CAPITAL APPRECIATION SAI

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CAbpo78eH0Xv8GqIUKPpzvfkl5ZQsXoJLLbTiH4AlyVbWJKm9bMTkofGeQEnzoHf S9CcoT8fW/Wnhm8K5VAA8g== 0000728889-01-500216.txt : 20010817 0000728889-01-500216.hdr.sgml : 20010817 ACCESSION NUMBER: 0000728889-01-500216 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20010816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPPENHEIMER CAPITAL APPRECIATION FUND CENTRAL INDEX KEY: 0000319767 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133054122 STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 002-69719 FILM NUMBER: 1716700 BUSINESS ADDRESS: STREET 1: TWO WORLD TRADE CTR SUITE 3400 CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2123230200 MAIL ADDRESS: STREET 1: 2 WORLD TRADE CENTER 34TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10048 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER TARGET FUND DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: OPPENHEIMER TARGET FUND INC DATE OF NAME CHANGE: 19870616 497 1 sai320revaug01.htm CAPITAL APPRECIATION REVISED SAI CAPITAL APPRECIATION SAI

Oppenheimer Capital Appreciation Fund

6308 South Tucson Way, Englewood, Colorado 80112
1-800-525-7048

Statement of Additional Information dated December 26, 2000 revised August 13, 2001

This Statement of Additional Information is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus dated December 26, 2000. It should be
read together with the Prospectus. You can obtain the Prospectus by writing to the Fund's Transfer Agent,
OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217, or by calling the Transfer Agent at the
toll-free number shown above, or by downloading it from the OppenheimerFunds Internet web site at
www.oppenheimerfunds.com.

Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks................................... 2
The Fund's Investment Policies..................................................................... 2
Other Investment Techniques and Strategies......................................................... 4
Investment Restrictions............................................................................ 19
How the Fund is Managed ................................................................................ 20
Organization and History........................................................................... 20
Trustees and Officers.............................................................................. 22
The Manager........................................................................................ 27
Brokerage Policies of the Fund.......................................................................... 28
Distribution and Service Plans.......................................................................... 30
Performance of the Fund................................................................................. 34

About Your Account
How To Buy Shares....................................................................................... 38
How To Sell Shares...................................................................................... 46
How To Exchange Shares.................................................................................. 51
Dividends, Capital Gains and Taxes...................................................................... 55
Additional Information About the Fund................................................................... 56

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

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

ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

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

The Fund's Investment Policies

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

|X| Cyclical Opportunities. The Fund might also seek to take advantage of changes in the business cycle
by investing in companies that are sensitive to those changes if the Manager believes they have growth potential.
For example, when the economy is expanding, companies in the consumer durables and technology sectors might
benefit and offer long-term growth opportunities. Other cyclical industries include insurance, for example. The
fund focuses on seeking growth over the long term, but could seek to take tactical advantage of short-term market
movements or events affecting particular issuers or industries.

|X| Investments in Equity Securities. The Fund focuses its investments in equity securities. Equity
securities include common stocks, preferred stocks, rights and warrants, and securities convertible into common
stock. The Fund's investments may include stocks of companies of all market capitalization ranges: small-cap,
mid-cap and large-cap. At times, the Fund may increase its emphasis on equity investments in securities of one or
more capitalization ranges, based upon the Manager's judgment of where are the best market opportunities to seek
the Fund's objective. It may use some of the specific investment techniques and strategies some times or not at
all.

In selecting securities for the Fund's portfolio, the Manager evaluates a number of factors, including
among them:
|_| the history of the issuer's operations and financial results,
|_| prospects for the industry of which the issuer is part,
|_| pending product developments and those of competitors,
|_| the effect of general market and economic conditions on the issuer's business,
|_| legislative proposals that might affect the issuer, and
|_| the issuer's current financial condition.

Current income is not a criterion used to select equity securities. However, certain debt securities may
be selected for the Fund's portfolio for defensive purposes (including debt securities that the Manager believes
may offer some opportunities for capital appreciation when stocks are disfavored).

The Fund can invest in securities of small cap issuers (having market capitalizations of less than $1
billion). Securities of small capitalization issuers may be subject to greater price volatility in general than
securities of large-cap and mid-cap companies. Therefore, to the degree that the Fund has investments in smaller
capitalization companies at times of market volatility, the Fund's share price may fluctuate more. As noted
below, the Fund limits investments in unseasoned small cap issuers.

|_| Convertible Securities. While convertible securities are a form of debt security in many
cases, their conversion feature (allowing conversion into equity securities) causes them to be regarded more as
"equity equivalents." As a result, the rating assigned to the security has less impact on the Manager's
investment decision with respect to convertible 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.

|_| Rights and Warrants. The Fund may invest up to 5% of its total assets in warrants or
rights. That 5% limit does not apply to warrants and rights the Fund has acquired as part of units of securities
or that are attached to other securities that the Fund buys. Warrants basically are options to purchase equity
securities at specific prices valid for a specific period of time. Their prices do not necessarily move parallel
to the prices of the underlying securities. Rights are similar to warrants, but normally have a short duration
and are distributed directly by the issuer to its shareholders. Rights and warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the issuer.

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

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

Investing in foreign securities offers potential benefits not available from investing solely in
securities of domestic issuers. They include the opportunity to invest in foreign issuers that appear to offer
growth 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.

|_| Risks of Foreign Investing. Investments in foreign securities may offer special opportunities for
investing but also present special additional risks and considerations not typically associated with investments
in domestic securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency rates or currency control
regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in foreign countries comparable
to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, stock exchanges and brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or loss of certificates for portfolio
securities;
o possibilities in some countries of expropriation, confiscatory taxation, political, financial or social
instability or adverse diplomatic developments; 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| Portfolio Turnover. "Portfolio turnover" describes the rate at which the Fund traded its portfolio
securities during its last fiscal year. For example, if a fund sold all of its securities during the year, its
portfolio turnover rate would have been 100%. The Fund's portfolio turnover rate will fluctuate from year to
year, although the Fund does not expect to have a portfolio turnover rate of more than 100% annually. Increased
portfolio turnover creates higher brokerage and transaction costs for the Fund, which may reduce its overall
performance. Additionally, the realization of capital gains from selling portfolio securities may result in
distributions of taxable long-term capital gains to shareholders, since the Fund will normally distribute all of
its capital gains realized each year, to avoid excise taxes under the Internal Revenue Code.

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

|X| 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. The Fund currently intends to invest no more than 5% of its net assets in those securities.

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

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

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

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 impose creditworthiness requirements to confirm that the vendor is financially sound and
will continuously monitor the collateral's value.

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

The Fund can 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.

Illiquid securities include repurchase agreements maturing in more than seven days and participation
interests that do not have puts exercisable within seven days.

|X| Loans of Portfolio Securities. To raise cash for liquidity purposes, the Fund can lend its portfolio
securities to brokers, dealers and other types of financial institutions approved by the Fund's Board of
Trustees. As a fundamental policy, these loans are limited to not more than 25% of the value of the Fund's total
assets. The Fund currently does not intend to engage in loans of securities, but if it does so, such loans will
not likely exceed 5% of the Fund's total assets.

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

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

|X| Borrowing for Leverage. The Fund has the ability to borrow from banks on an unsecured basis to
invest the borrowed funds in portfolio securities. This speculative technique is known as "leverage." The Fund
may borrow only from banks. Under current regulatory requirements, borrowings can be made only to the extent that
the value of the Fund's assets, less its liabilities other than borrowings, is equal to at least 300% of all
borrowings (including the proposed borrowing). If the value of the Fund's assets fails to meet this 300% asset
coverage requirement, the Fund will reduce its bank debt within three days to meet the requirement. To do so, the
Fund might have to sell a portion of its investments at a disadvantageous time.

The Fund will pay interest on these loans, and that interest expense will raise the overall expenses of
the Fund and reduce its returns. If it does borrow, its expenses will be greater than comparable funds that do
not borrow for leverage. Additionally, the Fund's net asset value per share might fluctuate more than that of
funds that do not borrow. Currently, the Fund does not contemplate using this technique, but if it does so, it
will not likely do so to a substantial degree.

|X| Debt Securities. While the Fund does not invest for the purpose of seeking current income, at times
certain debt securities may be selected for investment by the Fund for defensive purposes, as described below.
For example, when the stock market is volatile, or when the portfolio manager believes that growth opportunities
in stocks are not attractive, certain debt securities might provide not only offer defensive opportunities but
also some opportunities for capital appreciation. These investments could include corporate bonds and notes of
U.S. companies, as well as U.S. government securities, especially zero-coupon or "stripped" U. S. government
securities. It is not expected that this will be a significant portfolio strategy of the Fund under normal market
circumstances.

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

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

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

|_| Credit Risk. Debt securities are subject to credit risk. Credit risk relates to the ability
of the issuer of a debt security to make interest or principal payments on the security as they become due. If
the issuer fails to pay interest, the Fund's income may be reduced and if the issuer fails to repay principal,
the value of that bond and of the Fund's shares may be reduced. The Manager may rely to some extent on credit
ratings by nationally recognized rating agencies in evaluating the credit risk of securities selected for the
Fund's portfolio. It may also use its own research and analysis. Many factors affect an issuer's ability to make
timely payments, and the credit risks of a particular security may change over time.

|_| Interest Rate Risks. In addition to credit risks, debt securities are subject to changes in
value when prevailing interest rates change. When interest rates fall, the values of outstanding debt securities
generally rise, and the bonds may sell for more than their face amount. When interest rates rise, the values of
outstanding debt securities generally decline, and the bonds may sell at a discount from their face amount. The
magnitude of these price changes is generally greater for bonds with longer maturities. Therefore, when the
average maturity of the Fund's debt securities is longer, its share price may fluctuate more when interest rates
change.

|X| Derivatives. The Fund can invest in a variety of derivative investments to seek income for liquidity
needs or for hedging purposes. Some derivative investments the Fund can use are the hedging instruments described
below in this Statement of Additional Information. However, the Fund does not use, and does not currently
contemplate using, derivatives or hedging instruments to a significant degree.

Some of the derivative investments the Fund can use include debt exchangeable for common stock of an
issuer or "equity-linked debt securities" of an issuer. At maturity, the debt security is exchanged for common
stock of the issuer or it is payable in an amount based on the price of the issuer's common stock at the time of
maturity. Both alternatives present a risk that the amount payable at maturity will be less than the principal
amount of the debt because the price of the issuer's common stock may not be as high as the Manager expected.

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

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

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

|_| Futures. The Fund can buy and sell futures contracts that relate to (1) broadly-based stock indices
(these are referred to as "stock index futures"), (2) other broadly-based securities indices (these are referred
to as "financial 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. They may in some cases
be based on stocks of issuers in a particular industry or group of industries. A stock index assigns relative
values to the common stocks included in the index and its value fluctuates in response to the changes in value of
the underlying stocks. A stock index cannot be purchased or sold directly. Financial futures are similar
contracts based on the future value of the basket of securities that comprise the index. These contracts obligate
the seller to deliver, and the purchaser to take, cash to settle the futures transaction. There is no delivery
made of the underlying securities to settle the futures obligation. Either party may also settle the transaction
by entering into an offsetting contract.

An interest rate future obligates the seller to deliver (and the purchaser to take) cash or a specified
type of debt security to settle the futures transaction. Either party could also enter into an offsetting
contract to close out the position.

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

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

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

|_| Writing Covered Call Options. The Fund can write (that is, sell) covered calls. If the Fund sells a
call option, it must be covered. That means the Fund must own the security subject to the call while the call is
outstanding, or, for certain types of calls, the call may be covered by segregating liquid assets to enable the
Fund to satisfy its obligations if the call is exercised. Up to 25% of the Fund's total assets may be subject to
calls the Fund writes.

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

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

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

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

To terminate its obligation on a call it has written, the Fund may purchase a corresponding call in a
"closing purchase transaction." The Fund will then realize a profit or loss, depending upon whether the net of
the amount of the option transaction costs and the premium received on the call the Fund wrote is more or less
than the price of the call the Fund purchases to close out the transaction. The Fund may realize a profit if the
call expires unexercised, because the Fund will retain the underlying security and the premium it received when
it wrote the call. Any such profits are considered short-term capital gains for Federal income tax purposes, as
are the premiums on lapsed calls. When distributed by the Fund they are taxable as ordinary income. If the Fund
cannot effect a closing purchase transaction due to the lack of a market, it will have to hold the callable
securities until the call expires or is exercised.

The Fund may also write calls on a futures contract without owning the futures contract or securities
deliverable under the contract. To do so, at the time the call is written, the Fund must cover the call by
segregating an equivalent dollar amount of liquid assets. The Fund will segregate additional liquid assets if the
value of the segregated assets drops below 100% of the current value of the future. Because of this segregation
requirement, in no circumstances would the Fund's receipt of an exercise notice as to that future require the
Fund to deliver a futures contract. It would simply put the Fund in a short futures position, which is permitted
by the Fund's hedging policies.

|_| Writing Put Options. The Fund may sell put options. A put option on securities gives the
purchaser the right to sell, and the writer the obligation to buy, the underlying investment at the exercise
price during the option period. The Fund will not write puts if, as a result, more than 25% of the Fund's net
assets would be required to be segregated to cover such put options.

If the Fund writes a put, the put must be covered by segregated liquid assets. The premium the Fund
receives from writing a put represents a profit, as long as the price of the underlying investment remains equal
to or above the exercise price of the put. However, the Fund also assumes the obligation during the option period
to buy the underlying investment from the buyer of the put at the exercise price, even if the value of the
investment falls below the exercise price. If a put the Fund has written expires unexercised, the Fund realizes a
gain in the amount of the premium less the transaction costs incurred. If the put is exercised, the Fund must
fulfill its obligation to purchase the underlying investment at the exercise price. That price will usually
exceed the market value of the investment at that time. In that case, the Fund may incur a loss if it sells the
underlying investment. That loss will be equal to the sum of the sale price of the underlying investment and the
premium received minus the sum of the exercise price and any transaction costs the Fund incurred.

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

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

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

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

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

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

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

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

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

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

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

|_| Risks of Hedging with Options and Futures. The use of hedging instruments requires special skills
and knowledge of investment techniques that are different than what is required for normal portfolio management.
If the Manager uses a hedging instrument at the wrong time or judges market conditions incorrectly, hedging
strategies may reduce the Fund's return. The Fund could also experience losses if the prices of its futures and
options positions were not correlated with its other investments.

The Fund's option activities could affect its portfolio turnover rate and brokerage commissions. The
exercise of calls written by the Fund might cause the Fund to sell related portfolio securities, thus increasing
its turnover rate. The exercise by the Fund of puts on securities will cause the sale of underlying investments,
increasing portfolio turnover. Although the decision whether to exercise a put it holds is within the Fund's
control, holding a put might cause the Fund to sell the related investments for reasons that would not exist in
the absence of the put.

The Fund could pay a brokerage commission each time it buys a call or put, sells a call or put, or buys
or sells an underlying investment in connection with the exercise of a call or put. Those commissions could be
higher on a relative basis than the commissions for direct purchases or sales of the underlying investments.
Premiums paid for options are small in relation to the market value of the underlying investments. Consequently,
put and call options offer large amounts of leverage. The leverage offered by trading in options could result in
the Fund's net asset value being more sensitive to changes in the value of the underlying investment.

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

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

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

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

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

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

|_| 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 identifying to its Custodian bank assets
having a value equal to the aggregate amount of the Fund's commitment under forward contracts. The Fund will not
enter into forward contracts or maintain a net exposure to such contracts if the consummation of the contracts
would obligate the Fund to deliver an amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency or another currency that is the subject of the hedge.

However, to avoid excess transactions and transaction costs, the Fund may maintain a net exposure to
forward contracts in excess of the value of the Fund's portfolio securities or other assets denominated in
foreign currencies if the excess amount is "covered" by liquid securities denominated in any currency. The cover
must be at least equal at all times to the amount of that excess. As one alternative, the Fund may purchase a
call option permitting the Fund to purchase the amount of foreign currency being hedged by a forward sale
contract at a price no higher than the forward contract price. As another alternative, the Fund may purchase a
put option permitting the Fund to sell the amount of foreign currency subject to a forward purchase contract at a
price as high or higher than the forward contact price.

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

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

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

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

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

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

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

Under the Investment Company Act, when the Fund purchases a future, it must maintain cash or readily
marketable short-term debt instruments in an amount equal to the market value of the securities underlying the
future, less the margin deposit applicable to it. The account must be a segregated account or accounts held by
the Fund's Custodian bank.

|_| 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 company income available for distribution to its shareholders.

|X| Temporary Defensive Investments. When market conditions are unstable, or the Manager believes it is
otherwise appropriate to reduce holdings in stocks, the Fund can invest in a variety of debt securities for
defensive purposes. The Fund can also purchase these securities for liquidity purposes to meet cash needs due to
the redemption of Fund shares, or to hold while waiting reinvest cash received from the sale of other portfolio
securities. The Fund can buy:
|_| high-quality (rated in the top rating categories of nationally-recognized rating organizations or
deemed by the Manager to be of comparable quality), short-term money market instruments, including
those issued by the U. S. Treasury or other government agencies,
|_| commercial paper (short-term, unsecured, promissory notes of domestic or foreign companies) rated
in the top rating category of a nationally recognizes rating organization,
|_| debt obligations of corporate issuers, rated investment grade (rated at least Baa by Moody's
Investors Service, Inc. or at least BBB by Standard& Poor's Corporation, or a comparable rating
by another rating organization), or unrated securities judge by the Manager to have a comparable
quality to rated securities in those categories,
|_| preferred stocks,
|_| certificates of deposit and bankers' acceptances of domestic and foreign banks and savings and
loan associations, and
|_| repurchase agreements.

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

Investment Restrictions

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

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

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

|_| The Fund cannot buy securities issued or guaranteed by any one issuer if more than 5% of its total
assets would be invested in securities of that issuer or if it would then own more than 10% of that issuer's
voting securities. That restriction 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.

|_| The Fund cannot invest in companies for the purpose of acquiring control or management of them.

|_| The Fund cannot lend money. However, it can invest in all or a portion of an issue of bonds,
debentures, commercial paper or other similar corporate obligations of the types usually purchased by
institutions, whether or not those securities are publicly distributed. The Fund may also lend its portfolio
securities subject to the percentage restrictions stated in "Loans of Portfolio Securities."

|_| The Fund cannot concentrate investments. That means it cannot invest 25% or more of its total assets
in companies in any one industry.

|_| The Fund cannot purchase securities on margin. However, the Fund may make margin deposits in
connection with any of the hedging instruments permitted by any of its other fundamental policies.

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

|_| The Fund cannot invest in commodities or commodity contracts other than the hedging instruments
permitted by any of its other fundamental policies, whether or not such hedging instrument is considered to be a
commodity or commodity contract.

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

|_| The Fund cannot invest in or hold securities of any issuer if officers and Trustees of the Fund or
the 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.

|_| The Fund cannot invest in other open-end investment companies or invest more than 5% of its net
assets in closed-end investment companies, including small business investment companies. The Fund cannot make
any such investment at commission rates in excess of normal brokerage commissions.

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

|_| The Fund cannot pledge or mortgage any of its assets. However, this does not prohibit the escrow
arrangements in connection with covered call writing or margin arrangements in connection with any of the hedging
instruments permitted by its other fundamental policies.

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

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

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

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management investment company with an unlimited
number of authorized shares of beneficial interest. The Fund was organized as a Maryland corporation in 1980 and
reorganized as a Massachusetts business trust in 1987.

The Fund is governed by a Board of Trustees, which is responsible for protecting the interests of
shareholders under Massachusetts law. The Trustees meet periodically throughout the year to oversee the Fund's
activities, review its performance, and review the actions of the Manager. Although the Fund will not normally
hold annual meetings of its shareholders, it may hold shareholder meetings from time to time on important
matters, and shareholders have the right to call a meeting to remove a Trustee or to take other action described
in the Fund's Declaration of Trust.

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

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

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

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

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

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

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

Trustees and Officers of the Fund. The Fund's Trustees and officers and their principal occupations and business
affiliations and occupations during the past five years are listed below. Trustees denoted with an asterisk (*)
below are deemed to be "interested persons" of the Fund under the Investment Company Act. All of the Trustees are
Trustees or Directors of the following New York-based Oppenheimer funds1:

Oppenheimer California Municipal Fund Oppenheimer Large Cap Growth Fund
Oppenheimer Capital Appreciation Fund Oppenheimer Money Market Fund, Inc.
Oppenheimer Capital Preservation Fund Oppenheimer Multiple Strategies Fund
Oppenheimer Developing Markets Fund Oppenheimer Multi-Sector Income Trust
Oppenheimer Discovery Fund Oppenheimer Multi-State Municipal Trust
Oppenheimer Emerging Growth Fund Oppenheimer Municipal Bond Fund
Oppenheimer Emerging Technologies Fund Oppenheimer New York Municipal Fund
Oppenheimer Enterprise Fund Oppenheimer Series Fund, Inc.
Oppenheimer Europe Fund Oppenheimer Trinity Core Fund
Oppenheimer Global Fund Oppenheimer Trinity Growth Fund
Oppenheimer Global Growth&Income Fund Oppenheimer Trinity Value Fund
Oppenheimer Gold&Special Minerals Fund Oppenheimer U.S. Government Trust
Oppenheimer Growth Fund Oppenheimer World Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund

Ms. Macaskill and Messrs. Spiro, Donohue, Wixted, Zack, Bishop and Farrar respectively hold the same
offices with the other New York-based Oppenheimer funds as with the Fund. As of December 12, 2000, the Trustees
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. Ms. Macaskill and Mr. Donohue are trustees of that plan. Mr. Bartlett, as the
Fund's portfolio manager, receives advice and counsel from other members of the Manager's Equity Department.

Leon Levy, Chairman of the Board of Trustees, Age: 75.
280 Park Avenue, New York, NY 10017
General Partner of Odyssey Partners, L.P. (investment partnership) (since 1982) and Chairman of Avatar Holdings,
Inc. (real estate development).

Donald W. Spiro, Vice Chairman of the Board of Trustees, Age: 75.
399 Ski Trail, Smoke Rise, New Jersey 07405
Formerly he held the following positions: Chairman Emeritus (August 1991 - August 1999), Chairman (November 1987
- - January 1991) and a director (January 1969 - August 1999) of the Manager; President and Director of
OppenheimerFunds Distributor, Inc., a subsidiary of the Manager and the Fund's Distributor (July 1978 - January
1992).

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

Robert G. Galli, Trustee, Age: 67.
19750 Beach Road, Jupiter, FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following positions: Vice Chairman
(October 1995 - December 1997) and Executive Vice President (December 1977 - October 1995) of the Manager;
Executive Vice President and a director (April 1986 - October 1995) of HarbourView Asset Management Corporation.

Phillip A. Griffiths, Trustee, Age: 62.
97 Olden Lane, Princeton, N. J. 08540
The Director of the Institute for Advanced Study, Princeton, N.J. (since 1991) and a member of the National
Academy of Sciences (since 1979); formerly (in descending chronological order) a director of Bankers Trust
Corporation, Provost and Professor of Mathematics at Duke University, a director of Research Triangle Institute,
Raleigh, N.C., and a Professor of Mathematics at Harvard University.

Benjamin Lipstein, Trustee, Age: 77.
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor Emeritus of Marketing, Stern Graduate School of Business Administration, New York University.

Elizabeth B. Moynihan, Trustee, Age: 71.
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author and architectural historian; a trustee of the Freer Gallery of Art (Smithsonian Institute), Executive
Committee of Board of Trustees of the National Building Museum; a member of the Trustees Council, Preservation
League of New York State.

Kenneth A. Randall, Trustee, Age: 73.
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion Resources, Inc. (electric utility holding company), Dominion Energy, Inc. (electric power
and oil&gas producer), and Prime Retail, Inc. (real estate investment trust); formerly President and Chief
Executive Officer of The Conference Board, Inc. (international economic and business research) and a director of
Lumbermens Mutual Casualty Company, American Motorists Insurance Company and American Manufacturers Mutual
Insurance Company.

Edward V. Regan, Trustee, Age: 70.
40 Park Avenue, New York, New York 10016
Chairman of Municipal Assistance Corporation for the City of New York; Senior Fellow of Jerome Levy Economics
Institute, Bard College; a director of RBAsset (real estate manager); a director of OffitBank; Trustee, Financial
Accounting Foundation (FASB and GASB); President, Baruch College of the City University of New York; formerly New
York State Comptroller and trustee, New York State and Local Retirement Fund.

Russell S. Reynolds, Jr., Trustee, Age: 69.
8 Sound Shore Drive, Greenwich, Connecticut 06830
Chairman of The Directorship Search Group, Inc. (corporate governance consulting and executive recruiting); a
director of Professional Staff Limited (a U.K. temporary staffing company); a life trustee of International House
(non-profit educational organization), and a trustee of the Greenwich Historical Society.

Clayton K. Yeutter, Trustee, Age: 70.
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of Counsel, Hogan&Hartson (a Washington, D.C. law firm). Other directorships: Allied Zurich Pl.c; ConAgra,
Inc.; FMC Corporation; Farmers Group Inc.; Oppenheimer Funds; Texas Instruments Incorporated; Weyerhaeuser Co.
and Zurich Allied AG.

Jane Putnam, Vice President and Portfolio Manager, Age: 39.
Two World Trade Center, New York, New York 10048-0203
Vice President of the Manager (since October 1995); and officer and portfolio manager of another Oppenheimer
fund; before joining the Manager in May 1994, she was a portfolio manager and equity research analyst for
Chemical Bank (June 1989 - May 1994).

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

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

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

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

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

|X| Remuneration of Trustees. The officers of the Fund and certain Trustees of the Fund (Ms. Macaskill
and, prior to July 31, 1999, Mr. Spiro) who are affiliated with the Manager receive no salary or fee from the
Fund. The remaining Trustees of the Fund received the compensation shown below. The compensation from the Fund
was paid during its fiscal year ended July 31, 2000. The compensation from all of the New York-based Oppenheimer
funds (including the Fund) was received as a director, trustee or member of a committee of the boards of those
funds during the calendar year 1999.

- ------------------------------------ -------------------------- ------------------------- ----------------------------
                                                                                                     Total
                                                                       Retirement                Compensation
                                                                        Benefits                   from all
                                      Aggregate Compensation        Accrued as Part       New York based Oppenheimer
Trustee's Name                              from Fund1                  of Fund                Funds (29 Funds)2
and Position                                                            Expenses
- ------------------------------------ -------------------------- ------------------------- ----------------------------
- ------------------------------------ -------------------------- ------------------------- ----------------------------
Leon Levy                                     $49,006                   $24,905                    $166,700

- ------------------------------------ -------------------------- ------------------------- ----------------------------
- ------------------------------------ -------------------------- ------------------------- ----------------------------
Robert G. Galli 3                             $14,675                      $0                      $177,715

- ------------------------------------ -------------------------- ------------------------- ----------------------------
- ------------------------------------ -------------------------- ------------------------- ----------------------------
Phillip Griffiths4                            $5,306                       $0                       $5,125

- ------------------------------------ -------------------------- ------------------------- ----------------------------
- ------------------------------------ -------------------------- ------------------------- ----------------------------
Benjamin Lipstein                             $49,992                   $29,158                    $144,100

- ------------------------------------ -------------------------- ------------------------- ----------------------------
- ------------------------------------ -------------------------- ------------------------- ----------------------------
Elizabeth B. Moynihan                         $15,570                    $1,274                    $101,500

- ------------------------------------ -------------------------- ------------------------- ----------------------------
- ------------------------------------ -------------------------- ------------------------- ----------------------------
Kenneth A. Randall                            $28,453                   $15,460                     $93,100

- ------------------------------------ -------------------------- ------------------------- ----------------------------
- ------------------------------------ -------------------------- ------------------------- ----------------------------
Edward V. Regan                               $12,972                      $0                       $92,100

- ------------------------------------ -------------------------- ------------------------- ----------------------------
- ------------------------------------ -------------------------- ------------------------- ----------------------------
Russell S. Reynolds, Jr.                      $14,335                    $4,631                     $68,900

- ------------------------------------ -------------------------- ------------------------- ----------------------------
- ------------------------------------ -------------------------- ------------------------- ----------------------------
Donald Spiro                                  $6,226                       $0                       $10,250

- ------------------------------------ -------------------------- ------------------------- ----------------------------
- ------------------------------------ -------------------------- ------------------------- ----------------------------
Clayton K. Yeutter 5                          $8,809                       $0                       $51,675

- ------------------------------------ -------------------------- ------------------------- ----------------------------
1Aggregate  compensation includes fees, deferred  compensation,  if any, and retirement plan benefits accrued for a
Director.
2For the 1999 calendar year.
3Calendar year 1999 figures include compensation from the Oppenheimer NewYork, Quest and Rochester Funds.
4Includes $5,306 deferred under Deferred Compensation Plan described below.
5Includes $2,202 deferred under Deferred Compensation Plan described below.

|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan that provides for payments to
retired Trustees. Payments are up to 80% of the average compensation paid during a Trustee's five years of
service in which the highest compensation was received. A Trustee must serve as trustee for any of the New
York-based Oppenheimer funds for at least 15 years to be eligible for the maximum payment. Each Trustee's
retirement benefits will depend on the amount of the Trustee's future compensation and length of service.
Therefore the amount of those benefits cannot be determined at this time, nor can we estimate the number of years
of credited service that will be used to determine those benefits.

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

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

|X| Major Shareholders. As of December 12, 2000, the only persons who owned of record or were known by
the Fund to own beneficially 5% or more of any class of the Fund's outstanding shares were:

Mark Curran, Trustee, Boeing Co. Master Trust, 200 Newport Avenue Extension, North Quincy, MA
02171-2102, who owned 20,182,236.196 Class Y shares (86.05% of the Class Y shares then outstanding).

MassMutual Life Insurance Co., Separate Investment Account, 1295 State Street, Springfield, MA
01111-0001, which owned 2,865,067.934 Class Y shares (12.21% of the Class Y shares then outstanding).

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

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

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

|X| The Investment Advisory Agreement. The Manager provides investment advisory and management services to
the Fund under an investment advisory agreement between the Manager and the Fund. The Manager selects securities
for the Fund's portfolio and handles its day-to-day business. The portfolio manager of the Fund is employed by
the Manager and is the person who is principally responsible for the day-to-day management of the Fund's
portfolio. Other members of the Manager's Equity Portfolio Team provide the portfolio manager with counsel and
support in managing the Fund's portfolio.

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

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

------------------------------------------ -------------------------------------------------------------------
Fiscal Year ended 8/31: Management Fees Paid to OppenheimerFunds, Inc.
------------------------------------------ -------------------------------------------------------------------
------------------------------------------ -------------------------------------------------------------------
1998 $10,762,586
------------------------------------------ -------------------------------------------------------------------
------------------------------------------ -------------------------------------------------------------------
1999 $16,112,987
------------------------------------------ -------------------------------------------------------------------
------------------------------------------ -------------------------------------------------------------------
2000 $29,201,218
------------------------------------------ -------------------------------------------------------------------

The investment advisory agreement states that in the absence of willful misfeasance, bad faith, gross
negligence in the performance of its duties or reckless disregard of its obligations and duties under the
investment advisory agreement, the Manager is not liable for any loss. The Fund sustains for any investment,
adoption of any investment policy, or the purchase, sale or retention of any security.

The agreement permits the Manager to act as investment adviser for any other person, firm or corporation
and to use the name "Oppenheimer" in connection with other investment companies for which it may act as
investment 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 name "Oppenheimer" as part of its name.

Brokerage Policies of the Fund

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

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

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

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

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

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

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

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

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

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

  ------------------------------------- ---------------------------------------------------------------------------
        Fiscal Year Ended 8/31:                       Total Brokerage Concessions Paid by the Fund1
  ------------------------------------- ---------------------------------------------------------------------------
  ------------------------------------- ---------------------------------------------------------------------------
                  1998                                                  $2,238,255
  ------------------------------------- ---------------------------------------------------------------------------
  ------------------------------------- ---------------------------------------------------------------------------
                  1999                                                  $3,367,722
  ------------------------------------- ---------------------------------------------------------------------------
  ------------------------------------- ---------------------------------------------------------------------------
                  2000                                                 $4,345,7712
  ------------------------------------- ---------------------------------------------------------------------------
  1Amounts do not include spreads or concessions on principal transactions on a net trade basis.
  2In the fiscal year ended  8/31/00,  the amount of  transactions  directed to brokers for  research  services was
  $1,755,063,004 and the amount of the concessions paid to broker-dealers for those services was $2,261,853.

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 is not
obligated  to sell a  specific  number  of  shares.  Expenses  normally  attributable  to  sales  are  borne by the
Distributor.

         The  compensation  paid to (or retained by) the  Distributor  from the sale of shares or on the redemption
of shares during the Fund's three most recent fiscal years is shown in the table below.

  ------------- ------------------ ------------------- -------------------- ------------------- -------------------
                    Aggregate      Class A Front-End       Concessions        Concessions on      Concessions on
  Fiscal Year       Front-End        Sales Charges      on Class A Shares     Class B Shares      Class C Shares
  Ended 8/31:   Sales Charges on      Retained by          Advanced by         Advanced by         Advanced by
                 Class A Shares       Distributor         Distributor1         Distributor1        Distributor1
  ------------- ------------------ ------------------- -------------------- ------------------- -------------------
  ------------- ------------------ ------------------- -------------------- ------------------- -------------------
      1998         $4,755,096           $1,345,699          $482,064            $5,767,387           $479,256
  ------------- ------------------ ------------------- -------------------- ------------------- -------------------
  ------------- ------------------ ------------------- -------------------- ------------------- -------------------
      1999         $5,517,361          $1,584,9462          $990,319            $6,605,832           $506,690
  ------------- ------------------ ------------------- -------------------- ------------------- -------------------
  ------------- ------------------ ------------------- -------------------- ------------------- -------------------
      2000         $9,222,674          $2,675,878          $1,710,262          $12,986,219          $1,180,044
  ------------- ------------------ ------------------- -------------------- ------------------- -------------------
  1The  Distributor  advances  concession  payments to dealers for certain sales of Class A shares and for sales of
  Class B and Class C shares from its own resources at the time of sale.
  2Includes amounts returned by a broker/dealer that is an affiliate of the Distributor.

  ----------------- ------------------------------ ------------------------------- --------------------------------
                     Class A Contingent Deferred    Class B Contingent Deferred      Class C Contingent Deferred
    Fiscal Year       Sales Charges Retained by      Sales Charges Retained by        Sales Charges Retained by
    Ended 8/31:              Distributor                    Distributor                      Distributor
  ----------------- ------------------------------ ------------------------------- --------------------------------
  ----------------- ------------------------------ ------------------------------- --------------------------------
        1998                    None                          $263,911                         $25,640
  ----------------- ------------------------------ ------------------------------- --------------------------------
  ----------------- ------------------------------ ------------------------------- --------------------------------
        1999                   $18,001                        $727,007                         $39,179
  ----------------- ------------------------------ ------------------------------- --------------------------------
  ----------------- ------------------------------ ------------------------------- --------------------------------
        2000                   $35,205                       $1,325,150                        $46,952
  ----------------- ------------------------------ ------------------------------- --------------------------------

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.

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

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

The Board of Trustees and the Independent Trustees must approve all material amendments to a plan. An
amendment to increase materially the amount of payments to be made under a plan must be approved by shareholders
of the class affected by the amendment. Because Class B shares of the Fund automatically convert into Class A
shares after six years, the Fund must obtain the approval of both Class A and Class B shareholders for a proposed
material amendment to the Class A Plan that would materially increase payments under the Plan. That approval must
be by a "majority" (as defined in the Investment Company Act) of the shares of each Class, voting separately by
class.

While the Plans are in effect, the Treasurer of the Fund shall provide separate written reports on the
plans to the Board of Trustees at least quarterly for its review. The Reports shall detail the amount of all
payments made under a plan, the purpose for which the payments were made and the identity of each recipient of a
payment. The reports on the Class B Plan and Class C Plan shall also include the Distributor's distribution costs
for that quarter and in the case of the Class B plan the amount of those costs for previous fiscal periods that
have been carried forward. Those reports are subject to the review and approval of the Independent Trustees.

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

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

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

For the fiscal year ended August 31, 2000 payments under the Class A Plan totaled $6,679,168 all of which
was paid by the Distributor to recipients. That included $405,591 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 the Class A Plan to
pay any of its interest expenses, carrying charges, or other financial costs, or allocation of overhead.

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

The Class B, Class C and the Class N Plans permit the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a quarterly basis, without payment in
advance. However, the Distributor currently intends to pay the service fee to recipients in advance for the first
year after the shares are purchased. After the first year shares are outstanding, the Distributor makes service
fee payments quarterly on those shares. The advance payment is based on the net asset value of shares sold.
Shares purchased by exchange do not qualify for the advanced service fee payment. If Class B, Class C or Class N
shares are redeemed during the first year after their purchase, the recipient of the service fees on those shares
will be obligated to repay the Distributor a pro rata portion of the advance payment of the service fee made on
those shares.

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

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

- --------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
                    Distribution Fees Paid to the Distributor in the Fiscal Year Ended 8/31/00
                                                                       Distributor's
- -------------------------                                                Aggregate              Distributor's
                            Total Payments    Amount Retained by   Unreimbursed Expenses    Unreimbursed Expenses
                              Under Plan          Distributor            Under Plan         as % of Net Assets of
                                                                                                    Class
Class:
- -------------------------- ------------------ -------------------- ----------------------- -------------------------
- -------------------------- ------------------ -------------------- ----------------------- -------------------------
Class B Plan                  $9,208,551          $7,675,513            $18,419,726                 1.38%
- -------------------------- ------------------ -------------------- ----------------------- -------------------------
- -------------------------- ------------------ -------------------- ----------------------- -------------------------
Class C Plan                  $2,791,044          $1,039,502             $2,181,019                 0.54%
- -------------------------- ------------------ -------------------- ----------------------- -------------------------

      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  1-800-525-7048
or by visiting the OppenheimerFunds Internet web site at HTTP://WWW.OPPENHEIMERFUNDS.COM.
                                                         -------------------------------

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

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

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

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

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

         In  calculating  total  returns  for Class A  shares,  the  current  maximum  sales  charge of 5.75% (as a
percentage  of the  offering  price) is deducted  from the  initial  investment  ("P")  (unless the return is shown
without sales charge,  as described  below).  For Class B shares,  payment of the  applicable  contingent  deferred
sales  charge is applied,  depending on the period for which the return is shown:  5.0% in the first year,  4.0% in
the  second  year,  3.0% in the third and fourth  years,  2.0% in the fifth  year,  1.0% in the sixth year and none
thereafter.  For Class C shares,  the 1%  contingent  deferred  sales charge is deducted for returns for the 1-year
period. There is no sales charge for Class Y shares.

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

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

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

         |_|  Total  Returns  at Net Asset  Value.  From time to time the Fund may also  quote a  cumulative  or an
average annual total return "at net asset value"  (without  deducting  sales charges) for Class A, Class B, Class C
or Class N shares.  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 8/31/005
- ----------------------------------------------------------------------------------------------------------------------
- --------------- --------------------------- --------------------------------------------------------------------------
                 Cumulative Total Returns                         Average Annual Total Returns
                   (10 years or Life of
    Class                 Class)
  Of Shares
- --------------- --------------------------- --------------------------------------------------------------------------
- --------------- --------------------------- ----------------------- ------------------------- ------------------------
                                                                             5-Year                   10-Year
                                                    1-Year             (or life-of-class)       (or life-of-class)
- --------------- --------------------------- ----------------------- ------------------------- ------------------------
- --------------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------
                After Sales     Without     After       Without     After         Without     After         Without
                   Charge     Sales Charge  Sales       Sales       Sales       Sales Charge  Sales          Sales
                                              Charge      Charge      Charge                    Charge      Charge
- --------------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------
- --------------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------
Class A         617.52%(1)    661.29%(1)    39.50%      48.01%      26.81%      28.32%        21.78%      22.51%
- --------------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------
- --------------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------
Class B         221.05%(2)    223.05%(2)    41.88%      46.88%      27.29%(2)   27.46%(2)        N/A          N/A
- --------------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------
- --------------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------
Class C         327.33% (3)   327.33% (3)   45.89%      46.89%      27.28%      27.28%        24.01%(3)   24.01%(3)
- --------------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------
- --------------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------
Class Y         103.47% (4)   103.47% (4)   48.64%      48.64%      28.56%(4)   28.56% (4)       N/A          N/A
- --------------- ------------- ------------- ----------- ----------- ----------- ------------- ----------- ------------
1. Inception A:  01/22/81
2. Inception B:  11/01/95
3. Inception C:  12/01/93
4. Inception Y:  11/03/97
5.Class N shares  were not  offered  for sale  during  the  Fund's  fiscal  year  ended  8/31/00.  Therefore,  this
Statement of Additional Information does not contain any performance information for that class.

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.

         |_|  Lipper  Rankings.  From time to time the Fund may  publish  the  ranking  of the  performance  of its
classes of shares by Lipper  Analytical  Services,  Inc.  Lipper is a  widely-recognized  independent  mutual  fund
monitoring  service.  Lipper monitors the performance of regulated  investment  companies,  including the Fund, and
ranks their  performance for various periods based on categories  relating to investment  styles.  Lipper currently
ranks the Fund's performance  against all other capital  appreciation  funds. 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.

         |_|  Morningstar  Rankings.  From time to time the Fund may publish the star ranking of the performance of
its classes of shares by  Morningstar,  Inc., an independent  mutual fund  monitoring  service.  Morningstar  ranks
mutual funds in broad investment  categories:  domestic stock funds,  international stock funds, taxable bond funds
and municipal bond funds. The Fund is ranked among domestic stock funds.

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

         The Fund  may also  compare  its  performance  to that of other  funds  in its  Morningstar  category.  In
addition to its star rankings,  Morningstar  also  categorizes  and compares a fund's 3-year  performance  based on
Morningstar's  classification of the fund's  investments and investment  style,  rather than how a fund defines its
investment objective.  Morningstar's four broad categories (domestic equity,  international equity,  municipal bond
and taxable  bond) are each  further  subdivided  into  categories  based on types of  investments  and  investment
styles.  Those  comparisons by Morningstar are based on the same risk and return  measurements as its star rankings
but do not consider the effect of sales charges.

         |_| 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.

AccountLink.  When shares are purchased  through  AccountLink,  each purchase must be at least $25.  Shares will be
purchased two regular  business days  following the regular  business day you instruct the  Distributor to initiate
the Automated  Clearing House ("ACH")  transfer to buy the shares.  That  instruction must be received prior to the
close of The New York  Stock  Exchange  that day.  Dividends  will  begin to accrue  on shares  purchased  with the
proceeds of ACH  transfers on the  business day after the shares are  purchased.  The Exchange  normally  closes at
4:00 P.M., but may close earlier on certain days.  The proceeds of ACH transfers are normally  received by the Fund
3 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.

         |X|  Right of Accumulation.  To qualify for the lower sales charge rates that apply to larger purchases
of Class A shares, you and your spouse can add together:
o        Class A, Class B and Class N shares you purchase for your individual accounts (including IRAs and 403(b)
                                     -
                  plans), or for your joint accounts, or for trust or custodial accounts on behalf of your
                         -
                  children who are minors, and
o        Current purchases of Class A, Class B and Class N shares of the Fund and other Oppenheimer funds to
                  reduce the sales charge rate that applies to current purchases of Class A shares, and
o        Class A, Class B and Class N shares of Oppenheimer funds you previously purchased subject to an initial
                  or contingent deferred sales charge to reduce the sales charge rate for current purchases of
                  Class A shares, provided that you still hold your investment in one of the Oppenheimer funds.

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

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

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

Centennial America Fund, L. P.                                Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust                        Centennial Tax Exempt Trust
Centennial Government Trust                                   Oppenheimer Cash Reserves
Centennial Money Market Trust                                 Oppenheimer Money Market Fund, Inc.
1 - "OSM" is Oppenheimer Select Managers

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

If you make payments from your bank account to purchase shares of the Fund, your bank account will be
debited automatically. Normally the debit will be made two business days prior to the investment dates you
selected on your Application. Neither the Distributor, the Transfer Agent 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 15 days) after receipt of your instructions to implement them. The Fund reserves the right
to amend, suspend, or discontinue offering Asset Builder plans at any time without prior notice.

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

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

Classes of Shares. Each class of shares of the Fund represents an interest in the same portfolio of investments
of the Fund. However, each class has different shareholder privileges and features. The net income attributable
to Class B, Class C and Class N shares and the dividends payable on Class B, Class C and Class N shares will be
reduced by incremental expenses borne solely by that class. Those expenses include the asset-based sales charges
to which Class B, Class C and Class N 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
for selling from his or her firm Fund shares may receive different levels of compensation for selling one class
of shares than another.

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

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

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

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

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

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

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

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

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

Changes in the values of securities traded on foreign exchanges or markets as a result of events that
occur after the prices of those securities are determined, but before the close of The New York Stock Exchange,
will not be reflected in the Fund's calculation of its net asset values that day unless the Board of Trustees
determines that the event is likely to effect a material change in the value of the security. The Manager may
make that determination, under procedures established by the Board.

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

|_| Equity securities traded on a U.S. securities exchange or on NASDAQ are valued as follows:
(1) if last sale information is regularly reported, they are valued at the last reported sale price on the
principal exchange on which they are traded or on NASDAQ, as applicable, on that day, or
(2) if last sale information is not available on a valuation date, they are valued at the last reported sale
price preceding the valuation date if it is within the spread of the closing "bid" and "asked"
prices on the valuation date or, if not, at the closing "bid" price on the valuation date.
|_| Equity securities traded on a foreign securities exchange generally are valued in one of the
following ways:
(1) at the last sale price available to the pricing service approved by the Board of Trustees, or
(2) at the last sale price obtained by the Manager from the report of the principal exchange on which the
security is traded at its last trading session on or immediately before the valuation date, or
(3) at the mean between the "bid" and "asked" prices obtained from the principal exchange on which the
security is traded or, on the basis of reasonable inquiry, from two market makers in the
security.
|_| Long-term debt securities having a remaining maturity in excess of 60 days are valued based on the
mean between the "bid" and "asked" prices determined by a portfolio pricing service approved by the Fund's Board
of Trustees or obtained by the Manager from two active market makers in the security on the basis of reasonable
inquiry.
|_| The following securities are valued at the mean between the "bid" and "asked" prices determined by a
pricing service approved by the Fund's Board of Trustees or obtained by the Manager from two active market makers
in the security on the basis of reasonable inquiry:
(1) debt instruments that have a maturity of more than 397 days when issued,
(2) debt instruments that had a maturity of 397 days or less when issued and have a remaining maturity of
more than 60 days, and
(3) non-money market debt instruments that had a maturity of 397 days or less when issued and which have a
remaining maturity of 60 days or less.
|_| 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.
|_| Securities (including restricted securities) not having readily-available market quotations are
valued at fair value determined under the Board's procedures. If the Manager is unable to locate two market
makers willing to give quotes, a security may be priced at the mean between the "bid" and "asked" prices provided
by a single active market maker (which in certain cases may be the "bid" price if no "asked" price is available).

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

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

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

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

How to Sell Shares

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

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

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

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

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

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

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

Involuntary Redemptions. The Fund's Board of Trustees has the right to cause the involuntary redemption of the
shares held in any account if the aggregate net asset value of those shares is less than $200 or such lesser
amount as the Board may fix. The Board will not cause the involuntary redemption of shares in an account if the
aggregate net asset value of such shares has fallen below the stated minimum solely as a result of market
fluctuations. If the Board exercises this right, it may also fix the requirements for any notice to be given to
the shareholders in question (not less than 30 days). The Board may alternatively set requirements for the
shareholder to increase the investment, or set other terms and conditions so that the shares would not be
involuntarily redeemed.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Exchange Shares

As stated in the Prospectus, shares of a particular class of Oppenheimer funds having more than one
class of shares may be exchanged only for shares of the same class of other Oppenheimer funds. Shares of
Oppenheimer funds that have a single class without a class designation are deemed "Class A" shares for this
purpose. You can obtain a current list showing which funds offer which classes by calling the Distributor at
1.800.525.7048.
o All of the Oppenheimer funds currently offer Class A, B and C shares except Oppenheimer Money Market
Fund, Inc., Centennial Money Market Trust, Centennial Tax Exempt Trust, Centennial Government Trust,
Centennial New York Tax Exempt Trust, Centennial California Tax Exempt Trust, and Centennial America Fund,
L.P., which only offer Class A shares.
o Class B, Class C and Class N shares of Oppenheimer Cash Reserves are generally available only by
exchange from the same class of shares of other Oppenheimer funds or through OppenheimerFunds-sponsored
401(k) plans.
o Only certain Oppenheimer funds currently offer Class Y shares. Class Y shares of Oppenheimer Real Asset
Fund may not be exchanged for shares of any other fund.
o Only certain Oppenheimer funds currently offer Class N shares, which are only offered to retirement
plans as described in the Prospectus. Class N shares can be exchanged only for Class N shares of other
Oppenheimer funds.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged only for Class A shares of
other Oppenheimer funds. They may not be acquired by exchange of shares of any class of any other
Oppenheimer funds except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves
acquired by exchange of Class M shares.
o Class A shares of Senior Floating Rate Fund are not available by exchange of Class A shares of other
Oppenheimer funds. Class A shares of Senior Floating Rate Fund that are exchanged for shares of the other
Oppenheimer funds may not be exchanged back for Class A shares of Senior Floating Rate Fund.
o Class X shares of Limited Term New York Municipal Fund can be exchanged only for Class B shares of other
Oppenheimer funds and no exchanges may be made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for shares of Oppenheimer Money
Market Fund, Inc., Oppenheimer Cash Reserves or Oppenheimer Limited-Term Government Fund. Only participants
in certain retirement plans may purchase shares of Oppenheimer Capital Preservation Fund, and only those
participants may exchange shares of other Oppenheimer funds for shares of Oppenheimer Capital Preservation
Fund.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not available by exchange of shares of
Oppenheimer Money Market Fund or Class A shares of Oppenheimer Cash Reserves. If any Class A shares of
another Oppenheimer fund that are exchanged for Class A shares of Oppenheimer Senior Floating Rate Fund are
subject to the Class A contingent deferred sales charge of the other Oppenheimer fund at the time of
exchange, the holding period for that Class A contingent deferred sales charge will carry over to the Class
A shares of Oppenheimer Senior Floating Rate Fund acquired in the exchange. The Class A shares of
Oppenheimer Senior Floating Rate Fund acquired in that exchange will be subject to the Class A Early
Withdrawal Charge of Oppenheimer Senior Floating Rate Fund if they are repurchased before the expiration of
the holding period.
o Class A, Class B, Class C and Class Y Shares of Oppenheimer Select Managers Mercury Advisors S&P Index
Fund and Oppenheimer Select Managers QM Active Balanced Fund are only available to retirement plans and are
available only by exchange from the same class of shares of other Oppenheimer funds held by retirement plans.

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

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

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

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

|_| How Exchanges Affect Contingent Deferred Sales Charges. No contingent deferred sales charge is imposed on
exchanges of shares of any class purchased subject to a contingent deferred sales charge. However, when Class A
shares acquired by exchange of Class A shares of other Oppenheimer funds purchased subject to a Class A
contingent deferred sales charge are redeemed within 18 months of the end of the calendar month of the initial
purchase of the exchanged Class A shares, the Class A contingent deferred sales charge is imposed on the redeemed
shares. The Class B contingent deferred sales charge is imposed on Class B shares acquired by exchange if they
are redeemed within 6 years of the initial purchase of the exchanged Class B shares. The Class C contingent
deferred sales charge is imposed on Class C shares acquired by exchange if they are redeemed within 12 months of
the initial purchase of the exchanged Class C shares. With respect to Class N shares, a 1% contingent deferred
sales charge will be imposed if the retirement plan (not including IRAs and 403(b) plans) is terminated or Class
N shares of all Oppenheimer funds are terminated as an investment option of the plan and Class N shares are
redeemed within 18 months after the plan's first purchase of Class N shares of any Oppenheimer fund or with
respect to an individual retirement plan or 403(b) plan, Class N shares are redeemed within 18 months of the
plan's first purchase of Class N shares of any Oppenheimer fund.

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

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

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

|_| Processing Exchange Requests. Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption Date"). Normally, shares of the fund
to be acquired are purchased on the Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate transfer of the redemption
proceeds. The Fund reserves the right, in its discretion, to refuse any exchange request that may disadvantage
it. For example, if the receipt of multiple exchange requests from a dealer might require the disposition of
portfolio securities at a time or at a price that might be disadvantageous to the Fund, the Fund may refuse the
request. When you exchange some or all of your shares from one fund to another, any special account 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 and Class Y shares. That is because of the effect of
the asset-based sales charge on Class B, Class C and Class N shares. Those dividends will also differ in amount
as a consequence of any difference in the net asset values of the different classes of shares.

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

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

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

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

The Fund intends to qualify as a "regulated investment company" under the Internal Revenue Code
(although it reserves the right not to qualify). That qualification enables the Fund to "pass through" its income
and realized capital gains to shareholders without having to pay tax on them. This avoids a double tax on that
income and capital gains, since shareholders normally will be taxed on the dividends and capital gains they
receive from the Fund (unless the Fund's shares are held in a retirement account or the shareholder is otherwise
exempt from tax). If the Fund qualifies as a "regulated investment company" under the Internal Revenue Code, it
will not be liable for Federal income taxes on amounts paid by it as dividends and distributions. The Fund
qualified as a regulated investment company in its last fiscal year. The Internal Revenue Code contains a number
of complex tests relating to qualification which the Fund might not meet in any particular year. If it did not so
qualify, the Fund would be treated for tax purposes as an ordinary corporation and receive no tax deduction for
payments made to shareholders.

If prior distributions made by the Fund must be re-characterized as a non-taxable return of capital at
the end of the fiscal year as a result of the effect of the Fund's investment policies, they will be identified
as such in notices sent to shareholders.

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

Additional Information About the Fund

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

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

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

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

INDEPENDENT AUDITORS' REPORT


================================================================================
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
OPPENHEIMER CAPITAL APPRECIATION FUND:

We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Oppenheimer Capital Appreciation Fund as of
August 31, 2000, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended and the financial highlights for each of the years in
the four-year period then ended, the eight-month period ended August 31, 1996
and the year ended December 31, 1995. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 2000, by correspondence with the custodian and
brokers; and where confirmations were not received from brokers, we performed
other auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Oppenheimer Capital Appreciation Fund as of August 31, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and the financial highlights for
each of the years in the four-year period then ended, the eight-month period
ended August 31, 1996 and the year ended December 31, 1995, in conformity with
accounting principles generally accepted in the United States of America.




 KPMG LLP

 Denver, Colorado
 September 22, 2000



STATEMENT OF INVESTMENTS  August 31, 2000



                                                                     MARKET VALUE
                                                            SHARES     SEE NOTE 1
==================================================================================
COMMON STOCKS--88.5%
- ----------------------------------------------------------------------------------

BASIC MATERIALS--0.7%
- ----------------------------------------------------------------------------------
CHEMICALS--0.5%
Lafarge Corp.                                              400,300   $  9,757,312
- ----------------------------------------------------------------------------------
PPG Industries, Inc.                                       300,000     12,150,000
- ----------------------------------------------------------------------------------
Union Carbide Corp.                                        230,000      9,214,375
                                                                     -------------
                                                                       31,121,687

- ----------------------------------------------------------------------------------
METALS--0.1%
Alcoa, Inc.                                                280,000      9,310,000
- ----------------------------------------------------------------------------------
PAPER--0.1%
Boise Cascade Corp.                                        160,000      4,780,000
- ----------------------------------------------------------------------------------
CAPITAL GOODS--8.9%
- ----------------------------------------------------------------------------------
AEROSPACE/DEFENSE--0.2%
Boeing Co.                                                 230,000     12,333,750
- ----------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.9%
Vishay Intertechnology, Inc.(1)                          1,500,000     60,468,750
- ----------------------------------------------------------------------------------
INDUSTRIAL SERVICES--0.6%
Coflexip SA, Sponsored ADR                                 145,200      8,625,787
- ----------------------------------------------------------------------------------
Republic Services, Inc.(1)                                 600,000      8,775,000
- ----------------------------------------------------------------------------------
Waste Management, Inc.                                   1,200,000     22,725,000
                                                                     -------------
                                                                       40,125,787

- ----------------------------------------------------------------------------------
MANUFACTURING--7.2%
Corning, Inc.                                              170,600     55,946,137
- ----------------------------------------------------------------------------------
Dover Corp.                                                600,000     29,325,000
- ----------------------------------------------------------------------------------
Flextronics International Ltd.(1)                        1,130,000     94,143,125
- ----------------------------------------------------------------------------------
Honeywell International, Inc.                              400,000     15,425,000
- ----------------------------------------------------------------------------------
Minnesota Mining&Manufacturing Co.                       650,000     60,450,000
- ----------------------------------------------------------------------------------
Sanmina Corp.(1)                                         1,570,000    185,260,000
- ----------------------------------------------------------------------------------
Tyco International Ltd.                                    200,000     11,400,000
- ----------------------------------------------------------------------------------
United Technologies Corp.                                  260,000     16,233,750
- ----------------------------------------------------------------------------------
Veeco Instruments, Inc.(1)                                 180,000     16,132,500
                                                                     -------------
                                                                      484,315,512



                    12 OPPENHEIMER CAPITAL APPRECIATION FUND





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

COMMUNICATION SERVICES--3.3%
- ----------------------------------------------------------------------------------
TELECOMMUNICATIONS-LONG DISTANCE--0.6%
AT&T Corp.                                                 350,000   $ 11,025,000
- ----------------------------------------------------------------------------------
WorldCom, Inc.(1)                                          830,000     30,295,000
                                                                     -------------
                                                                       41,320,000

- ----------------------------------------------------------------------------------
TELECOMMUNICATIONS-WIRELESS--2.7%
Amdocs Ltd.(1)                                             384,600     27,474,862
- ----------------------------------------------------------------------------------
AT&T Wireless Group(1)                                     372,400      9,752,225
- ----------------------------------------------------------------------------------
Nextel Communications, Inc., Cl. A(1)                      600,000     33,262,500
- ----------------------------------------------------------------------------------
Tycom Ltd.(1)                                              116,200      4,836,825
- ----------------------------------------------------------------------------------
Vodafone Group plc, Sponsored ADR                        2,300,000     94,156,250
- ----------------------------------------------------------------------------------
Williams Communications Group, Inc.(1)                     421,800     12,390,375
                                                                     -------------
                                                                      181,873,037

- ----------------------------------------------------------------------------------
CONSUMER CYCLICALS--9.8%
- ----------------------------------------------------------------------------------
AUTOS&HOUSING--1.4%
Centex Corp.                                               615,000     17,758,125
- ----------------------------------------------------------------------------------
Ethan Allen Interiors, Inc.                                485,550     13,079,503
- ----------------------------------------------------------------------------------
Ford Motor Co.                                           1,748,175     42,283,983
- ----------------------------------------------------------------------------------
Gentex Corp.(1)                                            680,000     17,595,000
                                                                     -------------
                                                                       90,716,611

- ----------------------------------------------------------------------------------
CONSUMER SERVICES--1.2%
Omnicom Group, Inc.                                        730,000     60,909,375
- ----------------------------------------------------------------------------------
Young&Rubicam, Inc.                                      330,000     19,305,000
                                                                     -------------
                                                                       80,214,375

- ----------------------------------------------------------------------------------
LEISURE&ENTERTAINMENT--1.1%
Carnival Corp.                                           2,200,000     43,862,500
- ----------------------------------------------------------------------------------
Harley-Davidson, Inc.                                      600,000     29,887,500
                                                                     -------------
                                                                       73,750,000

- ----------------------------------------------------------------------------------
MEDIA--3.9%
News Corp. Ltd. (The), Sponsored ADR                     1,850,000     97,356,250
- ----------------------------------------------------------------------------------
Time Warner, Inc.                                        1,900,000    162,450,000
                                                                     -------------
                                                                      259,806,250



                    13 OPPENHEIMER CAPITAL APPRECIATION FUND



STATEMENT OF INVESTMENTS Continued



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

RETAIL:  SPECIALTY--2.1%
Abercrombie&Fitch Co., Cl. A(1)                          900,000   $ 20,868,750
- ----------------------------------------------------------------------------------
Gap, Inc.                                                1,750,000     39,265,625
- ----------------------------------------------------------------------------------
Nike, Inc., Cl. B                                          850,000     33,628,125
- ----------------------------------------------------------------------------------
Tiffany &Co.                                              800,000     33,300,000
- ----------------------------------------------------------------------------------
Zale Corp.(1)                                              398,800     14,730,675
                                                                     -------------
                                                                      141,793,175

- ----------------------------------------------------------------------------------
TEXTILE/APPAREL&HOME FURNISHINGS--0.1%
Too, Inc.(1)                                               360,000      8,865,000
- ----------------------------------------------------------------------------------
CONSUMER STAPLES--11.4%
- ----------------------------------------------------------------------------------
BEVERAGES--2.0%
Adolph Coors Co., Cl. B                                    500,000     29,781,250
- ----------------------------------------------------------------------------------
Anheuser-Busch Cos., Inc.                                  400,000     31,525,000
- ----------------------------------------------------------------------------------
PepsiCo, Inc.                                              800,000     34,100,000
- ----------------------------------------------------------------------------------
Seagram Co. Ltd. (The)                                     650,000     39,121,875
                                                                     -------------
                                                                      134,528,125

- ----------------------------------------------------------------------------------
BROADCASTING--5.0%
Cablevision Systems Corp., Cl. A(1)                        430,000     28,917,500
- ----------------------------------------------------------------------------------
Clear Channel Communications, Inc.(1)                    1,168,000     84,534,000
- ----------------------------------------------------------------------------------
Comcast Corp., Cl. A Special(1)                          2,610,000     97,222,500
- ----------------------------------------------------------------------------------
Fox Entertainment Group, Inc., A Shares(1)                 650,000     18,809,375
- ----------------------------------------------------------------------------------
Hispanic Broadcasting Corp.(1)                             750,000     19,265,625
- ----------------------------------------------------------------------------------
Infinity Broadcasting Corp., Cl. A(1)                    1,650,000     62,493,750
- ----------------------------------------------------------------------------------
Rogers Communications, Inc., Cl. B(1)                    1,005,200     24,811,338
                                                                     -------------
                                                                      336,054,088

- ----------------------------------------------------------------------------------
ENTERTAINMENT--2.0%
Royal Caribbean Cruises Ltd.                             2,280,000     52,155,000
- ----------------------------------------------------------------------------------
Viacom, Inc., Cl. B(1)                                   1,220,000     82,121,250
                                                                     -------------
                                                                      134,276,250

- ----------------------------------------------------------------------------------
FOOD--0.6%
Keebler Foods Co.                                          500,000     22,906,250
- ----------------------------------------------------------------------------------
Nabisco Holdings Corp., Cl. A                              300,000     16,031,250
                                                                     -------------
                                                                       38,937,500


                    14 OPPENHEIMER CAPITAL APPRECIATION FUND







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

FOOD&DRUG RETAILERS--1.2%
CVS Corp.                                                1,000,000   $ 37,125,000
- ----------------------------------------------------------------------------------
Safeway, Inc.(1)                                           900,000     44,381,250
                                                                     -------------
                                                                       81,506,250

- ----------------------------------------------------------------------------------
HOUSEHOLD GOODS--0.6%
Avon Products, Inc.                                      1,100,000     43,106,250
- ----------------------------------------------------------------------------------
ENERGY--5.7%
- ----------------------------------------------------------------------------------
ENERGY SERVICES--2.5%
Coastal Corp.                                              800,000     55,100,000
- ----------------------------------------------------------------------------------
Constellation Energy Group, Inc.                           150,000      5,737,500
- ----------------------------------------------------------------------------------
ENSCO International, Inc.                                  100,000      3,987,500
- ----------------------------------------------------------------------------------
Halliburton Co.                                            600,000     31,800,000
- ----------------------------------------------------------------------------------
Nabors Industries, Inc.(1)                                 540,000     25,683,750
- ----------------------------------------------------------------------------------
Schlumberger Ltd.                                          300,000     25,593,750
- ----------------------------------------------------------------------------------
Transocean Sedco Forex, Inc.                               300,000     17,925,000
                                                                     -------------
                                                                      165,827,500

- ----------------------------------------------------------------------------------
OIL:  DOMESTIC--2.3%
Amerada Hess Corp.                                         766,700     52,471,031
- ----------------------------------------------------------------------------------
Exxon Mobil Corp.                                        1,050,000     85,706,250
- ----------------------------------------------------------------------------------
Forest Oil Corp.(1)                                        600,000      9,187,500
- ----------------------------------------------------------------------------------
Tosco Corp.                                                160,000      4,880,000
                                                                     -------------
                                                                      152,244,781

- ----------------------------------------------------------------------------------
OIL:  INTERNATIONAL--0.9%
Total Fina Elf SA, Sponsored ADR                           700,000     52,150,000
- ----------------------------------------------------------------------------------
Varco International, Inc.(1)                               460,000      9,286,250
                                                                     -------------
                                                                       61,436,250

- ----------------------------------------------------------------------------------
FINANCIAL--9.6%
- ----------------------------------------------------------------------------------
BANKS--1.8%
Bank of America Corp.                                      600,000     32,137,500
- ----------------------------------------------------------------------------------
Chase Manhattan Corp.                                    1,125,000     62,859,375
- ----------------------------------------------------------------------------------
FleetBoston Financial Corp.                                525,000     22,410,937
                                                                     -------------
                                                                      117,407,812


                    15 OPPENHEIMER CAPITAL APPRECIATION FUND





STATEMENT OF INVESTMENTS Continued



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

DIVERSIFIED FINANCIAL--5.5%
Associates First Capital Corp., Cl. A                    1,300,000   $ 36,562,500
- ----------------------------------------------------------------------------------
C.I.T. Group, Inc., Cl. A                                  580,000     10,150,000
- ----------------------------------------------------------------------------------
Citigroup, Inc.                                          1,800,000    105,075,000
- ----------------------------------------------------------------------------------
Merrill Lynch&Co., Inc.                                  400,000     58,000,000
- ----------------------------------------------------------------------------------
Morgan Stanley Dean Witter&Co.                           660,000     70,991,250
- ----------------------------------------------------------------------------------
Price (T. Rowe) Associates, Inc.                           256,800     11,620,200
- ----------------------------------------------------------------------------------
Schwab (Charles) Corp.                                     862,500     32,936,719
- ----------------------------------------------------------------------------------
Stilwell Financial, Inc.(1)                                880,000     42,570,000
                                                                     -------------
                                                                      367,905,669

- ----------------------------------------------------------------------------------
INSURANCE--1.6%
American International Group, Inc.                         345,000     30,748,125
- ----------------------------------------------------------------------------------
AXA Financial, Inc.                                      1,350,000     69,862,500
- ----------------------------------------------------------------------------------
Everest Re Group Ltd.                                      200,000      8,050,000
                                                                     -------------
                                                                      108,660,625

- ----------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS--0.7%
Boston Properties, Inc.                                    900,000     36,393,750
- ----------------------------------------------------------------------------------
Equity Office Properties Trust                             300,000      8,662,500
                                                                     -------------
                                                                       45,056,250

- ----------------------------------------------------------------------------------
HEALTHCARE--6.4%
- ----------------------------------------------------------------------------------
HEALTHCARE/DRUGS--4.9%
ALZA Corp., Cl. A(1)                                       525,000     39,703,125
- ----------------------------------------------------------------------------------
Amgen, Inc.(1)                                             630,000     47,761,875
- ----------------------------------------------------------------------------------
Elan Corp. plc, ADR(1)                                   1,050,000     61,228,125
- ----------------------------------------------------------------------------------
Forest Laboratories, Inc.(1)                               240,000     23,490,000
- ----------------------------------------------------------------------------------
Pfizer, Inc.                                             2,070,000     89,527,500
- ----------------------------------------------------------------------------------
Pharmacia Corp.                                          1,120,000     65,590,000
                                                                     -------------
                                                                      327,300,625

- ----------------------------------------------------------------------------------
HEALTHCARE/SUPPLIES&SERVICES--1.5%
Baxter International, Inc.                                 335,000     27,888,750
- ----------------------------------------------------------------------------------
Becton, Dickinson&Co.                                  1,000,000     30,125,000
- ----------------------------------------------------------------------------------
Medtronic, Inc.                                            540,000     27,675,000
- ----------------------------------------------------------------------------------
PerkinElmer, Inc.                                          150,000     13,490,625
                                                                     -------------
                                                                       99,179,375


                    16 OPPENHEIMER CAPITAL APPRECIATION FUND







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

TECHNOLOGY--29.2%
- ----------------------------------------------------------------------------------
COMPUTER HARDWARE--2.9%
Compaq Computer Corp.                                      800,000   $ 27,250,000
- ----------------------------------------------------------------------------------
Dell Computer Corp.(1)                                     200,000      8,725,000
- ----------------------------------------------------------------------------------
Hewlett-Packard Co.                                        200,000     24,150,000
- ----------------------------------------------------------------------------------
Network Appliance, Inc.(1)                                 384,700     45,009,900
- ----------------------------------------------------------------------------------
Read-Rite Corp.(1)                                         110,000        993,438
- ----------------------------------------------------------------------------------
Seagate Technology, Inc.(1)                              1,100,000     65,312,500
- ----------------------------------------------------------------------------------
Sun Microsystems, Inc.(1)                                  150,000     19,040,625
                                                                     -------------
                                                                      190,481,463

- ----------------------------------------------------------------------------------
COMPUTER SOFTWARE--7.0%
America Online, Inc.(1)                                  1,100,000     64,487,500
- ----------------------------------------------------------------------------------
BMC Software, Inc.(1)                                    1,000,000     27,000,000
- ----------------------------------------------------------------------------------
Microsoft Corp.(1)                                       2,300,000    160,568,750
- ----------------------------------------------------------------------------------
Novell, Inc.(1)                                          2,170,000     26,582,500
- ----------------------------------------------------------------------------------
Oracle Corp.(1)                                            900,000     81,843,750
- ----------------------------------------------------------------------------------
Sybase, Inc.(1)                                            840,000     23,047,500
- ----------------------------------------------------------------------------------
Veritas Software Corp.(1)                                  390,000     47,019,375
- ----------------------------------------------------------------------------------
Yahoo!, Inc.(1)                                            280,000     34,020,000
                                                                     -------------
                                                                      464,569,375

- ----------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--9.6%
ADC Telecommunications, Inc.(1)                            400,000     16,375,000
- ----------------------------------------------------------------------------------
Cisco Systems, Inc.(1)                                   2,800,000    192,150,000
- ----------------------------------------------------------------------------------
L.M. Ericsson Telephone Co. ADR, Cl. B                     800,000     16,400,000
- ----------------------------------------------------------------------------------
Lucent Technologies, Inc.                                1,350,000     56,446,875
- ----------------------------------------------------------------------------------
Nokia Corp., A Shares, Sponsored ADR                     4,170,000    187,389,375
- ----------------------------------------------------------------------------------
Nortel Networks Corp.                                    1,800,000    146,812,500
- ----------------------------------------------------------------------------------
Tellabs, Inc.(1)                                           470,000     26,408,125
                                                                     -------------
                                                                      641,981,875

- ----------------------------------------------------------------------------------
ELECTRONICS--9.7%
Analog Devices, Inc.(1)                                    540,000     54,270,000
- ----------------------------------------------------------------------------------
Applied Materials, Inc.(1)                                 238,832     20,614,187
- ----------------------------------------------------------------------------------
Atmel Corp.(1)                                           3,400,000     68,000,000
- ----------------------------------------------------------------------------------
Cypress Semiconductor Corp.(1)                             800,000     39,550,000
- ----------------------------------------------------------------------------------
DuPont Photomasks, Inc.(1)                                 299,100     22,694,213
- ----------------------------------------------------------------------------------
International Rectifier Corp.(1)                           650,000     40,909,375


                    17 OPPENHEIMER CAPITAL APPRECIATION FUND



STATEMENT OF INVESTMENTS Continued




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

ELECTRONICS Continued
JDS Uniphase Corp.(1)                                      150,000   $ 18,672,656
- ----------------------------------------------------------------------------------
Micron Technology, Inc.(1)                                 600,000     49,050,000
- ----------------------------------------------------------------------------------
National Semiconductor Corp.(1)                            880,000     39,160,000
- ----------------------------------------------------------------------------------
Novellus Systems, Inc.(1)                                  640,000     39,400,000
- ----------------------------------------------------------------------------------
RF Micro Devices, Inc.(1)                                1,400,000     62,475,000
- ----------------------------------------------------------------------------------
Texas Instruments, Inc.                                    800,000     53,550,000
- ----------------------------------------------------------------------------------
Vitesse Semiconductor Corp.(1)                             905,000     80,375,313
- ----------------------------------------------------------------------------------
Waters Corp.(1)                                            720,000     57,285,000
                                                                     -------------
                                                                      646,005,744

- ----------------------------------------------------------------------------------
TRANSPORTATION--1.2%
- ----------------------------------------------------------------------------------
AIR TRANSPORTATION--0.1%
AMR Corp.(1)                                               300,000      9,843,750
- ----------------------------------------------------------------------------------
RAILROADS& TRUCKERS--0.7%
Canadian Pacific Ltd.                                    1,450,000     39,603,125
- ----------------------------------------------------------------------------------
CSX Corp.                                                  381,600      9,110,700
                                                                     -------------
                                                                       48,713,825

- ----------------------------------------------------------------------------------
SHIPPING--0.4%
FedEx Corp.(1)                                             600,000     24,210,000
- ----------------------------------------------------------------------------------
UTILITIES--2.3%
- ----------------------------------------------------------------------------------
ELECTRIC UTILITIES--1.6%
Calpine Corp.(1)                                           886,400     87,753,600
- ----------------------------------------------------------------------------------
Potomac Electric Power Co.                                 700,000     17,631,250
                                                                     -------------
                                                                      105,384,850

- ----------------------------------------------------------------------------------
GAS UTILITIES--0.7%
Kinder Morgan, Inc.                                        300,000     11,043,750
- ----------------------------------------------------------------------------------
Williams Cos., Inc. (The)                                  800,000     36,850,000
                                                                     -------------
                                                                       47,893,750
                                                                     -------------
Total Common Stocks (Cost $4,063,739,153)                           5,913,305,916



                    18 OPPENHEIMER CAPITAL APPRECIATION FUND





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

U.S. GOVERNMENT OBLIGATIONS--0.4%
U.S. Treasury Nts., 6.375%, 4/30/02 (Cost $29,804,581)   $30,000,000   $ 30,056,250

====================================================================================
STRUCTURED INSTRUMENTS--0.4%
Credit Suisse First Boston Corp. (New York Branch),
Carnival Corp. Equity Linked Nts., 7%, 7/17/02(2)         15,000,834     14,475,805
- ------------------------------------------------------------------------------------
Merrill Lynch&Co. Medium-Term Linked Nts., Series B,
7%, 7/8/02                                                15,000,000     10,950,000
                                                                       -------------
Total Structured Instruments (Cost $30,000,834)                          25,425,805

====================================================================================
SHORT-TERM NOTES--7.2%
American Express Credit Corp., 6.52%, 9/13/00             21,100,000     21,054,143
- ------------------------------------------------------------------------------------
CIESCO LP, 6.49%, 10/5/00                                 50,000,000     49,693,528
- ------------------------------------------------------------------------------------
Coca-Cola Enterprises, Inc., 6.49%, 9/15/00               30,000,000     29,924,283
- ------------------------------------------------------------------------------------
Corporate Asset-Backed Corp., 6.51%, 10/6/00              35,100,000     34,877,846
- ------------------------------------------------------------------------------------
Corporate Receivables Corp., 6.53%, 9/20/00               50,000,000     49,827,681
- ------------------------------------------------------------------------------------
GE Capital International Funding, Inc., 6.52%, 9/21/00    50,000,000     49,818,889
- ------------------------------------------------------------------------------------
Heller Financial, Inc., 6.57%, 9/21/00                    25,000,000     24,908,750
- ------------------------------------------------------------------------------------
Heller Financial, Inc., 6.61%, 9/5/00                     50,000,000     49,963,278
- ------------------------------------------------------------------------------------
Household Finance Corp., 6.51%, 9/14/00                   25,000,000     24,941,229
- ------------------------------------------------------------------------------------
Motiva Enterprises LLC, 6.51%, 9/18/00                    25,000,000     24,923,146
- ------------------------------------------------------------------------------------
Motiva Enterprises LLC, 6.52%, 9/19/00                    20,000,000     19,934,800
- ------------------------------------------------------------------------------------
New Center Asset Trust, 6.52%, 10/19/00                   50,000,000     49,565,333
- ------------------------------------------------------------------------------------
Wal-Mart Stores, Inc., 6.50%, 10/11/00                    50,000,000     49,638,889
                                                                       -------------

Total Short-Term Notes (Cost $479,071,795)                              479,071,795

                                                              SHARES
====================================================================================
OTHER SECURITIES--0.7%
Nasdaq-100 Unit Investment Trust(1) (Cost $40,833,810)       420,000     42,787,500



                    19 OPPENHEIMER CAPITAL APPRECIATION FUND




STATEMENT OF INVESTMENTS Continued




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

REPURCHASE AGREEMENTS--2.6%
Repurchase agreement with Zion First National Bank, 6.57%,
dated 8/31/00, to be repurchased at $174,935,920 on 9/1/00,
collateralized by U.S. Treasury Nts., 5.25%-7.75%, 2/28/01-7/15/06,
with a value of $178,748,017 (Cost $174,904,000)                     $174,904,000   $  174,904,000
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $4,818,354,173)                            99.8%   6,665,551,266
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS NET OF LIABILITIES                                               0.2       14,326,190
                                                                     ------------------------------
NET ASSETS                                                                  100.0%  $6,679,877,456
                                                                     ==============================




FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Non-income-producing security.

2. Identifies issues considered to be illiquid or restricted--See Note 6 of
Notes to Financial Statements.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



                    20 OPPENHEIMER CAPITAL APPRECIATION FUND




STATEMENT OF ASSETS AND LIABILITIES August 31, 2000



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

ASSETS
Investments, at value (cost $4,818,354,173)--see accompanying statement           $ 6,665,551,266
- ---------------------------------------------------------------------------------------------------
Cash                                                                                      800,527
- ---------------------------------------------------------------------------------------------------
Receivables and other assets:
Shares of beneficial interest sold                                                     17,525,560
Interest and dividends                                                                  5,037,504
Other                                                                                     332,127
                                                                                  -----------------
Total assets                                                                        6,689,246,984

===================================================================================================
LIABILITIES
Payables and other liabilities:
Shares of beneficial interest redeemed                                                  3,482,119
Distribution and service plan fees                                                      2,037,605
Transfer and shareholder servicing agent fees                                           1,964,735
Investments purchased                                                                     715,143
Registration and filing fees                                                              533,533
Trustees' compensation                                                                    340,653
Other                                                                                     295,740
                                                                                  -----------------
Total liabilities                                                                       9,369,528

===================================================================================================
NET ASSETS                                                                         $6,679,877,456
                                                                                  =================

===================================================================================================
COMPOSITION OF NET ASSETS
Paid-in capital                                                                    $4,320,720,098
- ---------------------------------------------------------------------------------------------------
Overdistributed net investment income                                                    (277,880)
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions                                                         512,238,145
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies                         1,847,197,093
                                                                                  -----------------
NET ASSETS                                                                         $6,679,877,456
                                                                                  =================



                    21 OPPENHEIMER CAPITAL APPRECIATION FUND





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 $3,648,961,253 and 58,738,938 shares of beneficial interest outstanding)            $62.12
Maximum offering price per share (net asset value plus sales charge
of 5.75% of offering price)                                                            $65.91
- ----------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$1,333,386,578 and 22,296,891 shares of beneficial interest outstanding)               $59.80
- ----------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge) and offering price per share (based on net assets of
$402,442,191 and 6,799,509 shares of beneficial interest outstanding)                  $59.19
- ----------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net
assets of $1,295,087,434 and 20,718,203 shares of
beneficial interest outstanding)                                                       $62.51



SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    22 OPPENHEIMER CAPITAL APPRECIATION FUND





STATEMENT OF OPERATIONS  For the Year Ended August 31, 2000


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

INVESTMENT INCOME
Interest                                                                       $   27,097,486
- ----------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $414,408)                           25,774,191
                                                                               ---------------
Total income                                                                       52,871,677
==============================================================================================
EXPENSES
Management fees                                                                    29,201,218
- ----------------------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                                             6,679,168
Class B                                                                             9,208,551
Class C                                                                             2,791,044
- ----------------------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                                             5,744,473
Class B                                                                             1,861,755
Class C                                                                               561,676
Class Y                                                                                43,089
- ----------------------------------------------------------------------------------------------
Trustees' compensation                                                                205,344
- ----------------------------------------------------------------------------------------------
Custodian fees and expenses                                                           199,919
- ----------------------------------------------------------------------------------------------
Other                                                                               1,751,079
                                                                               ---------------
Total expenses                                                                     58,247,316
Less expenses paid indirectly                                                         (70,909)
                                                                               ---------------
Net expenses                                                                       58,176,407

==============================================================================================
NET INVESTMENT LOSS                                                                (5,304,730)

==============================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments                                                                       610,655,373
Foreign currency transactions                                                        (133,737)
                                                                               ---------------
Net realized gain                                                                 610,521,636

- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments                                                                     1,150,735,827
Translation of assets and liabilities denominated in foreign currencies               247,932
                                                                               ---------------
Net change                                                                      1,150,983,759
                                                                               ---------------
Net realized and unrealized gain                                                1,761,505,395

==============================================================================================
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                           $1,756,200,665
                                                                               ===============



SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    23 OPPENHEIMER CAPITAL APPRECIATION FUND





STATEMENT OF CHANGES IN NET ASSETS




YEAR ENDED AUGUST 31,                                                                   2000              1999
================================================================================================================

OPERATIONS
Net investment loss                                                          $    (5,304,730)   $   (4,314,868)
- ----------------------------------------------------------------------------------------------------------------
Net realized gain                                                                610,521,636       213,387,917
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation                                          1,150,983,759       635,648,269
                                                                             ---------------    ----------------
Net increase in net assets resulting from operations                           1,756,200,665       844,721,318

================================================================================================================
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income:
Class A                                                                                   --        (3,435,127)
Class Y                                                                                   --        (1,089,768)
- ----------------------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A                                                                         (156,146,182)     (101,506,314)
Class B                                                                          (44,540,426)      (17,982,633)
Class C                                                                          (13,722,828)       (6,603,979)
Class Y                                                                          (34,586,462)      (14,490,090)

================================================================================================================
BENEFICIAL INTEREST TRANSACTIONS
Net increase in net assets resulting from beneficial interest transactions:
Class A                                                                          665,798,352       332,180,412
Class B                                                                          530,123,230       250,141,075
Class C                                                                          155,176,037        57,426,203
Class Y                                                                          632,947,701       165,100,529

================================================================================================================
NET ASSETS
Total increase                                                                 3,491,250,087     1,504,461,626
- ----------------------------------------------------------------------------------------------------------------
Beginning of period                                                            3,188,627,369     1,684,165,743
                                                                             ---------------    ----------------

End of period (including overdistributed net investment
income of $277,880 and $213,477, respectively)                                $6,679,877,456    $3,188,627,369
                                                                             ===============    ================



SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    24 OPPENHEIMER CAPITAL APPRECIATION FUND



FINANCIAL HIGHLIGHTS




                                                                                                  YEAR       YEAR
                                                                                                 ENDED      ENDED
                                                                                              AUG. 31,   DEC. 31,
CLASS A                                            2000        1999       1998        1997        1996(1)    1995
==================================================================================================================

PER SHARE OPERATING DATA
Net asset value, beginning of period             $44.73      $32.53     $38.63      $30.81      $27.44    $ 22.63
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                       (.02)       (.04)       .17         .18         .11        .24
Net realized and unrealized gain (loss)           20.63       14.87      (1.55)      11.36        3.26       7.61
                                                 -----------------------------------------------------------------
Total income (loss) from
investment operations                             20.61       14.83      (1.38)      11.54        3.37       7.85
- ------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                 --        (.09)      (.15)       (.17)         --       (.24)
Distributions from net realized gain              (3.22)      (2.54)     (4.57)      (3.55)         --      (2.80)
                                                 -----------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                   (3.22)      (2.63)     (4.72)      (3.72)         --      (3.04)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $62.12      $44.73     $32.53      $38.63      $30.81     $27.44
                                                 ================================================================

==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2)               48.01%      47.36%     (4.06)%     40.52%      12.28%     34.85%

==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)          $3,649      $2,071     $1,234      $1,179        $789       $758
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in millions)                 $2,898      $1,789     $1,353      $  986        $790       $538
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income (loss)                          0%      (0.05)%     0.48%       0.53%       0.55%      1.08%
Expenses                                           1.06%       1.04%      1.00%(4)    1.01%(4)    1.09%(4)
1.03%(4)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                              44%         59%        60%         66%         45%        72%



1. For the eight months ended August 31, 1996. The Fund changed its fiscal year
end from December 31 to August 31.

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

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

4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.



                    25 OPPENHEIMER CAPITAL APPRECIATION FUND




FINANCIAL HIGHLIGHTS  Continued




                                                                                                  YEAR       YEAR
                                                                                                 ENDED      ENDED
                                                                                              AUG. 31,   DEC. 31,
CLASS B                                            2000        1999       1998        1997        1996(1)
1995(2)
==================================================================================================================

PER SHARE OPERATING DATA

Net asset value, beginning of period             $43.48      $31.85     $38.07      $30.56      $27.37     $29.77
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                       (.20)       (.21)      (.02)        .07          --       (.14)
Net realized and unrealized gain (loss)           19.74       14.38      (1.62)      11.05        3.19        .78
                                                ------------------------------------------------------------------
Total income (loss) from
investment operations                             19.54       14.17      (1.64)      11.12        3.19        .64
- ------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                 --          --       (.01)       (.06)         --       (.24)
Distributions from net realized gain              (3.22)      (2.54)     (4.57)      (3.55)         --      (2.80)
                                                ------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                   (3.22)      (2.54)     (4.58)      (3.61)         --      (3.04)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $59.80      $43.48     $31.85      $38.07      $30.56     $27.37
                                                ==================================================================

==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3)               46.88%      46.20%     (4.86)%     39.30%      11.65%      1.67%

==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)          $1,333        $532       $194         $52          $5         $3
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in millions)                 $  922        $372       $133         $24          $4         $1
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment loss                               (0.76)%     (0.86)%    (0.37)%     (0.33)%     (0.25)%
(0.54)%
Expenses                                           1.83%       1.84%      1.81%(5)    1.86%(5)    1.94%(5)
2.62%(5)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                              44%         59%        60%         66%         45%        72%



1. For the eight months ended August 31, 1996. The Fund changed its fiscal year
end from December 31 to August 31.

2. For the period from November 1, 1995 (inception of offering) to December 31,
1995.

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

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

5. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    26 OPPENHEIMER CAPITAL APPRECIATION FUND





                                                                                                  YEAR       YEAR
                                                                                                 ENDED      ENDED
                                                                                              AUG. 31,   DEC. 31,
CLASS C                                            2000        1999       1998        1997        1996(1)    1995
=================================================================================================================

PER SHARE OPERATING DATA
Net asset value, beginning of period             $43.06      $31.57     $37.76      $30.27      $27.11     $22.50
- -----------------------------------------------------------------------------------------------------------------

Income (loss) from investment operations:
Net investment income (loss)                       (.18)       (.23)      (.03)        .01        (.03)       .09
Net realized and unrealized gain (loss)           19.53       14.26      (1.59)      11.03        3.19       7.43
                                               ------------------------------------------------------------------
Total income (loss) from
investment operations                             19.35       14.03      (1.62)      11.04        3.16       7.52
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income              --          --         --          --          --          (.11)
Distributions from net realized gain              (3.22)      (2.54)     (4.57)      (3.55)      --         (2.80)
                                               ------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                   (3.22)      (2.54)     (4.57)      (3.55)      --         (2.91)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $59.19      $43.06     $31.57      $37.76      $30.27     $27.11
                                               ==================================================================

=================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2)               46.89%      46.16%     (4.84)%     39.35%      11.66%     33.56%

=================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)            $402        $165        $76         $36         $10         $7
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in millions)                   $279        $126        $62         $20         $ 9         $4
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income (loss)                      (0.76)%     (0.86)%    (0.36)%     (0.32)%     (0.30)%     0.19%
Expenses                                           1.83%       1.85%      1.82%(4)    1.85%(4)    1.93%(4)
1.90%(4)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                              44%         59%        60%         66%         45%        72%



1. For the eight months ended August 31, 1996. The Fund changed its fiscal year
end from December 31 to August 31.

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

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

4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                    27 OPPENHEIMER CAPITAL APPRECIATION FUND




FINANCIAL HIGHLIGHTS  Continued



                                                                                                YEAR       PERIOD
                                                                                               ENDED        ENDED
                                                                                          AUGUST 31,   AUGUST 31,
CLASS Y                                                                           2000          1999
1998(1)
=================================================================================================================

PER SHARE OPERATING DATA
Net asset value, beginning of period                                            $44.81        $32.56       $40.15
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                                              .13           .13          .30
Net realized and unrealized gain (loss)                                          20.79         14.85        (3.11)
                                                                                ---------------------------------
Total income (loss) from investment operations                                   20.92         14.98        (2.81)
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                                             --             (.19)        (.21)
Distributions from net realized gain                                             (3.22)        (2.54)       (4.57)
                                                                                ---------------------------------
Total dividends and/or distributions
to shareholders                                                                  (3.22)        (2.73)       (4.78)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                                  $62.51        $44.81       $32.56
                                                                                =================================

=================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2)                                             48.64%        47.90%       (7.45)%

=================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)                                         $1,295          $420         $181
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in millions)                                                 $ 855          $307         $139
Ratios to average net assets:(3)
Net investment income                                                            0.45%         0.30%         0.75%
Expenses                                                                         0.64%         0.68%
0.69%(4)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                                            44%           59%         60%



1. For the period from November 3, 1997 (inception of offering) to August 31,
1998.

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

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

4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

                    28 OPPENHEIMER CAPITAL APPRECIATION FUND





NOTES TO FINANCIAL STATEMENTS


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

Oppenheimer Capital Appreciation Fund (the Fund) is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund's investment objective is to seek capital appreciation. The
Fund's investment advisor is OppenheimerFunds, Inc. (the Manager).

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

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

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

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

                    29 OPPENHEIMER CAPITAL APPRECIATION FUND



NOTES TO FINANCIAL STATEMENTS Continued
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

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

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

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

- --------------------------------------------------------------------------------
TRUSTEES' COMPENSATION. The Fund has adopted an unfunded retirement plan for the
Fund's independent Board of Trustees. Benefits are based on years of service and
fees paid to each trustee during the years of service. During the year ended
August 31, 2000, a provision of $75,428 was made for the Fund's projected
benefit obligations and payments of $11,052 were made to retired trustees,
resulting in an accumulated liability of $277,915 as of August 31, 2000.

     The Board of Trustees has adopted a deferred compensation plan for
independent trustees that enables trustees to elect to defer receipt of all or a
portion of annual compensation they are entitled to receive from the Fund. Under
the plan, the compensation deferred is periodically adjusted as though an
equivalent amount had been invested for the Board of Trustees in shares of one
or more Oppenheimer funds selected by the trustee. The amount paid to the Board
of Trustees under the plan will be determined based upon the performance of the
selected funds. Deferral of trustees' fees under the plan will not affect the
net assets of the Fund, and will not materially affect the Fund's assets,
liabilities or net investment income per share.

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


                    30 OPPENHEIMER CAPITAL APPRECIATION FUND






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

     The Fund adjusts the classification of distributions to shareholders to
reflect the differences between financial statement amounts and distributions
determined in accordance with income tax regulations. Accordingly, during the
year ended August 31, 2000, amounts have been reclassified to reflect an
increase in paid-in capital of $51,894,190, a decrease in overdistributed net
investment income of $5,240,327, and a decrease in accumulated net realized gain
on investments of $57,134,517. This reclassification includes $51,906,667
distributed in connection with Fund share redemptions which increased paid-in
capital and reduced accumulated net realized gain. Net assets of the Fund were
unaffected by the reclassifications.

- --------------------------------------------------------------------------------
EXPENSE OFFSET ARRANGEMENTS. Expenses paid indirectly represent a reduction of
custodian fees for earnings on cash balances maintained by the Fund.

- --------------------------------------------------------------------------------
OTHER. Investment transactions are accounted for as of trade date and dividend
income is recorded on the ex-dividend date. Certain dividends from foreign
securities will be recorded as soon as the Fund is informed of the dividend if
such information is obtained subsequent to the ex-dividend date. Realized gains
and losses on investments and unrealized appreciation and depreciation are
determined on an identified cost basis, which is the same basis used for federal
income tax purposes.

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


                    31 OPPENHEIMER CAPITAL APPRECIATION FUND



NOTES TO FINANCIAL STATEMENTS Continued


================================================================================
2. SHARES OF BENEFICIAL INTEREST

The Fund has authorized an unlimited number of no par value shares of beneficial
interest. Transactions in shares of beneficial interest were as follows:



                                            YEAR ENDED AUGUST 31, 2000              YEAR ENDED AUGUST 31, 1999
                                            SHARES              AMOUNT              SHARES              AMOUNT

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

CLASS A
Sold                                    21,248,494      $1,161,716,520          16,486,612       $ 682,694,426
Dividends and/or
distributions reinvested                 2,997,611         146,972,843           2,761,935         101,086,519
Redeemed                               (11,817,625)       (642,891,011)        (10,867,095)       (451,600,533)
                                       ------------------------------------------------------------------------
Net increase                            12,428,480        $665,798,352           8,381,452        $332,180,412
                                       ========================================================================

- ---------------------------------------------------------------------------------------------------------------
CLASS B
Sold                                    12,651,311       $ 670,804,410           8,303,860       $ 339,552,020
Dividends and/or
distributions reinvested                   907,173          43,064,587             488,475          17,477,638
Redeemed                                (3,488,619)       (183,745,767)         (2,644,213)       (106,888,583)
                                       ------------------------------------------------------------------------
Net increase                            10,069,865        $530,123,230           6,148,122        $250,141,075
                                       ========================================================================

- ---------------------------------------------------------------------------------------------------------------
CLASS C
Sold                                     4,959,476       $ 257,314,222           3,159,608       $ 128,803,033
Dividends and/or
distributions reinvested                   280,983          13,200,947             180,148           6,384,452
Redeemed                                (2,278,272)       (115,339,132)         (1,911,652)        (77,761,282)
                                       ------------------------------------------------------------------------
Net increase                             2,962,187        $155,176,037           1,428,104        $ 57,426,203
                                       ========================================================================

- ---------------------------------------------------------------------------------------------------------------
CLASS Y
Sold                                    12,933,936        $723,894,124           4,483,054       $ 191,633,897
Dividends and/or
distributions reinvested                   703,262          34,586,461             426,028          15,579,858
Redeemed                                (2,302,166)       (125,532,884)         (1,069,125)        (42,113,226)
                                       ------------------------------------------------------------------------
Net increase                            11,335,032        $632,947,701           3,839,957        $165,100,529
                                       ========================================================================




================================================================================
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 August 31, 2000, were
$3,232,360,809 and $1,987,229,452, respectively.

     As of August 31, 2000, unrealized appreciation (depreciation) based on cost
of securities for federal income tax purposes of $4,826,490,281 was:

         Gross unrealized appreciation                     $ 2,127,096,232
         Gross unrealized depreciation                        (288,035,247)
                                                           ---------------
         Net unrealized appreciation                       $ 1,839,060,985
                                                           ===============


                    32 OPPENHEIMER CAPITAL APPRECIATION FUND





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

MANAGEMENT FEES. Management fees paid to the Manager were in accordance with the
investment advisory agreement with the Fund which provides for a fee of 0.75% of
the first $200 million of average annual net assets, 0.72% of the next $200
million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60%
of the next $700 million, 0.58% of the next $1.0 billion and 0.56% of average
annual net assets over $2.5 billion. Effective January 1, 2000, the rate was
revised to 0.56% of average annual net assets over $2.5 billion to $4.5 billion
and 0.54% of average annual net assets over $4.5 billion. The Fund's management
fee for the year ended August 31, 2000 was an annualized rate of 0.59%, before
any waiver by the Manager if applicable.

- --------------------------------------------------------------------------------
TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the Manager,
acts as the transfer and shareholder servicing agent for the Fund on an
"at-cost" basis. OFS also acts as the transfer and shareholder servicing agent
for the other Oppenheimer funds.

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

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



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

August 31, 2000                 $9,222,674       $2,675,878       $1,710,262      $12,986,219       $1,180,044


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



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

August 31, 2000                    $35,205                        $1,325,150                           $46,952




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

                    33 OPPENHEIMER CAPITAL APPRECIATION FUND


NOTES TO FINANCIAL STATEMENTS  Continued

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

CLASS A SERVICE PLAN FEES. Under the Class A service plan, the Distributor
currently uses the fees it receives from the Fund to pay brokers, dealers and
other financial institutions. The Class A service plan permits reimbursements to
the Distributor at a rate of up to 0.25% of average annual net assets of Class A
shares purchased. The Distributor makes payments to plan recipients quarterly at
an annual rate not to exceed 0.25% of the average annual net assets consisting
of Class A shares of the Fund. For the year ended August 31, 2000, payments
under the Class A plan totaled $6,679,168 prior to Manager waivers if
applicable, all of which were paid by the Distributor to recipients, and
included $405,591 paid to an affiliate of the Manager. Any unreimbursed expenses
the Distributor incurs with respect to Class A shares in any fiscal year cannot
be recovered in subsequent years.

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

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

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

Distribution fees paid to the Distributor for the year ended August 31, 2000,
were as follows:



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

Class B Plan                            $9,208,551          $7,675,513         $18,419,726               1.38%
Class C Plan                             2,791,044           1,039,502           2,181,019               0.54



                    34 OPPENHEIMER CAPITAL APPRECIATION FUND





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

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

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

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

     Securities denominated in foreign currency to cover net exposure on
outstanding foreign currency contracts are noted in the Statement of Investments
where applicable.

- --------------------------------------------------------------------------------
6. ILLIQUID SECURITIES

As of August 31, 2000, investments in securities included issues that are
illiquid. A security may be considered illiquid if it lacks a readily available
market or if its valuation has not changed for a certain period of time. The
Fund intends to invest no more than 10% of its net assets (determined at the
time of purchase and reviewed periodically) in illiquid securities. The
aggregate value of illiquid securities subject to this limitation as of August
31, 2000 was $14,475,805, which represents 0.22% of the Fund's net assets.
Certain restricted securities, eligible for resale to qualified institutional
investors, are not subject to that limit.

- --------------------------------------------------------------------------------
7. BANK BORROWINGS

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

     The Fund had no borrowings outstanding during the year ended August 31,
2000.

FINANCIAL HIGHLIGHTS




                                                                                                  YEAR       YEAR
                                                                                                 ENDED      ENDED
                                                                                              AUG. 31,   DEC. 31,
CLASS A                                            2000        1999       1998        1997        1996(1)    1995
==================================================================================================================

PER SHARE OPERATING DATA
Net asset value, beginning of period             $44.73      $32.53     $38.63      $30.81      $27.44    $ 22.63
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                       (.02)       (.04)       .17         .18         .11        .24
Net realized and unrealized gain (loss)           20.63       14.87      (1.55)      11.36        3.26       7.61
                                                 -----------------------------------------------------------------
Total income (loss) from
investment operations                             20.61       14.83      (1.38)      11.54        3.37       7.85
- ------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                 --        (.09)      (.15)       (.17)         --       (.24)
Distributions from net realized gain              (3.22)      (2.54)     (4.57)      (3.55)         --      (2.80)
                                                 -----------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                   (3.22)      (2.63)     (4.72)      (3.72)         --      (3.04)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $62.12      $44.73     $32.53      $38.63      $30.81     $27.44
                                                 ================================================================

==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2)               48.01%      47.36%     (4.06)%     40.52%      12.28%     34.85%

==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)          $3,649      $2,071     $1,234      $1,179        $789       $758
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in millions)                 $2,898      $1,789     $1,353      $  986        $790       $538
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income (loss)                          0%      (0.05)%     0.48%       0.53%       0.55%      1.08%
Expenses                                           1.06%       1.04%      1.00%(4)    1.01%(4)    1.09%(4)
1.03%(4)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                              44%         59%        60%         66%         45%        72%



1. For the eight months ended August 31, 1996. The Fund changed its fiscal year
end from December 31 to August 31.

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

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

4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.






                     OPPENHEIMER CAPITAL APPRECIATION FUND




FINANCIAL HIGHLIGHTS  Continued




                                                                                                  YEAR       YEAR
                                                                                                 ENDED      ENDED
                                                                                              AUG. 31,   DEC. 31,
CLASS B                                            2000        1999       1998        1997        1996(1)
1995(2)
==================================================================================================================

PER SHARE OPERATING DATA

Net asset value, beginning of period             $43.48      $31.85     $38.07      $30.56      $27.37     $29.77
- ------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                       (.20)       (.21)      (.02)        .07          --       (.14)
Net realized and unrealized gain (loss)           19.74       14.38      (1.62)      11.05        3.19        .78
                                                ------------------------------------------------------------------
Total income (loss) from
investment operations                             19.54       14.17      (1.64)      11.12        3.19        .64
- ------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                 --          --       (.01)       (.06)         --       (.24)
Distributions from net realized gain              (3.22)      (2.54)     (4.57)      (3.55)         --      (2.80)
                                                ------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                   (3.22)      (2.54)     (4.58)      (3.61)         --      (3.04)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $59.80      $43.48     $31.85      $38.07      $30.56     $27.37
                                                ==================================================================

==================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(3)               46.88%      46.20%     (4.86)%     39.30%      11.65%      1.67%

==================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)          $1,333        $532       $194         $52          $5         $3
- ------------------------------------------------------------------------------------------------------------------
Average net assets (in millions)                 $  922        $372       $133         $24          $4         $1
- ------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(4)
Net investment loss                               (0.76)%     (0.86)%    (0.37)%     (0.33)%     (0.25)%
(0.54)%
Expenses                                           1.83%       1.84%      1.81%(5)    1.86%(5)    1.94%(5)
2.62%(5)
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                              44%         59%        60%         66%         45%        72%



1. For the eight months ended August 31, 1996. The Fund changed its fiscal year
end from December 31 to August 31.

2. For the period from November 1, 1995 (inception of offering) to December 31,
1995.

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

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

5. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.




                     OPPENHEIMER CAPITAL APPRECIATION FUND





                                                                                                  YEAR       YEAR
                                                                                                 ENDED      ENDED
                                                                                              AUG. 31,   DEC. 31,
CLASS C                                            2000        1999       1998        1997        1996(1)    1995
=================================================================================================================

PER SHARE OPERATING DATA
Net asset value, beginning of period             $43.06      $31.57     $37.76      $30.27      $27.11     $22.50
- -----------------------------------------------------------------------------------------------------------------

Income (loss) from investment operations:
Net investment income (loss)                       (.18)       (.23)      (.03)        .01        (.03)       .09
Net realized and unrealized gain (loss)           19.53       14.26      (1.59)      11.03        3.19       7.43
                                               ------------------------------------------------------------------
Total income (loss) from
investment operations                             19.35       14.03      (1.62)      11.04        3.16       7.52
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income              --          --         --          --          --          (.11)
Distributions from net realized gain              (3.22)      (2.54)     (4.57)      (3.55)      --         (2.80)
                                               ------------------------------------------------------------------
Total dividends and/or distributions
to shareholders                                   (3.22)      (2.54)     (4.57)      (3.55)      --         (2.91)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $59.19      $43.06     $31.57      $37.76      $30.27     $27.11
                                               ==================================================================

=================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2)               46.89%      46.16%     (4.84)%     39.35%      11.66%     33.56%

=================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)            $402        $165        $76         $36         $10         $7
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in millions)                   $279        $126        $62         $20         $ 9         $4
- -----------------------------------------------------------------------------------------------------------------
Ratios to average net assets:(3)
Net investment income (loss)                      (0.76)%     (0.86)%    (0.36)%     (0.32)%     (0.30)%     0.19%
Expenses                                           1.83%       1.85%      1.82%(4)    1.85%(4)    1.93%(4)
1.90%(4)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                              44%         59%        60%         66%         45%        72%



1. For the eight months ended August 31, 1996. The Fund changed its fiscal year
end from December 31 to August 31.

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

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

4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.



                     OPPENHEIMER CAPITAL APPRECIATION FUND




FINANCIAL HIGHLIGHTS  Continued



                                                                                                YEAR       PERIOD
                                                                                               ENDED        ENDED
                                                                                          AUGUST 31,   AUGUST 31,
CLASS Y                                                                           2000          1999
1998(1)
=================================================================================================================

PER SHARE OPERATING DATA
Net asset value, beginning of period                                            $44.81        $32.56       $40.15
- -----------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                                              .13           .13          .30
Net realized and unrealized gain (loss)                                          20.79         14.85        (3.11)
                                                                                ---------------------------------
Total income (loss) from investment operations                                   20.92         14.98        (2.81)
- -----------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Dividends from net investment income                                             --             (.19)        (.21)
Distributions from net realized gain                                             (3.22)        (2.54)       (4.57)
                                                                                ---------------------------------
Total dividends and/or distributions
to shareholders                                                                  (3.22)        (2.73)       (4.78)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period                                                  $62.51        $44.81       $32.56
                                                                                =================================

=================================================================================================================
TOTAL RETURN, AT NET ASSET VALUE(2)                                             48.64%        47.90%       (7.45)%

=================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in millions)                                         $1,295          $420         $181
- -----------------------------------------------------------------------------------------------------------------
Average net assets (in millions)                                                 $ 855          $307         $139
Ratios to average net assets:(3)
Net investment income                                                            0.45%         0.30%         0.75%
Expenses                                                                         0.64%         0.68%
0.69%(4)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                                            44%           59%         60%



1. For the period from November 3, 1997 (inception of offering) to August 31,
1998.

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

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

4. Expense ratio has not been grossed up to reflect the effect of expenses paid
indirectly.



                     OPPENHEIMER CAPITAL APPRECIATION FUND

                                                    Appendix A

                                             Industry Classifications


Aerospace/Defense                                            Food and Drug Retailers
Air Transportation                                           Gas Utilities
Asset-Backed                                                 Health Care/Drugs
Auto Parts and Equipment                                     Health Care/Supplies&Services
Automotive                                                   Homebuilders/Real Estate
Bank Holding Companies                                       Hotel/Gaming
Banks                                                        Industrial Services
Beverages                                                    Information Technology
Broadcasting                                                 Insurance
Broker-Dealers                                               Leasing& Factoring
Building Materials                                           Leisure
Cable Television                                             Manufacturing
Chemicals                                                    Metals/Mining
Commercial Finance                                           Nondurable Household Goods
Communication Equipment                                      Office Equipment
Computer Hardware                                            Oil - Domestic
Computer Software                                            Oil - International
Conglomerates                                                Paper
Consumer Finance                                             Photography
Consumer Services                                            Publishing
Containers                                                   Railroads&Truckers
Convenience Stores                                           Restaurants
Department Stores                                            Savings&Loans
Diversified Financial                                        Shipping
Diversified Media                                            Special Purpose Financial
Drug Wholesalers                                             Specialty Printing
Durable Household Goods                                      Specialty Retailing
Education                                                    Steel
Electric Utilities                                           Telecommunications - Long Distance
Electrical Equipment                                         Telephone - Utility
Electronics                                                  Textile, Apparel&Home Furnishings
Energy Services                                              Tobacco
Entertainment/Film                                           Trucks and Parts
Environmental                                                Wireless Services
Food

                                                    Appendix B

                          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 of the end of the calendar month of their purchase, as described in the Prospectus
(unless a waiver described elsewhere in this Appendix applies to the redemption). Additionally, on shares
purchased under these waivers that are subject to the Class A contingent deferred sales charge, the Distributor
will pay the applicable concession described in the Prospectus under "Class A Contingent Deferred Sales Charge."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.
- -        Purchases by an OppenheimerFunds-sponsored Rollover IRA, if the purchases are made:
(1)      through a broker, dealer, bank or registered investment adviser that has made special arrangements with
              the Distributor for those purchases, or
(2)      by a direct rollover of a distribution from a qualified Retirement Plan if the administrator of that
              Plan has made special arrangements with the Distributor for those purchases.
      -           Purchases of Class A shares by  Retirement  Plans that have any of the  following  record-keeping
      arrangements:
(1)      The record keeping is performed by Merrill Lynch Pierce Fenner&Smith, Inc. ("Merrill Lynch") on a
              daily valuation basis for the Retirement Plan. On the date the plan sponsor signs the
              record-keeping service agreement with Merrill Lynch, the Plan must have $3 million or more of its
              assets invested in (a) mutual funds, other than those advised or managed by Merrill Lynch
              Investment Management, L.P. ("MLIM"), that are made available under a Service Agreement between
              Merrill Lynch and the mutual fund's principal underwriter or distributor, and  (b) funds advised or
              managed by MLIM (the funds described in (a) and (b) are referred to as "Applicable Investments").
(2)      The record keeping for the Retirement Plan is performed on a daily valuation basis by a record keeper
              whose services are provided under a contract or arrangement between the Retirement Plan and Merrill
              Lynch. On the date the plan sponsor signs the record keeping service agreement with Merrill Lynch,
              the Plan must have $3 million or more of its assets (excluding assets invested in money market
              funds) invested in Applicable Investments.
(3)      The record keeping for a Retirement Plan is handled under a service agreement with Merrill Lynch and on
              the date the plan sponsor signs that agreement, the Plan has 500 or more eligible employees (as
              determined by the Merrill Lynch plan conversion manager).
      -           Purchases  by a Retirement  Plan whose record  keeper had a  cost-allocation  agreement  with the
      Transfer Agent on or before March 1, 2001.

II.                                Waivers of Class A Sales Charges of Oppenheimer Funds

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

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

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

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

The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following cases:
      -           To make Automatic  Withdrawal Plan payments that are limited  annually to no more than 12% of the
      account value adjusted annually.
- -        Involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts
         (please refer to "Shareholder Account Rules and Policies," in the applicable fund Prospectus).
- -        For distributions from Retirement Plans, deferred compensation plans or other employee benefit plans for
         any of the following purposes:
(1)      Following the death or disability (as defined in the Internal Revenue Code) of the participant or
                beneficiary. The death or disability must occur after the participant's account was established.
(2)      To return excess contributions.
(3)      To return contributions made due to a mistake of fact.
(4)      Hardship withdrawals, as defined in the plan.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.

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

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

A.  Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be waived for redemptions of shares in
the following cases:
- -        Shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," in the
         applicable Prospectus.
- -        Redemptions from accounts other than Retirement Plans following the death or disability of the last
         surviving shareholder, including a trustee of a grantor trust or revocable living trust for which the
         trustee is also the sole beneficiary. The death or disability must have occurred after the account was
         established, and for disability you must provide evidence of a determination of disability by the Social
         Security Administration.
- -        Distributions from accounts for which the broker-dealer of record has entered into a special agreement
         with the Distributor allowing this waiver.
- -        Redemptions of Class B shares held by Retirement Plans whose records are maintained on a daily valuation
         basis by Merrill Lynch or an independent record keeper under a contract with Merrill Lynch.
- -        Redemptions of Class C shares of Oppenheimer U.S. Government Trust from accounts of clients of financial
         institutions that have entered into a special arrangement with the Distributor for this purpose.
- -        Redemptions requested in writing by a Retirement Plan sponsor of Class C shares of an Oppenheimer fund
         in amounts of $500,000 or more and made more than 12 months after the Retirement Plan's first purchase
         of Class C shares, if the redemption proceeds are invested in Class N shares of one or more Oppenheimer
         funds.
- -        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 Value Fund                  Oppenheimer Quest Global Value Fund, Inc.
    Oppenheimer Quest Opportunity Value Fund

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

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

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

A.  Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

         A shareholder's account will be credited with the amount of any contingent deferred sales charge paid on
the redemption of any Class A, Class B or Class C shares of the Oppenheimer fund described in this section if the
proceeds are invested in the same Class of shares in that fund or another Oppenheimer fund within 90 days after
redemption.

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

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

Connecticut Mutual Liquid Account                             Connecticut Mutual Total Return Account
Connecticut Mutual Government Securities Account              CMIA LifeSpan Capital Appreciation Account
Connecticut Mutual Income Account                             CMIA LifeSpan Balanced Account
Connecticut Mutual Growth Account                             CMIA Diversified Income Account


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

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

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

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

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

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

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

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

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

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

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

          VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer Convertible Securities
                                                       Fund

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


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Oppenheimer Capital Appreciation Fund
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Internet Web Site:
         WWW.OPPENHEIMERFUNDS.COM
         ------------------------

Investment Adviser
         OppenheimerFunds, Inc.
         Two World Trade Center
         New York, New York 10048-0203

Distributor
         OppenheimerFunds Distributor, Inc.
         Two World Trade Center
         New York, New York 10048-0203

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

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

Independent Auditors
         KPMG  LLP
         707 Seventeenth Street
         Denver, Colorado 80202

Legal Counsel
         Mayer, Brown&Platt
         1675 Broadway
         New York, New York 10019-5820


67890


PX320.0301


NIA/320/320SAI_Mar01


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1 Ms. Macaskill and Mr. Griffiths are not Directors of Oppenheimer Money Market Fund, Inc.; Mr. Griffiths is also
not a Trustee of Oppenheimer Discovery Fund.
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 apply to 403(b)(7) custodial plans if the participant is less than 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.
12 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.

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