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

Statement of Additional Information dated October 25, 2004, revised February 3, 2005

         This Statement of Additional Information is not a Prospectus. This document contains additional information about the Fund and
supplements information in the Prospectus dated October 25, 2004.  It should be read together with the Prospectus. You can obtain the
Prospectus by writing to the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box 5270, Denver, Colorado 80217, or by calling
the Transfer Agent at the toll-free number shown above, or by downloading it from the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

Contents
                                                                                                        Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks...................................  2
     The Fund's Investment Policies.....................................................................  2
     Other Investment Techniques and Strategies.........................................................  5
     Other Investment Restrictions......................................................................  19
How the Fund is Managed ................................................................................  21
     Organization and History...........................................................................  21
     Board of Trustees and Oversight Committees.........................................................  22
     Trustees and Officers of the Fund..................................................................  23
     The Manager........................................................................................  31
Brokerage Policies of the Fund..........................................................................  34
Distribution and Service Plans..........................................................................  36
Performance of the Fund.................................................................................  41

About Your Account
How To Buy Shares.......................................................................................  45
How To Sell Shares......................................................................................  56
How To Exchange Shares..................................................................................  60
Dividends, Capital Gains and Taxes......................................................................  64
Additional Information About the Fund...................................................................  68

Financial Information About the Fund
Independent Registered Public Accounting Firms' Report..................................................  69
Financial Statements....................................................................................  70

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 objective. 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 total 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, currency devaluation 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        foreign withholding taxes on interest and dividends;
o        possibilities in some countries of expropriation, confiscatory taxation, political, financial or social instability or
              adverse diplomatic developments; and
o        unfavorable differences between the U.S. economy and foreign economies.

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

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

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

|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 that apply to those types of investments, and the following additional limitation: the Fund cannot invest in the securities of
other registered investment companies or registered unit investment trusts in reliance on sub-paragraph (F) or (G) of section
12(d)(1) of the Investment Company Act of 1940. 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 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.

         |      Borrowing.  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.  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 less all liabilities and indebtedness other than borrowing), 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.  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.

         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.

         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 identify
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 identified on its books) upon conversion or exchange of other foreign currency held in its
portfolio.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

         Transactions in options by the Fund are subject to limitations established by the option exchanges. The exchanges limit the
maximum number of options that may be written or held by a single investor or group of investors acting in concert. Those limits
apply regardless of whether the options were written or purchased on the same or different exchanges or are held in one or more
accounts or through one or more different exchanges or through one or more brokers. Thus, the number of options that the Fund may
write or hold may be affected by options written or held by other entities, including other investment companies having the same
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 interpretations of staff members of the SEC regarding applicable provisions of the Investment Company Act, when the
Fund purchases a future, it must segregate cash or readily marketable short-term debt instruments in an amount equal to the purchase
price of the future, less the margin deposit applicable to it. The account must be a segregated account or accounts held by the
Fund's custodian bank.

|_|      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.

Other Investment Restrictions

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

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

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

         For purposes of the Fund's policy not to concentrate its investments as described above, the Fund has adopted the industry
classifications set forth in Appendix 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, but may do so from time to time on important matters or when required to do so by the
Investment Company Act or other applicable law. Shareholders have the right, upon a vote or declaration in writing of two-thirds of
the outstanding shares of the Fund, to remove a Trustee or to take other action described in the Fund's Declaration of Trust.

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

         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.

         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 Joel Motley
(Chair), Mary Miller, Edward V. Regan and Kenneth Randall. The Audit Committee held 6 meetings during the Fund's fiscal year ended
August 31, 2004. 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 G. Galli (Chair), Joel Motley and Phillip Griffiths. The
Regulatory & Oversight Committee held 6 meetings during the Fund's fiscal year ended August 31, 2004. 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 Phillip Griffiths (Chair), Kenneth Randall and Russell S. Reynolds, Jr.  The
Governance Committee held 7 meetings during the Fund's fiscal year ended August 31, 2004. 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 V. Regan (Chair), Russell S. Reynolds Jr. and John V. Murphy.  The Proxy
Committee held 1 meeting during the Fund's fiscal year ended August 31, 2004.  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" under 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, their positions with the Fund, length of service in such position(s) and principal
occupations and business affiliations during the past five years are listed in the chart below. The information for each Trustee also
includes the dollar range of shares beneficially owned in the Fund and the aggregate dollar range of shares beneficially owned in all
registered investment companies in the Oppenheimer fund family that are overseen by the Trustee ("Supervised Funds"). All of the
Trustees except Mr. Fink and Mr. Murphy are also trustees or directors of each of the following publicly offered Oppenheimer funds
(referred to as "Board I Funds"). Mr. Murphy is a director of the funds indicated with an asterisk and Mr. Fink and Mr. Murphy are
both trustees or directors of the funds indicated with two asterisks.

Oppenheimer AMT-Free Municipals                                Oppenheimer Global Fund
Oppenheimer AMT-Free New York Municipals**                     Oppenheimer Global Opportunities Fund**
Oppenheimer Balanced Fund                                      Oppenheimer Gold & Special Minerals Fund**
Oppenheimer California Municipal Fund**                        Oppenheimer Growth Fund**
Oppenheimer Capital Appreciation Fund**                        Oppenheimer International Growth Fund
Oppenheimer Capital Preservation Fund                          Oppenheimer International Small Company Fund
Oppenheimer Developing Markets Fund                            Oppenheimer Money Market Fund, Inc.**
Oppenheimer Discovery Fund**                                   Oppenheimer Multi-Sector Income Trust**
Oppenheimer Emerging Growth Fund*                              Oppenheimer Multi-State Municipal Trust
Oppenheimer Emerging Technologies Fund*                        Oppenheimer Series Fund, Inc.**
Oppenheimer Enterprise 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 charge on
Class A shares is waived for that group because of the economies of sales efforts realized by the Distributor.

         Messrs. Murphy, Petersen, Vandehey, Vottiero, Wixted, Zack, Gillespie and Miao and Mses. Bloomberg, Putnam and Ives
respectively hold the same offices with one or more of the other Board I Funds as with the Fund.  As of October 6, 2004, 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 of $137,500 for calendar year ended December 31,
2002. Mr. Reynolds reported that The Directorship Search Group did not provide consulting services to Massachusetts Mutual Life
Insurance Company during the calendar year ended December 31, 2003, and does not expect to provide any such services in the calendar
year ended December 31, 2004.

         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.  Ms. Mary Miller was elected to the Board I Funds
effective August 13, 2004 and did not hold shares of Board I Funds during the calendar year ended December 31, 2003.

- -------------------------------------------------------------------------------------------------------------------------
                                                  Independent Trustees
- -------------------------------------------------------------------------------------------------------------------------
- ------------------------------- -------------------------------------------------------- --------------- ----------------
Name,                           Principal Occupation(s) During Past 5 Years;             Dollar Range    Aggregate
                                                                                                         Dollar Range
                                                                                                         Of Shares
                                                                                                         Beneficially
                                                                                                         Owned in Any
                                                                                         of Shares       of the
Position(s) Held with Fund,     Other Trusteeships/Directorships Held by Trustee;        Beneficially    Oppenheimer
Length of Service,              Number of Portfolios in Fund Complex Currently           Owned in the    Funds Overseen
Age                             Overseen by Trustee                                      Fund            by Trustee
- ------------------------------- -------------------------------------------------------- --------------- ----------------
- ------------------------------- -------------------------------------------------------- --------------------------------
                                                                                             As of December 31, 2003
- ------------------------------- -------------------------------------------------------- --------------------------------
- ------------------------------- -------------------------------------------------------- --------------- ----------------
Clayton K. Yeutter, Chairman    Of Counsel (since June 1993) Hogan & Hartson (a law          None        Over $100,000
of the Board of Trustees        firm); a director (since 2002) of Danielson Holding
since 2003;                     Corp. Formerly a director of Weyerhaeuser Corp.
Trustee since 1991              (1999-April 2004), Caterpillar, Inc. (1993-December
Age: 73                         2002), ConAgra Foods (1993-2001), Texas Instruments
                                (1993-2001) and FMC Corporation (1993-2001). Oversees
                                25 portfolios in the OppenheimerFunds complex.
- ------------------------------- -------------------------------------------------------- --------------- ----------------
- ------------------------------- -------------------------------------------------------- --------------- ----------------
Matthew P. Fink,                Director (since October 1991) of ICI Education Foundation;
Trustee since 2005              President (October 1991-October 2004) of the Investment Company
Age:  64                        Institute; Director (October 1991- October 2004) of ICI Mutual   None            None
                                Insurance Company.  Oversees 11 portfolios in the
                                OppenheimerFunds complex.
- ------------------------------- -------------------------------------------------------- --------------- ----------------
- ------------------------------- -------------------------------------------------------- --------------- ----------------
Robert G. Galli,                A trustee or director of other Oppenheimer funds.
Trustee since 1993              Oversees 35 portfolios in the OppenheimerFunds complex.       None        Over $100,000
Age: 71
- ------------------------------- -------------------------------------------------------- --------------- ----------------
- ------------------------------- -------------------------------------------------------- --------------- ----------------
Phillip A. Griffiths, Trustee   A director (since 1991) of the Institute for Advanced                   0
since 1999                      Study, Princeton, N.J., a director (since 2001) of GSI
Age: 66                         Lumonics, a trustee (since 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      $50,001-$100,00  Over $100,000
                                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 25 portfolios in the
                                OppenheimerFunds complex.
- ------------------------------- -------------------------------------------------------- --------------- ----------------
- ------------------------------- -------------------------------------------------------- --------------- ----------------
Mary Miller,                    Trustee (since October 1998) of the American Symphony
Trustee since 2004              Orchestra; Senior Vice President and General Auditor
Age: 62                         (July 1998-February 2003) American Express Company.           None            None
                                Oversees 25 portfolios in the OppenheimerFunds complex.
- ------------------------------- -------------------------------------------------------- --------------- ----------------
- ------------------------------- -------------------------------------------------------- --------------- ----------------
Joel W. Motley,                 Director (since January 2002) Columbia Equity
Trustee since 2002              Financial Corp. (privately-held financial adviser);
Age: 52                         Managing Director (since January 2002) Carmona Motley,
                                Inc. (privately-held financial adviser). Formerly a
                                Managing Director of Carmona Motley Hoffman Inc.              None       $10,001-$50,000
                                (privately-held financial adviser) (January
                                1998-December 2001). Oversees 25 portfolios in the
                                OppenheimerFunds complex.
- ------------------------------- -------------------------------------------------------- --------------- ----------------
- ------------------------------- -------------------------------------------------------- --------------- ----------------
Kenneth A. Randall, Trustee     A director (since February 1972) of Dominion
since 1981                      Resources, Inc. (electric utility holding company);
Age: 77                         formerly a director of Prime Retail, Inc. (real estate
                                investment trust) and Dominion Energy, Inc. (electric
                                power and oil & gas producer), President and Chief
                                Executive Officer of The Conference Board, Inc.          Over $100,000    Over $100,000
                                (international economic and business research) and a
                                director of Lumbermens Mutual Casualty Company,
                                American Motorists Insurance Company and American
                                Manufacturers Mutual Insurance Company. Oversees 25
                                portfolios in the OppenheimerFunds complex.
- ------------------------------- -------------------------------------------------------- --------------- ----------------
- ------------------------------- -------------------------------------------------------- --------------- ----------------
Edward V. Regan,                President, Baruch College, CUNY; a director of RBAsset
Trustee since 1993              (real estate manager); a director of OffitBank;
Age: 74                         formerly Trustee, Financial Accounting Foundation
                                (FASB and GASB), Senior Fellow of Jerome Levy
                                Economics Institute, Bard College, Chairman of             $1-$10,000    $10,001-$50,000
                                Municipal Assistance Corporation for the City of New
                                York, New York State Comptroller and Trustee of New
                                York State and Local Retirement Fund. Oversees 25
                                investment companies in the OppenheimerFunds complex.
- ------------------------------- -------------------------------------------------------- --------------- ----------------
- ------------------------------- -------------------------------------------------------- --------------- ----------------
Russell S. Reynolds, Jr.,       Chairman (since 1993) of The Directorship Search
Trustee since 1989              Group, Inc. (corporate governance consulting and
Age: 72                         executive recruiting); a Life Trustee of International
                                House (non-profit educational organization); a former         None       $10,001-$50,000
                                trustee of The Historical Society of the Town of
                                Greenwich. Oversees 25 portfolios in the
                                OppenheimerFunds complex.
- ------------------------------- -------------------------------------------------------- --------------- ----------------

         The address of Mr. Murphy in the chart below is Two World Financial Center, 225 Liberty Street, 11th Floor, New York, NY
10281-1008. Mr. Murphy serves for an indefinite term, until his resignation, death or removal.

- ---------------------------------------------------------------------------------------------------------------------------
                                              Interested Trustee and Officer
- ---------------------------------------------------------------------------------------------------------------------------
- ----------------------------- ------------------------------------------------------------ --------------- ----------------
Name,                         Principal Occupation(s) During Past 5 Years;                 Dollar Range    Aggregate
                                                                                                           Dollar Range
                                                                                                           Of Shares
                                                                                                           Beneficially
                                                                                                           Owned in Any
                                                                                           of Shares       of the
Position(s) Held with Fund,   Other Trusteeships/Directorships Held by Trustee;            Beneficially    Oppenheimer
Length of Service             Number of Portfolios in Fund Complex Currently Overseen by   Owned in the    Funds Overseen
Age                           Trustee                                                      Fund            by Trustee
- ----------------------------- ------------------------------------------------------------ --------------- ----------------
- ----------------------------- ------------------------------------------------------------ --------------------------------
                                                                                               As of December 31, 2003
- ----------------------------- ------------------------------------------------------------ --------------------------------
- ----------------------------- ------------------------------------------------------------ --------------- ----------------
John V. Murphy, President     Chairman, Chief Executive Officer and director (since June   $10,001-$50,000  Over $100,000
and Trustee;                  2001) and President (since September 2000) of the Manager;
Trustee since 2001            President and a director or trustee of other Oppenheimer
Age: 55                       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 following investment advisory
                              subsidiaries of the Manager: OFI Institutional Asset
                              Management, Inc., Centennial Asset Management Corporation,
                              Trinity Investment Management Corporation and Tremont
                              Capital Management, Inc. (since November 2001),
                              HarbourView Asset Management Corporation and OFI Private
                              Investments, Inc. (since July 2001); President (since
                              November 1, 2001) and a director (since July 2001) of
                              Oppenheimer Real Asset Management, Inc.; Executive Vice
                              President (since February 1997) of Massachusetts Mutual
                              Life Insurance Company (the Manager's parent company); a
                              director (since June 1995) of DLB Acquisition Corporation
                              (a holding company that owns the shares of Babson Capital
                              Management LLC); a member of the Investment Company
                              Institute's Board of Governors (elected to serve from
                              October 3, 2003 through September 30, 2006). Formerly,
                              Chief Operating Officer (September 2000-June 2001) of the
                              Manager; President and trustee (November 1999-November
                              2001) of MML Series Investment Fund and MassMutual
                              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 63 portfolios as Trustee/Director and 21
                              additional portfolios as an Officer in the
                              OppenheimerFunds complex.
- ----------------------------- ------------------------------------------------------------ --------------- ----------------

         The address of the Officers in the chart below is as follows: for Mr. Zack, Gillespie and Miao and Mses. Putnam and
Bloomberg, Two World Financial Center, 225 Liberty Street, New York, NY 10281-1008, for Messrs. Vandehey, Vottiero, Petersen and
Wixted and Ms. Ives, 6803 S. Tucson Way, Centennial, CO 80112-3924.  Each Officer serves for an indefinite 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 President of the Manager since October 1995; an officer of 2 portfolios in
Vice President and Portfolio Manager    the OppenheimerFunds complex.
since 1995
Age: 43
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Mark S. Vandehey,                       Senior Vice President and Chief Compliance Officer (since March 2004) of the
Vice President and Chief Compliance     Manager; Vice President (since June 1983) of OppenheimerFunds Distributor, Inc.,
Officer since 2004                      Centennial Asset Management Corporation and Shareholder Services, Inc. Formerly
Age:  54                                (until February 2004) Vice President and Director of Internal Audit of
                                        OppenheimerFunds, Inc. An officer of 84 portfolios in the Oppenheimer funds
                                        complex.
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Brian W. Wixted,                        Senior Vice President and Treasurer (since March 1999) of the Manager; Treasurer
Treasurer since 1999                    of HarbourView Asset Management Corporation, Shareholder Financial Services,
Age:  45                                Inc., Shareholder Services, Inc., Oppenheimer Real Asset Management Corporation,
                                        and Oppenheimer Partnership Holdings, Inc. (since March 1999), of OFI Private
                                        Investments, Inc. (since March 2000), of OppenheimerFunds International Ltd. and
                                        OppenheimerFunds plc (since May 2000), of OFI Institutional Asset Management,
                                        Inc. (since November 2000), and of OppenheimerFunds Legacy Program (a Colorado
                                        non-profit corporation) (since June 2003); Treasurer and Chief Financial Officer
                                        (since May 2000) of OFI Trust Company (a trust company subsidiary of the
                                        Manager); Assistant Treasurer (since March 1999) of Oppenheimer Acquisition Corp.
                                        Formerly Assistant Treasurer of Centennial Asset Management Corporation (March
                                        1999-October 2003) and OppenheimerFunds Legacy Program (April 2000-June 2003);
                                        Principal and Chief Operating Officer (March 1995-March 1999) at Bankers Trust
                                        Company-Mutual Fund Services Division. An officer of 84 portfolios in the
                                        OppenheimerFunds complex.
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Brian Petersen,                         Assistant Vice President of the Manager since August 2002; formerly
Assistant Treasurer since 2004          Manager/Financial Product Accounting (November 1998-July 2002) of the Manager. An
Age: 34                                 officer of 84 portfolios in the OppenheimerFunds complex.
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Philip Vottiero,                        Vice President/Fund Accounting of the Manager since March 2002. Formerly Vice
Assistant Treasurer since 2002          President/Corporate Accounting of the Manager (July 1999-March 2002) prior to
Age:  41                                which he was Chief Financial Officer at Sovlink Corporation (April 1996-June
                                        1999). An officer of 84 portfolios in the OppenheimerFunds complex.
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Robert G. Zack,                         Executive Vice President (since January 2004) and General Counsel (since February
Secretary since 2001                    2002) of the Manager; General Counsel and a director (since November 2001) of the
Age:  56                                Distributor; General Counsel (since November 2001) of Centennial Asset Management
                                        Corporation; Senior Vice President and General Counsel (since November 2001) of
                                        HarbourView Asset Management Corporation; Secretary and General Counsel (since
                                        November 2001) of Oppenheimer Acquisition Corp.; Assistant Secretary and a
                                        director (since October 1997) of OppenheimerFunds International Ltd. and
                                        OppenheimerFunds plc; Vice President and a director (since November 2001) of
                                        Oppenheimer Partnership Holdings, Inc.; a director (since November 2001) of
                                        Oppenheimer Real Asset Management, Inc.; Senior Vice President, General Counsel
                                        and a director (since November 2001) of Shareholder Financial Services, Inc.,
                                        Shareholder Services, Inc., OFI Private Investments, Inc. and OFI Trust Company;
                                        Vice President (since November 2001) of OppenheimerFunds Legacy Program; Senior
                                        Vice President and General Counsel (since November 2001) of OFI Institutional
                                        Asset Management, Inc.; a director (since June 2003) of OppenheimerFunds (Asia)
                                        Limited. Formerly Senior Vice President (May 1985-December 2003), Acting General
                                        Counsel (November 2001-February 2002) and Associate General Counsel (May
                                        1981-October 2001) of the Manager; Assistant Secretary of Shareholder Services,
                                        Inc. (May 1985-November 2001), Shareholder Financial Services, Inc. (November
                                        1989-November 2001); and OppenheimerFunds International Ltd. (October
                                        1997-November 2001). An officer of 84 portfolios in the OppenheimerFunds complex.
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Kathleen T. Ives,                       Vice President (since June 1998) and Senior Counsel and Assistant Secretary
Assistant Secretary since 2001          (since October 2003) of the Manager; Vice President (since 1999) and Assistant
Age:  38                                Secretary (since October 2003) of the Distributor; Assistant Secretary (since
                                        October 2003) of Centennial Asset Management Corporation; Vice President and
                                        Assistant Secretary (since 1999) of Shareholder Services, Inc.; Assistant
                                        Secretary (since December 2001) of OppenheimerFunds Legacy Program and of
                                        Shareholder Financial Services, Inc.. Formerly an Assistant Counsel (August
                                        1994-October 2003) and Assistant Vice President of the Manager (August 1997-June
                                        1998). An officer of 84 portfolios in the OppenheimerFunds complex.
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Lisa I. Bloomberg,                      Vice President and Associate Counsel of the Manager since May 2004; formerly
Assistant Secretary since 2004          First Vice President and Associate General Counsel of UBS Financial Services Inc.
Age:  36                                (formerly, PaineWebber Incorporated) (May 1999 - April 2004) prior to which she
                                        was an Associate at Skaden, Arps, Slate, Meagher & Flom, LLP (September 1996 -
                                        April 1999). An officer of 84 portfolios in the OppenheimerFunds complex.
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Phillip S. Gillespie,                   Senior Vice President and Deputy General Counsel of the Manager since September
Assistant Secretary since 2004          2004. Formerly Mr. Gillespie held the following positions at Merrill Lynch
Age:  40                                Investment Management: First Vice President (2001-September 2004); Director (from
                                        2000) and Vice President (1998-2000). An officer of 74 portfolios in the
                                        OppenheimerFunds complex.
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Wayne Miao,                             Assistant Vice President and Assistant Counsel of the Manager since June 2004.
Assistant Secretary since 2004          Formerly an Associate with Sidley Austin Brown & Wood LLP (September 1999 - May
Age:  31                                2004). An officer of 74 portfolios in the OppenheimerFunds complex.
- --------------------------------------- -----------------------------------------------------------------------------------

         |X|  Remuneration  of  Trustees.  The  officers  of the Fund and Mr.  Murphy  (who is an officer  and Trustee of the Fund) are
affiliated  with the  Manager and  receive no salary or fee from the Fund.  Mary Miler  became a Trustee of the Fund on August 13, 2004
and received no compensation  for the periods  indicated  below.  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, 2004.  The  compensation  from all 25 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, 2003.

- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
Trustee Name and Other Fund               Aggregate           Retirement         Estimated Annual     Total Compensation
                                                                                                           From All
                                                                                                      Oppenheimer Funds
                                                                                                          For Which
                                                         Benefits Accrued as   Retirement Benefits        Individual
Position(s)                             Compensation         Part of Fund        to be Paid Upon          Serves As
(as applicable)                          From Fund1            Expenses            Retirement2         Trustee/Director
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
Clayton K. Yeutter                        $40,5823             $37,077               $61,306               $152,079
Chairman of the Board
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
Robert G. Galli                            $30,211             $26,399               $80,9234             $213,5365
Regulatory & Oversight Committee
Chair
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
Phillip Griffiths
Governance Committee Chair and
Regulatory & Oversight Committee          $30,8273             $11,078               $23,309               $74,500
Member
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
Joel W. Motley
Audit Committee Chair and
Regulatory & Oversight Committee          $32,5713              $3,148               $14,530               $68,900
Member
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
Kenneth A. Randall                         $28,428                $0                 $79,622               $93,989
Audit Committee Member and
Governance Committee Member
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
Edward V. Regan                            $27,352             $29,336               $59,353               $98,983
Proxy Committee Chair and Audit
Committee Member
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
Russell S. Reynolds, Jr.                   $24,115             $25,896               $60,720               $77,002
Proxy Committee Member and
Governance Committee Member
- ------------------------------------- ------------------ --------------------- --------------------- ---------------------
Messrs.  Levy,  Lipstein and Spiro and Ms.  Moynihan  retired as Trustees from the Board I Funds effective  January 1, 2003,  March 31,
2003,  October 31, 2004 and July 31, 2003,  respectively.  For the fiscal year ended  August 31, 2004,  Ms.  Moynihan  received  $2,099
aggregate  compensation  from the Fund. For calendar year ended December 31, 2003, Messrs Levy,  Lipstein,  Spiro and Ms. Moynihan each
received $43,425,  $75,076, $64,080 and $88,229,  respectively,  of total compensation from all of the Oppenheimer funds for which they
served as Trustee/Director.
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 $10,146,  $30,827 and $13,028 deferred by Messrs.  Yeutter,  Griffiths and Motley,  respectively,  under the Deferred
     Compensation Plan described below.
4.       Includes  $36,990  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  $96,000  paid to Mr.  Galli for serving as trustee or director  of 10 other  Oppenheimer  funds that are not Board I
     Funds.

|X|      Retirement Plan for Trustees. The Fund has adopted a retirement plan that provides for payments to retired Independent
Trustees. Payments are up to 80% of the average compensation paid during a Trustee's five years of service in which the highest
compensation was received. A Trustee must serve as 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 Independent
Trustees that enables them to elect to defer receipt of all or a portion of the annual fees they are entitled to receive from the
Fund. Under the plan, the compensation deferred by a Trustee is periodically adjusted as though an equivalent amount had been
invested in shares of one or more Oppenheimer funds selected by the Trustee. The amount paid to the Trustee under the plan 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 SEC, the Fund may invest in the funds selected by the Trustee under the plan without
shareholder approval for the limited purpose of determining the value of the Trustee's deferred fee account.

|X|      Major Shareholders. As of October 6, 2004 the only persons who owned of record or were known by the Fund to own beneficially
5% or more of any class of the Fund's outstanding shares were:

         MLF&S For the Sole  Benefit  of its  Customers,  Attn Fund  Admn#98756,  4800 Deer Lake  Drive E, Fl 3,  Jacksonville,  FL
         32246-6484, which owned 14,117,779.444 Class A shares (9.97% of the Class A shares then outstanding).

         Great-West  Life & Annuity  Insurance  Company,  Attn Mutual Fund Trading 2T2, 8515 E Orchard Rd,  Greenwood  Village,  CO
         80111-500, which owned 11,858,348.11 Class A shares (8.37% of the Class A shares then outstanding).

         MLPF&S  FBO Sole  Benefit  of its  customers,  Attn  Fund  Admn#97C27,  4800  Deer Lake  Drive E, Fl 3,  Jacksonville,  FL
         32246-6484, which owned 2,323,042.757 Class C shares (12.50% of the Class C shares then outstanding).

         Mark Curran Tr, Boeing Co Master Trust, 200 Newport Avenue Ext, North Quincy,  MA 02171-2102,  which owned  21,225,456.160
         Class Y shares (57.91% of the Class Y shares then outstanding).

         Mass Mutual Life Insurance Co, Separate  Investment  Act, Attn:  N225, 1295 State St,  Springfield,  MA 01111-0001,  which
         owned 11,338,321.375 Class Y shares (30.93% 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 assets of a pension plan of a company soliciting the proxy. The
Fund's Portfolio Proxy Voting Guidelines on routine and non-routine proxy proposals are summarized below.

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

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

|X|      The Investment Advisory Agreement.  The Manager provides investment advisory and management services to the Fund under an
investment advisory agreement between the Manager and the Fund. The Manager selects securities for the Fund's portfolio and handles
its day-to-day business.  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 were:

- --------------------------------------- ----------------------------------------------------------------------------
Fiscal Year ended 8/31:                                    Management Fees Paid to OppenheimerFunds, Inc.
- --------------------------------------- ----------------------------------------------------------------------------
- --------------------------------------- ----------------------------------------------------------------------------
                 2002                                                       $34,456,425
- --------------------------------------- ----------------------------------------------------------------------------
- --------------------------------------- ----------------------------------------------------------------------------
                 2003                                                       $35,661,577
- --------------------------------------- ----------------------------------------------------------------------------
- --------------------------------------- ----------------------------------------------------------------------------
                 2004                                                       $46,800,100
- --------------------------------------- ----------------------------------------------------------------------------

         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, in choosing brokers to execute portfolio transactions for the Fund, the Manager may
select brokers (other than affiliates) that provide brokerage and/or research services to the Fund and/or the other accounts over
which the Manager or its affiliates have investment discretion.  The commission paid to those brokers may be higher than another
qualified broker would charge, if the Manager makes a good faith determination that the commission is fair and reasonable in relation
to the services provided.

         Subject to those considerations, as a factor in selecting brokers for the Fund's portfolio transactions, the investment
advisory agreement also permits the Manager to consider sales of shares of the Fund and other investment companies for which the
Manager or an affiliate serves as investment adviser.  Notwithstanding that authority, and with the concurrence of the Fund's Board,
the Manager has determined not to consider sales of shares of the Fund and other investment companies for which the Manager or an
affiliate serves as investment adviser as a factor in selecting brokers for the Fund's portfolio transactions.  However, the Manager
may continue to effect portfolio transactions through brokers who sell shares of the Fund.

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

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

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

         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
     ---------------------------------- -----------------------------------------------------------------
     ---------------------------------- -----------------------------------------------------------------
                   2002                                            $5,238,458
     ---------------------------------- -----------------------------------------------------------------
     ---------------------------------- -----------------------------------------------------------------
                   2003                                            $8,782,536
     ---------------------------------- -----------------------------------------------------------------
     ---------------------------------- -----------------------------------------------------------------
                   2004                                           $9,930,8752
     ---------------------------------- -----------------------------------------------------------------
1.       Amounts do not include spreads or commissions on principal transactions on a net trade basis.
2.       In the fiscal year ended 8/31/04,  the amount of transactions  directed to brokers for research  services was $642,734,692 and
     amount of the commissions paid to broker-dealers for those services was $914,324.

Distribution and Service Plans

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

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

- --------------- ----------------------- -----------------------
Fiscal Year     Aggregate Front-End     Class A Front-End
                                        Sales Charges
Ended 8/31:     Sales Charges on        Retained by
                Class A Shares          Distributor1
- --------------- ----------------------- -----------------------
- --------------- ----------------------- -----------------------
     2002            $11,107,427              $2,473,867
- --------------- ----------------------- -----------------------
- --------------- ----------------------- -----------------------
     2003             $6,165,627              $1,306,916
- --------------- ----------------------- -----------------------
- --------------- ----------------------- -----------------------
     2004             $8,609,333              $2,506,575
- --------------- ----------------------- -----------------------
1.       Includes amounts retained by a broker-dealer that is an affiliate or a parent of the Distributor.

- --------------- ----------------------- ---------------------- ------------------------ ------------------------
Fiscal Year     Concessions on Class    Concessions on Class   Concessions on Class C   Concessions on Class N
Ended 8/31:     A Shares Advanced by    B Shares Advanced by   Shares Advanced by       Shares Advanced by
                Distributor1            Distributor1           Distributor1             Distributor1
- --------------- ----------------------- ---------------------- ------------------------ ------------------------
- --------------- ----------------------- ---------------------- ------------------------ ------------------------
     2002             $2,999,939             $13,196,558             $2,463,444                $755,491
- --------------- ----------------------- ---------------------- ------------------------ ------------------------
- --------------- ----------------------- ---------------------- ------------------------ ------------------------
     2003             $2,013,246             $5,339,379              $1,079,724                $315,363
- --------------- ----------------------- ---------------------- ------------------------ ------------------------
- --------------- ----------------------- ---------------------- ------------------------ ------------------------
     2004             $1,173,421             $5,971,705              $1,566,277                $732,141
- --------------- ----------------------- ---------------------- ------------------------ ------------------------
1.       The Distributor  advances  concession  payments to financial  intermediaries for certain sales of Class A shares and for sales
     of Class B and Class C shares from its own resources at the time of sale.

- --------------- ----------------------- ----------------------- ------------------------- -----------------------
Fiscal    Year  Class A Contingent      Class B Contingent      Class C Contingent        Class N Contingent
                Deferred Sales          Deferred Sales                                    Deferred Sales
Ended 8/31:     Charges Retained by     Charges Retained by     Deferred Sales Charges    Charges Retained by
                Distributor             Distributor             Retained by Distributor   Distributor
- --------------- ----------------------- ----------------------- ------------------------- -----------------------
- --------------- ----------------------- ----------------------- ------------------------- -----------------------
     2002              $93,365                $3,072,069                $152,225                  $2,557
- --------------- ----------------------- ----------------------- ------------------------- -----------------------
- --------------- ----------------------- ----------------------- ------------------------- -----------------------
     2003              $67,713                $3,086,814                $140,485                 $326,760
- --------------- ----------------------- ----------------------- ------------------------- -----------------------
- --------------- ----------------------- ----------------------- ------------------------- -----------------------
     2004              $78,402                $2,425,021                $105,674                 $115,630
- --------------- ----------------------- ----------------------- ------------------------- -----------------------

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 Trustees1, cast in person at a
meeting called for the purpose of voting on that plan.

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

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

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

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

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

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

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

|X|      Class A Service Plan Fees. Under the Class A service plan, the Distributor currently uses the fees it receives from the Fund
to pay brokers, dealers and other financial institutions (they are referred to as "recipients") for personal services and account
maintenance services they provide for their customers who hold Class A shares. The services include, among others, answering customer
inquiries about the Fund, assisting in establishing and maintaining accounts in the Fund, making the Fund's investment plans
available and providing other services at the request of the Fund or the Distributor. The Class A service plan permits reimbursements
to the Distributor at a rate of up to 0.25% of average annual net assets of Class A shares. The Board has set the rate at that level.
The Distributor does not receive or retain the service fee on Class A shares in accounts for which the Distributor has been listed as
the broker-dealer of record.  While the plan permits the Board to authorize payments to the Distributor to reimburse itself for
services under the plan, the Board has not yet done so, except in the case of the special arrangement described below, regarding
grandfathered retirement accounts. The Distributor makes payments to 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, 2004 payments under the Class A plan totaled $12,071,622, of which $308,856 was
retained by the Distributor under the arrangement described above, regarding grandfathered retirement accounts, and included $457,453
paid to an affiliate of the Distributor's parent company.  Any unreimbursed expenses the Distributor incurs with respect to Class A
shares in any fiscal year cannot be recovered in subsequent years. The Distributor may not use payments received under the Class A
plan to pay any of its interest expenses, carrying charges, or other financial costs, or allocation of overhead.

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

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

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

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

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

         During a calendar year, 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 asset-based sales charges
paid to the Distributor by the Fund under the distribution and service plans.  Those excess expenses are carried over on the
Distributor's books and may be recouped from asset-based sales charge payments from the Fund in future years.  However, the
Distributor has voluntarily agreed to cap the amount of expenses under the plans that may be carried over from year to year and
recouped that relate to (i) expenses the Distributor has incurred that represent compensation and expenses of its sales personnel and
(ii) other direct distribution costs it has incurred, such as sales literature, state registration fees, advertising and prospectuses
used to offer Fund shares.  The cap on the carry-over of those categories of expenses is set at 0.70% of annual gross sales of shares
of the Fund.  If those categories of expenses exceed the capped amount, the Distributor bears the excess costs.  If the Class B,
Class C or Class N plan were to be terminated by the Fund, the Fund's Board of Trustees may allow the Fund to continue payments of
the asset-based sales charge to the Distributor for distributing shares prior to the termination of the plan.

- ----------------------------------------------------------------------------------------------------------------------
                     Distribution Fees Paid to the Distributor for the Fiscal Year Ended 8/31/04
- ----------------------------------------------------------------------------------------------------------------------
- -------------------- -------------------- ---------------------- -------------------------- --------------------------
Class:               Total Payments       Amount Retained by     Distributor's Aggregate    Distributor's
                                                                 Unreimbursed Expenses      Unreimbursed Expenses as
                     Under Plan           Distributor            Under Plan                 % of Net Assets of Class
- -------------------- -------------------- ---------------------- -------------------------- --------------------------
- -------------------- -------------------- ---------------------- -------------------------- --------------------------
Class B Plan             $11,697,728           $8,580,8191              $23,948,753                   2.17%
- -------------------- -------------------- ---------------------- -------------------------- --------------------------
- -------------------- -------------------- ---------------------- -------------------------- --------------------------
Class C Plan             $6,231,668            $1,308,5702              $9,273,924                    1.45%
- -------------------- -------------------- ---------------------- -------------------------- --------------------------
- -------------------- -------------------- ---------------------- -------------------------- --------------------------
Class N Plan              $772,104              $496,5453               $2,251,979                    1.18%
- -------------------- -------------------- ---------------------- -------------------------- --------------------------
1.       Includes $202,841 paid to an affiliate of the Distributor's parent company.
2.       Includes $202,601 paid to an affiliate of the Distributor's parent company.
3.       Includes $14,070 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
NASD on payments of asset-based sales charges and service fees.

Performance of the Fund

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

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

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

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

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

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

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

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

ERV   l/n      - 1     Average Annual Total Return
  P

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

ATVD   l/n       - 1   = Average Annual Total Return (After Taxes on 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    l/n      - 1    = Average Annual Total Return (After Taxes on 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 8/31/04
- ----------------------------------------------------------------------------------------------------------------------
- -------------- ------------------------- -----------------------------------------------------------------------------
Class      of      Cumulative Total                              Average Annual Total Returns
                 Returns (10 years or
Shares              life-of-class)
- -------------- ------------------------- -----------------------------------------------------------------------------
- -------------- ------------------------- ------------------------ ------------------------- --------------------------
                                                 1-Year                    5-Year                    10-Year
                                                                    (or life of class if      (or life of class if
                                                                           less)                      less)
- -------------- ------------------------- ------------------------ ------------------------- --------------------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
                  After       Without    After         Without       After       Without    After Sales     Without
                  Sales        Sales     Sales          Sales        Sales        Sales        Charge        Sales
                 Charge       Charge       Charge      Charge       Charge       Charge                     Charge
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
Class A1           182.49%      199.72%       0.06%        6.16%       -0.79%        0.39%        10.94%       11.60%
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
Class B2           120.56%      120.56%       0.23%        5.23%       -0.73%       -0.40%         9.37%        9.37%
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
Class C3           176.61%      176.61%       4.35%        5.35%       -0.37%       -0.37%        10.71%       10.71%
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
Class N4           -16.40%      -16.40%       4.80%        5.80%       -4.99%       -4.99%           N/A          N/A
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
Class Y5            42.23%       42.23%       6.55%        6.55%        0.77%        0.77%         5.29%        5.29%
- -------------- ------------ ------------ ----------- ------------ ------------ ------------ ------------- ------------
1.       Inception of Class A:      01/22/81
2.       Inception of Class B:      11/01/95
3.       Inception of Class C:      12/01/93
4.       Inception of Class N:      03/01/01
5.       Inception of Class Y:      11/03/97

- -------------------------------------------------------------------------------------------------------------------
                      Average Annual Total Returns for Class A1 Shares (After Sales Charge)
                                          For the Periods Ended 8/31/04
- -------------------------------------------------------------------------------------------------------------------
- ------------------------------------------ ---------------------- ----------------------- -------------------------
                                                  1-Year
                                                                          5-Year                  10-Year
- ------------------------------------------ ---------------------- ----------------------- -------------------------
- ------------------------------------------ ---------------------- ----------------------- -------------------------
After Taxes on Distributions                       0.06%                  -1.85%                   8.67%
- ------------------------------------------ ---------------------- ----------------------- -------------------------
- ------------------------------------------ ---------------------- ----------------------- -------------------------
After Taxes on Distributions and                   0.04%                  -1.09%                   8.39%
Redemption of Fund Shares
- ------------------------------------------ ---------------------- ----------------------- -------------------------
     1.  Inception of Class A:  01/22/81

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 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.

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

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

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

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

Oppenheimer AMT-Free Municipals                           Oppenheimer Limited-Term Government Fund
Oppenheimer AMT-Free New York Municipals                  Oppenheimer Limited Term Municipal Fund
Oppenheimer Balanced Fund                                 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 New Jersey Municipal Fund
Oppenheimer Capital Income Fund                           Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Champion Income Fund                          Oppenheimer Principal Protected Main Street Fund
Oppenheimer Convertible Securities Fund                   Oppenheimer Principal Protected Main Street Fund II
Oppenheimer Developing Markets Fund                       Oppenheimer Principal Protected Main Street Fund III
Oppenheimer Disciplined Allocation Fund                   Oppenheimer Quest Balanced Fund
Oppenheimer Discovery Fund                                Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Emerging Growth Fund                          Oppenheimer Quest International Value 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 Global Opportunities Fund                     Oppenheimer Rochester National Municipals
Oppenheimer Gold & Special Minerals Fund                  Oppenheimer Select Value Fund
Oppenheimer Growth Fund                                   Oppenheimer Senior Floating Rate Fund
Oppenheimer High Yield Fund                               Oppenheimer Small Cap Value Fund
Oppenheimer International Bond Fund                       Oppenheimer Strategic Income Fund
Oppenheimer International Growth Fund                     Oppenheimer Total Return Bond Fund
Oppenheimer International Small Company Fund              Oppenheimer U.S. Government Trust
Oppenheimer International Value Fund                      Oppenheimer Value Fund
Oppenheimer Limited Term California Municipal Fund        Limited-Term New York Municipal Fund
                                                          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. 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 or Class N 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 charges or at reduced
sales charge rates, as described in an Appendix to this Statement of Additional Information.  Certain special sales charge
arrangements described in that Appendix apply to retirement plans whose records are maintained on a daily valuation basis by Merrill
Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent record keeper that has a contract or special arrangement with
Merrill Lynch.  If on the date the plan sponsor signed the Merrill Lynch record keeping service agreement the plan has less than $1
million in assets invested in applicable investments (other than assets invested in money market funds), then the retirement plan may
purchase only Class C shares of the Oppenheimer funds.  If on the date the plan sponsor signed the Merrill Lynch record keeping
service agreement the plan has $1 million or more in assets but less than $5 million in assets invested in applicable investments
(other than assets invested in money market funds), then the retirement plan may purchase only Class N shares of the Oppenheimer
funds.  If on the date the plan sponsor signed the Merrill Lynch record keeping service agreement the plan has $5 million or more in
assets invested in applicable investments (other than assets invested in money market funds), then the retirement plan may purchase
only Class A shares of the Oppenheimer funds.

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

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

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

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

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

|X|      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:
              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),
              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
              on purchases of Class N shares by an OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan made with the
                  redemption proceeds of Class A shares of one or more Oppenheimer funds.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to Sell Shares

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

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

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

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

         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 Money Market Trust
     Centennial California Tax Exempt Trust                      Centennial New York Tax Exempt Trust
     Centennial Government Trust                                 Centennial Tax Exempt Trust

     The following funds do not offer Class N shares:
     Oppenheimer AMT-Free Municipals                          Oppenheimer Pennsylvania Municipal Fund
     Oppenheimer AMT-Free New York Municipals                 Oppenheimer Rochester National Municipals
     Oppenheimer California Municipal Fund                    Limited Term New York Municipal Fund
     Oppenheimer Limited Term Municipal Fund                  Oppenheimer Senior Floating Rate Fund
     Oppenheimer New Jersey Municipal Fund                    Rochester Fund Municipals
     Oppenheimer Principal Protected Main Street Fund II      Oppenheimer Limited Term California Municipal Fund
     Oppenheimer International Value Fund

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

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

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

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

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

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

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

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

o        With respect to Class B shares (other than  Limited-Term Government Fund, Limited Term Municipal Fund, Limited Term New York
Municipal Fund, Oppenheimer Capital Preservation Fund and Oppenheimer Senior Floating Rate Fund), 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 B shares of Limited-Term Government Fund, Limited Term Municipal Fund, Limited Term New York Municipal
Fund, Oppenheimer Capital Preservation Fund and Oppenheimer Senior Floating Rate Fund, the Class B contingent deferred sales charge
is imposed on Class B shares acquired by exchange if they are redeemed within 5 years of the initial purchase of the exchanged Class
B shares.

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.

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

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

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

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

Dividends, Capital Gains and Taxes

Dividends and Distributions. The Fund has no fixed dividend rate and there can be no assurance as to the payment of any dividends or
the realization of any capital gains. The dividends and distributions paid by a class of shares will vary from time to time depending
on market conditions, the composition of the Fund's portfolio, and expenses borne by the Fund or borne separately by a class.
Dividends are calculated in the same manner, at the same time, and on the same day for each class of shares. However, dividends on
Class B, Class C and Class N shares are expected to be lower than dividends on Class A 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). Any tax withheld by the Fund is remitted by the Fund to the U.S.
Treasury and all income and any tax withheld is identified in reports mailed to shareholders in January of each year.

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

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

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

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

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







EPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
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, 2004, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

      We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of August 31, 2004, 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, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.


KPMG LLP

/s/ KPMG LLP

Denver, Colorado
September 22, 2004



STATEMENT OF INVESTMENTS  August 31, 2004
- --------------------------------------------------------------------------------



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

COMMON STOCKS--96.1%
- ---------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--15.6%
- ---------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--1.8%
Carnival Corp.                                      1,680,700    $    76,959,253
- ---------------------------------------------------------------------------------
Royal Caribbean
Cruises Ltd.                                        1,843,200         76,124,160
                                                                 ----------------
                                                                     153,083,413

- ---------------------------------------------------------------------------------
MEDIA--10.3%
Clear Channel
Communications,
Inc.                                                2,366,930         79,315,824
- ---------------------------------------------------------------------------------
Comcast Corp.,
Cl. A Special,
Non-Vtg. 1                                          8,125,825        225,491,644
- ---------------------------------------------------------------------------------
Cox
Communications,
Inc., Cl. A 1                                         685,300         22,518,958
- ---------------------------------------------------------------------------------
News Corp. Ltd.
(The), Sponsored
ADR                                                 3,044,900         95,153,125
- ---------------------------------------------------------------------------------
Omnicom Group,
Inc.                                                  469,500         32,306,295
- ---------------------------------------------------------------------------------
Time Warner, Inc. 1                                10,586,200        173,084,370
- ---------------------------------------------------------------------------------
Univision
Communications,
Inc., Cl. A 1                                       2,048,896         67,613,568
- ---------------------------------------------------------------------------------
Viacom, Inc., Cl. B                                 5,570,000        185,536,700
                                                                 ----------------
                                                                     881,020,484

- ---------------------------------------------------------------------------------
MULTILINE RETAIL--2.0%
Federated
Department
Stores, Inc.                                          983,000         42,662,200
- ---------------------------------------------------------------------------------
J.C. Penney Co., Inc.
(Holding Co.)                                         632,900         24,252,728
- ---------------------------------------------------------------------------------
Target Corp.                                        2,350,780        104,797,772
                                                                 ----------------
                                                                     171,712,700

- ---------------------------------------------------------------------------------
SPECIALTY RETAIL--1.5%
Gap, Inc. (The)                                     3,842,200         72,002,828
- ---------------------------------------------------------------------------------
Home Depot, Inc.                                    1,173,500         42,903,160
- ---------------------------------------------------------------------------------
PetsMart, Inc.                                        308,230          8,648,934
                                                                 ----------------
                                                                     123,554,922

- ---------------------------------------------------------------------------------
CONSUMER STAPLES--9.0%
- ---------------------------------------------------------------------------------
BEVERAGES--3.9%
Anheuser-Busch
Cos., Inc.                                          2,725,700    $   143,916,960
- ---------------------------------------------------------------------------------
Coca-Cola Co.
(The)                                                 872,400         39,005,004
- ---------------------------------------------------------------------------------
PepsiCo, Inc.                                       2,920,410        146,020,500
                                                                 ----------------
                                                                     328,942,464

- ---------------------------------------------------------------------------------
FOOD & STAPLES RETAILING--2.3%
Costco Wholesale
Corp.                                               1,377,388         56,707,064
- ---------------------------------------------------------------------------------
Wal-Mart Stores,
Inc.                                                1,760,600         92,730,802
- ---------------------------------------------------------------------------------
Walgreen Co.                                        1,297,400         47,290,230
                                                                 ----------------
                                                                     196,728,096

- ---------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS--2.2%
Clorox Co. (The)                                      887,900         46,916,636
- ---------------------------------------------------------------------------------
Kimberly-Clark
Corp.                                                 325,600         21,717,520
- ---------------------------------------------------------------------------------
Procter & Gamble
Co. (The)                                           2,147,000        120,167,590
                                                                 ----------------
                                                                     188,801,746

- ---------------------------------------------------------------------------------
PERSONAL PRODUCTS--0.6%
Estee Lauder Cos.,
Inc. (The), Cl. A                                   1,193,760         52,465,752
- ---------------------------------------------------------------------------------
ENERGY--6.8%
- ---------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--1.7%
BJ Services Co. 1                                   1,026,000         49,299,300
- ---------------------------------------------------------------------------------
Halliburton Co.                                     1,022,500         29,826,325
- ---------------------------------------------------------------------------------
Schlumberger Ltd.                                   1,035,200         63,975,360
                                                                 ----------------
                                                                     143,100,985

- ---------------------------------------------------------------------------------
OIL & GAS--5.1%
Amerada Hess Corp.                                    380,300         30,614,150
- ---------------------------------------------------------------------------------
Apache Corp.                                          282,800         12,638,332
- ---------------------------------------------------------------------------------
Burlington
Resources, Inc.                                     1,145,100         41,486,973
- ---------------------------------------------------------------------------------
Encana Corp.                                        1,085,480         44,368,416
- ---------------------------------------------------------------------------------
Exxon Mobil Corp.                                   3,779,200        174,221,120



                   19 | OPPENHEIMER CAPITAL APPRECIATION FUND


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



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

OIL & GAS Continued
Kinder Morgan
Management LLC                                      1,318,375    $    51,245,236
- ---------------------------------------------------------------------------------
Murphy Oil Corp.                                      324,900         24,533,199
- ---------------------------------------------------------------------------------
TotalFinaElf SA,
Sponsored ADR                                         597,000         58,500,030
                                                                 ----------------
                                                                     437,607,456

- ---------------------------------------------------------------------------------
FINANCIALS--10.6%
- ---------------------------------------------------------------------------------
COMMERCIAL BANKS--0.6%
Bank of America
Corp.                                               1,003,400         45,132,932
- ---------------------------------------------------------------------------------
Commerce
Bancorp, Inc.                                         166,000          8,710,020
                                                                 ----------------
                                                                      53,842,952

- ---------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--7.5%
American
Express Co.                                         2,194,640        109,775,893
- ---------------------------------------------------------------------------------
Bear Stearns Cos.,
Inc. (The)                                            519,600         45,683,232
- ---------------------------------------------------------------------------------
Citigroup, Inc.                                     4,424,300        206,083,894
- ---------------------------------------------------------------------------------
JPMorgan Chase
& Co.                                               3,612,020        142,963,752
- ---------------------------------------------------------------------------------
Morgan Stanley                                      2,661,100        134,997,603
- ---------------------------------------------------------------------------------
Providian Financial
Corp. 1                                               286,700          4,139,948
                                                                 ----------------
                                                                     643,644,322

- ---------------------------------------------------------------------------------
INSURANCE--2.5%
American
International
Group, Inc.                                         1,697,900        120,958,396
- ---------------------------------------------------------------------------------
Prudential
Financial, Inc.                                     1,495,000         69,039,100
- ---------------------------------------------------------------------------------
XL Capital Ltd., Cl. A                                305,200         21,425,040
                                                                 ----------------
                                                                     211,422,536

- ---------------------------------------------------------------------------------
HEALTH CARE--17.4%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--3.7%
Amgen, Inc. 1                                       1,931,900        114,542,351
- ---------------------------------------------------------------------------------
Applera Corp./
Applied Biosystems
Group                                               1,177,080         22,411,603
- ---------------------------------------------------------------------------------
Biogen Idec, Inc. 1                                 1,117,000         66,271,610
- ---------------------------------------------------------------------------------
Digene Corp. 1                                        880,871         22,065,819
- ---------------------------------------------------------------------------------
Gilead Sciences, Inc. 1                             1,077,500         74,487,575
- ---------------------------------------------------------------------------------
Martek Biosciences
Corp. 1                                                81,900          4,373,460
- ---------------------------------------------------------------------------------
MedImmune, Inc. 1                                     569,000         13,582,030
                                                                 ----------------
                                                                     317,734,448

- ---------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--4.3%
Medtronic, Inc.                                     3,740,095        186,069,726
- ---------------------------------------------------------------------------------
Millipore Corp. 1                                   1,685,700         84,790,710
- ---------------------------------------------------------------------------------
PerkinElmer, Inc.                                   1,763,100         30,818,988
- ---------------------------------------------------------------------------------
Stryker Corp.                                       1,124,100         50,921,730
- ---------------------------------------------------------------------------------
Waters Corp. 1                                        387,600         16,786,956
                                                                 ----------------
                                                                     369,388,110

- ---------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--0.3%
Pharmaceutical
Product
Development, Inc. 1                                   691,100         23,462,845
- ---------------------------------------------------------------------------------
PHARMACEUTICALS--9.1%
Eli Lilly & Co.                                     1,585,100        100,574,595
- ---------------------------------------------------------------------------------
Johnson & Johnson                                   2,777,200        161,355,320
- ---------------------------------------------------------------------------------
Merck & Co., Inc.                                   1,873,421         84,247,742
- ---------------------------------------------------------------------------------
Novartis AG                                         2,340,028        108,153,331
- ---------------------------------------------------------------------------------
Pfizer, Inc.                                        7,016,689        229,235,230
- ---------------------------------------------------------------------------------
Roche Holdings AG                                     350,247         33,938,127
- ---------------------------------------------------------------------------------
Teva Pharmaceutical
Industries Ltd.,
Sponsored ADR                                       2,236,250         60,937,813
                                                                 ----------------
                                                                     778,442,158

- ---------------------------------------------------------------------------------
INDUSTRIALS--13.1%
- ---------------------------------------------------------------------------------
AEROSPACE & DEFENSE--3.7%
Boeing Co.                                            600,500         31,358,110
- ---------------------------------------------------------------------------------
Honeywell
International, Inc.                                 1,625,000         58,467,500
- ---------------------------------------------------------------------------------
L-3 Communications
Holdings, Inc.                                        641,100         40,158,504
- ---------------------------------------------------------------------------------
Lockheed Martin
Corp.                                               1,297,500         69,779,550



                   20 | OPPENHEIMER CAPITAL APPRECIATION FUND




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

AEROSPACE & DEFENSE Continued
Northrop Grumman
Corp.                                                 664,000    $    34,295,600
- ---------------------------------------------------------------------------------
Rockwell Collins,
Inc.                                                  175,700          6,042,323
- ---------------------------------------------------------------------------------
United Technologies
Corp.                                                 796,700         74,818,097
                                                                 ----------------
                                                                     314,919,684

- ---------------------------------------------------------------------------------
AIR FREIGHT & LOGISTICS--1.9%
Expeditors
International of
Washington, Inc.                                      824,306         40,209,647
- ---------------------------------------------------------------------------------
FedEx Corp.                                           571,800         46,881,882
- ---------------------------------------------------------------------------------
United Parcel
Service, Inc., Cl. B                                  998,400         72,933,120
                                                                 ----------------
                                                                     160,024,649

- ---------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--1.0%
Manpower, Inc.                                        443,400         18,724,782
- ---------------------------------------------------------------------------------
Waste
Management, Inc.                                    2,528,100         70,255,899
                                                                 ----------------
                                                                      88,980,681

- ---------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--0.1%
Rockwell
Automation, Inc.                                      221,100          8,622,900
- ---------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--5.7%
General Electric Co.                               12,884,900        422,495,871
- ---------------------------------------------------------------------------------
Tyco International
Ltd.                                                2,190,700         68,612,724
                                                                 ----------------
                                                                     491,108,595

- ---------------------------------------------------------------------------------
MACHINERY--0.7%
Ingersoll-Rand
Co., Cl. A                                            864,500         56,201,145
- ---------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--20.7%
- ---------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--4.2%
Cisco Systems, Inc. 1                               9,315,140        174,752,026
- ---------------------------------------------------------------------------------
Lucent
Technologies, Inc. 1                                6,212,600         19,445,438
- ---------------------------------------------------------------------------------
Motorola, Inc.                                      2,873,000         46,398,950
- ---------------------------------------------------------------------------------
Nokia Corp.,
Sponsored ADR                                       4,494,200         53,391,096
- ---------------------------------------------------------------------------------
QUALCOMM, Inc.                                        491,800         18,712,990
- ---------------------------------------------------------------------------------
Telefonaktiebolaget
LM Ericsson,
Sponsored ADR 1                                     1,598,700         43,228,848
                                                                 ----------------
                                                                     355,929,348

- ---------------------------------------------------------------------------------
COMPUTERS & PERIPHERALS--3.3%
Dell, Inc. 1                                        2,421,400         84,361,576
- ---------------------------------------------------------------------------------
EMC Corp. 1                                         1,164,800         12,544,896
- ---------------------------------------------------------------------------------
International
Business
Machines Corp.                                      2,171,500        183,904,335
                                                                 ----------------
                                                                     280,810,807

- ---------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--1.4%
Agilent
Technologies, Inc. 1                                2,321,100         47,582,550
- ---------------------------------------------------------------------------------
Tektronix, Inc.                                     1,647,000         47,054,790
- ---------------------------------------------------------------------------------
Vishay
Intertechnology,
Inc. 1                                              1,942,000         24,760,500
                                                                 ----------------
                                                                     119,397,840

- ---------------------------------------------------------------------------------
INTERNET SOFTWARE & SERVICES--1.5%
Yahoo!, Inc. 1                                      4,505,200        128,443,252
- ---------------------------------------------------------------------------------
IT SERVICES--0.4%
Accenture Ltd.,
Cl. A 1                                             1,522,600         39,739,860
- ---------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.0%
Analog Devices, Inc.                                  987,540         34,287,389
- ---------------------------------------------------------------------------------
Cypress
Semiconductor
Corp. 1                                             1,518,200         14,817,632
- ---------------------------------------------------------------------------------
Intel Corp.                                         7,386,140        157,250,921
- ---------------------------------------------------------------------------------
Texas
Instruments, Inc.                                   2,804,600         54,801,884
                                                                 ----------------
                                                                     261,157,826

- ---------------------------------------------------------------------------------
SOFTWARE--6.9%
Adobe Systems, Inc.                                 2,374,134        108,901,527
- ---------------------------------------------------------------------------------
Cadence Design
Systems, Inc. 1                                     2,378,700         29,567,241
- ---------------------------------------------------------------------------------
Citrix Systems, Inc. 1                              2,110,680         33,580,919



                   21 | OPPENHEIMER CAPITAL APPRECIATION FUND


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



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

SOFTWARE Continued
Microsoft Corp.                                    11,336,111    $   309,475,830
- ---------------------------------------------------------------------------------
Novell, Inc. 1                                      1,283,800          7,574,420
- ---------------------------------------------------------------------------------
SAP AG,
Sponsored ADR                                       2,326,300         84,816,898
- ---------------------------------------------------------------------------------
Symantec Corp. 1                                      278,300         13,347,268
                                                                 ----------------
                                                                     587,264,103

- ---------------------------------------------------------------------------------
MATERIALS--2.4%
- ---------------------------------------------------------------------------------
CHEMICALS--2.4%
Air Products &
Chemicals, Inc.                                       952,600         49,897,188
- ---------------------------------------------------------------------------------
Dow Chemical Co.                                      629,400         26,944,614
- ---------------------------------------------------------------------------------
E.I. DuPont de
Nemours & Co.                                         700,700         29,611,582
- ---------------------------------------------------------------------------------
Monsanto Co.                                          238,800          8,740,080
- ---------------------------------------------------------------------------------
Praxair, Inc.                                       2,111,800         85,696,844
                                                                 ----------------
                                                                     200,890,308

- ---------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--0.5%
- ---------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.5%
Telefonos de Mexico
SA de CV,
Sponsored ADR                                       1,360,900         44,079,548
                                                                 ----------------
Total Common Stocks
(Cost $7,979,201,836)                                              8,212,525,935


                                                    PRINCIPAL
                                                       AMOUNT
- ---------------------------------------------------------------------------------

SHORT-TERM NOTES--2.8%
- ---------------------------------------------------------------------------------
Barton Capital Corp.,
1.58%, 10/7/04 2                               $   38,945,000         38,883,467
- ---------------------------------------------------------------------------------
Old Line Funding
Corp.:
1.58%, 10/4/04 2                                   18,186,000         18,159,661
1.62%, 10/12/04 2                                  24,997,000         24,950,881
- ---------------------------------------------------------------------------------
Sheffield
Receivables Corp.:
1.50%, 9/7/04 2                                    30,000,000         29,992,500
1.60%, 9/28/04 2                                   45,000,000         44,946,000
- ---------------------------------------------------------------------------------
Windmill Funding
Corp.:
1.42%, 9/2/04 2                                    25,000,000         24,999,014
1.49%, 9/7/04 2                                    33,000,000         32,991,805
1.60%, 10/8/04 2                                   20,000,000         19,967,111
                                                                 ----------------
Total Short-Term Notes
(Cost $234,890,439)                                                  234,890,439

- ---------------------------------------------------------------------------------
JOINT REPURCHASE AGREEMENTS--2.0%
- ---------------------------------------------------------------------------------
Undivided interest of 42.24% in joint
repurchase agreement (Principal Amount/
Value $400,335,000, with a maturity value
of $400,352,125) with Cantor Fitzgerald
& Co./Cantor Fitzgerald Securities, 1.54%,
dated 8/31/04, to be repurchased at
$169,121,234 on 9/1/04,  collateralized
by U.S. Treasury Bonds, 1.625%--11.25%,
1/31/05--2/15/15, with a value
of $408,806,656 (Cost
$169,114,000)                                     169,114,000        169,114,000

- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $8,383,206,275)                                   100.9%     8,616,530,374
- ---------------------------------------------------------------------------------
LIABILITIES
IN EXCESS OF
OTHER ASSETS                                             (0.9)       (72,782,919)
                                               ----------------------------------
NET ASSETS                                              100.0%   $ 8,543,747,455
                                               ==================================


FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Non-income producing security.

2. Security issued in an exempt transaction without registration under the
Securities Act of 1933. Such securities amount to $234,890,439, or 2.75% of the
Fund's net assets, and have been determined to be liquid pursuant to guidelines
adopted by the Board of Trustees.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   22 | OPPENHEIMER CAPITAL APPRECIATION FUND


STATEMENT OF ASSETS AND LIABILITIES  August 31, 2004
- --------------------------------------------------------------------------------



- ---------------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------------
Investments, at value (cost $8,383,206,275)--see accompanying statement of investments   $ 8,616,530,374
- ---------------------------------------------------------------------------------------------------------
Cash                                                                                           1,146,172
- ---------------------------------------------------------------------------------------------------------
Receivables and other assets:
Interest and dividends                                                                        10,336,976
Investments sold                                                                               8,711,332
Shares of beneficial interest sold                                                             2,643,646
Other                                                                                            131,932
                                                                                         ----------------
Total assets                                                                               8,639,500,432

- ---------------------------------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Investments purchased                                                                         78,270,623
Shares of beneficial interest redeemed                                                        10,341,842
Distribution and service plan fees                                                             2,971,213
Transfer and shareholder servicing agent fees                                                  1,801,184
Trustees' compensation                                                                         1,180,215
Shareholder communications                                                                       840,462
Other                                                                                            347,438
                                                                                         ----------------
Total liabilities                                                                             95,752,977

- ---------------------------------------------------------------------------------------------------------
NET ASSETS                                                                               $ 8,543,747,455
                                                                                         ================

- ---------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Par value of shares of beneficial interest                                               $       230,510
- ---------------------------------------------------------------------------------------------------------
Additional paid-in capital                                                                 9,084,470,773
- ---------------------------------------------------------------------------------------------------------
Accumulated net investment loss                                                               (1,140,376)
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions              (773,140,623)
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of assets and liabilities
denominated in foreign currencies                                                            233,327,171
                                                                                         ----------------
NET ASSETS                                                                               $ 8,543,747,455
                                                                                         ================



                   23 | OPPENHEIMER CAPITAL APPRECIATION FUND


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



- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE
- ---------------------------------------------------------------------------------------------------------

Class A Shares:
Net asset value and redemption price per share (based on net assets of $5,218,309,811 and
138,895,139 shares of beneficial interest outstanding)                                            $ 37.57
Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price)   $ 39.86
- ---------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $1,104,347,802 and 31,717,717 shares
of beneficial interest outstanding)                                                               $ 34.82
- ---------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $638,675,932 and 18,530,610 shares
of beneficial interest outstanding)                                                               $ 34.47
- ---------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales charge)
and offering price per share (based on net assets of $190,696,095 and 5,124,686 shares
of beneficial interest outstanding)                                                               $ 37.21
- ---------------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based on net assets of
$1,391,717,815 and 36,241,580 shares of beneficial interest outstanding)                          $ 38.40


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   24 | OPPENHEIMER CAPITAL APPRECIATION FUND


STATEMENT OF OPERATIONS  For the Year Ended August 31, 2004
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $1,051,101)        $  92,209,476
- --------------------------------------------------------------------------------
Interest                                                              4,328,054
                                                                  --------------
Total investment income                                              96,537,530

- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees                                                      46,800,100
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A                                                              12,071,622
Class B                                                              11,697,728
Class C                                                               6,231,668
Class N                                                                 772,104
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A                                                              12,824,955
Class B                                                               4,257,798
Class C                                                               1,660,764
Class N                                                                 581,681
Class Y                                                               1,761,300
- --------------------------------------------------------------------------------
Shareholder communications:
Class A                                                                 256,263
Class B                                                                 555,377
Class C                                                                 132,075
Class N                                                                   2,358
- --------------------------------------------------------------------------------
Trustees' compensation                                                  379,427
- --------------------------------------------------------------------------------
Custodian fees and expenses                                             224,677
- --------------------------------------------------------------------------------
Other                                                                   288,516
                                                                  --------------
Total expenses                                                      100,498,413
Less reduction to custodian expenses                                    (16,398)
Less payments and waivers of expenses                                  (338,516)
                                                                  --------------
Net expenses                                                        100,143,499

- --------------------------------------------------------------------------------
NET INVESTMENT LOSS                                                  (3,605,969)


                   25 | OPPENHEIMER CAPITAL APPRECIATION FUND


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



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

Net realized gain on:
Investments                                                               $ 302,169,142
Foreign currency transactions                                                 1,813,922
Net increase from payment by affiliate                                          550,217
                                                                          -------------
Net realized gain                                                           304,533,281
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation on:
Investments                                                                 113,687,536
Translation of assets and liabilities denominated in foreign currencies       2,329,522
                                                                          -------------
Net change in unrealized appreciation                                       116,017,058

- ---------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS                      $ 416,944,370
                                                                          =============


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   26 | OPPENHEIMER CAPITAL APPRECIATION FUND


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



YEAR ENDED AUGUST 31,                                                    2004              2003
- ------------------------------------------------------------------------------------------------

OPERATIONS
- ------------------------------------------------------------------------------------------------
Net investment loss                                           $    (3,605,969)  $   (14,584,020)
- ------------------------------------------------------------------------------------------------
Net realized gain (loss)                                          304,533,281      (737,292,237)
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)              116,017,058     1,676,110,664
                                                              ----------------------------------
Net increase in net assets resulting from operations              416,944,370       924,234,407

- ------------------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
- ------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from beneficial interest transactions:
Class A                                                           678,678,523       504,686,099
Class B                                                           (70,119,032)      (50,319,183)
Class C                                                            71,136,610        24,021,003
Class N                                                            74,734,764        25,028,168
Class Y                                                           166,178,783       142,226,078

- ------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------
Total increase                                                  1,337,554,018     1,569,876,572
- ------------------------------------------------------------------------------------------------
Beginning of period                                             7,206,193,437     5,636,316,865
                                                              ----------------------------------
End of period (including accumulated net investment loss of
$1,140,376 and $948,533, respectively)                        $ 8,543,747,455   $ 7,206,193,437
                                                              ==================================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   27 | OPPENHEIMER CAPITAL APPRECIATION FUND


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



CLASS A    YEAR ENDED AUGUST 31,                   2004               2003            2002              2001            2000
- -------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period        $     35.39        $     30.72     $     41.11       $     62.12     $     44.73
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                        .01               (.05)           (.09)              .10            (.02)
Net realized and unrealized gain (loss)            2.17               4.72           (9.31)           (15.86)          20.63
                                            -----------------------------------------------------------------------------------
Total from investment operations                   2.18               4.67           (9.40)           (15.76)          20.61
- -------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to
shareholders:
Distributions from net realized gain                 --                 --            (.99)            (5.25)          (3.22)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period              $     37.57        $     35.39     $     30.72       $     41.11     $     62.12
                                            ===================================================================================

- -------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                 6.16%             15.20%         (23.48)%          (26.38)%         48.01%
- -------------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)    $ 5,218,310        $ 4,288,332     $ 3,219,391       $ 3,055,197     $ 3,648,961
- -------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)           $ 4,971,315        $ 3,655,594     $ 3,204,793       $ 3,255,995     $ 2,898,088
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)                       0.09%             (0.11)%         (0.15)%            0.28%           0.00%
Total expenses                                     1.09% 3,4          1.17% 3         1.22% 3,4         1.03% 3         1.06% 3
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                              45%                42%             28%               46%             44%


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.


                   28 | OPPENHEIMER CAPITAL APPRECIATION FUND




CLASS B    YEAR ENDED AUGUST 31,                         2004           2003           2002             2001           2000
- -----------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     33.09    $     28.95    $     39.09      $     59.80    $     43.48
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                                      (.36)          (.31)          (.26)            (.07)          (.20)
Net realized and unrealized gain (loss)                  2.09           4.45          (8.89)          (15.39)         19.74
                                                  ---------------------------------------------------------------------------
Total from investment operations                         1.73           4.14          (9.15)          (15.46)         19.54
- -----------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain                       --             --           (.99)           (5.25)         (3.22)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     34.82    $     33.09    $     28.95      $     39.09    $     59.80
                                                  ===========================================================================

- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                       5.23%         14.30%        (24.07)%         (26.95)%        46.88%
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $ 1,104,348    $ 1,114,052    $ 1,029,322      $ 1,242,098    $ 1,333,387
- -----------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $ 1,169,402    $ 1,001,311    $ 1,221,005      $ 1,265,753    $   922,480
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss                                     (0.81)%        (0.89)%        (0.92)%          (0.48)%        (0.76)%
Total expenses                                           1.99%          2.10%          1.99%            1.80%          1.83%
Expenses after payments and waivers
and reduction to custodian expenses                      1.97%          1.96%           N/A 3,4          N/A 3          N/A 3
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                    45%            42%            28%              46%            44%


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.


                   29 | OPPENHEIMER CAPITAL APPRECIATION FUND


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



CLASS C    YEAR ENDED AUGUST 31,                       2004            2003          2002            2001          2000
- --------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $   32.72       $   28.63     $   38.64       $   59.19     $   43.06
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                                    (.16)           (.23)         (.11)           (.01)         (.18)
Net realized and unrealized gain (loss)                1.91            4.32         (8.91)         (15.29)        19.53
                                                  ------------------------------------------------------------------------
Total from investment operations                       1.75            4.09         (9.02)         (15.30)        19.35
- --------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain                     --              --          (.99)          (5.25)        (3.22)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $   34.47       $   32.72     $   28.63       $   38.64     $   59.19
                                                  ========================================================================

- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1                     5.35%          14.28%       (24.01)%        (26.95)%       46.89%
- --------------------------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $ 638,676       $ 540,118     $ 450,989       $ 426,476     $ 402,442
- --------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $ 623,172       $ 463,768     $ 477,369       $ 400,009     $ 278,800
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss                                   (0.69)%         (0.89)%       (0.87)%         (0.48)%       (0.76)%
Total expenses                                         1.87% 3,4       1.96% 3       1.94% 3,4       1.80% 3       1.83% 3
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                  45%             42%           28%             46%           44%


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.


                   30 | OPPENHEIMER CAPITAL APPRECIATION FUND




CLASS N    YEAR ENDED AUGUST 31,                         2004         2003        2002       2001 1
- -----------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
- -----------------------------------------------------------------------------------------------------
Net asset value, beginning of period                $   35.17    $   30.60    $  41.05      $ 45.58
- -----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                                      (.08)        (.10)       (.07) 2      (.01)
Net realized and unrealized gain (loss)                  2.12         4.67       (9.39) 2     (4.52)
                                                    -------------------------------------------------
Total from investment operations                         2.04         4.57       (9.46)       (4.53)
- -----------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain                       --           --        (.99)          --
- -----------------------------------------------------------------------------------------------------
Net asset value, end of period                      $   37.21    $   35.17    $  30.60      $ 41.05
                                                    =================================================

- -----------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 3                       5.80%       14.94%     (23.67)%      (9.94)%
- -----------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)            $ 190,696    $ 111,374    $ 72,178      $ 6,791
- -----------------------------------------------------------------------------------------------------
Average net assets (in thousands)                   $ 154,605    $  86,761    $ 38,232      $ 3,173
- -----------------------------------------------------------------------------------------------------
Ratios to average net assets: 4
Net investment loss                                     (0.25)%      (0.35)%     (0.37)%      (0.11)%
Total expenses                                           1.46%        1.46%       1.46%        1.36%
Expenses after payments and waivers and reduction
to custodian expenses                                    1.44%        1.42%        N/A 5,6      N/A 5
- -----------------------------------------------------------------------------------------------------
Portfolio turnover rate                                    45%          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, 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.


                   31 | OPPENHEIMER CAPITAL APPRECIATION FUND


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



CLASS Y    YEAR ENDED AUGUST 31,                         2004            2003            2002            2001            2000
- --------------------------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period              $     36.04     $     31.16       $   41.55     $     62.51     $     44.81
- --------------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                     .09             .01             .02 1           .27             .13
Net realized and unrealized gain (loss)                  2.27            4.87           (9.42) 1       (15.98)          20.79
                                                  ------------------------------------------------------------------------------
Total from investment operations                         2.36            4.88           (9.40)         (15.71)          20.92
- --------------------------------------------------------------------------------------------------------------------------------
Dividends and/or distributions to shareholders:
Distributions from net realized gain                       --              --            (.99)          (5.25)          (3.22)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period                    $     38.40     $     36.04       $   31.16     $     41.55     $     62.51
                                                  ==============================================================================

- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2                       6.55%          15.66%         (23.23)%        (26.12)%         48.64%
- --------------------------------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)          $ 1,391,718     $ 1,152,318       $ 864,437     $   974,820     $ 1,295,087
- --------------------------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                 $ 1,327,404     $   930,500       $ 968,867     $ 1,095,575     $   855,270
- --------------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment income                                    0.47%           0.29%           0.17%           0.66%           0.45%
Total expenses                                           0.71% 4         0.78% 4,5       0.89% 4         0.66% 4         0.64% 4
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                                    45%             42%            28%              46%             44%


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

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

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

4. Reduction to custodian expenses less than 0.01%.

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                   32 | OPPENHEIMER 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, however, the institutional investor
may impose charges on those accounts. All classes of shares have identical
rights and voting privileges with respect to the Fund in general and exclusive
voting rights on matters that affect that class alone. Earnings, net assets and
net asset value per share may differ due to each class having its own expenses,
such as transfer and shareholder servicing agent fees and shareholder
communications, directly attributable to that class. Class A, B, C and N have
separate distribution and/or service plans. No such plan has been adopted for
Class Y shares. Class B shares will automatically convert to Class A shares six
years after the date of purchase.

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

- --------------------------------------------------------------------------------
SECURITIES VALUATION. The Fund calculates the net asset value of its shares as
of the close of The New York Stock Exchange (the Exchange), normally 4:00 P.M.
Eastern time, on each day the Exchange is open for business. Securities listed
or traded on National Stock Exchanges or other domestic or foreign exchanges are
valued based on the last sale price of the security traded on that exchange
prior to the time when the Fund's assets are valued. Securities traded on NASDAQ
are valued based on the closing price provided by NASDAQ prior to the time when
the Fund's assets are valued. In the absence of a sale, the security is valued
at the last sale price on the prior trading day, if it is within the spread of
the closing bid and asked prices, and if not, at the closing bid price.
Corporate, government and municipal debt instruments having a remaining maturity
in excess of 60 days and all mortgage-backed securities will be valued at the
mean between the "bid" and "asked" prices. Securities may be valued primarily
using dealer-supplied valuations or a portfolio pricing service authorized by
the Board of Trustees. Securities (including restricted securities) for which
market quotations are not readily available are valued at their fair value.
Foreign and domestic securities whose values have been materially affected by
what the Manager identifies as a significant event occurring before the Fund's
assets are valued but after the close of their respective exchanges will be fair
valued. Fair value is determined in good faith using consistently applied
procedures under the supervision of the Board of Trustees. Short-term "money
market type" debt securities


                   33 | OPPENHEIMER CAPITAL APPRECIATION FUND


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

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

with remaining maturities of sixty days or less are valued at amortized cost
(which approximates market value).

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

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

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

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

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


                   34 | OPPENHEIMER CAPITAL APPRECIATION FUND


not offset by capital loss carryforwards, if any, to shareholders, therefore, no
federal income or excise tax provision is required.

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

                                                                NET UNREALIZED
                                                                  APPRECIATION
  UNDISTRIBUTED    UNDISTRIBUTED     ACCUMULATED              BASED ON COST OF
  NET INVESTMENT       LONG-TERM            LOSS        SECURITIES FOR FEDERAL
  INCOME                    GAIN    CARRYFORWARD 1,2,3     INCOME TAX PURPOSES
  ----------------------------------------------------------------------------
  $ --                      $ --   $ 733,161,333                 $ 193,347,875

1. As of August 31, 2004, the Fund had $733,161,333 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, 2004, details
of the capital carryforwards were as follows:

                           EXPIRING
                           ------------------------
                           2010       $  61,636,235
                           2011         374,938,776
                           2012         296,586,322
                                      -------------
                           Total      $ 733,161,333
                                      =============

2. During the fiscal year ended August 31, 2004, the Fund did not utilize any
capital loss carryforward.

3. During the fiscal year ended August 31, 2003, the Fund did not utilize any
capital loss carryforward.

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, 2004. Net assets of the
Fund were unaffected by the reclassifications.

                                                     REDUCTION TO
                                   REDUCTION TO   ACCUMULATED NET
              REDUCTION TO      ACCUMULATED NET     REALIZED LOSS
              PAID-IN CAPITAL   INVESTMENT LOSS    ON INVESTMENTS
              ---------------------------------------------------
              $ 8,137,473           $ 3,414,126       $ 4,723,347

No distributions were paid during the years ended August 31, 2004 and August 31,
2003.

The aggregate cost of securities and other investments and the composition of
unrealized appreciation and depreciation of securities and other investments for
federal income tax purposes as of August 31, 2004 are noted below. The primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of losses
or tax realization of financial statement unrealized gain or loss.


                   35 | OPPENHEIMER CAPITAL APPRECIATION FUND


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

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

             Total federal tax cost          $ 8,423,185,571
                                             ================

             Gross unrealized appreciation   $   802,141,286
             Gross unrealized depreciation      (608,793,411)
                                             ----------------
             Net unrealized appreciation     $   193,347,875
                                             ================

- --------------------------------------------------------------------------------
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, 2004, the Fund's projected benefit obligations were increased by $143,178
and payments of $73,625 were made to retired trustees, resulting in an
accumulated liability of $1,018,121 as of August 31, 2004.

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

- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. Income 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, if applicable,
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that


                   36 | OPPENHEIMER CAPITAL APPRECIATION FUND


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, 2004      YEAR ENDED AUGUST 31, 2003
                      SHARES             AMOUNT        SHARES            AMOUNT
- --------------------------------------------------------------------------------
CLASS A
Sold              44,049,927   $  1,683,774,151    45,225,452   $ 1,394,693,911
Redeemed         (26,327,315)    (1,005,095,628)  (28,851,156)     (890,007,812)
                 ---------------------------------------------------------------
Net increase      17,722,612   $    678,678,523    16,374,296   $   504,686,099
                 ===============================================================

- --------------------------------------------------------------------------------
CLASS B
Sold               6,370,743   $    226,256,788     6,747,394   $   197,106,768
Redeemed          (8,319,344)      (296,375,820)   (8,635,132)     (247,425,951)
                 ---------------------------------------------------------------
Net decrease      (1,948,601)  $    (70,119,032)   (1,887,738)  $   (50,319,183)
                 ===============================================================

- --------------------------------------------------------------------------------
CLASS C
Sold               5,516,439   $    193,981,052     4,972,919   $   143,578,548
Redeemed          (3,492,729)      (122,844,442)   (4,220,870)     (119,557,545)
                 ---------------------------------------------------------------
Net increase       2,023,710   $     71,136,610       752,049   $    24,021,003
                 ===============================================================

- --------------------------------------------------------------------------------
CLASS N
Sold               3,052,463   $    116,239,098     1,644,398   $    50,946,387
Redeemed          (1,094,111)       (41,504,334)     (836,639)      (25,918,219)
                 ---------------------------------------------------------------
Net increase       1,958,352   $     74,734,764       807,759   $    25,028,168
                 ===============================================================

- --------------------------------------------------------------------------------
CLASS Y
Sold               9,392,719   $    365,551,482     9,921,935   $   316,008,775
Redeemed          (5,128,257)      (199,372,699)   (5,689,335)     (173,782,697)
                 ---------------------------------------------------------------
Net increase       4,264,462   $    166,178,783     4,232,600   $   142,226,078
                 ===============================================================

- --------------------------------------------------------------------------------
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, 2004, were
$4,554,482,042 and $3,490,902,536, respectively.

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

MANAGEMENT FEES. Effective January 1, 2004, 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
average annual net assets


                   37 | OPPENHEIMER CAPITAL APPRECIATION FUND


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

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

of the Fund, 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 $2.0
billion, 0.52% of the next $2.0 billion, and 0.50% of average annual net assets
over $8.5 billion. Prior to January 1, 2004, the annual advisory fee rate was
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.

- --------------------------------------------------------------------------------
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, 2004, the Fund paid
$20,650,549 to OFS for services to the Fund.

      Additionally, Class Y shares are subject to minimum fees of $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.

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

- --------------------------------------------------------------------------------
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. The Distributor currently uses all of those fees to
pay dealers, brokers, banks and other financial institutions quarterly for
providing personal services and maintenance of accounts of their customers that
hold Class A shares. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in subsequent
years. Fees incurred by the Fund under the Plan are detailed in the Statement of
Operations.

- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B and Class C shares and 0.25% per year on Class N shares. The Distributor
also receives a service fee of up to 0.25% per year under each plan. If either
the Class B, Class C or Class N plan is terminated by the Fund or by the
shareholders of a class, the Board of Trustees and its independent trustees must
determine whether the Distributor shall be entitled to payment from the Fund of
all or a portion of the service fee and/or asset-based sales charge in respect
to shares sold prior to the effective date of such termination. The
Distributor's aggregate uncompensated


                   38 | OPPENHEIMER CAPITAL APPRECIATION FUND


expenses under the plan at August 31, 2004 for Class B, Class C and Class N
shares were $23,948,753, $9,273,924 and $2,251,979, respectively. Fees incurred
by the Fund under the plans are detailed in the Statement of Operations.

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



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

August 31, 2004     $ 2,506,575        $ 78,402     $ 2,425,021       $ 105,674       $ 115,630


- --------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
commissions for sales that is permitted under its investment advisory agreement,
the Fund's Manager terminated that practice in July 2003. Subsequently, the
Manager paid the Fund $550,217, an amount equivalent to certain of such
commissions incurred in prior years.

      Effective July 1, 2003, the Manger has voluntarily undertaken to waive
fees or reimburse expenses of Class Y shares so that "Total Annual Operating
Expenses" of Class Y shares do not exceed 0.75% of average daily net assets. The
Manager may amend or withdraw these waivers and reimbursements at any time
without notice to shareholders.

      OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average daily net assets per fiscal year
for all classes. During the year ended August 31, 2004, OFS waived $86,214,
$195,605, $18,323 and $38,374 for Class A, Class B, Class C and Class N shares,
respectively. This undertaking may be amended or withdrawn at any time.

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

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

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


                   39 | OPPENHEIMER CAPITAL APPRECIATION FUND


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

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

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

      As of August 31, 2004, the Fund had no outstanding foreign currency
contracts.

- --------------------------------------------------------------------------------
6. LITIGATION

Six complaints have been filed as putative derivative and class actions against
the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as well
as 51 of the Oppenheimer funds (collectively, the "Funds") including this Fund,
and nine directors/trustees of certain of the Funds (collectively, the
"Directors/Trustees"). The complaints allege that the Manager charged excessive
fees for distribution and other costs, improperly used assets of the Funds in
the form of directed brokerage commissions and 12b-1 fees to pay brokers to
promote sales of the Funds, and failed to properly disclose the use of Fund
assets to make those payments in violation of the Investment Company Act of 1940
and the Investment Advisers Act of 1940. The complaints further allege that by
permitting and/or participating in those actions, the Directors/Trustees
breached their fiduciary duties to Fund shareholders under the Investment
Company Act of 1940 and at common law.

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


                   40 | 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 Services                Road & Rail
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

                                                     Appendix B

                                    OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class A shares2 of the Oppenheimer funds or the contingent
deferred sales charge that may apply to Class A, Class B or Class C shares may be waived.3  That is because of the economies of sales
efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this document as the "Distributor"), or by dealers or other
financial institutions that offer those shares to certain classes of investors.

Not all waivers apply to all funds. For example, waivers relating to Retirement Plans do not apply to Oppenheimer municipal funds,
because shares of those funds are not available for purchase by or on behalf of retirement plans. Other waivers apply only to
shareholders of certain funds.

For the purposes of some of the waivers described below and in the Prospectus and Statement of Additional Information of the
applicable Oppenheimer funds, the term "Retirement Plan" refers to the following types of plans:
              1)  plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code,
              2)  non-qualified deferred compensation plans,
              3)  employee benefit plans4
              4)  Group Retirement Plans5
              5)  403(b)(7) custodial plan accounts
              6)  Individual Retirement Accounts ("IRAs"), including traditional IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans

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



Waivers that apply at the time shares are redeemed must be requested by the shareholder and/or dealer in the redemption request.
I.                              Applicability of Class A Contingent Deferred Sales Charges in Certain Cases
- ---------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

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

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

A.   Waivers for Redemptions in Certain Cases.

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

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

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

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

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

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

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

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

A.   Reductions or Waivers of Class A Sales Charges.

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

|X|


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

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

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

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

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

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

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




Oppenheimer Capital Appreciation Fund

Internet Website:
         www.oppenheimerfunds.com

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

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

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

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

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

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

1234


PX320.001.0205



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