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

Statement of Additional Information dated October 23, 2003

      This Statement of Additional Information is not a Prospectus. This
document contains additional information about the Fund and should be read
together with the Prospectus dated October 23, 2003. You can obtain the
Prospectus by writing to the Fund's Transfer Agent, OppenheimerFunds Services,
at P.O. Box 5270, Denver, Colorado 80217, or by calling the Transfer Agent at
the toll-free number shown above, or by downloading it from the OppenheimerFunds
Internet website at WWW.OPPENHEIMERFUNDS.COM.

Contents
                                                                            Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks..    2
    The Fund's Investment Policies.....................................    2
    Other Investment Techniques and Strategies.........................    5
    Investment Restrictions............................................    21
How the Fund is Managed ...............................................    23
    Organization and History...........................................    23
    Board of Trustees and Oversight Committees.........................    24
    Trustees and Officers of the Fund..................................    25
    The Manager........................................................    33
Brokerage Policies of the Fund.........................................    35
Distribution and Service Plans.........................................    38
Performance of the Fund................................................    42

About Your Account
How To Buy Shares......................................................    47
How To Sell Shares.....................................................    57
How To Exchange Shares.................................................    61
Dividends, Capital Gains and Taxes.....................................    65
Additional Information About the Fund..................................    69

Financial Information About the Fund
Independent Auditors' Report...........................................    71
Financial Statements...................................................    72

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. (the "Manager"), can select for the Fund. Additional information is also
provided about the strategies that the Fund may use to try to achieve its
objective.

The Fund's Investment Policies

      The composition of the Fund's portfolio and the techniques and strategies
that the 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 credit 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. The value of a convertible
security is a function of its "investment value" and its "conversion value." If
the investment value exceeds the conversion value, the security will behave more
like a debt security and the security's price will likely increase when interest
rates fall and decrease when interest rates rise. If the conversion value
exceeds the investment value, the security will behave more like an equity
security. In that case it will likely sell at a premium over its conversion
value and its price will tend to fluctuate directly with the price of the
underlying security. 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.

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

      If interest rates rise, the fixed dividend on preferred stocks may be less
attractive, causing the price of preferred stocks to decline. Preferred stock
may have mandatory sinking fund provisions, as well as provisions allowing the
stock to be called or redeemed prior to its maturity, which can have a negative
impact on the stock's price when interest rates decline. Preferred stock
generally has a preference over common stock on the distribution of a
corporation's assets in the event of liquidation of the corporation. The rights
of preferred stock on distribution of a corporation's assets in the event of a
liquidation are generally subordinate to the rights associated with a
corporation's debt securities.

|_| 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. The Fund currently does not expect to have more than
35% of its assets invested in foreign securities, although it has the ability to
invest in them without limit.

      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.

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

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

|_| 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| Investment in Other Investment Companies. The Fund can also invest in the
securities of other investment companies, which can include open-end funds,
closed-end funds and unit investment trusts, subject to the limits set forth in
the Investment Company Act of 1940, as amended (the "Investment Company Act")
that apply to those types of investments. For example, the Fund can invest in
Exchange-Traded Funds, which are typically open-end funds or unit investment
trusts, listed on a stock exchange. The Fund might do so as a way of gaining
exposure to the segments of the equity or fixed-income markets represented by
the Exchange-Traded Funds' portfolio, at times when the Fund may not be able to
buy those portfolio securities directly.

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

|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 for vendors set by the Manager from time to time.

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

      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.

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

|X| Illiquid and Restricted Securities. 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 applicable securities
laws, the Fund may have to cause those securities to be registered. The expenses
of registering restricted securities may be negotiated by the Fund with the
issuer at the time the Fund buys the securities. When the Fund must arrange
registration because the Fund wishes to sell the security, a considerable period
may elapse between the time the decision is made to sell the security and the
time the security is registered so that the Fund could sell it. The Fund would
bear the risks of any downward price fluctuation during that period.

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

      The Fund has limitations that apply to purchases of restricted securities,
as stated in the Prospectus. Those percentage restrictions do not limit
purchases of restricted securities that are eligible for sale to qualified
institutional purchasers under Rule 144A of the Securities Act of 1933, as
amended, 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.

      | Interfund Borrowing and Lending Arrangements. Consistent with its
fundamental policies and pursuant to an exemptive order issued by the SEC, the
Fund may engage in borrowing and lending activities with other funds in the
OppenheimerFunds complex. Borrowing money from affiliated funds may afford the
Fund the flexibility to use the most cost-effective alternative to satisfy its
borrowing requirements. Lending money to an affiliated fund may allow the Fund
to obtain a higher rate of return than it could from interest rates on
alternative short-term investments. Implementation of interfund lending will be
accomplished consistent with applicable regulatory requirements, including the
provisions of the SEC order.

o Interfund Borrowing. The Fund will not borrow from affiliated funds unless the
terms of the borrowing arrangement are at least as favorable as the terms the
Fund could otherwise negotiate with a third party. To assure that the Fund will
not be disadvantaged by borrowing from an affiliated fund, certain safeguards
may be implemented. Examples of these safeguards include the following:
o              the Fund will not borrow money from affiliated funds unless the
               interest rate is more favorable than available bank loan rates;
o              the Fund's borrowing from affiliated funds must be consistent
               with its investment objective and investment policies;
o              the loan rates will be the average of the overnight repurchase
               agreement rate available through the OppenheimerFunds joint
               repurchase agreement account and a pre-established formula based
               on quotations from independent banks to approximate the lowest
               interest rate at which bank loans would be available to the Fund;
o              if the Fund has outstanding borrowings from all sources greater
               than 10% of its total assets, then the Fund must secure each
               additional outstanding interfund loan by segregating liquid
               assets of the Fund as collateral;
o              the Fund cannot borrow from an affiliated fund in excess of 125%
               of its total redemptions for the preceding seven days;
o     each interfund loan may be repaid on any day by the Fund; and
o              the Trustees will be provided with a report of all interfund
               loans and the Trustees will monitor all such borrowings to ensure
               that the Fund's participation is appropriate.

      There is a risk that a borrowing fund could have a loan called on one
day's notice. In that circumstance, the Fund might have to borrow from a bank at
a higher interest cost if money to lend were not available from another
Oppenheimer fund.

o Interfund Lending. To assure that the Fund will not be disadvantaged by making
loans to affiliated funds, certain safeguards will be implemented. Examples of
these safeguards include the following:

o     the Fund will not lend money to affiliated funds unless the interest rate on such
               loan is determined to be reasonable under the circumstances;
o     the Fund may not make interfund loans in excess of 15% of its net assets;
o     an interfund loan to any one affiliated fund shall not exceed 5% of the Fund's net
               assets;
o an interfund loan may not be outstanding for more than seven days; o each
interfund loan may be called on one business day's notice; and o the Manager
will provide the Trustees reports on all interfund loans demonstrating
               that the Fund's participation is appropriate and that the loan is
               consistent with its investment objectives and policies.

      When the Fund lends assets to another affiliated fund, the Fund is subject
to the credit that the borrowing fund fails to repay the loan.

      | Borrowing. Currently, under the Investment Company Act, a mutual fund
may borrow only from banks and the maximum amount it may borrow is up to
one-third of its total assets (including the amount borrowed), except that a
fund may borrow up to 5% of its total assets for temporary purposes from any
person. Under the Investment Company Act, there is a rebuttable presumption that
a loan is temporary if it is repaid within 60 days and not extended or renewed.
As a matter of fundamental policy, the Fund is authorized to borrow up to 33
1/3% of its total assets. During periods of substantial borrowings, the value of
the Fund's assets would be reduced due to the added expense of interest on
borrowed monies. The Fund is authorized to borrow, and to pledge assets to
secure such borrowings, up to the maximum extent permissible under the
Investment Company Act (i.e., presently 50% of net assets). Any such borrowing
will be made only pursuant to the requirements of the Investment Company Act and
will be made only to the extent that the value of each 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 a Fund's assets, so computed,
should fail to meet the 300% asset coverage requirement, the Fund is required,
within three business days to reduce its bank debt to the extent necessary to
meet such requirement and may have to sell a portion of its investments at a
time when independent investment judgment would not dictate such sale. Interest
on money borrowed is an expense the Fund would not otherwise incur, so that it
may have little or no net investment income during periods of substantial
borrowings. Since substantially all of a Fund's assets fluctuate in value, but
borrowing obligations are fixed when the Fund has outstanding borrowings, the
net asset value per share of a Fund correspondingly will tend to increase and
decrease more when the Fund's assets increase or decrease in value than would
otherwise be the case.

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

      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 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
prevailing interest rates fall, the values of outstanding debt securities
generally rise, and the bonds may sell for more than their face amount. When
prevailing 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) an individual stock ("single stock futures"), (3) other broadly-based
securities indices (these are referred to as "financial futures"), (4) debt
securities (these are referred to as "interest rate futures") and (5) 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. Similarly, a single stock future obligates the seller to
deliver (and the purchaser to take) cash or a specified equity security to
settle the futures transaction. Either party could also enter into an offsetting
contract to close out the position. Single stock futures trade on a very limited
number of exchanges, with contracts typically not fungible among the exchanges.

      No 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.

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

      When the Fund purchases a 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
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 segregating 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 and Interim Investments. When market, economic or
political 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 principal 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 as contemplated by the
Investment Company Act. The limitations of the following policies may be changed
to the extent that the corresponding policies of the Investment Company Act are
changed by amendment, exemptive or interpretive relief.

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

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

|_| 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 invest in real estate, except to the extent permitted under
the Investment Company Act, the rules or regulations thereunder or any exemption
therefrom, as such statute, rules or regulations may be amended or interpreted
from time to time.

|_| The Fund cannot invest in physical commodities or commodity contracts,
except to the extent permitted under the Investment Company Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.

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

|_| The Fund cannot issue "senior securities," 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.

|X| Does the Fund Have Any Restrictions That Are Not Fundamental? The Fund has
an investment restriction that is not a fundamental policy, which means it can
be changed by the Board of Trustees without shareholder approval.

|_| The Fund cannot invest in securities of other investment companies, except
to the extent permitted under the Investment Company Act, the rules or
regulations thereunder or any exemption therefrom, as such statute, rules or
regulations may be amended or interpreted from time to time.

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

      For purposes of the Fund's policy not to concentrate its investments as
described above, the Fund has adopted the industry classifications set forth in
Appendix 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.

Classes of Shares. The Trustees are authorized, without shareholder approval, 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.

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

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

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. 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.

Board of Trustees and Oversight Committees. 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.

      The Board of Trustees has an Audit Committee, a Regulatory & Oversight
Committee, a Governance Committee, and a Proxy Committee. The Audit Committee is
comprised solely of Independent Trustees. The members of the Audit Committee are
Edward Regan (Chairman), Kenneth Randall and Russell Reynolds. The Audit
Committee held 6 meetings during the Fund's fiscal year ended August 31, 2003.
The Audit Committee provides the Board with recommendations regarding the
selection of the Fund's independent auditor. The Audit Committee also reviews
the scope and results of audits and the audit fees charged, reviews reports from
the Fund's independent auditor concerning the Fund's internal accounting
procedures, and controls and reviews reports of the Manager's internal auditor,
among other duties as set forth in the Committee's charter.

      The members of the Regulatory & Oversight Committee are Robert Galli
(Chairman), Joel Motley and Phillip Griffiths. The Regulatory & Oversight
Committee held 6 meetings during the Fund's fiscal year ended August 31, 2003.
The Regulatory & Oversight Committee evaluates and reports to the Board on the
Fund's contractual arrangements, including the Investment Advisory and
Distribution Agreements, transfer and shareholder service agreements and
custodian agreements as well as the policies and procedures adopted by the Fund
to comply with the Investment Company Act and other applicable law, among other
duties as set forth in the Committee's charter.

      The members of the Governance Committee are Joel Motley (Acting Chairman),
Phillip Griffiths and Kenneth Randall. The Governance Committee held one meeting
during the Fund's fiscal year ended August 31, 2003. The Governance Committee
reviews the Fund's governance guidelines, the adequacy of the Fund's Codes of
Ethics, and develops qualification criteria for Board members consistent with
the Fund's governance guidelines, among other duties set forth in the
Committee's charter.

      The members of the Proxy Committee are Edward Regan (Chairman), Russell
Reynolds and John Murphy. The Proxy Committee held 2 meetings during the Fund's
fiscal year ended August 31, 2003. The Proxy Committee provides the Board with
recommendations for proxy voting and monitors proxy voting by the Fund.

Trustees and Officers of the Fund. Except for Mr. Murphy, each of the Trustees is an
"Independent Trustee," as defined in the Investment Company Act.  Mr. Murphy is an
"Interested Trustee," because he is affiliated with the Manager by virtue of his positions
as an officer and director of the Manager, and as a shareholder of its parent company.

      The Fund's Trustees and officers and their positions held with the Fund
and length of service in such position(s) and their principal occupations and
business affiliations during the past five years are listed in the chart below.
The information for the Trustees also includes the dollar range of shares of the
Fund as well as the aggregate dollar range of shares beneficially owned in any
of the Oppenheimer funds overseen by the Trustees. All of the Trustees are also
trustees or directors of the following publicly offered Oppenheimer funds
(referred to as "Board I Funds"):

Oppenheimer AMT-Free New York Municipals   Oppenheimer Gold & Special Minerals Fund
Oppenheimer California Municipal Fund      Oppenheimer Growth Fund
Oppenheimer Capital Appreciation Fund      Oppenheimer International Growth Fund
                                           Oppenheimer  International  Small Company
Oppenheimer Capital Preservation Fund      Fund
Oppenheimer Developing Markets Fund        Oppenheimer Money Market Fund, Inc.
Oppenheimer Discovery Fund                 Oppenheimer Multiple Strategies Fund
Oppenheimer Emerging Growth Fund           Oppenheimer Multi-Sector Income Trust
Oppenheimer Emerging Technologies Fund     Oppenheimer Multi-State Municipal Trust
Oppenheimer Enterprise Fund                Oppenheimer Municipal Bond Fund
Oppenheimer Global Fund                    Oppenheimer Series Fund, Inc.
Oppenheimer Global Opportunities Fund      Oppenheimer U.S. Government Trust

      In addition to being a trustee or director of the Board I Funds, Mr. Galli
is also a director or trustee of 10 other portfolios in the OppenheimerFunds
complex. Present or former officers, directors, trustees and employees (and
their immediate family members) of the Fund, the Manager and its affiliates, and
retirement plans established by them for their employees are permitted to
purchase Class A shares of the Fund and the other Oppenheimer funds at net asset
value without sales charge. The sales charges on Class A shares is waived for
that group because of the economies of sales efforts realized by the
Distributor.

      Messrs. Murphy, Molleur, Vottiero, Wixted and Zack, and Mses. Putnam,
Bechtolt, Feld and Ives respectively hold the same offices with one or more of
the other Board I Funds as with the Fund. As of September 30, 2003 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. In addition, each Independent
Trustee, and his or her family members, do not own securities of either the
Manager or Distributor of the Board I Funds or any person directly or indirectly
controlling, controlled by or under common control with the Manager or
Distributor

|X| Affiliated Transactions and Material Business Relationships. Mr. Reynolds
has reported he has a controlling interest in The Directorship Group, Inc. ("The
Directorship Search Group"), a director recruiting firm that provided consulting
services to Massachusetts Mutual Life Insurance Company (which controls the
Manager) for fees aggregating $247,500 from January 1, 2001 through December 31,
2002. Mr. Reynolds estimates that The Directorship Search Group will not provide
consulting services to Massachusetts Mutual Life Insurance Company during the
calendar year 2003.

The Independent Trustees have unanimously (except for Mr. Reynolds, who
abstained) determined that the consulting arrangements between The Directorship
Search Group and Massachusetts Mutual Life Insurance Company were not material
business or professional relationships that would compromise Mr. Reynolds'
status as an Independent Trustee. Nonetheless, to assure certainty as to
determinations of the Board and the Independent Trustees as to matters upon
which the Investment Company Act or the rules thereunder require approval by a
majority of Independent Trustees, Mr. Reynolds will not be counted for purposes
of determining whether a quorum of Independent Trustees was present or whether a
majority of Independent Trustees approved the matter.

      The address of each Trustee in the chart below is 6803 S. Tucson Way,
Centennial, CO 80112-3924. Each Trustee serves for an indefinite term, until his
or her resignation, retirement, death or removal.

-----------------------------------------------------------------------------------
                               Independent Trustees
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Name,              Principal Occupation(s) During Past 5    Dollar     Aggregate
                                                                       Dollar
                                                                       Range Of
                                                                       Shares
                                                                       Beneficially
                                                                       Owned in
                   Years;                                   Range of   Any of the
Position(s) Held   Other Trusteeships/Directorships Held    Shares     Oppenheimer
with Fund,         by Trustee;                              BeneficiallFunds
Length of Service, Number of Portfolios in Fund Complex     Owned in   Overseen
Age                Currently Overseen by Trustee            the Fund   by Trustee
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
                                                              As of December 31,
                                                                     2002
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Clayton K.         Of Counsel (since 1993), Hogan &         $0         $50,001-$100,000
Yeutter, Chairman  Hartson (a law firm). Other
of the Board of    directorships: Weyerhaeuser Corp.
Trustees since     (since 1999) and Danielson Holding
2003;              Corp. (since 2002); formerly a director
Trustee since 1991 of Caterpillar, Inc. (1993-December
Age: 72            2002). Oversees 29 portfolios in the
                   OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Robert G. Galli,   A trustee or director of other           $0         Over
Trustee since 1993 Oppenheimer funds. Formerly Trustee                 $100,000
Age: 70            (May 2000-2002) of Research Foundation
                   of AIMR (investment research, non-profit) and Vice Chairman
                   (October 1995-December 1997) of the Manager. Oversees 39
                   portfolios in the OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Phillip A.         A director (since 1991) of the           Over       Over
Griffiths,         Institute for Advanced Study,            $100,000   $100,000
Trustee, since     Princeton, N.J., a director (since
1999               2001) of GSI Lumonics, a trustee (since
Age: 65            1983) of Woodward Academy, a Senior
                   Advisor (since 2001) of The Andrew W.
                   Mellon Foundation. A member of: the
                   National Academy of Sciences (since
                   1979), American Academy of Arts and
                   Sciences (since 1995), American
                   Philosophical Society (since 1996) and
                   Council on Foreign Relations (since
                   2002). Formerly a director of Bankers
                   Trust New York Corporation (1994-1999).
                   Oversees 29 portfolios in the
                   OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Joel W. Motley,    Director (since 2002) Columbia Equity    $01        $01
Trustee since 2002 Financial Corp. (privately-held
Age: 51            financial adviser); Managing Director
                   (since 2002) Carmona Motley, Inc.
                   (privately-held financial adviser);
                   Formerly he held the following
                   positions: Managing Director (January
                   1998-December 2001), Carmona Motley
                   Hoffman Inc. (privately-held financial
                   adviser); Managing Director (January
                   1992-December 1997), Carmona Motley &
                   Co. (privately-held financial adviser).
                   Oversees 29 portfolios in the
                   OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Kenneth A.         A director of Dominion Resources, Inc.   Over       Over
Randall, Trustee   (electric utility holding company) and   $100,000   $100,000
since 1981         Prime Retail, Inc. (real estate
Age: 76            investment trust); formerly a director
                   of Dominion Energy, Inc. (electric
                   power and oil & gas producer),
                   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. Oversees 29 portfolios in the
                   OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Edward V. Regan,   President, Baruch College, CUNY; a       $1 -       $50,001-$100,000
Trustee since 1993 director of RBAsset (real estate         $10,000
Age: 73            manager); a director of OffitBank;
                   formerly Trustee, Financial Accounting Foundation (FASB and
                   GASB), Senior Fellow of Jerome Levy Economics Institute, Bard
                   College, Chairman of Municipal Assistance Corporation for the
                   City of New York, New York State Comptroller and Trustee of
                   New York State and Local Retirement Fund. Oversees 29
                   investment companies in the OppenheimerFunds complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Russell S.         Chairman (since 1993) of The             $1 -       $10,001-$50,000
Reynolds, Jr.,     Directorship Search Group, Inc.          $10,000
Trustee since 1989 (corporate governance consulting and
Age: 71            executive recruiting); a life trustee
                   of International House (non-profit educational organization),
                   and a trustee (since 1996) of the Greenwich Historical
                   Society. Oversees 29 portfolios in the OppenheimerFunds
                   complex.
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Donald W. Spiro,   Chairman Emeritus (since January 1991)   Over       Over
Vice Chairman of   of the Manager. Formerly a director      $100,000   $100,000
the Board of       (January 1969-August 1999) of the
Trustees,          Manager. Oversees 29 portfolios in the
Trustee since 1985 OppenheimerFunds complex.
Age: 77
-----------------------------------------------------------------------------------

      The address of Mr. Murphy in the chart below is Two World Financial Center, 225
Liberty Street, 11th Floor, New York, NY 10080. Mr. Murphy serves for an indefinite term,
until his resignation, death or removal.

-------------------------------------------------------------------------------------
                           Interested Trustee and Officer
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name,               Principal Occupation(s) During Past 5     Dollar     Aggregate
                                                                         Dollar
                                                                         Range Of
                                                                         Shares
                                                                         Beneficially
                                                                         Owned in
                    Years;                                    Range of   Any of the
Position(s) Held    Other Trusteeships/Directorships Held by  Shares     Oppenheimer
with Fund,          Trustee;                                  BeneficiallFunds
Length of Service   Number of Portfolios in Fund Complex      Owned in   Overseen
Age                 Currently Overseen by Trustee             the Fund   by Trustee
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                                                                As of December 31,
                                                                            2002
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John V. Murphy,     Chairman, Chief Executive Officer and     $10,001 -     Over
President and       director (since June 2001) and President  $50,000     $100,000
Trustee,            (since September 2000) of the Manager;
Trustee since 2001  President and a director or trustee of
Age: 52             other Oppenheimer funds; President and a
                    director (since July 2001) of Oppenheimer Acquisition Corp.
                    (the Manager's parent holding company) and of Oppenheimer
                    Partnership Holdings, Inc. (a holding company subsidiary of
                    the Manager); a director (since November 2001) of
                    OppenheimerFunds Distributor, Inc. (a subsidiary of the
                    Manager); Chairman and a director (since July 2001) of
                    Shareholder Services, Inc. and of Shareholder Financial
                    Services, Inc. (transfer agent subsidiaries of the Manager);
                    President and a director (since July 2001) of
                    OppenheimerFunds Legacy Program (a charitable trust program
                    established by the Manager); a director of the investment
                    advisory subsidiaries of the Manager: OFI Institutional
                    Asset Management, Inc. and Centennial Asset Management
                    Corporation (since November 2001), HarbourView Asset
                    Management Corporation and OFI Private Investments, Inc.
                    (since July 2001); President (since November 1, 2001) and a
                    director (since July 2001) of Oppenheimer Real Asset
                    Management, Inc.; a director (since November 2001) of
                    Trinity Investment Management Corp. and Tremont Advisers,
                    Inc. (investment advisory affiliates of the Manager);
                    Executive Vice President (since February 1997) of
                    Massachusetts Mutual Life Insurance Company (the Manager's
                    parent company); a director (since June 1995) of DLB
                    Acquisition Corporation (a holding company that owns the
                    shares of David L. Babson & Company, Inc.); formerly, Chief
                    Operating Officer (September 2000-June 2001) of the Manager;
                    President and trustee (November 1999-November 2001) of MML
                    Series Investment Fund and MassMutual Institutional Funds
                    (open-end investment companies); a director (September
                    1999-August 2000) of C.M. Life Insurance Company; President,
                    Chief Executive Officer and director (September 1999-August
                    2000) of MML Bay State Life Insurance Company; a director
                    (June 1989-June 1998) of Emerald Isle Bancorp and Hibernia
                    Savings Bank (a wholly-owned subsidiary of Emerald Isle
                    Bancorp). Oversees 75 portfolios in the OppenheimerFunds
                    complex.
-------------------------------------------------------------------------------------

      The address of the Officers in the chart below is as follows: for Messrs. Molleur and
Zack and Ms. Feld and Putnam, Two World Financial Center, 225 Liberty Street, 11th Floor,
New York, New York 10080 for Messrs. Vottiero and Wixted and Mses. Bechtolt and Ives, 6803
S. Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual term or until
his or her earlier resignation, death or removal.

-------------------------------------------------------------------------------------
                                Officers of the Fund
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name,                   Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund, Length of
Service,
Age
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Jane Putnam, Vice       Vice  President  of the Manager  (since  October  1995);  an
President and           officer of 2 portfolios in the OppenheimerFunds complex.
Portfolio Manager
since
Age: 42
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian W. Wixted,        Senior Vice  President and  Treasurer  (since March 1999) of
Treasurer since 1999    the Manager;  Treasurer  (since  March 1999) of  HarbourView
Age: 44                 Asset Management  Corporation,  Shareholder Services,  Inc.,
                        Oppenheimer Real Asset Management  Corporation,  Shareholder
                        Financial Services,  Inc., Oppenheimer Partnership Holdings,
                        Inc.,  OFI Private  Investments,  Inc.  (since  March 2000),
                        OppenheimerFunds  International  Ltd.  and  OppenheimerFunds
                        plc   (since   May   2000)  and  OFI   Institutional   Asset
                        Management,   Inc.  (since  November  2000)  (offshore  fund
                        management  subsidiaries  of  the  Manager);  Treasurer  and
                        Chief  Financial  Officer  (since  May 2000) of  Oppenheimer
                        Trust Company (a trust  company  subsidiary of the Manager);
                        Assistant   Treasurer  (since  March  1999)  of  Oppenheimer
                        Acquisition  Corp.  and   OppenheimerFunds   Legacy  Program
                        (since April 2000);  formerly  Principal and Chief Operating
                        Officer    (March    1995-March    1999),    Bankers   Trust
                        Company-Mutual  Fund  Services  Division.  An  officer of 91
                        portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Connie Bechtolt,        Assistant Vice President of the Manager  (since September
Assistant Treasurer     1998); formerly Manager/Fund Accounting (September
since 2002              1994-September 1998) of the Manager. An officer of 91
Age: 40                 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip Vottiero,        Vice  President/Fund  Accounting of the Manager (since March
Assistant Treasurer     2002); formerly Vice  President/Corporate  Accounting of the
since 2002              Manager (July  1999-March  2002) prior to which he was Chief
Age: 40                 Financial  Officer at Sovlink  Corporation  (April 1996-June
                        1999). An officer of 91 portfolios in the
                        OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack,         Senior Vice President  (since May 1985) and General  Counsel
Secretary since 2001    (since February 2002) of the Manager;  General Counsel and a
Age: 55                 director   (since   November   2001)   of   OppenheimerFunds
                        Distributor,   Inc.;   Senior  Vice  President  and  General
                        Counsel  (since   November   2001)  of   HarbourView   Asset
                        Management  Corporation;   Vice  President  and  a  director
                        (since November 2000) of Oppenheimer  Partnership  Holdings,
                        Inc.; Senior Vice President,  General Counsel and a director
                        (since  November  2001)  of  Shareholder   Services,   Inc.,
                        Shareholder   Financial   Services,    Inc.,   OFI   Private
                        Investments,   Inc.,   Oppenheimer  Trust  Company  and  OFI
                        Institutional   Asset  Management,   Inc.;  General  Counsel
                        (since  November  2001)  of  Centennial   Asset   Management
                        Corporation;   a   director   (since   November   2001)   of
                        Oppenheimer   Real   Asset   Management,   Inc.;   Assistant
                        Secretary   and  a  director   (since   November   2001)  of
                        OppenheimerFunds  International  Ltd.; Vice President (since
                        November   2001)   of   OppenheimerFunds   Legacy   Program;
                        Secretary  (since November 2001) of Oppenheimer  Acquisition
                        Corp.;    formerly   Acting   General   Counsel    (November
                        2001-February  2002)  and  Associate  General  Counsel  (May
                        1981-October  2001) of the Manager;  Assistant  Secretary of
                        Shareholder   Services,   Inc.  (May  1985-November   2001),
                        Shareholder     Financial    Services,     Inc.    (November
                        1989-November  2001);  OppenheimerFunds  International  Ltd.
                        and  OppenheimerFunds  plc (October  1997-November 2001). An
                        officer of 91 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Katherine P. Feld,      Vice  President and Senior  Counsel (since July 1999) of the
Assistant Secretary     Manager;    Vice    President    (since    June   1990)   of
since 2001              OppenheimerFunds    Distributor,    Inc.;   Director,   Vice
Age: 45                 President  and  Assistant  Secretary  (since  June  1999) of
                        Centennial Asset Management Corporation; Vice President
                        (since 1997) of Oppenheimer Real Asset Management, Inc.;
                        formerly Vice President and Associate Counsel of the
                        Manager (June 1990-July 1999). An officer of 91
                        portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives,       Vice  President and Assistant  Counsel  (since June 1998) of
Assistant Secretary     the    Manager;    Vice    President    (since    1999)   of
since 2001              OppenheimerFunds  Distributor,   Inc.;  Vice  President  and
Age: 37                 Assistant  Secretary  (since 1999) of Shareholder  Services,
                        Inc.;   Assistant   Secretary   (since   December  2001)  of
                        OppenheimerFunds  Legacy Program and  Shareholder  Financial
                        Services,   Inc.;  formerly  Assistant  Vice  President  and
                        Assistant  Counsel of the Manager (August  1997-June  1998);
                        Assistant Counsel of the Manager (August  1994-August 1997).
                        An officer of 91 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Denis R. Molleur,       Vice  President  and Senior  Counsel of the  Manager  (since
Assistant Secretary     July 1999);  formerly a Vice President and Associate Counsel
since 2001              of the Manager (September  1995-July 1999). An officer of 82
Age: 46                 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------

      |X| Remuneration of Trustees. The officers of the Fund and one of the
Trustees of the Fund (Mr. Murphy) 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 from the Fund with respect to the Fund's fiscal year
ended August 31, 2003. The compensation from all 31 of the Board I Funds
(including the Fund) represents compensation received for serving as a director
or trustee and member of a committee (if applicable) of the boards of those
funds during the calendar year ended December 31, 2002.

------------------------------------------------------------------------------------
Trustee Name and Other    Aggregate      Retirement     Estimated        Total
                                                                      Compensation
                                                                        From All
                                                                      Oppenheimer
                                                          Annual       Funds For
                                          Benefits      Retirement       Which
                                         Accrued as    Benefits to     Individual
Fund Position(s)         Compensation   Part of Fund   be Paid Upon    Serves As
(as applicable)           From Fund1      Expenses     Retirement2   Trustee/Director
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Clayton K. Yeutter         $29,1473       $15,921        $36,372        $71,792
Chairman of the Board
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Robert G. Galli            $25,704        $24,040        $55,6784      $198,3865
Regulatory & Oversight
Committee Chairman
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Phillip Griffiths
Regulatory & Oversight
Committee Member and       $14,7536        $5,730        $10,256        $60,861
Governance Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Leon Levy7                 $19,995           $0          $113,352       $173,700
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Benjamin Lipstein7         $25,927         $7,717        $115,270       $150,152
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Joel W. Motley
Governance Committee
Acting Chairman and        $13,1038         $64             $0          $14,453
Regulatory & Oversight
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Elizabeth Moynihan7        $24,349        $29,210        $57,086        $105,760
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Kenneth A. Randall
Audit Committee Member
and Governance             $22,335         $6,129        $74,471        $97,012
Committee Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Edward V. Regan            $22,093        $15,392        $46,313        $95,960
Audit Committee
Chairman and Proxy
Committee Chairman
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Russell S. Reynolds,       $16,528        $17,049        $48,991        $71,792
Jr.
Proxy Committee Member
and Audit Committee
Member
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Donald Spiro               $14,753         $7,049        $9,3969        $64,080
------------------------------------------------------------------------------------
1. Aggregate Compensation From Fund includes fees and deferred compensation, if
   any, for a Trustee.
2. Estimated Annual Retirement Benefits to be Paid Upon Retirement is based on a
   straight life payment plan election with the assumption that a Trustee will
   retire at the age of 75 and is eligible (after 7 years of service) to receive
   retirement plan benefits as described below under "Retirement Plan for
   Trustees."
3. Includes $7,287 deferred by Mr. Yeutter under the Deferred Compensation Plan
   described below.
4. Includes $24,989 estimated to be paid to Mr. Galli for serving as a trustee
   or director of 10 other Oppenheimer funds that are not Board I Funds.
5. Includes $92,626 paid to Mr. Galli for serving as trustee or director of 10
   other Oppenheimer funds that are not Board I Funds.
6. Includes $14,753 deferred by Mr. Griffiths under the Deferred Compensation
   Plan described below.
7. Messrs. Levy and Lipstein and Ms. Moynihan retired as Trustees from the Board
   I Funds effective January 1, 2003, March 31, 2003 and July 31, 2003,
   respectively.
8. Includes $1,310 deferred by Mr. Motley under the Deferred Compensation Plan
   described below.
9. The amount for Mr. Spiro is based on the assumption that he will retire at
   age 82 when he becomes eligible to receive retirement plan benefits (after 7
   years of service).

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

|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 is 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 September 30, 2003 the only persons who owned of
record or were known by the Fund to own of record 5% or more of any class of the
Fund's outstanding shares were:

      Great-West Life & Annuity Insurance Company, Attn: Mutual Fund Trading
      2T2, 8515 E. Orchard Rd, Greenwood Village, CO, 80111-5037, which owned
      12,409,069.407 Class A shares (10.19% of the Class A shares then
      outstanding).

      MCB Trust Service Cust., Torchmark Corporation, 700 17th Street, Suite
      300, Denver, CO 80202-3531, which owned 263,651.299 Class N shares (8.15%
      of the Class N shares then outstanding).

      Mark Curran Tr, Boeing Co. Master Trust, 200 Newport Avenue Ext, North
      Quincy, MA 02171-2102, which owned 21,174,863.190 Class Y shares (65.05%
      of the Class Y shares then outstanding).

      Mass Mutual Life Insurance Co, Separate Investment Acct, Attn: N225, 1295
      State Street, Springfield, MA 01111-0001 which owned 10,141,858.553 Class
      Y shares (31.15% 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, a global, diversified
insurance and financial services organization.

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

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

|X| Portfolio Proxy Voting. The Fund has adopted Portfolio Proxy Voting Policies
and Procedures under which the Fund votes proxies relating to securities
("portfolio proxies") held by the Fund. The Fund's primary consideration in
voting portfolio proxies is the financial interests of the Fund and its
shareholders. The Fund has retained an unaffiliated third-party as its agent to
vote portfolio proxies in accordance with the Fund's Portfolio Proxy Voting
Guidelines and to maintain records of such portfolio proxy voting. The Proxy
Voting Guidelines include provisions to address conflicts of interest that may
arise between the fund and OFI where an OFI directly-controlled affiliate
manages or administers the assts of a pension plan of a company soliciting the
proxy. The Fund's Portfolio Proxy Voting Guidelines on routine and non-routine
proxy proposals are summarized below.

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

      The Fund will be required to file new Form N-PX, with its complete proxy
voting record for the 12 months ended June 30th, no later than August 31st of
each year. The first such filing is due no later than August 31, 2004, for the
twelve months ended June 30, 2004. Once filed, the Fund's Form N-PX filing will
be available (i) without charge, upon request, by calling the Fund toll-free at
1.800.225.5677 and (ii) on the SEC's website at WWW.SEC.GOV.

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 Department provide the portfolio managers with
counsel and support in managing the Fund's portfolio.

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

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

 ----------------------------------------------------------------------------
    Fiscal Year ended 8/31:      Management Fees Paid to OppenheimerFunds,
                                                   Inc.
 ----------------------------------------------------------------------------
 ----------------------------------------------------------------------------
             2001
                               $35,024,076
 ----------------------------------------------------------------------------
 ----------------------------------------------------------------------------
             2002                               $34,456,425
 ----------------------------------------------------------------------------
 ----------------------------------------------------------------------------
             2003                               $35,661,577
 ----------------------------------------------------------------------------

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

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

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

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

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

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

      After careful deliberation, the Board, including the Independent Trustees,
concluded that it was in the best interest of shareholders to continue the
investment advisory agreement for another year. In arriving at a decision, the
Board did not single out any one factor or group of factors as being more
important than other factors, but considered all factors together. The Board
judged the terms and conditions of the investment advisory agreement, including
the investment advisory fee, in light of all of the surrounding circumstances.

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 commissions paid to such brokers may be higher than
another qualified broker would charge, if the Manager makes a good faith
determination that the commission is fair and reasonable in relation to the
services provided. Subject to those considerations, as a factor in selecting
brokers for the Fund's portfolio transactions, the Manager may also consider
sales of shares of the Fund and other investment companies for which the Manager
or an affiliate serves as investment advisor.

Brokerage Practices Followed by the Manager. Most securities purchases made by
the Fund are in principal transactions at net prices. The Fund usually deals
directly with the selling or purchasing principal or market maker without
incurring charges for the services of a broker on its behalf unless the Manager
determines that a better price or execution may be obtained by using the
services of a broker. Therefore, the Fund does not incur substantial brokerage
costs. Portfolio securities purchased from underwriters include a commission or
concession paid by the issuer to the underwriter in the price of the security.
Portfolio securities purchased from dealers include a spread between the bid and
asked price. The Fund seeks to obtain prompt execution of these orders at the
most favorable net price.

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

      Transactions in securities other than those for which an exchange is the
primary market are generally done with principals or market makers. 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.

      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. When possible, the Manager tries to combine concurrent
orders to purchase or sell the same security by more than one of the accounts
managed by the Manager or its affiliates. The transactions under those combined
orders are averaged as to price and allocated in accordance with the purchase or
sale orders actually placed for each account.

      The investment advisory agreement permits the Manager to allocate
brokerage for research services. The 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 commissions 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 Commissions Paid by the Fund1
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           2001                                $5,996,124
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           2002                                $5,238,458
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           20032                               $8,782,536
 ------------------------------------------------------------------------------
 1 Amounts do not include spreads or commissions on principal transactions on a
 net trade basis. 2 In the fiscal year ended 8/31/03, the amount of transactions
 directed to brokers for research services was $571,385,133, and the amount of
 the commissions paid to broker-dealers for those services was $1,033,452.

Distribution and Service Plans

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

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

-------------------------------------------
Fiscal    Aggregate        Class A
                           Front-End
Year      Front-End Sales  Sales Charges
Ended     Charges on       Retained by
08/31:    Class A Shares   Distributor1
-------------------------------------------
-------------------------------------------
  2001      $10,082,655      $2,828,156
-------------------------------------------
-------------------------------------------
  2002      $11,107,427      $2,473,867
-------------------------------------------
-------------------------------------------
  2003       $6,165,627      $1,306,916
-------------------------------------------
1.  Includes amounts retained by a broker-dealer that is an affiliate of the
    parent of the Distributor.


-----------------------------------------------------------------------------
Fiscal    Concessions on   Concessions on   Concessions on  Concessions on
        Year Class A Shares Class B Shares Class C Shares Class N Shares
Ended     Advanced by      Advanced by      Advanced by     Advanced by
08/31:    Distributor1     Distributor1     Distributor1    Distributor1
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2001       $1,634,569      $16,125,855      $1,835,899          N/A2
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2002       $2,999,939      $13,196,558      $2,463,444        $755,491
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2003       $2,013,246       $5,339,379      $1,079,724        $315,363
-----------------------------------------------------------------------------
1. The Distributor advances concession payments to dealers for certain sales of
   Class A shares and for sales of Class B, Class C and Class N shares from its
   own resources at the time of sale.
2. The inception date of Class N shares was March 1, 2001.
-----------------------------------------------------------------------------
Fiscal    Class A          Class B          Class C          Class N
          Contingent       Contingent       Contingent       Contingent
Year      Deferred Sales   Deferred Sales   Deferred Sales   Deferred Sales
Ended     Charges          Charges          Charges          Charges
08/31     Retained by      Retained by      Retained by      Retained by
          Distributor      Distributor      Distributor      Distributor
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2001        $99,138         $2,111,146        $116,686           $47
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2002        $93,365         $3,072,069        $152,225         $2,557
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
  2003        $67,713         $3,086,814        $140,485        $326,760
-----------------------------------------------------------------------------

Distribution and Service Plans. The Fund has adopted a Service Plan for Class A
shares and Distribution and Service Plans for Class B, Class C and Class N
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class. Each plan has been approved by a vote of the Board of
Trustees, including a majority of the Independent Trustees2, cast in person at a
meeting called for the purpose of voting on that plan.

      Under the plans, the Manager and the Distributor may make payments to
affiliates and in their sole discretion, from time to time, may use their own
resources (at no direct cost to the Fund) to make payments to brokers, dealers
or other financial institutions for distribution and administrative services
they perform. The Manager may use its profits from the 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 72 months after purchase, the Fund must obtain the
approval of both Class A and Class B shareholders for a proposed material
amendment to the Class A Plan that would materially increase payments under the
Plan. That approval must be by a "majority" (as defined in the Investment
Company Act) of the shares of each Class, voting separately by class.

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

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

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

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

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

    For the fiscal year ended August 31, 2003 payments under the Class A Plan
totaled $8,832,561, of which $227,233 was retained by the Distributor under the
arrangement described above and included $352,981 paid to an affiliate of the
Distributor's parent company. Any unreimbursed expenses the Distributor incurs
with respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. The Distributor may not use payments received under the Class
A Plan to pay any of its interest expenses, carrying charges, or other financial
costs, or allocation of overhead.

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

      Each Plan permits the Distributor to retain both the asset-based sales
charges and the service fees or to pay recipients the service fee on a quarterly
basis, without payment in advance. However, the Distributor currently intends to
pay the service fee to recipients in advance for the first year after Class B,
Class C and Class N shares are purchased. After the first year Class B, Class C
or Class N shares are outstanding, after their purchase, the Distributor makes
service fee payments quarterly on those shares. The advance payment is based on
the net asset value of shares sold. Shares purchased by exchange do not qualify
for the advance service fee payment. If Class B, Class C or Class N shares are
redeemed during the first year after their purchase, the recipient of the
service fees on those shares will be obligated to repay the Distributor a pro
rata portion of the advance payment of the service fee made on those shares. In
cases where the Distributor is the broker of record for Class B, Class C and
Class N shares, i.e. shareholders without the services of a broker directly
invest in the Fund, the Distributor will retain the asset-based sales charge and
service fee for Class B, Class C and Class N shares.

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

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

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

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


-------------------------------------------------------------------------------
------------------------------------------------------------------------------
  Distribution Fees Paid to the Distributor in the Fiscal Year Ended 8/31/03
                                              Distributor's    Distributor's
-----------------                               Aggregate       Unreimbursed
                     Total        Amount       Unreimbursed    Expenses as %
                    Payments    Retained by   Expenses Under   of Net Assets
                   Under Plan   Distributor        Plan           of Class
Class:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class B Plan      $10,010,756   $8,006,7371    $26,949,124         2.42%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class C Plan       $4,580,168   $1,356,8082     $7,404,866         1.37%
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Class N Plan        $433,274     $369,7613      $1,333,950         1.20%
-------------------------------------------------------------------------------
1. Includes $161,769 paid to an affiliate of the Distributor's parent company.
2. Includes $116,482 paid to an affiliate of the Distributor's parent company.
3. Includes $4,527 paid to an affiliate of the Distributor's parent company.

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

Performance of the Fund

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

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

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

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

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

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

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

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

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

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

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

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

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

                                ERV-P
                                ----- = Total Return
                                  P

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

---------------------------------------------------------------------------------
             The Fund's Total Returns for the Periods Ended 8/31/03
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
           Cumulative Total              Average Annual Total Returns
           Returns (10 years
  Class    or Life of Class)
Of Shares
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
                                                   5-Year           10-Year
                                  1-Year            (or               (or
                                               life-of-class) life-of-class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
          After     Without   After   Without After    Without After    Without
          Sales     Sales     Sales   Sales   Sales    Sales   Sales    Sales
           Charge    Charge   Charge  Charge   Charge  Charge   Charge   Charge
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class A   185.29%(1)202.71%(1) 8.58%  15.20%   5.93%    7.20%   11.05%   11.71%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B   107.76%(2)107.76%(2) 9.30%  14.30%   6.05%    6.37%   9.78%2   9.78%2
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C   171.09%   171.09%   13.28%  14.28%   6.37%    6.37%  10.77%3  10.77%3
             (3) (3)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N   -20.99%(4)-20.99%(4)13.94%  14.94%   -8.99%  -8.99%    N/A      N/A
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class Y   33.49%    33.49%    15.66%  15.66%   7.60%    7.60%   5.08%    5.08%
             (5) (5)
---------------------------------------------------------------------------------
1. Inception A: 01/22/81 2. Inception B: 11/01/95 3. Inception C: 12/01/93 4.
Inception N: 03/01/01 5. Inception Y: 11/03/97

--------------------------------------------------------------------------
      Average Annual Total Returns for Class A Shares (After Taxes)
                      For the Periods Ended 8/31/03
--------------------------------------------------------------------------
--------------------------------------------------------------------------
                                  1-Year 5-Year
                                                              10-Year
--------------------------------------------------------------------------
--------------------------------------------------------------------------
After Taxes on Distributions     8.58%          4.45%          8.71%
--------------------------------------------------------------------------
--------------------------------------------------------------------------
After Taxes on                   5.58%          4.53%          8.48%
Distributions and
Redemption of Fund Shares
--------------------------------------------------------------------------

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

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

|X| Morningstar Ratings. From time to time the Fund may publish the star rating
of the performance of its classes of shares by Morningstar, Inc., an independent
mutual fund monitoring service. Morningstar rates mutual funds in their
specialized market sector. The Fund is rated among the Large Blend category
within the domestic stock funds.

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

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

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


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

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


ABOUT your account

How to Buy Shares

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

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

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

      |X| Right of Accumulation. To qualify for the lower sales charge rates
that apply to larger purchases of Class A shares, you and your spouse can add
together: o Class A and Class B 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 and Class B 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 and Class B 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.

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

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

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


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

Letters of Intent. Under a Letter of Intent ("Letter"), 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. Letters do not consider Class C,
Class N or Class Y shares you purchase or may have purchased.

      A Letter 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 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 period,
when added to the value (at offering price) of the investor's holdings of shares
on the last day of that period, do not equal or exceed the intended purchase
amount, the investor agrees to pay the additional amount of sales charge
applicable to such purchases. That amount is described in "Terms of Escrow,"
below (those terms may be amended by the Distributor from time to time). The
investor agrees that shares equal in value to 5% of the intended purchase amount
will be held in escrow by the Transfer Agent subject to the Terms of Escrow.
Also, the investor agrees to be bound by the terms of the Prospectus, this
Statement of Additional Information and the application used for a Letter. If
those terms are amended, as they may be from time to time by the Fund, the
investor agrees to be bound by the amended terms and that those amendments will
apply automatically to existing Letters.

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

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

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

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

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

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

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

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

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

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

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

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

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

Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales 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. ("Merrill Lynch") or an independent record keeper
that has a contract or special arrangement with Merrill Lynch. If on the date
the plan sponsor signed the Merrill Lynch record keeping service agreement the
plan has less than $3 million in assets (other than assets invested in money
market funds) invested in applicable investments, then the retirement plan may
purchase only Class B shares of the Oppenheimer funds. Any retirement plans in
that category that currently invest in Class B shares of the Fund will have
their Class B shares converted to Class A shares of the Fund when the plan's
applicable investments reach $5 million. OppenheimerFunds has entered into
arrangements with certain record keepers whereby the Transfer Agent compensates
the record keeper for its record keeping and account servicing functions that it
performs on behalf of the participant level accounts of a retirement plan. While
such compensation may act to reduce the record keeping fees charged by the
retirement plan's record keeper, that compensation arrangement may be terminated
at any time, potentially affecting the record keeping fees charged by the
retirement plan's record keeper.

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

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

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

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

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

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

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

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

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

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

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

Account Fees. As stated in the Prospectus, a $12 annual fee is assessed on any account
valued at less than $500. This fee will not be assessed on the following accounts:
o     Accounts that have balances below $500 due to the automatic conversion of shares from
      Class B to Class A shares;
o     Accounts with an active Asset Builder Plan, payroll deduction plan or a military
      allotment plan;
o     OppenheimerFunds-sponsored group retirement accounts that are making continuing
      purchases;
o     Certain accounts held by broker-dealers through the National Securities Clearing
      Corporation; and
o     Accounts that fall below the $500 threshold due solely to market
      fluctuations within the 12-month period preceding the date the fee is
      deducted.

      The fee is automatically deducted from qualifying accounts annually on or
about the second to last business day of September. This annual fee is waived
for any shareholders who elect to access their account documents through
electronic document delivery rather than in paper copy and who elect to utilize
the Internet or PhoneLink as their primary source for their general servicing
needs. To sign up to access account documents electronically via eDocs Direct,
please visit the Service Center on our website at WWW.OPPENHEIMERFUNDS.COM or
call 1.888.470.0862 for instructions.

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

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

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

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

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

      The closing prices in the 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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      To use Class A 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
of shares by calling the Distributor.

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

      The following funds only offer Class A shares:
      Centennial America Fund, L.P.         Centennial New York Tax Exempt
                                      Trust
      Centennial California Tax Exempt      Centennial Tax Exempt Trust
      Trust
      Centennial Government Trust           Oppenheimer Money Market Fund, Inc.
      Centennial Money Market Trust

      The following funds do not offer Class N shares:
      Oppenheimer AMT-Free New York          Oppenheimer Pennsylvania Municipal
      Municipals                             Fund
      Oppenheimer California Municipal Fund  Oppenheimer Rochester National
                                             Municipals
      Oppenheimer Limited Term Municipal     Oppenheimer Senior Floating Rate
      Fund                                   Fund
      Oppenheimer Municipal Bond Fund        Limited Term New York Municipal Fund
      Oppenheimer New Jersey Municipal Fund  Rochester Fund Municipals

      The following funds do not offer Class Y shares:
      Oppenheimer AMT-Free New York Oppenheimer Limited Term Municipal Fund
      Municipals Oppenheimer California Municipal Fund Oppenheimer Multiple
      Strategies Fund Oppenheimer Capital Income Fund Oppenheimer New Jersey
      Municipal Fund Oppenheimer Cash Reserves Oppenheimer Pennsylvania
      Municipal Fund Oppenheimer Champion Income Fund Oppenheimer Principal
      Protected Main
                                             Street Fund
      Oppenheimer Convertible Securities     Oppenheimer Quest Capital Value Fund,
      Fund                                   Inc.
      Oppenheimer Disciplined Allocation     Oppenheimer Quest International Value
      Fund                                   Fund, Inc.
      Oppenheimer Developing Markets Fund    Oppenheimer Rochester National
                                             Municipals
      Oppenheimer Gold & Special Minerals Oppenheimer Senior Floating Rate Fund
      Fund Oppenheimer International Bond Fund Oppenheimer Small Cap Value Fund
      Oppenheimer International Growth Fund Oppenheimer Total Return Bond Fund
      Oppenheimer International Small Limited Term New York Municipal Fund
      Company Fund
o     Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for
      shares of any other fund.
o     Class B, Class C and Class N shares of Oppenheimer Cash Reserves are
      generally available only by exchange from the same class of shares of
      other Oppenheimer funds or through OppenheimerFunds-sponsored 401(k)
      plans.
o     Class M shares of Oppenheimer Convertible Securities Fund may be exchanged
      only for Class A shares of other Oppenheimer funds. They may not be
      acquired by exchange of shares of any class of any other Oppenheimer funds
      except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash
      Reserves acquired by exchange of Class M shares.
o     Class X shares of Limited Term New York Municipal Fund may 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.
o     Class A shares of Oppenheimer funds may be exchanged at net asset value
      for shares of any money market fund offered by the Distributor. Shares of
      any money market fund purchased without a sales charge may be exchanged
      for shares of Oppenheimer funds offered with a sales charge upon payment
      of the sales charge. They may also be used to purchase shares of
      Oppenheimer funds subject to an early withdrawal charge or contingent
      deferred sales charge.
o     Shares of 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.
o     Shares of the Fund acquired by reinvestment of dividends or distributions
      from any of the other Oppenheimer funds or from any unit investment trust
      for which reinvestment arrangements have been made with the Distributor
      may be exchanged at net asset value for shares of any of the Oppenheimer
      funds.
o     Shares of Oppenheimer Principal Protected Main Street Fund may be
      exchanged at net asset value for shares of any of the Oppenheimer funds.
      However, shareholders are not permitted to exchange share of other
      Oppenheimer funds for shares of Oppenheimer Principal Protected Main
      Street Fund until after the expiration of the warranty period (8/5/2010).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.

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

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

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

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

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

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

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

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

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

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

Additional Information About the Fund

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

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

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

Independent 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 of
 Oppenheimer Capital Appreciation Fund, including the statement of investments,
 as of August 31, 2003, and the related statement of operations for the year
 then ended, the statements of changes in net assets for each of the two years
 in the period then ended, and the financial highlights for each of the five
 years in the period then ended. These financial statements and financial
 highlights are the responsibility of the Fund's management. Our responsibility
 is to express an opinion on these financial statements and financial highlights
 based on our audits.
    We conducted our audits in accordance with auditing standards generally
 accepted in the United States of America. Those standards require that we plan
 and perform the audit to obtain reasonable assurance about whether the
 financial statements and financial highlights are free of material
 misstatement. An audit includes examining, on a test basis, evidence supporting
 the amounts and disclosures in the financial statements. Our procedures
 included confirmation of securities owned as of August 31, 2003, by
 correspondence with the custodian and brokers or by other appropriate auditing
 procedures where replies from brokers were not received. An audit also includes
 assessing the accounting principles used and significant estimates made by
 management, as well as evaluating the overall financial statement presentation.
 We believe that our audits provide a reasonable basis for our opinion.
    In our opinion, the financial statements and financial highlights referred
 to above present fairly, in all material respects, the financial position of
 Oppenheimer Capital Appreciation Fund as of August 31, 2003, the results of its
 operations for the year then ended, the changes in its net assets for each of
 the two years in the period then ended, and the financial highlights for each
 of the five years in the period then ended, in conformity with accounting
 principles generally accepted in the United States of America.



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

 Denver, Colorado
 September 22, 2003



--------------------------------------------------------------------------------
STATEMENT OF INVESTMENTS  August 31, 2003
--------------------------------------------------------------------------------


                                                                   Market Value
                                                       Shares        See Note 1
--------------------------------------------------------------------------------
 Common Stocks--92.9%
--------------------------------------------------------------------------------
 Consumer Discretionary--23.2%
--------------------------------------------------------------------------------
 Hotels, Restaurants & Leisure--5.5%
 Brinker
 International, Inc. 1                               1,589,400    $  54,357,480
--------------------------------------------------------------------------------
 Carnival Corp.                                      3,788,200      131,033,838
--------------------------------------------------------------------------------
 International
 Game Technology                                     1,832,000       47,338,880
--------------------------------------------------------------------------------
 Mandalay
 Resort Group                                          482,400       18,331,200
--------------------------------------------------------------------------------
 Royal Caribbean
 Cruises Ltd.                                        4,206,800      131,041,820
--------------------------------------------------------------------------------
 Starwood Hotels &
 Resorts Worldwide, Inc.                               491,800       16,637,594
                                                                  --------------
                                                                    398,740,812

--------------------------------------------------------------------------------
 Household Durables--0.4%
 Ethan Allen
 Interiors, Inc.                                       742,170       28,729,401
--------------------------------------------------------------------------------
 Media--14.9%
 AOL Time
 Warner, Inc. 1                                      9,436,600      154,382,776
--------------------------------------------------------------------------------
 Cablevision Systems
 New York Group,
 Cl. A 1                                               590,700       11,902,605
--------------------------------------------------------------------------------
 Clear Channel
 Communications,
 Inc. 1                                              2,325,530      104,927,913
--------------------------------------------------------------------------------
 Comcast Corp., Cl. A
 Special, Non-Vtg. 1                                 8,162,250      231,481,410
--------------------------------------------------------------------------------
 Cox Communications,
 Inc., Cl. A 1                                         528,800       17,302,336
--------------------------------------------------------------------------------
 Hispanic
 Broadcasting Corp. 1                                1,067,525       33,520,285
--------------------------------------------------------------------------------
 Liberty Media
 Corp., Cl. A 1                                      2,805,700       33,948,970
--------------------------------------------------------------------------------
 McGraw-Hill
 Cos., Inc. (The)                                      520,200       31,732,200
--------------------------------------------------------------------------------
 New York Times
 Co., Cl. A                                            893,300       39,653,587
--------------------------------------------------------------------------------
 News Corp. Ltd. (The),
 Sponsored ADR                                       2,724,200       93,576,270
--------------------------------------------------------------------------------
 Omnicom
 Group, Inc.                                           461,500       36,043,150
--------------------------------------------------------------------------------
 Univision
 Communications,
 Inc., Cl. A 1                                       1,004,000       37,639,960


                                                                   Market Value
                                                       Shares        See Note 1
--------------------------------------------------------------------------------

 Media Continued
 Viacom, Inc., Cl. B 1                               5,471,000   $  246,195,000
                                                                  --------------
                                                                  1,072,306,462

--------------------------------------------------------------------------------
 Multiline Retail--1.1%
 Target Corp.                                        1,968,400       79,917,040
--------------------------------------------------------------------------------
 Specialty Retail--0.9%
 Gap, Inc. (The)                                     2,452,800       51,238,992
--------------------------------------------------------------------------------
 Pier 1 Imports, Inc.                                  456,300        9,386,091
                                                                  --------------
                                                                     60,625,083

--------------------------------------------------------------------------------
 Textiles, Apparel & Luxury Goods--0.4%
 Nike, Inc., Cl. B                                     493,600       28,125,328
--------------------------------------------------------------------------------
 Consumer Staples--5.6%
--------------------------------------------------------------------------------
 Beverages--3.3%
 Anheuser-Busch
 Cos., Inc.                                          2,721,700      140,276,418
--------------------------------------------------------------------------------
 PepsiCo, Inc.                                       2,118,100       94,340,174
                                                                  --------------
                                                                    234,616,592

--------------------------------------------------------------------------------
 Food & Staples Retailing--0.2%
 Costco
 Wholesale Corp. 1                                     554,600       17,797,114
--------------------------------------------------------------------------------
 Food Products--0.7%
 General Mills, Inc.                                 1,038,200       48,130,952
--------------------------------------------------------------------------------
 Household Products--0.6%
 Procter & Gamble
 Corp. (The)                                           501,200       43,749,748
--------------------------------------------------------------------------------
 Personal Products--0.6%
 Avon Products, Inc.                                   287,200       18,409,520
--------------------------------------------------------------------------------
 Estee Lauder Cos.,
 Inc. (The), Cl. A                                     791,160       27,287,108
                                                                  --------------
                                                                     45,696,628

--------------------------------------------------------------------------------
 Tobacco--0.2%
 Altria Group, Inc.                                    382,900       15,783,138
--------------------------------------------------------------------------------
 Energy--5.6%
--------------------------------------------------------------------------------
 Energy Equipment & Services--1.5%
 BJ Services Co. 1                                   1,130,300       42,239,311
--------------------------------------------------------------------------------
 Halliburton Co.                                       759,200       18,357,456
--------------------------------------------------------------------------------
 Noble Corp. 1                                         551,110       19,939,160
--------------------------------------------------------------------------------
 Rowan Cos., Inc. 1                                    839,400       21,018,576
--------------------------------------------------------------------------------
 Varco
 International, Inc. 1                                 655,400       11,305,650
                                                                  --------------
                                                                    112,860,153



11 OPPENHEIMER CAPITAL APPRECIATION FUND




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


                                                                   Market Value
                                                       Shares        See Note 1
--------------------------------------------------------------------------------
 Oil & Gas--4.1%
 Burlington
 Resources, Inc.                                       516,100    $  24,989,562
--------------------------------------------------------------------------------
 ConocoPhillips                                        746,500       41,684,560
--------------------------------------------------------------------------------
 Encana Corp.                                        1,420,180       53,176,765
--------------------------------------------------------------------------------
 Exxon Mobil Corp.                                   3,406,400      128,421,280
--------------------------------------------------------------------------------
 TotalFinaElf SA,
 Sponsored ADR                                         586,600       45,174,066
                                                                  -------------
                                                                    293,446,233

--------------------------------------------------------------------------------
 Financials--12.4%
--------------------------------------------------------------------------------
 Commercial Banks--2.1%
 Bank of America Corp.                                 968,400       76,745,700
--------------------------------------------------------------------------------
 Bank One Corp.                                      1,991,100       78,588,717
                                                                  -------------
                                                                    155,334,417

--------------------------------------------------------------------------------
 Diversified Financial Services--7.6%
 American Express Co.                                2,234,000      100,641,700
--------------------------------------------------------------------------------
 Citigroup, Inc.                                     4,221,700      183,010,695
--------------------------------------------------------------------------------
 Goldman Sachs
 Group, Inc. (The)                                     477,500       42,253,975
--------------------------------------------------------------------------------
 J.P. Morgan
 Chase & Co.                                           803,500       27,495,770
--------------------------------------------------------------------------------
 Merrill Lynch
 & Co., Inc.                                           929,300       49,977,754
--------------------------------------------------------------------------------
 Morgan Stanley                                      2,137,300      104,278,867
--------------------------------------------------------------------------------
 Schwab
 (Charles) Corp.                                     3,576,800       38,844,048
                                                                  -------------
                                                                    546,502,809

--------------------------------------------------------------------------------
 Insurance--1.7%
 American International
 Group, Inc.                                         1,435,600       85,518,692
--------------------------------------------------------------------------------
 Everest Re Group Ltd.                                 163,700       11,999,210
--------------------------------------------------------------------------------
 St. Paul Cos., Inc.                                   376,900       13,101,044
--------------------------------------------------------------------------------
 XL Capital Ltd., Cl. A                                164,500       12,460,875
                                                                  -------------
                                                                    123,079,821

--------------------------------------------------------------------------------
 Real Estate--0.5%
 Host Marriott Corp. 1                               3,283,200       32,897,664
--------------------------------------------------------------------------------
 Thrifts & Mortgage Finance--0.5%
 Fannie Mae                                            604,000       39,133,160
--------------------------------------------------------------------------------
 Health Care--14.1%
--------------------------------------------------------------------------------
 Biotechnology--2.8%
 Amgen, Inc. 1                                       1,266,100       83,435,990
--------------------------------------------------------------------------------
 Celgene Corp. 1                                     1,248,900       48,070,161



                                                                   Market Value
                                                       Shares        See Note 1
--------------------------------------------------------------------------------
 Biotechnology Continued
 Chiron Corp. 1                                        445,700    $  22,650,474
--------------------------------------------------------------------------------
 Invitrogen Corp. 1                                    130,000        7,497,100
--------------------------------------------------------------------------------
 Serono SA, ADR                                      1,373,000       22,270,060
--------------------------------------------------------------------------------
 Sicor, Inc. 1                                         879,200       17,452,120
                                                                  -------------
                                                                    201,375,905

--------------------------------------------------------------------------------
 Health Care Equipment & Supplies--3.4%
 Applera Corp./Applied
 Biosystems Group                                      805,080       17,518,541
--------------------------------------------------------------------------------
 Medtronic, Inc.                                     2,809,100      139,275,178
--------------------------------------------------------------------------------
 Millipore Corp. 1                                   1,121,600       50,920,640
--------------------------------------------------------------------------------
 Steris Corp. 1                                         93,200        2,182,744
--------------------------------------------------------------------------------
 Varian Medical
 Systems, Inc. 1                                       614,100       34,297,485
                                                                  --------------
                                                                    244,194,588

--------------------------------------------------------------------------------
 Health Care Providers & Services--1.7%
 Aetna, Inc.                                           894,000       50,958,000
--------------------------------------------------------------------------------
 Anthem, Inc. 1                                         98,800        7,232,160
--------------------------------------------------------------------------------
 Apria Healthcare
 Group, Inc. 1                                         292,400        7,573,160
--------------------------------------------------------------------------------
 UnitedHealth
 Group, Inc.                                           488,600       24,151,498
--------------------------------------------------------------------------------
 WellPoint Health
 Networks, Inc. 1                                      432,100       33,703,800
                                                                  -------------
                                                                    123,618,618

--------------------------------------------------------------------------------
 Pharmaceuticals--6.2%
 Abbott Laboratories                                 1,003,700       40,449,110
--------------------------------------------------------------------------------
 Barr Laboratories, Inc. 1                             714,300       48,336,681
--------------------------------------------------------------------------------
 Bristol-Myers
 Squibb Co.                                          1,044,600       26,501,502
--------------------------------------------------------------------------------
 Dr. Reddy's Laboratories Ltd.,
 Sponsored ADR                                         456,000       11,559,600
--------------------------------------------------------------------------------
 Forest
 Laboratories, Inc. 1                                  413,300       19,425,100
--------------------------------------------------------------------------------
 GlaxoSmithKline
 plc, ADR                                              274,400       10,654,952
--------------------------------------------------------------------------------
 Medicis
 Pharmaceutical
 Corp., Cl. A                                          264,000       16,125,120
--------------------------------------------------------------------------------
 Merck & Co., Inc.                                     518,300       26,080,856
--------------------------------------------------------------------------------
 Perrigo Co.                                         1,819,610       25,565,520
--------------------------------------------------------------------------------
 Pfizer, Inc.                                        3,898,500      116,643,120
--------------------------------------------------------------------------------
 Schering-Plough Corp.                                 642,000        9,751,980



12 OPPENHEIMER CAPITAL APPRECIATION FUND



                                                                   Market Value
                                                       Shares        See Note 1
--------------------------------------------------------------------------------
 Pharmaceuticals Continued
 Teva Pharmaceutical
 Industries Ltd.,
 Sponsored ADR                                       1,644,400    $  96,546,013
                                                                  --------------
                                                                    447,639,554

--------------------------------------------------------------------------------
 Industrials--5.5%
--------------------------------------------------------------------------------
 Aerospace & Defense--1.0%
 Honeywell
 International, Inc.                                 1,237,000       35,860,630
--------------------------------------------------------------------------------
 Northrop
 Grumman Corp.                                         373,100       35,623,588
                                                                  --------------
                                                                     71,484,218

--------------------------------------------------------------------------------
 Air Freight & Logistics--1.3%
 Expeditors International
 of Washington, Inc.                                   810,000       30,545,100
--------------------------------------------------------------------------------
 FedEx Corp.                                           950,200       63,758,420
                                                                  --------------
                                                                     94,303,520

--------------------------------------------------------------------------------
 Commercial Services & Supplies--1.1%
 Dun & Bradstreet Corp. 1                              384,200       16,174,820
--------------------------------------------------------------------------------
 Waste
 Management, Inc.                                    2,191,700       58,321,137
                                                                  --------------
                                                                     74,495,957

--------------------------------------------------------------------------------
 Industrial Conglomerates--1.0%
 3M Co.                                                123,300       17,566,551
--------------------------------------------------------------------------------
 General Electric Co.                                1,907,100       56,392,947
                                                                  --------------
                                                                     73,959,498

--------------------------------------------------------------------------------
 Machinery--1.1%
 Danaher Corp.                                         241,600       18,663,600
--------------------------------------------------------------------------------
 Dover Corp.                                           437,700       16,641,354
--------------------------------------------------------------------------------
 Ingersoll-Rand
 Co., Cl. A                                            744,500       44,312,640
                                                                  --------------
                                                                     79,617,594

--------------------------------------------------------------------------------
 Information Technology--23.1%
--------------------------------------------------------------------------------
 Communications Equipment--3.5%
 Cisco Systems, Inc. 1                               4,408,700       84,426,605
--------------------------------------------------------------------------------
 Lucent
 Technologies, Inc. 1                                6,883,600       13,147,676
--------------------------------------------------------------------------------
 Nokia Corp., Sponsored
 ADR, A Shares                                       7,663,300      124,835,157
--------------------------------------------------------------------------------
 UTStarcom, Inc. 1                                     729,200       31,326,432
                                                                  --------------
                                                                    253,735,870


                                  Market Value
                                Shares See Note 1
--------------------------------------------------------------------------------
 Computers & Peripherals--2.7%
 Dell, Inc. 1                                        2,437,500    $  79,535,625
--------------------------------------------------------------------------------
 EMC Corp. 1                                         1,580,000       20,145,000
--------------------------------------------------------------------------------
 International Business
 Machines Corp.                                      1,169,600       95,918,896
--------------------------------------------------------------------------------
 Seagate Technology
 International, Inc.
 (Escrow Shares) 1,2                                 1,000,000               --
                                                                  -------------
                                                                    195,599,521

--------------------------------------------------------------------------------
 Electronic Equipment & Instruments--1.0%
 Sanmina-SCI Corp. 1                                 4,047,700       36,348,346
--------------------------------------------------------------------------------
 Vishay
 Intertechnology, Inc. 1                             2,257,600       37,182,672
                                                                  -------------
                                                                     73,531,018

--------------------------------------------------------------------------------
 Internet Software & Services--1.0%
 Yahoo!, Inc. 1                                      2,117,600       70,727,840
--------------------------------------------------------------------------------
 IT Services--1.3%
 CACI International,
 Inc., Cl. A 1                                          19,100          852,051
--------------------------------------------------------------------------------
 First Data Corp.                                    1,421,120       54,571,008
--------------------------------------------------------------------------------
 Infosys
 Technologies Ltd.                                     400,000       34,122,164
                                                                  --------------
                                                                     89,545,223

--------------------------------------------------------------------------------
 Semiconductors & Semiconductor Equipment--7.0%
 Analog
 Devices, Inc. 1                                       559,600       22,943,600
--------------------------------------------------------------------------------
 Applied
 Materials, Inc. 1                                   1,700,100       36,722,160
--------------------------------------------------------------------------------
 Broadcom
 Corp., Cl. A 1                                        618,400       16,894,688
--------------------------------------------------------------------------------
 Cypress
 Semiconductor Corp. 1                               2,794,700       51,897,579
--------------------------------------------------------------------------------
 Intel Corp.                                         6,017,700      172,226,574
--------------------------------------------------------------------------------
 International
 Rectifier Corp. 1                                   1,017,900       42,334,461
--------------------------------------------------------------------------------
 National
 Semiconductor Corp. 1                               1,302,900       37,966,506
--------------------------------------------------------------------------------
 STMicroelectronics NV,
 NY Registered Shares                                  928,500       23,156,790
--------------------------------------------------------------------------------
 Taiwan Semiconductor
 Manufacturing
 Co. Ltd., ADR                                       3,195,944       37,648,220
--------------------------------------------------------------------------------
 Texas
 Instruments, Inc.                                   2,681,400       63,951,390
                                                                  --------------
                                                                    505,741,968




13 OPPENHEIMER CAPITAL APPRECIATION FUND





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


                                                                   Market Value
                                                       Shares        See Note 1
--------------------------------------------------------------------------------
 Software--6.6%
 Adobe Systems, Inc.                                 1,892,500    $  73,485,775
--------------------------------------------------------------------------------
 Cadence Design
 Systems, Inc. 1                                     1,983,700       28,208,214
--------------------------------------------------------------------------------
 Electronic Arts, Inc. 1                               679,830       61,014,743
--------------------------------------------------------------------------------
 Intuit, Inc. 1                                        440,800       19,977,056
--------------------------------------------------------------------------------
 Microsoft Corp.                                     9,065,700      240,422,364
--------------------------------------------------------------------------------
 Peoplesoft, Inc. 1                                    327,200        5,922,320
--------------------------------------------------------------------------------
 SAP AG (Systeme,
 Anwendungen,
 Produkte in der
 Datenverarbeitung),
 Sponsored ADR                                         450,400       13,484,976
--------------------------------------------------------------------------------
 Veritas Software Corp. 1                              924,000       31,859,520
                                                                 ---------------
                                                                    474,374,968

--------------------------------------------------------------------------------
 Materials--2.2%
--------------------------------------------------------------------------------
 Chemicals--1.6%
 Air Products &
 Chemicals, Inc.                                       781,500       36,980,580
--------------------------------------------------------------------------------
 Ecolab, Inc.                                          572,400       14,762,196
--------------------------------------------------------------------------------
 Praxair, Inc.                                         934,000       59,607,880
                                                                 ---------------
                                                                    111,350,656

--------------------------------------------------------------------------------
 Paper & Forest Products--0.6%
 International
 Paper Co.                                           1,107,800       44,921,290
--------------------------------------------------------------------------------
 Telecommunication Services--0.6%
--------------------------------------------------------------------------------
 Diversified Telecommunication Services--0.4%
 Telefonos de Mexico
 SA, Sponsored ADR                                     935,100       28,342,881
--------------------------------------------------------------------------------
 Wireless Telecommunication Services--0.2%
 Vodafone Group plc,
 Sponsored ADR                                         725,900       13,283,970
--------------------------------------------------------------------------------
 Utilities--0.6%
--------------------------------------------------------------------------------
 Gas Utilities--0.5%
 Kinder Morgan
 Management LLC                                      1,080,825       40,314,772
--------------------------------------------------------------------------------
 Water Utilities--0.1%
 Philadelphia
 Suburban Corp.                                        208,175        4,923,339
                                                                 ---------------
 Total Common Stocks
 (Cost $6,583,024,789)                                            6,694,555,323


                                                                   Market Value
                                                       Shares        See Note 1
--------------------------------------------------------------------------------
 Other Securities--0.5%

 Nasdaq-100 Unit
 Investment Trust 1
 (Cost $28,087,898)                                  1,014,300    $  33,867,477

                                                     Principal
                                                       Amount
--------------------------------------------------------------------------------
 Short-Term Notes--5.4%

 Gemini
 Securitization Corp.:
 1.05%, 9/12/03                                   $ 30,000,000       29,990,375
 1.07%, 9/15/03                                     50,000,000       49,979,194
--------------------------------------------------------------------------------
 Old Line Funding
 Corp.:
 1.06%, 9/30/03                                     50,055,000       50,012,259
 1.07%, 9/3/03                                      20,056,000       20,054,808
--------------------------------------------------------------------------------
 Sheffield
 Receivables Corp.:
 1.07%, 9/22/03                                     50,000,000       49,969,083
 1.07%, 9/24/03                                     32,970,000       32,947,461
--------------------------------------------------------------------------------
 Ticonderoga
 Funding LLC,
 1.07%, 10/3/03 3                                   50,000,000       49,952,445
--------------------------------------------------------------------------------
 Windmill Funding
 Corp., 1.07%, 9/2/03                               50,000,000       49,998,514
--------------------------------------------------------------------------------
 Yorktown Capital
 LLC, 1.06%, 9/19/03                                59,802,000       59,770,305
                                                                 ---------------
 Total Short-Term Notes
 (Cost $392,674,444)                                                392,674,444

--------------------------------------------------------------------------------
 Joint Repurchase Agreements--1.4%

 Undivided interest of 22.56% in joint
 repurchase agreement (Principal Amount/
 Market Value $433,610,000, with a maturity
 value of $433,657,215) with Banc One Capital
 Markets, Inc., 0.98%, dated 8/29/03, to be
 repurchased at $97,837,652 on 9/2/03,
 collateralized by U.S. Treasury Nts.,
 3.25%--3.375%, 4/30/04--5/31/04, with a
 value of $382,438,290 and U.S. Treasury
 Bills, 9/25/03, with a value of $60,192,630
 (Cost $97,827,000)                                 97,827,000       97,827,000

--------------------------------------------------------------------------------
 Total Investments,
 at Value
 (Cost $7,101,614,131)                                   100.2%   7,218,924,244
--------------------------------------------------------------------------------
 Liabilities in Excess
 of Other Assets                                          (0.2)     (12,730,807)
                                                   -----------------------------
 Net Assets                                              100.0%  $7,206,193,437
                                                   =============================



14 OPPENHEIMER CAPITAL APPRECIATION FUND




Footnotes to Statement of Investments
1. Non-income producing security.
2. Identifies issues considered to be illiquid. See Note 6 of Notes to Financial
Statements. 3. Represents securities sold under Rule 144A, which are exempt from
registration under the Securities Act of 1933, as amended. These securities have
been determined to be liquid under guidelines established by the Board of
Trustees. These securities amount to $49,952,445 or 0.69% of the Fund's net
assets as of August 31, 2003.

See accompanying Notes to Financial Statements.


15 OPPENHEIMER CAPITAL APPRECIATION FUND




--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES  August 31, 2003
--------------------------------------------------------------------------------




--------------------------------------------------------------------------------------------------
 Assets

 Investments, at value (cost $7,101,614,131)--see accompanying statement         $ 7,218,924,244
--------------------------------------------------------------------------------------------------
 Cash                                                                                    844,662
--------------------------------------------------------------------------------------------------
 Receivables and other assets:
 Investments sold                                                                     17,646,336
 Shares of beneficial interest sold                                                   11,291,402
 Interest and dividends                                                                5,423,654
 Other                                                                                    20,062
                                                                                  ----------------
 Total assets                                                                      7,254,150,360

--------------------------------------------------------------------------------------------------
 Liabilities

 Payables and other liabilities:
 Investments purchased                                                                34,087,188
 Shares of beneficial interest redeemed                                                7,151,237
 Distribution and service plan fees                                                    2,417,545
 Transfer and shareholder servicing agent fees                                         1,703,751
 Shareholder reports                                                                   1,383,412
 Trustees' compensation                                                                  983,279
 Other                                                                                   230,511
                                                                                  ----------------
 Total liabilities                                                                    47,956,923


--------------------------------------------------------------------------------------------------
 Net Assets                                                                      $ 7,206,193,437
                                                                                  ================


--------------------------------------------------------------------------------------------------
 Composition of Net Assets

 Par value of shares of beneficial interest                                      $       206,489
--------------------------------------------------------------------------------------------------
 Additional paid-in capital                                                        8,172,022,619
--------------------------------------------------------------------------------------------------
 Accumulated net investment loss                                                        (948,533)
--------------------------------------------------------------------------------------------------
 Accumulated net realized loss on investments and foreign currency
 transactions                                                                     (1,082,397,251)
--------------------------------------------------------------------------------------------------
 Net unrealized appreciation on investments and translation
 of assets and liabilities denominated in foreign currencies                         117,310,113
                                                                                  ----------------
 Net Assets                                                                      $ 7,206,193,437
                                                                                  ================




16 OPPENHEIMER CAPITAL APPRECIATION FUND






-------------------------------------------------------------------------------------------------
 Net Asset Value Per Share

 Class A Shares:
 Net asset value and redemption price per share (based on net assets of
 $4,288,331,772 and 121,172,527 shares of beneficial interest outstanding)                $35.39
 Maximum offering price per share (net asset value plus sales charge of
 5.75% of offering price)                                                                 $37.55
-------------------------------------------------------------------------------------------------
 Class B Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of
 $1,114,052,303 and 33,666,318 shares of beneficial interest outstanding)                 $33.09
-------------------------------------------------------------------------------------------------
 Class C Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $540,117,770
 and 16,506,900 shares of beneficial interest outstanding)                                $32.72
-------------------------------------------------------------------------------------------------
 Class N Shares:
 Net asset value, redemption price (excludes applicable contingent deferred
 sales charge) and offering price per share (based on net assets of $111,373,718
 and 3,166,334 shares of beneficial interest outstanding)                                 $35.17
-------------------------------------------------------------------------------------------------
 Class Y Shares:
 Net asset value, redemption price and offering price per share (based on net
 assets of $1,152,317,874 and 31,977,118 shares of
 beneficial interest outstanding)                                                         $36.04



 See accompanying Notes to Financial Statements.

17 OPPENHEIMER CAPITAL APPRECIATION FUND




--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS  For the Year Ended August 31, 2003
--------------------------------------------------------------------------------




--------------------------------------------------------------------------------------------------
 Investment Income

 Dividends (net of foreign withholding taxes of $806,699)                         $   58,135,208
--------------------------------------------------------------------------------------------------
 Interest                                                                              7,513,162
                                                                                  ----------------
 Total investment income                                                              65,648,370

--------------------------------------------------------------------------------------------------
 Expenses

 Management fees                                                                      35,661,577
--------------------------------------------------------------------------------------------------
 Distribution and service plan fees:
 Class A                                                                               8,832,561
 Class B                                                                              10,010,756
 Class C                                                                               4,580,168
 Class N                                                                                 433,274
--------------------------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Class A                                                                              11,002,173
 Class B                                                                               4,695,421
 Class C                                                                               1,561,469
 Class N                                                                                 283,974
 Class Y                                                                               1,408,039
--------------------------------------------------------------------------------------------------
 Trustees' compensation                                                                  356,988
--------------------------------------------------------------------------------------------------
 Custodian fees and expenses                                                              75,633
--------------------------------------------------------------------------------------------------
 Other                                                                                 2,773,659
                                                                                  ----------------
 Total expenses                                                                       81,675,692
 Less reduction to custodian expenses                                                     (8,948)
 Less voluntary waiver of transfer and shareholder servicing agent fees--Class B      (1,378,709)
 Less voluntary waiver of transfer and shareholder servicing agent fees--Class N         (36,445)
 Less voluntary waiver of transfer and shareholder servicing agent fees--Class Y         (19,200)
                                                                                  ----------------
 Net expenses                                                                         80,232,390


--------------------------------------------------------------------------------------------------
 Net Investment Loss                                                                 (14,584,020)


--------------------------------------------------------------------------------------------------
 Realized and Unrealized Gain (Loss)

 Net realized gain (loss) on:
 Investments                                                                        (737,382,709)
 Foreign currency transactions                                                            90,472
                                                                                  ----------------
 Net realized loss                                                                  (737,292,237)
--------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation on:
 Investments                                                                       1,672,429,608
 Translation of assets and liabilities denominated in foreign currencies               3,681,056
                                                                                  ----------------
 Net change in unrealized appreciation                                             1,676,110,664


--------------------------------------------------------------------------------------------------
 Net Increase in Net Assets Resulting from Operations                             $  924,234,407
                                                                                  ================



 See accompanying Notes to Financial Statements.


18 OPPENHEIMER CAPITAL APPRECIATION FUND




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




 Year Ended August 31,                                                              2003               2002
------------------------------------------------------------------------------------------------------------
 Operations

 Net investment loss                                                      $  (14,584,020)   $   (18,671,997)
------------------------------------------------------------------------------------------------------------
 Net realized loss                                                          (737,292,237)      (330,072,053)
------------------------------------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation)                      1,676,110,664     (1,276,143,258)
                                                                          ----------------------------------
 Net increase (decrease) in net assets resulting from operations             924,234,407     (1,624,887,308)

------------------------------------------------------------------------------------------------------------
 Dividends and/or Distributions to Shareholders

 Distributions from net realized gain:
 Class A                                                                              --        (78,925,210)
 Class B                                                                              --        (32,881,006)
 Class C                                                                              --        (12,072,075)
 Class N                                                                              --           (448,693)
 Class Y                                                                              --        (23,930,560)

------------------------------------------------------------------------------------------------------------
 Beneficial Interest Transactions

 Net increase (decrease) in net assets resulting from beneficial interest
 transactions:
 Class A                                                                     504,686,099      1,117,051,404
 Class B                                                                     (50,319,183)       155,846,095
 Class C                                                                      24,021,003        173,690,841
 Class N                                                                      25,028,168         78,890,789
 Class Y                                                                     142,226,078        178,600,006

------------------------------------------------------------------------------------------------------------
 Net Assets

 Total increase (decrease)                                                 1,569,876,572        (69,065,717)
------------------------------------------------------------------------------------------------------------
 Beginning of period                                                       5,636,316,865      5,705,382,582
                                                                          ----------------------------------
 End of period [including accumulated net investment loss of
 $948,533 and $858,396, respectively]                                     $7,206,193,437    $ 5,636,316,865
                                                                          ==================================


 See accompanying Notes to Financial Statements.


19 OPPENHEIMER CAPITAL APPRECIATION FUND





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



 Class A           Year Ended August 31,                       2003         2002        2001         2000         1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                        $30.72       $41.11     $ 62.12       $44.73       $32.53
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                                  (.05)        (.09)        .10         (.02)        (.04)
 Net realized and unrealized gain (loss)                       4.72        (9.31)     (15.86)       20.63        14.87
                                                            -------------------------------------------------------------
 Total from investment operations                              4.67        (9.40)     (15.76)       20.61        14.83
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                            --           --          --           --         (.09)
 Distributions from net realized gain                            --         (.99)      (5.25)       (3.22)       (2.54)
                                                            -------------------------------------------------------------
 Total dividends and/or
 distributions to shareholders                                   --         (.99)      (5.25)       (3.22)       (2.63)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $35.39       $30.72     $ 41.11       $62.12       $44.73
                                                            =============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 1                           15.20%      (23.48)%    (26.38)%      48.01%       47.36%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                $4,288,332   $3,219,391  $3,055,197   $3,648,961   $2,071,317
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                       $3,655,594   $3,204,793  $3,255,995   $2,898,088   $1,788,774
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment income (loss)                                 (0.11)%      (0.15)%      0.28%        0.00%       (0.05)%
 Total expenses                                                1.17% 3      1.22% 3,4   1.03% 3      1.06% 3      1.04% 3
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                         42%          28%         46%          44%          59%

1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year. 3. Reduction to custodian
expenses less than 0.01%. 4. Voluntary waiver of transfer agent fees less than
0.01%.



See accompanying Notes to Financial Statements.


20 OPPENHEIMER CAPITAL APPRECIATION FUND





 Class B           Year Ended August 31,                       2003         2002        2001         2000         1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                        $28.95       $39.09     $ 59.80       $43.48       $31.85
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment loss                                           (.31)        (.26)       (.07)        (.20)        (.21)
 Net realized and unrealized gain (loss)                       4.45        (8.89)     (15.39)       19.74        14.38
                                                             ------------------------------------------------------------
 Total from investment operations                              4.14        (9.15)     (15.46)       19.54        14.17
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                            --           --          --           --           --
 Distributions from net realized gain                            --         (.99)      (5.25)       (3.22)       (2.54)
                                                             ------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                 --         (.99)      (5.25)       (3.22)       (2.54)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $33.09       $28.95     $ 39.09       $59.80       $43.48
                                                             ============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 1                           14.30%      (24.07)%    (26.95)%      46.88%       46.20%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                $1,114,052   $1,029,322  $1,242,098   $1,333,387     $531,625
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                       $1,001,311   $1,221,005  $1,265,753   $  922,480     $372,157
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment loss                                          (0.89)%      (0.92)%     (0.48)%      (0.76)%      (0.86)%
 Total expenses                                                2.10%        1.99%       1.80%        1.83%        1.84%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                            1.96%         N/A 3,4     N/A 3        N/A 3        N/A 3
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                         42%          28%         46%          44%          59%

1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year. 3. Reduction to custodian
expenses less than 0.01%. 4. Voluntary waiver of transfer agent fees less than
0.01%.



See accompanying Notes to Financial Statements.


21 OPPENHEIMER CAPITAL APPRECIATION FUND



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




 Class C           Year Ended August 31,                       2003         2002        2001         2000         1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                        $28.63       $38.64     $ 59.19       $43.06       $31.57
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment loss                                           (.23)        (.11)       (.01)        (.18)        (.23)
 Net realized and unrealized gain (loss)                       4.32        (8.91)     (15.29)       19.53        14.26
                                                             ------------------------------------------------------------
 Total from investment operations                              4.09        (9.02)     (15.30)       19.35        14.03
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                            --           --          --           --           --
 Distributions from net realized gain                            --         (.99)      (5.25)       (3.22)       (2.54)
                                                             ------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                 --         (.99)      (5.25)       (3.22)       (2.54)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $32.72       $28.63     $ 38.64       $59.19       $43.06
                                                             ============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 1                           14.28%      (24.01)%    (26.95)%      46.89%       46.16%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                  $540,118     $450,989    $426,476     $402,442     $165,231
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                         $463,768     $477,369    $400,009     $278,800     $126,443
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 2
 Net investment loss                                          (0.89)%      (0.87)%     (0.48)%      (0.76)%      (0.86)%
 Total expenses                                                1.96% 3      1.94% 3,4   1.80% 3      1.83% 3      1.85% 3
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                         42%          28%         46%          44%          59%

1. Assumes an investment on the business day before the first day of the fiscal
period, with all dividends and distributions reinvested in additional shares on
the reinvestment date, and redemption at the net asset value calculated on the
last business day of the fiscal period. Sales charges are not reflected in the
total returns. Total returns are not annualized for periods of less than one
full year. Returns do not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares.
2. Annualized for periods of less than one full year. 3. Reduction to custodian
expenses less than 0.01%. 4. Voluntary waiver of transfer agent fees less than
0.01%.



See accompanying Notes to Financial Statements.


22 OPPENHEIMER CAPITAL APPRECIATION FUND







 Class N           Year Ended August 31,                       2003         2002        2001 1
-----------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                        $30.60       $41.05      $45.58
-----------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment loss                                           (.10)        (.07) 2     (.01)
 Net realized and unrealized gain (loss)                       4.67        (9.39) 2    (4.52)
                                                             ----------------------------------
 Total from investment operations                              4.57        (9.46)      (4.53)
-----------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                            --           --          --
 Distributions from net realized gain                            --         (.99)         --
                                                             ----------------------------------
 Total dividends and/or distributions to shareholders            --         (.99)         --
-----------------------------------------------------------------------------------------------
 Net asset value, end of period                              $35.17       $30.60      $41.05
                                                             ==================================

-----------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 3                           14.94%      (23.67)%     (9.94)%

-----------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                  $111,374      $72,178      $6,791
-----------------------------------------------------------------------------------------------
 Average net assets (in thousands)                         $ 86,761      $38,232      $3,173
-----------------------------------------------------------------------------------------------
 Ratios to average net assets: 4
 Net investment loss                                          (0.35)%      (0.37)%     (0.11)%
 Total expenses                                                1.46%        1.46%       1.36%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                            1.42%         N/A 5,6     N/A 5
-----------------------------------------------------------------------------------------------
 Portfolio turnover rate                                         42%          28%         46%

1. For the period from March 1, 2001 (inception of offering) to August 31, 2001.
2. Per share amounts calculated based on the average shares outstanding during
the period.
3. Assumes an 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. Returns do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of
Fund shares.
4. Annualized for periods of less than one full year. 5. Reduction to custodian
expenses less than 0.01%. 6. Voluntary waiver of transfer agent fees less than
0.01%.



See accompanying Notes to Financial Statements.


23 OPPENHEIMER CAPITAL APPRECIATION FUND




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




 Class Y           Year Ended August 31,                       2003         2002        2001         2000         1999
-------------------------------------------------------------------------------------------------------------------------

 Per Share Operating Data

 Net asset value, beginning of period                        $31.16       $41.55     $ 62.51       $44.81       $32.56
-------------------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                                          .01          .02 1       .27          .13          .13
 Net realized and unrealized gain (loss)                       4.87        (9.42) 1   (15.98)       20.79        14.85
                                                             ------------------------------------------------------------
 Total from investment operations                              4.88        (9.40)     (15.71)       20.92        14.98
-------------------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                            --           --          --           --         (.19)
 Distributions from net realized gain                            --         (.99)      (5.25)       (3.22)       (2.54)
                                                             ------------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                                 --         (.99)      (5.25)       (3.22)       (2.73)
-------------------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                              $36.04       $31.16     $ 41.55       $62.51       $44.81
                                                             ============================================================

-------------------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                           15.66%      (23.23)%    (26.12)%      48.64%       47.90%

-------------------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data

 Net assets, end of period (in thousands)                $1,152,318     $864,437  $  974,820   $1,295,087     $420,455
-------------------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                       $  930,500     $968,867  $1,095,575   $  855,270     $307,498
-------------------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment income                                         0.29%        0.17%       0.66%        0.45%        0.30%
 Total expenses                                                0.78% 4,5    0.89% 4     0.66% 4      0.64% 4      0.68% 4
-------------------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                         42%          28%         46%          44%          59%

1. Per share amounts calculated based on the average shares outstanding during
the period. 2. Assumes an investment on the business day before the first day of
the fiscal period, with all dividends and distributions reinvested in additional
shares on the reinvestment date, and redemption at the net asset value
calculated on the last business day of the fiscal period. Sales charges are not
reflected in the total returns. Total returns are not annualized for periods of
less than one full year. Returns do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares. 3.
Annualized for periods of less than one full year.
4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of
transfer agent fees less than 0.01%.



See accompanying  Notes to Financial Statements.


24 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, Class N and Class Y shares. Class
 A shares are sold at their offering price, which is normally net asset value
 plus a front-end sales charge. Class B, Class C and Class N shares are sold
 without a front-end sales charge but may be subject to a contingent deferred
 sales charge (CDSC). Class N shares are sold only through retirement plans.
 Retirement plans that offer Class N shares may impose charges on those
 accounts. Class Y shares are sold to certain institutional investors without
 either a front-end sales charge or a CDSC. All classes of shares have identical
 rights and voting privileges. Earnings, net assets and net asset value per
 share may differ by minor amounts due to each class having its own expenses
 directly attributable to that class. Classes A, B, C and N have separate
 distribution and/or service plans. No such plan has been adopted for Class Y
 shares. Class B shares will automatically convert to Class A shares six years
 after the date of purchase.
    The following is a summary of significant accounting policies consistently
 followed by the Fund.
--------------------------------------------------------------------------------
 Securities Valuation. Securities listed or traded on National Stock Exchanges
 or other domestic or foreign exchanges are valued based on the last sale price
 of the security traded on that exchange prior to the time when the Fund's
 assets are valued. Securities traded on NASDAQ are valued based on the closing
 price provided by NASDAQ prior to the time when the Fund's assets are valued.
 In the absence of a sale, the security is valued at the last sale price on the
 prior trading day, if it is within the spread of the closing bid and asked
 prices, and if not, at the closing bid price. 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 using 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 Fund's accounting records 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.

25 OPPENHEIMER CAPITAL APPRECIATION FUND




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

--------------------------------------------------------------------------------
 1. Significant Accounting Policies Continued
 Joint Repurchase Agreements. Pursuant to an Exemptive Order issued by the
 Securities and Exchange Commission, the Fund, along with other affiliated funds
 advised by the Manager, may transfer uninvested cash balances into joint
 trading accounts on a daily basis. Secured by U.S. government securities, these
 balances are invested in one or more repurchase agreements. Securities pledged
 as collateral for repurchase agreements are held by a custodian bank until the
 agreements mature. Each agreement requires that the market value of the
 collateral be sufficient to cover payments of interest and principal. In the
 event of default by the other party to the agreement, retention of the
 collateral may be subject to legal proceedings.
--------------------------------------------------------------------------------
 Allocation of Income, Expenses, Gains and Losses. Income, expenses (other than
 those attributable to a specific class), gains and losses are allocated on a
 daily basis to each class of shares based upon the relative proportion of net
 assets represented by such class. Operating expenses directly attributable to a
 specific class are charged against the operations of that class.
--------------------------------------------------------------------------------
 Federal Taxes. The Fund intends to comply with provisions of the Internal
 Revenue Code applicable to regulated investment companies and to distribute
 substantially all of its investment company taxable income, including any net
 realized gain on investments not offset by capital loss carryforwards, if any,
 to shareholders, therefore, no federal income or excise tax provision is
 required.

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


                                                                Net Unrealized
                                                            Appreciation Based
     Undistributed    Undistributed     Accumulated      on Cost of Securities
     Net Investment       Long-Term            Loss         for Federal Income
     Income                    Gain    Carryforward 1,2,3         Tax Purposes
     -------------------------------------------------------------------------
     $--                        $--  $1,038,585,529                $73,498,385

 1. As of August 31, 2003, the Fund had $436,575,011 of net capital loss
 carryforwards available to offset future realized capital gains, if any, and
 thereby reduce future taxable gain distributions. As of August 31, 2003,
 details of the capital loss carryforwards were as follows:

                              Expiring
                              ----------------------
                              2010      $ 61,636,235
                              2011       374,938,776
                                        ------------
                              Total     $436,575,011
                                        ============

 2. During the fiscal years ended August 31, 2003 and August 31, 2002, the Fund
 did not utilize any capital loss carryforwards. 3. As of August 31, 2003, the
 Fund had $602,003,735 of post-October losses available to offset future
 realized capital gains, if any. Such losses, if unutilized, will expire in
 2012. Additionally, the Fund had $6,783 of post- October foreign currency
 losses which were deferred.


26 OPPENHEIMER CAPITAL APPRECIATION FUND



 Net investment income (loss) and net realized gain (loss) may differ for
 financial statement and tax purposes. The character of dividends and
 distributions made during the fiscal year from net investment income or net
 realized gains may differ from their ultimate characterization for federal
 income tax purposes. Also, due to timing of dividends and distributions, the
 fiscal year in which amounts are distributed may differ from the fiscal year in
 which the income or net realized gain was recorded by the Fund. Accordingly,
 the following amounts have been reclassified for August 31, 2003. Net assets of
 the Fund were unaffected by the reclassifications.

                 From               From                            Net
                 Ordinary        Capital     Tax Return      Investment
                 Loss               Loss     of Capital            Loss
                 ------------------------------------------------------
                 $14,493,883     $19,715            $--     $14,513,598

 The tax character of distributions paid during the years ended August 31, 2003
 and August 31, 2002 was as follows:
                                          Year Ended         Year Ended
                                      August 31, 2003   August 31, 2002
                 ------------------------------------------------------
                 Distributions paid from:
                 Long-term capital gain           $--      $148,257,544

 The aggregate cost of investments and the composition of unrealized
 appreciation and depreciation of investments for federal income tax purposes as
 of August 31, 2003 are noted below. The primary difference between book and tax
 appreciation or depreciation of investments, if applicable, is attributable to
 the tax deferral of losses or tax realization of financial statement unrealized
 gain or loss.

                 Federal tax cost                    $7,145,425,859
                                                     ==============

                 Gross unrealized appreciation       $  546,285,142
                 Gross unrealized depreciation         (472,786,757)
                                                     --------------
                 Net unrealized appreciation         $   73,498,385
                                                     ==============

--------------------------------------------------------------------------------
 Trustees' Compensation. The Fund has adopted an unfunded retirement plan for
 the Fund's independent trustees. Benefits are based on years of service and
 fees paid to each trustee during the years of service. During the year ended
 August 31, 2003, the Fund's projected benefit obligations were increased by
 $128,301 and payments of $38,164 were made to retired trustees, resulting in an
 accumulated liability of $948,568 as of August 31, 2003.
    The Board of Trustees has adopted a deferred compensation plan for
 independent trustees that enables trustees to elect to defer receipt of all or
 a portion of the annual compensation they are entitled to receive from the
 Fund. Under the plan, deferred amounts are treated as though equal dollar
 amounts had been invested in shares of the Fund or are invested in other
 selected Oppenheimer 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. Amounts will be
 deferred until distributed in accordance to the Plan.

27 OPPENHEIMER CAPITAL APPRECIATION FUND




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

--------------------------------------------------------------------------------
 1. Significant Accounting Policies Continued
 Dividends and Distributions to Shareholders. Dividends and distributions to
 shareholders, which are determined in accordance with income tax regulations,
 are recorded on the ex-dividend date. Income and capital gain distributions, if
 any, are declared and paid annually.
--------------------------------------------------------------------------------
 Investment Income. Dividend income is recorded on the ex-dividend date or upon
 ex-dividend notification in the case of certain foreign dividends where the
 ex-dividend date may have passed. Non-cash dividends included in dividend
 income, if any, are recorded at the fair market value of the securities
 received. Interest income, which includes accretion of discount and
 amortization of premium, is accrued as earned.
--------------------------------------------------------------------------------
 Expense Offset Arrangement. The reduction of custodian fees represents earnings
 on cash balances maintained by the Fund.
--------------------------------------------------------------------------------
 Security Transactions. Security transactions are recorded on the trade date.
 Realized gains and losses on securities sold are determined on the basis of
 identified cost.
--------------------------------------------------------------------------------
 Other. The preparation of financial statements in conformity with accounting
 principles generally accepted in the United States of America requires
 management to make estimates and assumptions that affect the reported amounts
 of assets and liabilities and disclosure of contingent assets and liabilities
 at the date of the financial statements and the reported amounts of income and
 expenses during the reporting period. Actual results could differ from those
 estimates.

--------------------------------------------------------------------------------
 2. Shares of Beneficial Interest
 The Fund has authorized an unlimited number of $0.001 par value shares of
 beneficial interest of each class. Transactions in shares of beneficial
 interest were as follows:



                                  Year Ended August 31, 2003                 Year Ended August 31, 2002
                                     Shares           Amount                   Shares            Amount
--------------------------------------------------------------------------------------------------------

 Class A
 Sold                            45,225,452   $1,394,693,911               53,070,823    $1,905,539,371
 Dividends and/or
 distributions reinvested                --               --                1,755,869        72,763,164
 Redeemed                       (28,851,156)    (890,007,812)             (24,347,868)     (861,251,131)
                                ------------------------------------------------------------------------
 Net increase                    16,374,296   $  504,686,099               30,478,824    $1,117,051,404
                                ========================================================================


--------------------------------------------------------------------------------------------------------
 Class B
 Sold                             6,747,394   $  197,106,768               12,282,673    $  436,416,730
 Dividends and/or
 distributions reinvested                --               --                  786,310        30,886,268
 Redeemed                        (8,635,132)    (247,425,951)              (9,289,206)     (311,456,903)
                                ------------------------------------------------------------------------
 Net increase (decrease)         (1,887,738)  $  (50,319,183)               3,779,777    $  155,846,095
                                ========================================================================



28 OPPENHEIMER CAPITAL APPRECIATION FUND





                                  Year Ended August 31, 2003                 Year Ended August 31, 2002
                                     Shares           Amount                   Shares            Amount
--------------------------------------------------------------------------------------------------------

 Class C
 Sold                             4,972,919    $ 143,578,548                8,394,929    $  291,814,714
 Dividends and/or
 distributions reinvested                --               --                  277,019        10,753,885
 Redeemed                        (4,220,870)    (119,557,545)              (3,953,474)     (128,877,758)
                                ------------------------------------------------------------------------
 Net increase                       752,049    $  24,021,003                4,718,474    $  173,690,841
                                ========================================================================


--------------------------------------------------------------------------------------------------------
 Class N
 Sold                             1,644,398    $  50,946,387                2,573,390    $   92,009,980
 Dividends and/or
 distributions reinvested                --               --                   10,848           448,566
 Redeemed                          (836,639)     (25,918,219)                (391,091)      (13,567,757)
                                ------------------------------------------------------------------------
 Net increase                       807,759    $  25,028,168                2,193,147    $   78,890,789
                                ========================================================================


--------------------------------------------------------------------------------------------------------
 Class Y
 Sold                             9,921,935    $ 316,008,775               10,706,767    $  404,655,100
 Dividends and/or
 distributions reinvested                --               --                  557,609        23,369,417
 Redeemed                        (5,689,335)    (173,782,697)              (6,979,040)     (249,424,511)
                                ------------------------------------------------------------------------
 Net increase                     4,232,600    $ 142,226,078                4,285,336    $  178,600,006
                                ========================================================================



--------------------------------------------------------------------------------
 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, 2003, were
 $3,117,067,251 and $2,333,866,432, respectively.

--------------------------------------------------------------------------------
 4. Fees and Other Transactions with Affiliates
 Management Fees. Management fees paid to the Manager were in accordance with
 the investment advisory agreement with the Fund which provides for a fee at an
 annual rate of 0.75% of the first $200 million of aggregate 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,
 0.56% of the next $2.0 billion, 0.54% of the next $4.0 billion, and 0.52% of
 aggregate net assets over $8.5 billion. Effective July 1, 2003, the Manager has
 voluntarily undertaken to limit total annual operating expenses of Class Y
 shares so that the annualized rate of such expenses for the remainder of the
 fiscal year ending August 31, 2003 shall be 0.75% of average daily net assets,
 and to limit total annual operating expenses of Class Y shares to 0.75% of
 average daily net assets for the fiscal year commencing September 1, 2003. The
 Manager may amend or withdraw this limitation at any time.
--------------------------------------------------------------------------------
 Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the
 Manager, acts as the transfer and shareholder servicing agent for the Fund. The
 Fund pays OFS a per account fee. For the year ended August 31, 2003, the Fund
 paid $18,220,767 to OFS for services to the Fund.


29 OPPENHEIMER CAPITAL APPRECIATION FUND




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

--------------------------------------------------------------------------------
 4. Fees and Other Transactions with Affiliates Continued Additionally, Class Y
    shares are subject to minimum fees of $5,000 for
 assets of less than $10 million and $10,000 for assets of $10 million or more.
 The Class Y shares are subject to the minimum fees in the event that the per
 account fee does not equal or exceed the applicable minimum fees. OFS may
 voluntarily waive the minimum fees.
    OFS has voluntarily agreed to limit transfer and shareholder servicing agent
 fees up to an annual rate of 0.35% of average annual net assets for all
 classes. This undertaking may be amended or withdrawn at any time.
--------------------------------------------------------------------------------
 Distribution and Service Plan (12b-1) Fees. Under its General Distributor's
 Agreement with the Manager, OppenheimerFunds Distributor, Inc. (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   Concessions    Concessions     Concessions     Concessions
                  Front-End      Front-End    On Class A     On Class B      On Class C      On Class N
              Sales Charges  Sales Charges        Shares         Shares          Shares          Shares
                 On Class A    Retained by   Advanced by    Advanced by     Advanced by     Advanced by
 Year Ended          Shares    Distributor   Distributor 1  Distributor 1   Distributor 1   Distributor 1
--------------------------------------------------------------------------------------------------------

 August 31, 2003 $6,165,627     $1,306,916    $2,013,246     $5,339,379      $1,079,724        $315,363


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

                           Class A       Class B        Class C        Class N
                        Contingent    Contingent     Contingent     Contingent
                          Deferred      Deferred       Deferred       Deferred
                     Sales Charges Sales Charges  Sales Charges  Sales Charges
                       Retained by   Retained by    Retained by    Retained by
 Year Ended            Distributor   Distributor    Distributor    Distributor
-------------------------------------------------------------------------------
 August 31, 2003           $67,713    $3,086,814       $140,485       $326,760


--------------------------------------------------------------------------------
 Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class
 A Shares. It reimburses the Distributor for a portion of its costs incurred for
 services provided to accounts that hold Class A shares. Reimbursement is made
 quarterly at an annual rate of up to 0.25% of the average annual net assets of
 Class A shares of the Fund. For the year ended August 31, 2003, expense under
 the Class A Plan totaled $8,832,561, all of which were paid by the Distributor
 to recipients, which included $227,233 retained by the Distributor and $352,981
 which was 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.


30 OPPENHEIMER CAPITAL APPRECIATION FUND



--------------------------------------------------------------------------------
 Distribution and Service Plans for Class B, Class C and Class N Shares. The
 Fund has adopted Distribution and Service Plans for Class B, Class C and Class
 N shares. Under the plans, the Fund pays the Distributor an annual asset-based
 sales charge of 0.75% per year on Class B shares and on Class C shares and the
 Fund pays the Distributor an annual asset-based sales charge of 0.25% per year
 on Class N shares. The Distributor also receives a service fee of 0.25% per
 year under each plan.

 Distribution fees paid to the Distributor for the year ended August 31, 2003,
 were as follows:

                                                                  Distributor's
                                                   Distributor's      Aggregate
                                                       Aggregate   Unreimbursed
                                                    Unreimbursed  Expenses as %
                 Total Payments   Amount Retained       Expenses  of Net Assets
                     Under Plan    by Distributor     Under Plan       of Class
--------------------------------------------------------------------------------
 Class B Plan       $10,010,756        $8,006,737    $26,949,124           2.42%
 Class C Plan         4,580,168         1,356,808      7,404,866           1.37
 Class N Plan           433,274           369,761      1,333,950           1.20


--------------------------------------------------------------------------------
 5. Foreign Currency Contracts
 A foreign currency contract is a commitment to purchase or sell a foreign
 currency at a future date, at a negotiated rate. The Fund may enter into
 foreign currency contracts to settle specific purchases or sales of securities
 denominated in a foreign currency and for protection from adverse exchange rate
 fluctuation. Risks to the Fund include the potential inability of the
 counterparty to meet the terms of the contract.
    The net U.S. dollar value of foreign currency underlying all contractual
 commitments held by the Fund and the resulting unrealized appreciation or
 depreciation are determined using prevailing foreign currency exchange rates.
 Unrealized appreciation and depreciation on foreign currency contracts are
 reported in the Statement of Assets and Liabilities as a receivable or payable
 and in the Statement of Operations with the change in unrealized appreciation
 or depreciation.
    The Fund may realize a gain or loss upon the closing or settlement of the
 foreign transaction. Contracts closed or settled with the same broker are
 recorded as net realized gain or loss. Such realized gains and losses are
 reported with all other foreign currency gains and losses in the Statement of
 Operations.
    As of August 31, 2003, the Fund had no outstanding foreign currency
contracts.

--------------------------------------------------------------------------------
 6. Illiquid Securities
 As of August 31, 2003, 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, 2003 was zero.


31 OPPENHEIMER CAPITAL APPRECIATION FUND




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

--------------------------------------------------------------------------------
 7. Borrowing and Lending Arrangements
 The Fund entered into an "interfund borrowing and lending arrangement" with
 other funds in the Oppenheimer funds complex, to allow funds to borrow for
 liquidity purposes. The arrangement was initiated pursuant to exemptive relief
 granted by the Securities and Exchange Commission to allow these affiliated
 funds to lend money to, and borrow money from, each other, in an attempt to
 reduce borrowing costs below those of bank loan facilities. Under the
 arrangement the Fund may lend money to other Oppenheimer funds and may borrow
 from other Oppenheimer funds at a rate set by the Fund's Board of Trustees,
 based upon a recommendation by the Manager. The Fund's borrowings, if any, are
 subject to asset coverage requirements under the Investment Company Act and the
 provisions of the SEC order and other applicable regulations. If the Fund
 borrows money, there is a risk that the loan could be called on one day's
 notice, in which case the Fund might have to borrow from a bank at higher rates
 if a loan were not available from another Oppenheimer fund. If the Fund lends
 money to another fund, it will be subject to the risk that the other fund might
 not repay the loan in a timely manner, or at all.
    The Fund had no interfund borrowings or loans outstanding during the year
 ended or at August 31, 2003.


32 OPPENHEIMER CAPITAL APPRECIATION FUND



                                   Appendix A

                            Industry Classifications

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






                                      B-11
                                   Appendix B

OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class A
shares3 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.4 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 plans5 4) Group Retirement Plans6 5) 403(b)(7) custodial plan
         accounts 6) Individual Retirement Accounts ("IRAs"), including
         traditional IRAs, Roth IRAs,
            SEP-IRAs, SARSEPs or SIMPLE plans

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

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





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

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

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





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

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

Class A shares purchased by the following investors are not subject to any Class
A sales charges (and no concessions are paid by the Distributor on such
purchases): |_| The Manager or its affiliates.
|_|      Present or former officers, directors, trustees and employees (and
         their "immediate families") of the Fund, the Manager and its
         affiliates, and retirement plans established by them for their
         employees. The term "immediate family" refers to one's spouse,
         children, grandchildren, grandparents, parents, parents-in-law,
         brothers and sisters, sons- and daughters-in-law, a sibling's spouse, a
         spouse's siblings, aunts, uncles, nieces and nephews; relatives by
         virtue of a remarriage (step-children, step-parents, etc.) are
         included.
|_|      Registered management investment companies, or separate accounts of
         insurance companies having an agreement with the Manager or the
         Distributor for that purpose.
|_|      Dealers or brokers that have a sales agreement with the Distributor, if
         they purchase shares for their own accounts or for retirement plans for
         their employees.
|_|      Employees and registered representatives (and their spouses) of dealers
         or brokers described above or financial institutions that have entered
         into sales arrangements with such dealers or brokers (and which are
         identified as such to the Distributor) or with the Distributor. The
         purchaser must certify to the Distributor at the time of purchase that
         the purchase is for the purchaser's own account (or for the benefit of
         such employee's spouse or minor children).
|_|      Dealers, brokers, banks or registered investment advisors that have
         entered into an agreement with the Distributor providing specifically
         for the use of shares of the Fund in particular investment products
         made available to their clients. Those clients may be charged a
         transaction fee by their dealer, broker, bank or advisor for the
         purchase or sale of Fund shares.
|_|      Investment advisors and financial planners who have entered into an
         agreement for this purpose with the Distributor and who charge an
         advisory, consulting or other fee for their services and buy shares for
         their own accounts or the accounts of their clients.
|_|      "Rabbi trusts" that buy shares for their own accounts, if the purchases
         are made through a broker or agent or other financial intermediary that
         has made special arrangements with the Distributor for those purchases.
|_|   Clients of investment advisors or financial planners (that have entered into an
         agreement for this purpose with the Distributor) who buy shares for their own
         accounts may also purchase shares without sales charge but only if their accounts
         are linked to a master account of their investment advisor or financial planner on
         the books and records of the broker, agent or financial intermediary with which
         the Distributor has made such special arrangements . Each of these investors may
         be charged a fee by the broker, agent or financial intermediary for purchasing
         shares.
|_|      Directors, trustees, officers or full-time employees of OpCap Advisors
         or its affiliates, their relatives or any trust, pension, profit
         sharing or other benefit plan which beneficially owns shares for those
         persons.
|_|      Accounts for which Oppenheimer Capital (or its successor) is the
         investment advisor (the Distributor must be advised of this
         arrangement) and persons who are directors or trustees of the company
         or trust which is the beneficial owner of such accounts.
|_|      A unit investment trust that has entered into an appropriate agreement
         with the Distributor.
|_|      Dealers, brokers, banks, or registered investment advisers that have
         entered into an agreement with the Distributor to sell shares to
         defined contribution employee retirement plans for which the dealer,
         broker or investment adviser provides administration services.
|-|




      Retirement Plans and deferred compensation plans and trusts used to fund
         those plans (including, for example, plans qualified or created under
         sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue Code),
         in each case if those purchases are made through a broker, agent or
         other financial intermediary that has made special arrangements with
         the Distributor for those purchases.
|_|      A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
         Advisors) whose Class B or Class C shares of a Former Quest for Value
         Fund were exchanged for Class A shares of that Fund due to the
         termination of the Class B and Class C TRAC-2000 program on November
         24, 1995.
|_|      A qualified Retirement Plan that had agreed with the former Quest for
         Value Advisors to purchase shares of any of the Former Quest for Value
         Funds at net asset value, with such shares to be held through
         DCXchange, a sub-transfer agency mutual fund clearinghouse, if that
         arrangement was consummated and share purchases commenced by December
         31, 1996.

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

Class A shares issued or purchased in the following transactions are not subject
to sales charges (and no concessions are paid by the Distributor on such
purchases): |_| Shares issued in plans of reorganization, such as mergers, asset
acquisitions and
         exchange offers, to which the Fund is a party.
|_|      Shares purchased by the reinvestment of dividends or other
         distributions reinvested from the Fund or other Oppenheimer funds
         (other than Oppenheimer Cash Reserves) or unit investment trusts for
         which reinvestment arrangements have been made with the Distributor.
|_|   Shares purchased 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.8
         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.9
         10)Participant-directed redemptions to purchase shares of a mutual
            fund (other than a fund managed by the Manager or a subsidiary of
            the Manager) if the plan has made special arrangements with the
            Distributor.
         11)Plan termination or "in-service distributions," if the redemption
            proceeds are rolled over directly to an OppenheimerFunds-sponsored
            IRA.
|_|      For distributions from 401(k) plans sponsored by broker-dealers that
         have entered into a special agreement with the Distributor allowing
         this waiver.
|_|      For distributions from retirement plans that have $10 million or more
         in plan assets and that have entered into a special agreement with the
         Distributor.
|_|      For distributions from retirement plans which are part of a retirement
         plan product or platform offered by certain banks, broker-dealers,
         financial advisors, insurance companies or record keepers which have
         entered into a special agreement with the Distributor.
III.        Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer Funds
--------------------------------------------------------------------------------------------

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases: |_| Shares redeemed
involuntarily, as described in "Shareholder Account Rules and
         Policies," in the applicable Prospectus.
|_|      Redemptions from accounts other than Retirement Plans following the
         death or disability of the last surviving shareholder. The death or
         disability must have occurred after the account was established, and
         for disability you must provide evidence of a determination of
         disability by the Social Security Administration.
|_|      The contingent deferred sales charges are generally not waived
         following the death or disability of a grantor or trustee for a trust
         account. The contingent deferred sales charges will only be waived in
         the limited case of the death of the trustee of a grantor trust or
         revocable living trust for which the trustee is also the sole
         beneficiary. The death or disability must have occurred after the
         account was established, and for disability you must provide evidence
         of a determination of disability by the Social Security Administration.
|_|      Distributions from accounts for which the broker-dealer of record has
         entered into a special agreement with the Distributor allowing this
         waiver.
|_|      Redemptions of Class B shares held by Retirement Plans whose records
         are maintained on a daily valuation basis by Merrill Lynch or an
         independent record keeper under a contract with Merrill Lynch.
|_|      Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
         accounts of clients of financial institutions that have entered into a
         special arrangement with the Distributor for this purpose.
|_|      Redemptions 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.
|_|      Distributions10 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.11 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.12
         9) On account of the participant's separation from service.13
         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 International Value Fund,
   Inc.
   Oppenheimer Quest Opportunity Value Fund

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

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

      A shareholder's account will be credited with the amount of any contingent
deferred sales charge paid on the redemption of any Class A, Class B or Class C
shares of the Oppenheimer fund described in this section if the proceeds are
invested in the same Class of shares in that fund or another Oppenheimer fund
within 90 days after redemption. V. Special Sales Charge Arrangements for
Shareholders of Certain Oppenheimer Funds Who
               Were Shareholders of Connecticut Mutual Investment Accounts, Inc.
-----------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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





Oppenheimer Capital Appreciation Fund

Internet Website:
      WWW.OPPENHEIMERFUNDS.COM

Investment Advisor
      OppenheimerFunds, Inc.
      2 World Financial Center
      225 Liberty Street-11th Floor
      New York, New York 10080

Distributor
      OppenheimerFunds Distributor, Inc.
      2 World Financial Center
      225 Liberty Street-11th Floor
      New York, New York 10080

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

Custodian Bank
      JPMorgan Chase Bank
      4 Chase Metro Tech Center
      Brooklyn, New York, 11245

Independent Auditors
      KPMG LLP
      707 Seventeenth Street
      Denver, Colorado 80202

Legal Counsel
      Mayer, Brown, Rowe & Maw LLP
      1675 Broadway
      New York, New York 10019


PX320.1003

------------
1 Mr. Motley was elected as Trustee to the Board I Funds effective October 10,
2002.
2 In accordance with Rule 12b-1 of the Investment Company Act, the term
"Independent Trustees" in this Statement of Additional Information refers to
those Trustees who are not "interested persons" of the Fund and who do not have
any direct or indirect financial interest in the operation of the distribution
plan or any agreement under the plan.
3 Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
4 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.
5 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.
6 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.
7 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.
8 This provision does not apply to IRAs.
9 This provision does not apply to 403(b)(7) custodial plans if the participant
is less than age 55, nor to IRAs.
10 The distribution must be requested prior to Plan termination or the
elimination of the Oppenheimer funds as an investment option under the Plan.
11 This provision does not apply to IRAs.
12 This provision does not apply to loans from 403(b)(7) custodial plans and
loans from the OppenheimerFunds-sponsored Single K retirement plan.
13 This provision does not apply to 403(b)(7) custodial plans if the participant
is less than age 55, nor to IRAs.