------------------------------------------------------

CONTRACTS TO SELL
British Pound Sterling (GBP) 12/2/04 1,098GBP $2,097,431 $19,866
Japanese Yen (JPY) 12/3/04 75,668JPY 735,478 229
-------
Total unrealized depreciation $20,095
=======

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

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

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

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

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

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

39 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

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

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

Written option activity for the year ended November 30, 2004 was as follows:

CALL OPTIONS
--------------------------
NUMBER OF AMOUNT OF
CONTRACTS PREMIUMS
--------------------------------------------------------------------------------
Options outstanding as of
November 30, 2003 -- $ --
Options written 400 81,495
Options closed or expired (400) (81,495)
---------------------
Options outstanding as of
November 30, 2004 -- $ --
=====================

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

A consolidated amended complaint has been filed as putative derivative and class
actions against the Manager, OFS and the Distributor (collectively,
"OppenheimerFunds"), as well as 51 of the Oppenheimer funds (collectively, the
"Funds") including this Fund, and 31 present and former Directors/Trustees
(collectively, the "Directors/Trustees") and nine present and former officers
(collectively, the "Officers") of certain of the Funds. This complaint, filed in
the U.S. District Court for the Southern District of New York on January 10,
2005, consolidates into a single action and amends six individual
previously-filed putative derivative and class action complaints. Like those
prior complaints, the consolidated amended complaint alleges that the Manager
charged excessive fees for distribution and other costs, improperly used assets
of the Funds in the form of directed brokerage commissions and 12b-1 fees to pay
brokers to promote sales of the Funds, and failed to properly disclose the use
of Fund assets to make those payments, in violation of the Investment Company
Act of 1940 and the Investment Advisers Act of 1940. Also like those prior
complaints, the consolidated amended complaint further alleges that by
permitting and/or participating in those actions, the Directors/Trustees and the
Officers breached their fiduciary duties to Fund shareholders under the
Investment Company Act of 1940 and at common law. The complaint seeks
unspecified compensatory and punitive damages, rescission of the Funds'
investment advisory agreements, an accounting of all fees paid, and an award of
attorneys' fees and litigation expenses.

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

40 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

--------------------------------------------------------------------------------
8. SUBSEQUENT EVENT

The subadvisory agreement between the Manager and OpCap Advisors will terminate
on December 31, 2004. Effective January 1, 2005, the Manager will assume
day-to-day investment management of the Fund.

41 | OPPENHEIMER QUEST INTERNATIONAL VALUE FUND, INC.

Appendix A

RATINGS DEFINITIONS

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

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

LONG-TERM 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-11
Appendix C

OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class A
shares2 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 example, waivers relating to Retirement
Plans do not apply to Oppenheimer municipal funds, because shares of those funds
are not available for purchase by or on behalf of retirement plans. Other
waivers apply only to shareholders of certain funds.

For the purposes of some of the waivers described below and in the Prospectus
and Statement of Additional Information of the applicable Oppenheimer funds, the
term "Retirement Plan" refers to the following types of plans:
1) plans qualified under Sections 401(a) or 401(k) of the Internal
Revenue Code,
2) non-qualified deferred compensation plans, 3) employee benefit
plans4
4) Group Retirement Plans5 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 $3 million or more
of its assets (excluding assets invested in money market funds)
invested in Applicable Investments.
3) The record keeping for a Retirement Plan is handled under a service
agreement with Merrill Lynch and on the date the plan sponsor signs
that agreement, the Plan has 500 or more eligible employees (as
determined by the Merrill Lynch plan conversion manager).

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

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

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

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

Class A shares issued or purchased in the following transactions are not subject
to sales charges (and no concessions are paid by the Distributor on such
purchases):
|_|Shares issued in plans of reorganization, such as mergers, asset
acquisitions and exchange offers, to which the Fund is a party.
|_|Shares purchased by the reinvestment of dividends or other
distributions reinvested from the Fund or other Oppenheimer funds
(other than Oppenheimer Cash Reserves) or unit investment trusts for
which reinvestment arrangements have been made with the Distributor.
|_|Shares purchased 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.

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

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

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

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_|Shares redeemed involuntarily, as described in "Shareholder Account
Rules and Policies," in the applicable Prospectus.
|_|Redemptions from accounts other than Retirement Plans following the
death or disability of the last surviving shareholder. The death or
disability must have occurred after the account was established, and
for disability you must provide evidence of a determination of
disability by the Social Security Administration.
|_|The contingent deferred sales charges are generally not waived
following the death or disability of a grantor or trustee for a trust
account. The contingent deferred sales charges will only be waived in
the limited case of the death of the trustee of a grantor trust or
revocable living trust for which the trustee is also the sole
beneficiary. The death or disability must have occurred after the
account was established, and for disability you must provide evidence
of a determination of disability by the Social Security Administration.
|_|Distributions from accounts for which the broker-dealer of record has
entered into a special agreement with the Distributor allowing this
waiver.
|_|Redemptions of Class B shares held by Retirement Plans whose records
are maintained on a daily valuation basis by Merrill Lynch or an
independent record keeper under a contract with Merrill Lynch.
|_|Redemptions of Class C shares of Oppenheimer U.S. Government Trust
from accounts of clients of financial institutions that have entered
into a special arrangement with the Distributor for this purpose.
|_|Redemptions 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.
|_|Distributions9 from Retirement Plans or other employee benefit plans
for any of the following purposes: 1) Following the death or disability
(as defined in the Internal
Revenue Code) of the participant or beneficiary. The death or
disability must occur after the participant's account was
established in an Oppenheimer fund.
2) To return excess contributions made to a participant's account. 3)
To return contributions made due to a mistake of fact. 4) To make
hardship withdrawals, as defined in the plan.10 5) To make
distributions required under a Qualified Domestic
Relations Order or, in the case of an IRA, a divorce or separation
agreement described in Section 71(b) of the Internal Revenue Code.
6) To meet the minimum distribution requirements of the Internal
Revenue Code.
7) To make "substantially equal periodic payments" as described in
Section 72(t) of the Internal Revenue Code.
8) For loans to participants or beneficiaries.11 9) On account of the
participant's separation from service.12 10) Participant-directed
redemptions to purchase shares of a
mutual fund (other than a fund managed by the Manager or a
subsidiary of the Manager) offered as an investment option in a
Retirement Plan if the plan has made special arrangements with the
Distributor.
11)Distributions made on account of a plan termination or "in-service"
distributions, if the redemption proceeds are rolled over directly
to an OppenheimerFunds-sponsored IRA.
12)For distributions from a participant's account under an Automatic
Withdrawal Plan after the participant reaches age 59 1/2, as long as
the aggregate value of the distributions does not exceed 10% of the
account's value, adjusted annually.
13)Redemptions of Class B shares under an Automatic Withdrawal Plan
for an account other than a Retirement Plan, if the aggregate value
of the redeemed shares does not exceed 10% of the account's value,
adjusted annually.
14)For distributions from 401(k) plans sponsored by broker-dealers
that have entered into a special arrangement with the Distributor
allowing this waiver.
|_|Redemptions of Class B shares or Class C shares under an Automatic
Withdrawal Plan from an account other than a Retirement Plan if the
aggregate value of the redeemed shares does not exceed 10% of the
account's value annually.

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

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

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

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

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

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

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

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

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

V. Special Sales Charge Arrangements for Shareholders of Certain
Oppenheimer Funds Who Were Shareholders of Connecticut Mutual
Investment Accounts, Inc.
---------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

VI. Special Reduced Sales Charge for Former Shareholders of Advance
America Funds, Inc.
------------------------------------------------------------------------------

Shareholders of Oppenheimer 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 International Value Fund, Inc. SM

Internet Website
WWW.OPPENHEIMERFUNDS.COM

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

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

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

Custodian Bank
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

PX0254.001.0305

-------------------
1 In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Directors" in this Statement of Additional Information refers to
those Directors who are not "interested persons" of the Fund and who do not have
any direct or indirect financial interest in the operation of the distribution
plan or any agreement under the plan.
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 does not applyonly applies to qualified retirement plans and
403(b)(7) custodial plans ifafter your separation from service in or after the
participant is less thanyear you reached age 55, nor to IRAs.. 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.