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 December
5, 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...................................... 20
    Disclosure of Portfolio Holdings................................... 21
How the Fund is Managed ............................................... 25
    Organization and History........................................... 25
    Board of Trustees and Oversight Committees......................... 26
    Trustees and Officers of the Fund.................................. 28
    The Manager........................................................ 37
Brokerage Policies of the Fund......................................... 40
Distribution and Service Plans......................................... 42
Payments to the Fund Intermediaries.................................... 47
Performance of the Fund................................................ 50

About Your Account
How To Buy Shares...................................................... 55
How To Sell Shares..................................................... 65
How To Exchange Shares................................................. 69
Dividends, Capital Gains and Taxes..................................... 73
Additional Information About the Fund.................................. 77

Financial Information About the Fund
Independent Registered Public Accounting Firms' Report................. 79
Financial Statements................................................... 80

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 of 1940 (the "Investment Company Act")
that apply to those types of investments, and the following additional
limitation: the Fund cannot invest in the securities of other registered
investment companies or registered unit investment trusts in reliance on
sub-paragraph (F) or (G) of section 12(d)(1) of the Investment Company Act.
For example, the Fund can invest in exchange-traded funds, which are
typically open-end funds or unit investment trusts, listed on a stock
exchange. The Fund might do so as a way of gaining exposure to the segments
of the equity or fixed-income markets represented by the Exchange-Traded
Funds' portfolio, at times when the Fund may not be able to buy those
portfolio securities directly.

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

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

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

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

|_|   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, 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.

|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.

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

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

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

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

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

      Except under special limited circumstances discussed below, month-end
lists of the Fund's complete portfolio holdings may be disclosed no sooner
than 30-days after the relevant month-end, subject to the procedures below.
If the Fund's complete portfolio holdings have not been disclosed publicly,
they may be disclosed pursuant to special requests for legitimate business
reasons, provided that:
   o  The third-party recipient must first submit a request for release of
      Fund portfolio holdings, explaining the business reason for the request;
   o  Senior officers (a Senior Vice President or above) in the Manager's
      Portfolio and Legal departments must approve the completed request for
      release of Fund portfolio holdings; and
   o  The third-party recipient must sign the Manager's portfolio holdings
      non-disclosure agreement before receiving the data, agreeing to keep
      information that is not publicly available regarding the Fund's
      holdings confidential and agreeing not to trade directly or indirectly
      based on the information.

      The Fund's complete portfolio holdings positions may be released to the
following categories of entities or individuals on an ongoing basis, provided
that such entity or individual either (1) has signed an agreement to keep
such information confidential and not trade on the basis of such information
or (2) is subject to fiduciary obligations, as a member of the Fund's Board,
or as an employee, officer and/or director of the Manager, Distributor, or
Transfer Agent, or their respective legal counsel, not to disclose such
information except in conformity with these policies and procedures and not
to trade for his/her personal account on the basis of such information:
   o  Employees of the Fund's Manager, Distributor and Transfer Agent who need
      to have access to such information (as determined by senior officers of
      such entity),
   o  The Fund's certified public accountants and independent registered
      public accounting firm,
   o  Members of the Fund's Board and the Board's legal counsel,
   o  The Fund's custodian bank,
   o  A proxy voting service designated by the Fund and its Board,
   o  Rating/ranking organizations (such as Lipper and Morningstar),
   o  Portfolio pricing services retained by the Manager to provide portfolio
      security prices, and
   o  Dealers, to obtain bids (price quotations if securities are not priced
      by the Fund's regular pricing services).

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

      Portfolio holdings information (which may include information on
individual securities positions or multiple securities) may be provided to
the entities listed below (1) by portfolio traders employed by the Manager in
connection with portfolio trading, and (2) by the members of the Manager's
Security Valuation Group and Accounting Departments in connection with
portfolio pricing or other portfolio evaluation purposes:
   o  Brokers and dealers in connection with portfolio transactions
      (purchases and sales)
   o  Brokers and dealers to obtain bids or bid and asked prices (if
      securities held by the Fund are not priced by the fund's regular
      pricing services)
   o  Dealers to obtain price quotations where the fund is not identified as
      the owner

      Portfolio holdings information (which may include information on the
Fund's entire portfolio or individual securities therein) may be provided by
senior officers of the Manager or attorneys on the legal staff of the
Manager, Distributor, or Transfer Agent, in the following circumstances:
   o  Response to legal process in litigation matters, such as responses to
      subpoenas or in class action matters where the Fund may be part of the
      plaintiff class (and seeks recovery for losses on a security) or a
      defendant,
   o  Response to regulatory requests for information (the SEC, NASD, state
      securities regulators, and/or foreign securities authorities, including
      without limitation requests for information in inspections or for
      position reporting purposes),
   o  To potential sub-advisers of portfolios (pursuant to confidentiality
      agreements),
   o  To consultants for retirement plans for plan sponsors/discussions at
      due diligence meetings (pursuant to confidentiality agreements),
   o  Investment bankers in connection with merger discussions (pursuant to
      confidentiality agreements)

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

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

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

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

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

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

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

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

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

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

      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 Trustees who are not "interested persons" under the
Investment Company Act (the "Independent Trustees"). The members of the Audit
Committee are Joel W. Motley (Chairman), Mary F. Miller, Kenneth A. Randall
and Joseph M. Wikler. The Audit Committee held 6 meetings during the Fund's
fiscal year ended August 31, 2005. The Audit Committee furnishes the Board
with recommendations regarding the selection of the Fund's independent
registered public accounting firm (also referred to as the "independent
Auditors"). Other main functions of the Audit Committee outlined in the Audit
Committee Charter, include, but are not limited to: (i) reviewing the scope
and results of financial statement audits and the audit fees charged; (ii)
reviewing reports from the Fund's independent Auditors regarding the Fund's
internal accounting procedures and controls; (iii) reviewing reports from the
Manager's Internal Audit Department; (iv) maintaining a separate line of
communication between the Fund's independent Auditors and the Trustees who
are not "interested persons" under the Investment Company Act (the
"Independent Trustees"); (v) reviewing the independence of the Fund's
independent Auditors; and (vi) pre-approving the provision of any audit or
non-audit services by the Fund's independent Auditors, including tax
services, that are not prohibited by the Sarbanes-Oxley Act, to the Fund, the
Manager and certain affiliates of the Manager.

      The members of the Regulatory & Oversight Committee are Robert G. Galli
(Chairman), Matthew P. Fink, Phillip A. Griffiths, Joel W. Motley and Brian
F. Wruble. The Regulatory & Oversight Committee held 6 meetings during the
Fund's fiscal year ended August 31, 2005. The Regulatory & Oversight
Committee evaluates and reports to the Board on the Fund's contractual
arrangements, including the Investment Advisory and Distribution Agreements,
transfer agency 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 Regulatory & Oversight Committee's Charter.

      The members of the Governance Committee are, Phillip A. Griffiths
(Chairman), Kenneth A. Randall, Russell S. Reynolds, Jr. and Peter I Wold.
The Governance Committee held 7 meetings during the Fund's fiscal year ended
August 31, 2005. 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 Governance
Committee's Charter.

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

      To date, the Governance Committee has been able to identify from its
own resources an ample number of qualified candidates. Nonetheless, under the
current policy of the Board, if the Board determines that a vacancy exists or
is likely to exist on the Board, the Governance Committee will consider
candidates for Board membership including those recommended by the Fund's
shareholders. The Governance Committee will consider nominees recommended by
Independent Board members or recommended by any other Board members including
Board members affiliated with the Fund's Manager. The Governance Committee
may, upon Board approval, retain an executive search firm to assist in
screening potential candidates. Upon Board approval, the Governance Committee
may also use the services of legal, financial, or other external counsel that
it deems necessary or desirable in the screening process. Shareholders
wishing to submit a nominee for election to the Board may do so by mailing
their submission to the offices of OppenheimerFunds, Inc., Two World
Financial Center, 225 Liberty Street, 11th Floor, New York, New York
10281-1008, to the attention of the Board of Trustees of Oppenheimer Capital
Appreciation Fund, c/o the Secretary of the Fund.

      Submissions should, at a minimum, be accompanied by the following: (1)
the name, address, and business, educational, and/or other pertinent
background of the person being recommended; (2) a statement concerning
whether the person is an "interested person" as defined in the Investment
Company Act; (3) any other information that the Fund would be required to
include in a proxy statement concerning the person if he or she was
nominated; and (4) the name and address of the person submitting the
recommendation and, if that person is a shareholder, the period for which
that person held Fund shares. Shareholders should note that a person who owns
securities issued by Massachusetts Mutual Life Insurance Company (the parent
company of the Manager) would be deemed an "interested person" under the
Investment Company Act. In addition, certain other relationships with
Massachusetts Mutual Life Insurance Company or its subsidiaries, with
registered broker-dealers, or with the Funds' outside legal counsel may cause
a person to be deemed an "interested person."

      The Governance Committee has not established specific qualifications
that it believes must be met by a trustee nominee. In evaluating trustee
nominees, the Governance Committee considers, among other things, an
individual's background, skills, and experience; whether the individual is an
"interested person" as defined in the Investment Company Act; and whether the
individual would be deemed an "audit committee financial expert" within the
meaning of applicable Securities and Exchange Commission ("SEC") rules. The
Governance Committee also considers whether the individual's background,
skills, and experience will complement the background, skills, and experience
of other nominees and will contribute to the Board. There are no differences
in the manner in which the Governance Committee evaluates nominees for
trustees based on whether the nominee is recommended by a shareholder.
Candidates are expected to provide a mix of attributes, experience,
perspective and skills necessary to effectively advance the interests of
shareholders.

      The members of the Proxy Committee are Russell S. Reynolds, Jr.
(Chairman), Matthew P. Fink and Mary F. Miller. The Proxy Committee held 1
meetings during the Fund's fiscal year ended August 31, 2005. The Proxy
Committee provides the Board with recommendations for the proxy voting of
portfolio securities held by the Fund 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. All of
the Trustees are also trustees or directors of the following Oppenheimer
funds (referred to as "Board I Funds"):

Oppenheimer AMT-Free Municipals           Oppenheimer International Growth Fund
                                          Oppenheimer  International  Large Cap Core
Oppenheimer AMT-Free New York Municipals  Fund
                                          Oppenheimer  International  Small  Company
Oppenheimer Balanced Fund                 Fund
Oppenheimer California Municipal Fund     Oppenheimer International Value Fund
                                          Oppenheimer    Limited   Term   California
Oppenheimer Capital Appreciation Fund     Municipal Fund
Oppenheimer Developing Markets Fund       Oppenheimer Money Market Fund, Inc.
Oppenheimer Discovery Fund                Oppenheimer Multi-State Municipal Trust
Oppenheimer Dividend Growth Fund          Oppenheimer Portfolio Series
Oppenheimer Emerging Growth Fund          Oppenheimer Real Estate Fund
Oppenheimer Emerging Technologies Fund    Oppenheimer Select Value Fund
Oppenheimer Enterprise Fund               Oppenheimer Series Fund, Inc.
Oppenheimer Global Fund                   OFI Tremont Core Strategies Hedge Fund
Oppenheimer Global Opportunities Fund     OFI Tremont Market Neutral Hedge Fund
                                          Oppenheimer  Tremont  Market  Neutral Fund
Oppenheimer Gold & Special Minerals Fund  LLC
Oppenheimer Growth Fund                   Oppenheimer Tremont Opportunity Fund LLC
Oppenheimer   International   Diversified
Fund                                      Oppenheimer U.S. Government Trust

      In addition to being a trustee or director of each of the Board I
Funds, Messrs. Galli and Wruble are directors or trustees of ten other
portfolios and Messrs. Wikler and Wold are trustees in one other portfolio in
the OppenheimerFunds complex.

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

      Messrs. Baylin, Murphy, Petersen, Vandehey, Vottiero, Wilby, Wixted and
Zack and Mss. Bloomberg and Ives, who are officers of the Fund, hold the same
offices with one or more of the other Board I Funds as with the Fund. As of
October 6, 2004, 2005, the Trustees and officers of the Fund, as a group,
owned of record or beneficially less than 1% of any class of shares of the
Fund. The foregoing statement does not reflect ownership of shares of the
Fund held of record by an employee benefit plan for employees of the Manager,
other than the shares beneficially owned under that plan by the officers of
the Fund listed above. In addition, none of the Independent Trustees (nor any
of the immediate family members) own securities of either the Manager or the
Distributor of the Board I Funds or of any entity directly or indirectly
controlling, controlled by or under common control with the Manager or the
Distributor.

      Affiliated Transactions and Material Business Relationships. Mr.
Reynolds has reported he has a controlling interest in The Directorship
Group, Inc. (the "Directorship 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 Group did not
provide consulting services to Massachusetts Mutual Life Insurance Company
during the calendar years ended December 31, 2003 and 2004 and does not
expect to provide any such services in the calendar year ending December 31,
2005.

      The Independent Trustees have unanimously (except for Mr. Reynolds, who
abstained) determined that the consulting arrangements between the
Directorship Group and Massachusetts Mutual Life Insurance Company were not
material business or professional relationships that would compromise Mr.
Reynolds's 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.

      Biographical Information. The Trustees and officers, their positions
with the Fund, length of service in such position(s) and principal
occupations and business affiliations during at least the past five years are
listed in the charts below. The charts also include information about each
Trustee's beneficial share ownership in the Fund and in all of the registered
investment companies that the Trustee oversees in the Oppenheimer family of
funds ("Supervised Funds"). Ms. Miller was elected to certain Board I Funds
during 2004 and did not hold shares of Board I Funds during the calendar year
ended December 31, 2004. Mr. Fink was elected to the Board I Funds in 2005
and did not hold shares of Board I Funds during the calendar year ended
December 31, 2004. The address of each Trustee in the chart below is 6803 S.
Tucson Way, Centennial, Colorado 80112-3924. Each Trustee serves for an
indefinite term, or until his or her resignation, retirement, death or
removal.

- -----------------------------------------------------------------------------------
                               Independent Trustees
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Name, Position(s)     Principal Occupation(s) During the     Dollar    Aggregate
                                                                       Dollar
                                                                       Range Of
                                                             Range of  Shares
                      Past 5 Years; Other                    Shares    Beneficially
Held with the Fund,   Trusteeships/Directorships Held;       BeneficialOwned in
Length of Service,    Number of Portfolios in the Fund       Owned in  Supervised
Age                   Complex Currently Overseen             the Fund  Funds
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
                                                              As of December 31,
                                                                     2004
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Clayton K. Yeutter,   Director of American Commercial Lines  None      Over
Chairman of the       (barge company) (since January 2005);            $100,000
Board of Trustees     Attorney at Hogan & Hartson (law
since 2003;           firm) (since June 1993); Director of
Trustee since 1993    Covanta Holding Corp.
Age: 75               (waste-to-energy company) (since
                      2002); Director of Weyerhaeuser Corp.
                      (1999-April 2004); Director of
                      Caterpillar, Inc. (1993-December
                      2002); Director of ConAgra Foods
                      (1993-2001); Director of Texas
                      Instruments (1993-2001); Director of
                      FMC Corporation (1993-2001). Oversees
                      38 portfolios in the OppenheimerFunds
                      complex.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Matthew P. Fink,      Trustee of the Committee for Economic  None      None
Trustee since 2005    Development (policy research
Age: 64               foundation) (since 2005); Director of
                      ICI Education Foundation (education
                      foundation) (since October 1991);
                      President of the Investment Company
                      Institute (trade association)
                      (1991-2004); Director of ICI Mutual
                      Insurance Company (insurance company)
                      (1991-2004). Oversees 38 portfolios
                      in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Robert G. Galli,      A director or trustee of other         None      Over
Trustee since 1993    Oppenheimer funds. Oversees 48                   $100,000
Age: 72               portfolios in the OppenheimerFunds
                      complex.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Phillip A.            Director of GSI Lumonics Inc.          $50,001-$1Over00
Griffiths, Trustee    (precision medical equipment                     $100,000
since 1999            supplier) (since 2001); Trustee of
Age: 67               Woodward Academy (since 1983); Senior
                      Advisor of The Andrew W. Mellon
                      Foundation (since 2001); Member of
                      the National Academy of Sciences
                      (since 1979); Member of the American
                      Philosophical Society (since 1996);
                      Council on Foreign Relations (since
                      2002); Director of the Institute for
                      Advanced Study (1991-2004); Director
                      of Bankers Trust New York Corporation
                      (1994-1999). Oversees 38 portfolios
                      in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Mary Miller,          Trustee of the American Symphony       None      None
Trustee since 2004    Orchestra (not-for-profit) (since
Age: 63               October 1998); and Senior Vice
                      President and General Auditor of
                      American Express Company (financial
                      services company) (July 1998-February
                      2003). Oversees 38 portfolios in the
                      OppenheimerFunds complex.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Joel W. Motley,       Director of Columbia Equity Financial  None      Over
Trustee since 2002    Corp. (privately-held financial                  $100,000
Age: 53               adviser) (since 2002); Managing
                      Director of Carmona Motley, Inc.
                      (privately-held financial adviser)
                      (since January 2002); Managing
                      Director of Carmona Motley Hoffman
                      Inc. (privately-held financial
                      adviser) (January 1998-December
                      2001); Member of the Finance and
                      Budget Committee of the Council on
                      Foreign Relations, the Investment
                      Committee of the Episcopal Church of
                      America, the Investment Committee of
                      Human Rights Watch and the Investment
                      Committee of Historic Hudson Valley.
                      Oversees 38 portfolios in the
                      OppenheimerFunds complex.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Kenneth A. Randall,   Director of Dominion Resources, Inc.   Over      Over
Trustee since 1987    (electric utility holding company)     $100,000  $100,000
Age: 78               (since February 1972); Former
                      Director of Prime Retail, Inc. (real
                      estate investment trust), Dominion
                      Energy Inc. (electric power and oil &
                      gas producer), Lumbermens Mutual
                      Casualty Company, American Motorists
                      Insurance Company and American
                      Manufacturers Mutual Insurance
                      Company; Former President and Chief
                      Executive Officer of The Conference
                      Board, Inc. (international economic
                      and business research). Oversees 38
                      portfolios in the OppenheimerFunds
                      complex.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Russell S. Reynolds,  Chairman of The Directorship Search    None      $10,001-$50,000
Jr.,                  Group, Inc. (corporate governance
Trustee since 1989    consulting and executive recruiting)
Age: 74               (since 1993); Life Trustee of
                      International House (non-profit
                      educational organization); Former
                      Trustee of The Historical Society of
                      the Town of Greenwich. Oversees 38
                      portfolios in the OppenheimerFunds
                      complex.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Joseph M. Wikler,     Director  of  the  following   medical None      $10,001-$50,000
Trustee since 2005    device   companies:   Medintec  (since
Age: 64               1992)   and   Cathco   (since   1996);
                      Director   of   Lakes    Environmental
                      Association  (since  1996);  Member of
                      the   Investment   Committee   of  the
                      Associated    Jewish    Charities   of
                      Baltimore  (since  1994);  Director of
                      Fortis/Hartford      mutual      funds
                      (1994-December   2001).   Oversees  39
                      portfolios  in  the   OppenheimerFunds
                      complex.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Peter I. Wold         President  of  Wold  Oil   Properties, None      Over
Trustee since 2005    Inc.  (oil  and  gas  exploration  and           $100,000
Age: 57               production   company)   (since  1994);
                      Vice    President,    Secretary    and
                      Treasurer of Wold Trona Company,  Inc.
                      (soda ash processing  and  production)
                      (since 1996);  Vice  President of Wold
                      Talc  Company,   Inc.   (talc  mining)
                      (since  1999);   Managing   Member  of
                      Hole-in-the-Wall     Ranch     (cattle
                      ranching)  (since 1979);  Director and
                      Chairman  of the Denver  Branch of the
                      Federal  Reserve  Bank of Kansas  City
                      (1993-1999);     and    Director    of
                      PacifiCorp.     (electric     utility)
                      (1995-1999).  Oversees  39  portfolios
                      in the OppenheimerFunds complex.
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Brian F. Wruble,      General  Partner of Odyssey  Partners, None      Over
Trustee since 2005    L.P.  (hedge  fund)  (since  September           $100,000
Age: 62               1995);   Director  of  Special   Value
                      Opportunities  Fund,  LLC  (registered
                      investment  company) (since  September
                      2004);  Director  of Zurich  Financial
                      Investment  Advisory Board  (affiliate
                      of  the  Manager's   parent   company)
                      (since   October   2004);   Board   of
                      Governing   Trustees  of  The  Jackson
                      Laboratory  (non-profit) (since August
                      1990);  Trustee of the  Institute  for
                      Advanced       Study       (non-profit
                      educational   institute)   (since  May
                      1992);   Special  Limited  Partner  of
                      Odyssey   Investment   Partners,   LLC
                      (private equity  investment)  (January
                      1999-September   2004);   Trustee   of
                      Research     Foundation     of    AIMR
                      (2000-2002)    (investment   research,
                      non-profit);   Governor,  Jerome  Levy
                      Economics  Institute  of Bard  College
                      (August      1990-September      2001)
                      (economics research);  Director of Ray
                      &  Berendtson,  Inc.  (May  2000-April
                      2002)    (executive    search   firm).
                      Oversees   48    portfolios   in   the
                      OppenheimerFunds complex.
- -----------------------------------------------------------------------------------

      The address of Mr. Murphy is Two World Financial Center, 225 Liberty
Street, 11th Floor, New York, NY 10281-1008. Mr. Murphy serves as a Trustee
for an indefinite term and as an officer for an indefinite term, or until his
resignation, retirement, death or removal. 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.



- ------------------------------------------------------------------------------------
                          Interested Trustee and Officer
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Name,  Position(s)    Principal Occupation(s) During the     Dollar    Aggregate
                                                                       Dollar
                                                                       Range Of
                                                             Range of  Shares
                      Past 5 Years; Other                    Shares    Beneficially
Held with the Fund,   Trusteeships/Directorships Held;       BeneficialOwned in
Length of Service,    Number of Portfolios in the Fund       Owned in  Supervised
Age                   Complex Currently Overseen             the Fund  Funds
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
                                                               As of December 31,
                                                                      2004
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
John V. Murphy,       Chairman, Chief Executive Officer and  $50,000 -  Over
President and         Director (since June 2001) and         $100,000   $100,000
Trustee;              President (since September 2000) of
Trustee since 2001    the Manager; President and Director
Age: 56               or Trustee of other Oppenheimer
                      funds; President and a director of
                      Oppenheimer Acquisition Corp. ("OAC")
                      (the Manager's parent holding
                      company) and of Oppenheimer
                      Partnership Holdings, Inc. (holding
                      company subsidiary of the Manager)
                      (since July 2001); Director of
                      OppenheimerFunds Distributor, Inc.
                      (subsidiary of the Manager) (since
                      November 2001); Chairman and Director
                      of Shareholder Services, Inc. and of
                      Shareholder Financial Services, Inc.
                      (transfer agent subsidiaries of the
                      Manager) (since July 2001); President
                      and Director of OppenheimerFunds
                      Legacy Program (charitable trust
                      program established by the Manager)
                      (since July 2001); Director of the
                      following investment advisory
                      subsidiaries of the Manager: OFI
                      Institutional Asset Management, Inc.,
                      Centennial Asset Management
                      Corporation, Trinity Investment
                      Management Corporation and Tremont
                      Capital Management, Inc. (since
                      November 2001), HarbourView Asset
                      Management Corporation and OFI
                      Private Investments, Inc. (since July
                      2001); President (since November 1,
                      2001) and Director (since July 2001)
                      of Oppenheimer Real Asset Management,
                      Inc.; Executive Vice President of
                      Massachusetts Mutual Life Insurance
                      Company (OAC's parent company) (since
                      February 1997); Director of DLB
                      Acquisition Corporation (holding
                      company parent of Babson Capital
                      Management LLC) (since June 1995);
                      Member of the Investment Company
                      Institute's Board of Governors (since
                      October 3, 2003); Chief Operating
                      Officer of the Manager (September
                      2000-June 2001); President and
                      Trustee of MML Series Investment Fund
                      and MassMutual Select Funds (open-end
                      investment companies) (November
                      1999-November 2001); Director of C.M.
                      Life Insurance Company (September
                      1999-August 2000); President, Chief
                      Executive Officer and Director of MML
                      Bay State Life Insurance Company
                      (September 1999-August 2000);
                      Director of Emerald Isle Bancorp and
                      Hibernia Savings Bank (wholly-owned
                      subsidiary of Emerald Isle Bancorp)
                      (June 1989-June 1998). Oversees 77
                      portfolios in the Oppenheimer Funds
                      Complex as a director or trustee and
                      officer and an additional 10
                      portfolios as an officer.
- ------------------------------------------------------------------------------------

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

- ------------------------------------------------------------------------------------
                            Other Officers of the Fund
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Name, Position(s) Held    Principal Occupation(s) During Past 5 Years
with the Fund, Length of
Service, Age
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
William L. Wilby          Senior Vice President of the Manager since July 1994 and
Portfolio Manager (since  Senior Investment Officer and Director of Equities of
2005)                     the Manager since July 2004. Mr. Wilby was Director of
Age: 61                   International Equities of the Manager from May 2000
                          through July 2004 and Senior Vice President of
                          HarbourView Asset Management Corporation from May 1999
                          through November 2001. Before joining OppenheimerFunds
                          in 1991, Mr. Wilby was an International Investment
                          Strategist at Brown Brothers Harriman & Co., a Managing
                          Director and Portfolio Manager at AIG Global Investors,
                          an International Pension Manager at Northern Trust Bank
                          in Chicago and an International Financial Economist at
                          Northern Trust Bank and at the Federal Reserve Bank in
                          Chicago. A portfolio manager of other Oppenheimer funds.
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Marc L. Baylin            Vice President of the Manager and a member of the Growth
Portfolio Manager (since  Equity Investment Team. He was Managing Director and
2005)                     Lead Portfolio Manager at JP Morgan Fleming Investment
Age: 37                   Management from June 2002 to August 2005 and was a Vice
                          President of T. Rowe Price, where he was an analyst from
                          June 1993 and a portfolio manager from March 1999 to
                          June 2002. A portfolio manager of other Oppenheimer
                          funds.
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Mark S. Vandehey,         Senior Vice President and Chief Compliance Officer of
Vice President and Chief  the Manager (since March 2004); Vice President of
Compliance Officer since  OppenheimerFunds Distributor, Inc., Centennial Asset
2004                      Management Corporation and Shareholder Services, Inc.
Age: 55                   (since June 1983). Former Vice President and Director of
                          Internal Audit of the Manager (1997-February 2004). An
                          officer of 87 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Brian W. Wixted,          Senior Vice President and Treasurer of the Manager
Treasurer since 1999      (since March 1999); Treasurer of the following:
Age: 46                   HarbourView Asset Management Corporation, Shareholder
                          Financial Services, Inc., Shareholder Services, Inc.,
                          Oppenheimer Real Asset Management Corporation, and
                          Oppenheimer Partnership Holdings, Inc. (since March
                          1999), OFI Private Investments, Inc. (since March 2000),
                          OppenheimerFunds International Ltd. (since May 2000),
                          OppenheimerFunds plc (since May 2000), OFI Institutional
                          Asset Management, Inc. (since November 2000), and
                          OppenheimerFunds Legacy Program (charitable trust
                          program established by the Manager) (since June 2003);
                          Treasurer and Chief Financial Officer of OFI Trust
                          Company (trust company subsidiary of the Manager) (since
                          May 2000); Assistant Treasurer of the following: OAC
                          (since March 1999),Centennial Asset Management
                          Corporation (March 1999-October 2003) and
                          OppenheimerFunds Legacy Program (April 2000-June 2003);
                          Principal and Chief Operating Officer of Bankers Trust
                          Company-Mutual Fund Services Division (March 1995-March
                          1999). An officer of 87 portfolios in the
                          OppenheimerFunds complex.
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Brian Petersen,           Assistant Vice President of the Manager (since August
Assistant Treasurer       2002); Manager/Financial Product Accounting of the
since 2004                Manager (November 1998-July 2002). An officer of 87
Age: 35                   portfolios in the OppenheimerFunds complex
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Philip F. Vottiero,       Vice President/Fund Accounting of the Manager (since
Assistant Treasurer       March 2002); Vice President/Corporate Accounting of the
since 2002                Manager (July 1999-March 2002); Chief Financial Officer
Age: 42                   of Sovlink Corporation (April 1996-June 1999). An
                          officer of 87 portfolios in the OppenheimerFunds complex.
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Robert G. Zack,           Executive Vice President (since January 2004) and
Secretary since 2001      General Counsel (since March 2002) of the Manager;
Age: 57                   General Counsel and Director of the Distributor (since
                          December 2001); General Counsel of Centennial Asset
                          Management Corporation (since December 2001); Senior
                          Vice President and General Counsel of HarbourView Asset
                          Management Corporation (since December 2001); Secretary
                          and General Counsel of OAC (since November 2001);
                          Assistant Secretary (since September 1997) and Director
                          (since November 2001) of OppenheimerFunds International
                          Ltd. and OppenheimerFunds plc; Vice President and
                          Director of Oppenheimer Partnership Holdings, Inc.
                          (since December 2002); Director of Oppenheimer Real
                          Asset Management, Inc. (since November 2001); Senior
                          Vice President, General Counsel and Director of
                          Shareholder Financial Services, Inc. and Shareholder
                          Services, Inc. (since December 2001); Senior Vice
                          President, General Counsel and Director of OFI Private
                          Investments, Inc. and OFI Trust Company (since November
                          2001); Vice President of OppenheimerFunds Legacy Program
                          (since June 2003); Senior Vice President and General
                          Counsel of OFI Institutional Asset Management, Inc.
                          (since November 2001); Director of OppenheimerFunds
                          (Asia) Limited (since December 2003); Senior Vice
                          President (May 1985-December 2003), Acting General
                          Counsel (November 2001-February 2002) and Associate
                          General Counsel (May 1981-October 2001) of the Manager;
                          Assistant Secretary of the following: Shareholder
                          Services, Inc. (May 1985-November 2001), Shareholder
                          Financial Services, Inc. (November 1989-November 2001),
                          and OppenheimerFunds International Ltd. (September
                          1997-November 2001). An officer of 87 portfolios in the
                          OppenheimerFunds complex.
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Kathleen T. Ives,         Vice President (since June 1998) and Senior Counsel and
Assistant Secretary       Assistant Secretary (since October 2003) of the Manager
since 2001                Vice President (since 1999) and Assistant Secretary
Age: 40                   (since October 2003) of the Distributor; Assistant
                          Secretary of Centennial Asset Management Corporation
                          (since October 2003); Vice President and Assistant
                          Secretary of Shareholder Services, Inc. (since 1999);
                          Assistant Secretary of OppenheimerFunds Legacy Program
                          and Shareholder Financial Services, Inc. (since December
                          2001); Assistant Counsel of the Manager (August
                          1994-October 2003). An officer of 87 portfolios in the
                          OppenheimerFunds complex.
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Lisa I. Bloomberg,        Vice President and Associate Counsel of the Manager
Assistant Secretary       (since May 2004); First Vice President (April 2001-April
since 2004                2004), Associate General Counsel (December 2000-April
Age: 37                   2004), Corporate Vice President (May 1999-April 2001)
                          and Assistant General Counsel (May 1999-December 2000)
                          of UBS Financial Services Inc. (formerly, PaineWebber
                          Incorporated). An officer of 87 portfolios in the
                          OppenheimerFunds complex.
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Phillip S. Gillespie,     Senior Vice President and Deputy General Counsel of the
Assistant Secretary       Manager (since September 2004); Mr. Gillespie held the
since 2004                following positions at Merrill Lynch Investment
Age: 41                   Management: First Vice President (2001-September 2004);
                          Director (2000-September 2004) and Vice President
                          (1998-2000). An officer of 87 portfolios in the
                          OppenheimerFunds complex.
- ------------------------------------------------------------------------------------

      |X|   Remuneration  of the Officers and  Trustees.  The officers and the
interested  Trustee of the Fund, who are affiliated with the Manager,  receive
no salary or fee from the Fund. The Independent  Trustees'  compensation  from
the Fund,  shown below,  is for serving as a Trustee and member of a committee
(if  applicable),  with  respect to the Fund's  fiscal  year ended  August 31,
2005. The total compensation,  including accrued retirement benefits, from the
Fund and fund complex  represents  compensation,  including accrued retirement
benefits  for serving as a Trustee and member of a committee  (if  applicable)
of the  Boards of the Fund and  other  funds in the  OppenheimerFunds  complex
during the calendar year ended December 31, 2004.

- ----------------------------------------------------------------------------------
Name and Other Fund Position(s)    Aggregate  Retirement  Estimated     Total
                                               Benefits
                                              Accrued as    Annual   Compensation
                                  Compensation  Part of    Benefits    From the
                                     From        Fund        Upon      Fund and
(as applicable)                     Fund(1)    Expenses   Retirement(Fund Complex
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Clayton K. Yeutter                $ 39,036(3)    None      $86,171     $173,700
Chairman of the Board
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Ronald J. Abdow(14)                  None        None        None    $81,833(15)
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Matthew P. Fink(4)
Proxy Committee Member and
Regulatory & Oversight Committee    $9,571       None       $2,641       None
Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Robert G. Galli
Regulatory & Oversight Committee    $29,061      None     $100,824(5)$237,312(6)
Chairman
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Phillip Griffiths
Governance Committee Chairman
and Regulatory & Oversight        $33,792(7)     None      $34,972     $142,092
Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Mary F. Miller(8)
Audit Committee Member and Proxy    $20,463      None       $7,128      $8,532
Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Joel W. Motley
Audit Committee Chairman and
Regulatory & Oversight Committee  $33,882(9)     None      $23,945     $150,760
Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Kenneth A. Randall
Audit Committee Member and          $30,133    None(10)    $85,944     $134,080
Governance Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Edward V. Regan(11)                 $24,673      None      $70,977     $118,788
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Russell S. Reynolds, Jr.
Proxy Committee Chairman and        $24,050      None      $66,602     $106,792
Governance Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Donald Spiro(12)                    $2,471       None        None      $64,080
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Eustis Walcott(14)                   None        None        None      $18,500
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Joseph M. Wikler(13)                 None        None         -        $23,000
Audit Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Peter I. Wold(13)                    None        None         -        $20,500
Governance Committee Member
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
Brian F. Wruble(16)
Regulatory & Oversight Committee     None        None     $22,238(17)$111,000(18)
Member
- ----------------------------------------------------------------------------------
1. Aggregate Compensation From the Fund" includes fees and deferred
compensation, if any.
2. "Estimated Annual Benefits Upon Retirement" is based on a straight life
payment plan election with the assumption that a Trustee will retire at the
age of 75 and is eligible (after 7 years of service) to receive retirement
plan benefits with respect to certain Board I Funds as described below under
"Retirement Plan for Trustees."
3. Includes $9,759 deferred by Mr. Yeutter under the "Deferred Compensation
Plan" described below.
4. Mr. Fink was appointed as a Director or Trustee of 10 of the Board I Funds
effective January 1, 2005 and was elected as Director or Trustee of all of
the other Board I Funds during 2005.
5. Includes $45,840 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.
6. Includes $111,000 for serving as a trustee or director of 10 other
Oppenheimer funds (at December 31, 2004) that are not Board I Funds.
7. Includes $33,7952 deferred by Mr. Griffiths under the "Deferred
Compensation Plan" described below.
8. Ms. Miller was appointed as Director or Trustee of 13 of the Board I Funds
effective August13, 2004 and of 9 of the Board I Funds effective October 26,
2004. She was elected as director or trustee of all of the other Board I
Funds during 2005.
9. Includes $13,553 deferred by Mr. Motley under the "Deferred Compensation
Plan" described below.
10. Due to actuarial considerations, no additional retirement benefits were
accrued with respect to Mr. Randall.
11. Mr. Regan retired as Trustee of the Board I funds effective June  30,
2005.
12. Mr. Spiro retired as Trustee of the Board I funds effective October 31,
2004.
13. Mr. Wkler and Mr. Wold were elected as trustees or directors of the Board
I Funds as of August 17, 2005.
14. Mr. Abdow and Mr. Walcott retired as Trustees of the Fund as of September
26, 2005.
15. Includes $61,333 compensation paid to Mr. Abdow for serving as a trustee
for two open-end investment companies (MassMutual Institutional Funds and MML
Series Investment Fund) the investment adviser for which is the indirect
parent company of the Fund's Manager. The Manager also serves as the
Sub-Advisor to the MassMutual International Equity Fund, a series of
MassMutual Institutional Funds. In accordance with SEC regulations, for
purposes of this section only, "Fund Complex" includes the Oppenheimer funds,
MassMutual Institutional Funds and MML Series Investment Fund. The Manager
does not consider MassMutual Institutional Funds and MML Series Investment
Fund to be part of the OppenheimerFunds' "Fund Complex" as that term may be
otherwise interpreted.
16. Mr. Wruble was elected as director or trustee of the Board I Funds
effective October 10, 2005.
17. Estimated to be paid to Mr. Wruble for serving as a director or trustee
of 10 other Oppenheimer funds that are not Board I Funds. Mr. Wruble's
service as a director or trustee of such funds will not be counted towards
the fulfillment of his eligibility requirements for payments under the Board
I retirement plan, described below.
18. For serving as a trustee or director of 10 other Oppenheimer funds (at
December 31, 2005) 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 a director or trustee for any of the Board I Funds for at least seven
years to be eligible for retirement plan benefits and must serve for at least
15 years to be eligible for the maximum benefit. The amount of retirement
benefits a Trustee will receive depends on the amount of the Trustee's
compensation, including future compensation and the length of his or her
service on the Board.

|X|   Deferred Compensation Plan. 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 will be determined based upon
the amount of compensation deferred and the performance of the selected
funds.

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

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

      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 the Manager where a
directly-controlled affiliate of the Manager 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 the independent registered public
      accounting firm, unless circumstances indicate otherwise.
o     In general, the Fund opposes "anti-takeover" proposals and supports the
      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
managers of the Fund are employed by the Manager and are the persons who are
principally responsible for the day-to-day management of 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
               2003                                 $35,661,577
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
               2004                                 $46,800,100
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
               2005                                 $49,541,160
- --------------------------------------------------------------------------------

      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 names "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 names "Oppenheimer" as part of its name.

 Portfolio Managers. The Fund's portfolio is co-managed by William L. Wilby
and Marc I. Baylin (each is referred to as a "Portfolio Manager" and
collectively they are referred to as the "Portfolio Managers"). They are the
persons who are responsible for the day-to-day management of the Fund's
investments.

      |X| Other Accounts Managed. In addition to managing the Fund's
investment portfolio, Mr. Wilby also manages other investment portfolios on
behalf of the Manager or its affiliates. The following table provides
information regarding those portfolios as of August 31, 2005:

                                  Registered       Other Pooled       Other
                                  Investment        Investment      Accounts
                                   Companies         Vehicles
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Account Managed                       15                 1            None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Assect Managed*                  $                 $            None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Accounts with                          1               None           None
Performance-Based Advisory
Fees
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Assets in Accounting             $               None           None
with Perfoamnce-Based
Advisory Fees*

      In addition to managing the Fund's investment portfolio, Mr. Baylin
also manages other investment portfolios on behalf of the Manager or its
affiliates. The following table provides information regarding those
portfolios as of August 31, 2005. No account has a performance-based advisory
fee:

                                                   Total
                            Total                Assets in
                            Assets in   Other   t  Other               Total
                 Registered Registered Pooled     Pooled              Assets
                 Investment Investment InvestmenInvestment  Other    in Other
Portfolio        Companies  Companies  Vehicles  Vehicles   Accounts Accounts
Manager           Managed    Managed*  Managed   Managed*   Managed  Managed*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 Marc L. Baylin      1        $8,616.6   None       None      None      None
* In millions.

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

      |X| Compensation of the Portfolio Managers. The Fund's Portfolio
Managers are employed and compensated by the Manager, not the Fund. Under the
Manager's compensation program for its portfolio managers and portfolio
analysts, their compensation is based primarily on the investment performance
results of the funds and accounts they manage, rather than on the financial
success of the Manager. This is intended to align the portfolio managers' and
analysts' interests with the success of the funds and accounts and their
investors. The Manager's compensation structure is designed to attract and
retain highly qualified investment management professionals and to reward
individual and team contributions toward creating shareholder value. As of
August 31, 2005, each Portfolio Manager's compensation consisted of three
elements: a base salary, an annual discretionary bonus and eligibility to
participate in long-term awards of options and appreciation rights in regard
to the common stock of the Manager's holding company parent. Senior portfolio
managers may also be eligible to participate in the Manager's deferred
compensation plan.

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

      |X| Ownership of Fund Shares. As of August 31, 2005 the Portfolio
Managers did not beneficially own any shares of the Fund.


Brokerage Policies of the Fund

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

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

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

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

- --------------------------------------------------------------------------------
  Fiscal Year Ended 8/31:     Total Brokerage Commissions Paid by the Fund(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
            2003                                 $8,782,536
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
            2004                                 $9,930,875
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
            2005                               $5,876,407(2)
- --------------------------------------------------------------------------------
1.   Amounts  do  not  include   spreads  or   concessions   on   principal
transactions on a net trade basis.
2. In the fiscal year ended 8/31/05,  the amount of  transactions  directed
to brokers for  research  services was  $311,277,421  and the amount of the
commissions paid to broker-dealers for those services was $454,398.

Distribution and Service Plans

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

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

- --------------------------------------------
  Fiscal      Aggregate         Class A
                               Front-End
Year       Front-End Sales   Sales Charges
Ended         Charges on      Retained by
  8/31:     Class A Shares  Distributor(1)
- --------------------------------------------
- --------------------------------------------
   2003       $6,165,627      $1,306,916
- --------------------------------------------
- --------------------------------------------
   2004       $8,609,333      $2,506,575
- --------------------------------------------
- --------------------------------------------
   2005       $9,283,998      $2,594,826
- --------------------------------------------
1.  Includes  amounts  retained by a  broker-dealer  that is an affiliate or a
parent of the Distributor.

- ------------------------------------------------------------------------------
  Fiscal    Concessions on  Concessions on   Concessions on   Concessions on
Year        Class A Shares  Class B Shares   Class C Shares   Class N Shares
Ended        Advanced by      Advanced by     Advanced by      Advanced by
  8/31:     Distributor(1)  Distributor(1)   Distributor(1)   Distributor(1)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
   2003       $2,013,246      $5,339,379       $1,079,724        $315,363
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
   2004       $1,173,421      $5,971,705       $1,566,277        $732,141
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
   2005        $976,097       $4,464,534       $1,284,533        $537,358
- ------------------------------------------------------------------------------
1.   The   Distributor    advances    concession   payments   to   financial
intermediaries  for  certain  sales of Class A shares and for sales of Class
B, Class C and Class N shares from its own resources at the time of sale.

- -------------------------------------------------------------------------------
  Fiscal       Class A          Class B          Class C          Class N
              Contingent      Contingent                         Contingent
            Deferred Sales  Deferred Sales     Contingent      Deferred Sales
Year           Charges          Charges      Deferred Sales       Charges
Ended        Retained by      Retained by   Charges Retained    Retained by
  8/31:      Distributor      Distributor    by Distributor     Distributor
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
   2003        $67,713        $3,086,814        $140,485          $326,760
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
   2004        $78,402        $2,425,021        $105,674          $115,630
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
   2005        $32,458        $2,448,819        $143,743          $173,648
- -------------------------------------------------------------------------------

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 Trustees(1), cast in person
at a meeting called for the purpose of voting on that plan.

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

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

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

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

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

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

      |X| Class A 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 periodically at an annual rate not to exceed 0.25% of the average
annual net assets consisting of Class A shares held in the accounts of the
recipients or their customers.

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

      For the fiscal year ended August 31, 2005 payments under the Class A
plan totaled $13,537,595, of which $150,929 was retained by the Distributor
under the arrangement described above, regarding grandfathered retirement
accounts, and included $446,601 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 Plans Fees.
Under each plan, distribution and service fees are computed on the average of
the net asset value of shares in the respective class, determined as of the
close of each regular business day during the period. Each plan provides for
the Distributor to be compensated at a flat rate, whether the Distributor's
distribution expenses are more or less than the amounts paid by the Fund
under the plan during the period for which the fee is paid. The types of
services that recipients provide are similar to the services provided under
the Class A service plan, described above.

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

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

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

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

      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 the 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 8/31/05
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class:            Total         Amount        Distributor's      Distributor's
                                                Aggregate        Unreimbursed
                                               Unreimbursed    Expenses as % of
                Payments      Retained by     Expenses Under     Net Assets of
               Under Plan     Distributor          Plan              Class
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class B Plan   $10,973,112   $8,530,512(1)     $18,060,644           1.73%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class C Plan   $6,804,810    $1,463,584(2)      $9,953,003           1.44%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class N Plan   $1,102,660     $609,973(3)       $2,926,948           1.19%
- ---------------------------------------------------------------------------------
1. Includes $170,301 paid to an affiliate of the Distributor's parent company.
2. Includes $207,138 paid to an affiliate of the Distributor's parent company.
3. Includes $23,789 paid to an affiliate of the Distributor's parent company.

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

Payments to Fund Intermediaries

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

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

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

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

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

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

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

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

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

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

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

      For the year ended December 31, 2004, the following financial
intermediaries that are broker-dealers offering shares of the Oppenheimer
funds, and/or their respective affiliates, received revenue sharing or
similar distribution-related payments from the Manager or Distributor for
marketing or program support:

  ADVEST INC.                             AEGON
  A.G. Edwards & Sons, Inc                AIG Network
  Allianz Life Insurance Company          Allstate Life Insurance Company
  Ameritas Life Insurance Corporation     American Centurian Life Insurance
  American Enterprise Life Insurance      American Express Financial Advisors
                                          Inc.
  American Portfolios                     Annuity Investors Life
  AXA Advisors                            Banc One Securities Corporation
  Bank of New York                        Cadaret Grant & Co. Inc.
  Charter One Securities Inc.             Chase Investment Services
  Citigroup Financial Network             CitiStreet
  Citizens Bank of Rhode Island           CJM Planning Corp.
  Columbus Life Insurance Company         Commonwealth Financial Network
  CUNA Brokerage Services Inc.            CUSO Financial Services, L.P.
  Federal Kemper                          First Allied Securities Inc
  First Global Capital                    GE Financial Assurance
  GlenBrook Life and Annuity Co.          Great West Life & Annuity Co., Inc.
  HD Vest                                 Hewitt Associates
  HSBC Brokerage (USA) Inc.               ING Network
  Jefferson Pilot Securities Corporation  John Hancock Variable Life Insurance
                                          Company
  Kemper Life Assurance Company           Legend Equities Corporation
  Legg Mason Wood Walker, Incorporated    Lincoln National Life Insurance
                                          Company
  Lincoln Financial Advisors Corporation  Lincoln Investment Planning
  Linsco/Private Ledger Corp.             MassMutual Financial Group and
                                          affiliates
  McDonald Investments, Inc.              Merrill Lynch & Co., Inc. and
                                          affiliates
  Metlife and affiliates                  Minnesota Life Insurance Company
  Morgan Stanley DW Inc.                  NPH Network
  Nationwide and affiliates               New York Life Securities, LLC
  PacLife Network                         Park Avenue Securities LLC
  Planmember Securities Corporation       Prime Capital Services, Inc.
  Princor Financial Services Corporation  Protective Life Insurance Co.
  Provident Mutual Insurance Company      Prudential Investment Management
                                          Services LLC
  Raymond James Financial Services, Inc.  Raymond James & Associates, Inc.
  RBC Dain Rauscher Inc.                  Securities America, Inc.
  Security Benefit Life Insurance Company Signator Investments
  Sun Life Insurance Company              Suntrust Investment Services, Inc.
  Tower Square Securities, Inc            Travelers Life & Annuity Co., Inc.
  UBS Financial Services Inc.             Union Central Life Insurance Company
  Wachovia Securities LLC                 Wells Fargo Investments, LLC

      For the year ended December 31, 2004, the following firms, which in
some cases are broker-dealers, received payments from the Manager or
Distributor for administrative or other services provided (other than revenue
sharing arrangements), as described above:

  ABN AMRO                                ADP
  Alliance Benefit Group                  AMVESCAP Retirement Plans
  American Stock & Transfer               Baden Retirement
  BCG                                     Benefit Administration Co., LLC
  Benefit Administration, Inc.            Benefit Plans Administrative Services
  Benetech, Inc.                          BISYS Retirement Services
  Boston Financial Data Services          Ceridian
  Circle Trust Company                    Citigroup
  CitiStreet                              CPI
  Daily Access.Com, Inc.                  Digital Retirement Solutions
  Dyatech                                 ERISA Administrative Services, Inc.
  ExpertPlan.com                          FAScore
  FBD Consulting                          Federated Investors
  Fidelity Institutional                  First National Bank of Omaha
  First Trust Corp.                       Franklin Templeton
  Geller Group                            Gold K
  Great West Financial Services           Hartford Life Insurance Co.
  Equities, Inc.
  ICMA - RC Services                      In West Pension Mgmt
  Independent Plan Coordinators           Ingham Group
  Interactive Retirement Systems, Ltd.    Invesmart, Inc.
  Kaufman & Goble                         Leggette & Co., Inc.
  Manulife                                MassMutual Financial Group and
                                          affiliates
  Matrix Settlement & Clearance Services  Mellon HR Solutions
  Merrill Lynch & Co., Inc.               Metavante
  Metlife Securities Inc.                 MFS Investment Management
  Mid Atlantic Capital Corp.              Milliman USA
  Morgan Stanley DW Inc.                  National City Bank
  National Financial Services Corp.       National Investors Services Corp.
  Nationwide Investment Service Corp.     New York Life Investment Management,
                                          Inc.
  Northwest Plan Services                 Pension Administration and Consulting
  PFPC, Inc.                              PSMI Group
  Putnam Fiduciary Trust Company          Quads Trust Company
  RSM McGladrey                           SAFECO
  Charles Schwab & Co., Inc.              Security Trust Company
  Sentinel / National Life                Standard Insurance Co
  Stanley, Hunt, Dupree & Rhine           State Street Bank & Trust Company
  Suntrust Investment Services, Inc.      Swerdlin & Co.
  T. Rowe Price Brokerage Services, L.P.  Taylor, Perky & Parker, LLC
  The 401k Company                        The Investment Center, Inc.
  Trusource                               Union Bank and Trust Co.
  USI Consulting Group                    Vanguard Group
  Web401K.com                             Wilmington Trust Company

Performance of the Fund

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

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

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

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

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

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

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


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

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

           1/n
ATVD        - 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:


             - 1=  Average Annual Total Return (After Taxes on
ATVDR   1/n  Distributions and Redemption)
  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 8/31/05
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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       (or life of
                                              class if less)    class if less)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
          After    Without  After   Without  After    Without  After    Without
          Sales    Sales    Sales   Sales    Sales    Sales    Sales    Sales
           Charge   Charge  Charge   Charge   Charge   Charge   Charge   Charge
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class     149.22%  164.42%   3.99%   10.33%   -6.45%   -5.34%   9.56%    10.21%
A(1)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class     143.34%  143.34%   4.36%   9.36%    -6.44%   -6.11%   9.47%    9.47%
B(2)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class     144.33%  144.33%   8.46%   9.46%    -6.06%   -6.06%   9.34%    9.34%
C(3)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class      -8.09%   -8.09%   8.94%   9.94%    -1.86%   -1.86%    N/A      N/A
N(4)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class      57.49%   57.49%  10.73%   10.73%   -4.99%   -4.99%   5.97%    5.97%
Y(5)
- ---------------------------------------------------------------------------------
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 A(1) Shares (After Sales Charge)
                         For the Periods Ended 8/31/05
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
                                   1-Year          5-Year           10-Year
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
After Taxes on Distributions       3.99%           -7.15%            7.71%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
After Taxes on Distributions       2.59%           -5.67%            7.38%
and 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 "NYSE"). The NYSE normally closes
at 4:00 p.m., but may close earlier on certain days. If Federal Funds are
received on a business day after the close of the NYSE, the shares will be
purchased and dividends will begin to accrue on the next regular business
day. The proceeds of ACH transfers are normally received by the Fund three
days after the transfers are initiated. If the proceeds of the ACH transfer
are not received on a timely basis, the Distributor reserves the right to
cancel the purchase order. The Distributor and the Fund are not responsible
for any delays in purchasing shares resulting from delays in ACH
transmissions.

Reduced Sales Charges. As discussed in the Prospectus, a reduced sales charge
rate may be obtained for Class A shares under Right of Accumulation and
Letters of Intent because of the economies of sales efforts and reduction in
expenses realized by the Distributor, dealers and brokers making such sales.
No sales charge is imposed in certain other circumstances described in
Appendix 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 Municipal Fund
Oppenheimer AMT-Free New York Municipals  Oppenheimer Main Street Fund
Oppenheimer Balanced Fund                 Oppenheimer Main Street Opportunity Fund
Oppenheimer Core Bond Fund                Oppenheimer Main Street Small Cap Fund
Oppenheimer California Municipal Fund     Oppenheimer MidCap Fund
Oppenheimer Capital Appreciation Fund     Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Income Fund           Oppenheimer Pennsylvania Municipal Fund
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Champion Income Fund          Street Fund
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Convertible Securities Fund   Street Fund II
                                          Oppenheimer   Principal  Protected  Main
Oppenheimer Developing Markets Fund       Street Fund III
Oppenheimer Disciplined Allocation Fund   Oppenheimer Quest Balanced Fund
                                          Oppenheimer  Quest  Capital  Value Fund,
Oppenheimer Discovery Fund                Inc.
                                          Oppenheimer  Quest  International  Value
Oppenheimer Dividend Growth Fund          Fund, Inc.
Oppenheimer Emerging Growth Fund          Oppenheimer Quest Opportunity Value Fund
Oppenheimer Emerging Technologies Fund    Oppenheimer Quest Value Fund, Inc.
Oppenheimer Enterprise Fund               Oppenheimer Real Asset Fund
Oppenheimer Equity Fund, Inc.             Oppenheimer Real Estate Fund
                                          Oppenheimer      Rochester      National
Oppenheimer Global Fund                   Municipals
Oppenheimer Global Opportunities Fund     Oppenheimer Select Value Fund
Oppenheimer Gold & Special Minerals Fund  Oppenheimer Senior Floating Rate Fund
Oppenheimer Growth Fund                   Oppenheimer Small- & Mid- Cap Value Fund
Oppenheimer High Yield Fund               Oppenheimer Strategic Income Fund
Oppenheimer International Bond Fund       Oppenheimer Total Return Bond Fund
Oppenheimer   International   Diversified
Fund                                      Oppenheimer U.S. Government Trust
Oppenheimer International Growth Fund     Oppenheimer Value Fund
Oppenheimer  International  Small Company
Fund                                      Limited-Term New York Municipal Fund
Oppenheimer International Value Fund      Rochester Fund Municipals
Oppenheimer   Limited   Term   California
Municipal Fund                            Oppenheimer Portfolio Series:
                                            Active Allocation Fund
                                            Aggressive Investor Fund
                                            Conservative Investor Fund
Oppenheimer Limited-Term Government Fund      Moderate Investor Fund



And the following money market funds:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charges or at reduced sales charge rates, as
described in Appendix B to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to
retirement plans whose records are maintained on a daily valuation basis by
Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent
record keeper that has a contract or special arrangement with Merrill Lynch.
If on the date the plan sponsor signed the Merrill Lynch record keeping
service agreement the plan has less than $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 a purchase order of more than $100,000
for Class B shares or a purchase order of $1 million or more to purchase
Class C shares on behalf of a single investor (not including dealer "street
name" or omnibus accounts).

      Class B, Class C or Class N shares may not be purchased by an investor
directly from the Distributor without the investor designating another
registered broker-dealer.

|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 Retirement Plans with at least 100 eligible employees or $500,000 or
            more in plan assets,
o     to OppenheimerFunds-sponsored Ascender 401(k) plans that pay for the
            purchase with the redemption proceeds of Class A shares of one or
            more Oppenheimer funds, and
o     to certain customers of broker-dealers and financial advisors that are
            identified in a special agreement between the broker-dealer or
            financial advisor and the Distributor for that purpose.

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

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

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

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

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

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

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

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

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

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

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

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

      |X|   Securities Valuation. The Fund's Board of Trustees has
established procedures for the valuation of the Fund's securities. In general
those procedures are as follows:
o     Equity securities traded on a U.S. securities exchange 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 NYSE on a regular business day, it will be processed at that
day's net asset value if the order was received by the dealer or broker from
its customers prior to the time the NYSE closes. Normally, the NYSE closes at
4:00 p.m., but may do so earlier on some days. 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 California Tax Exempt Trust   Centennial New York Tax Exempt
                                            Trust
   Centennial Government Trust              Centennial Tax Exempt Trust
   Centennial Money Market Trust

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

   The following funds do not offer Class Y shares:
   Limited Term New York Municipal Fund     Oppenheimer Limited Term California
                                            Municipal Fund
   Oppenheimer AMT-Free Municipals          Oppenheimer Limited Term Municipal
                                            Fund
   Oppenheimer AMT-Free New York Municipals Oppenheimer New Jersey Municipal Fund
   Oppenheimer Balanced Fund                Oppenheimer Pennsylvania Municipal
                                            Fund
   Oppenheimer California Municipal Fund    Oppenheimer Principal Protected Main
                                            Street Fund
   Oppenheimer Capital Income Fund          Oppenheimer Principal Protected Main
                                            Street Fund II
   Oppenheimer Cash Reserves                Oppenheimer Principal Protected Main
                                            Street Fund III
   Oppenheimer Champion Income Fund         Oppenheimer Quest Capital Value Fund,
                                            Inc.
   Oppenheimer Convertible Securities Fund  Oppenheimer Quest International Value
                                            Fund, Inc.
   Oppenheimer Disciplined Allocation Fund  Oppenheimer Rochester National
                                            Municipals
   Oppenheimer Dividend Growth Fund         Oppenheimer Total Return Bond Fund
   Oppenheimer Gold & Special Minerals 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  and Class C shares of Oppenheimer Cash Reserves are generally
   available only by exchange from the same class of shares of other
   Oppenheimer funds or through OppenheimerFunds-sponsored 401(k) plans.
o     Class M shares of Oppenheimer Convertible Securities Fund may be
   exchanged only for Class A shares of other Oppenheimer funds. They may not
   be acquired by exchange of shares of any class of any other Oppenheimer
   funds except Class A shares of Oppenheimer Money Market Fund or
   Oppenheimer Cash Reserves acquired by exchange of Class M shares.
o     Class A shares of Oppenheimer funds may be exchanged at net asset value
   for shares of any money market fund offered by the Distributor. Shares of
   any money market fund purchased without a sales charge may be exchanged
   for shares of Oppenheimer funds offered with a sales charge upon payment
   of the sales charge. They may also be used to purchase shares of
   Oppenheimer funds subject to an early withdrawal charge or contingent
   deferred sales charge.
o     Shares of the Fund acquired by reinvestment of dividends or
   distributions from any of the other Oppenheimer funds or from any unit
   investment trust for which reinvestment arrangements have been made with
   the Distributor may be exchanged at net asset value for shares of any of
   the Oppenheimer funds.
o     Shares of Oppenheimer Principal Protected Main Street Fund may be
   exchanged at net asset value for shares of any of the Oppenheimer funds.
   However, shareholders are not permitted to exchange shares of other
   Oppenheimer funds for shares of Oppenheimer Principal Protected Main
   Street Fund until after the expiration of the warranty period (8/5/2010).
o     Shares of Oppenheimer Principal Protected Main Street Fund II may be
   exchanged at net asset value for shares of any of the Oppenheimer funds.
   However, shareholders are not permitted to exchange shares of other
   Oppenheimer funds for shares of Oppenheimer Principal Protected Main
   Street Fund II until after the expiration of the warranty period
   (3/3/2011).
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
   (12/16/2011).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dividends, Capital Gains and Taxes

Dividends and Distributions. The Fund has no fixed dividend rate and there
can be no assurance as to the payment of any dividends or the realization of
any capital gains. The dividends and distributions paid by a class of shares
will vary from time to time depending on market conditions, the composition
of the Fund's portfolio, and expenses borne by the Fund or borne separately
by a class. Dividends are calculated in the same manner, at the same time,
and on the same day for each class of shares. However, dividends on Class B,
Class C and Class N shares are expected to be lower than dividends on Class A
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. The Fund may be subject to U.S. Federal income tax, and an interest
charge, on certain distributions or gains from the sale of shares of a
foreign company considered to be a PFIC, even if those amounts are paid out
as dividends to shareholders. To avoid imposition of the interest charge, the
Fund may elect to "mark to market" all PFIC shares that it holds at the end
of each taxable year. In that case, any increase or decrease in the value of
those shares would be recognized as ordinary income or as ordinary loss (but
only to the extent of previously recognized "mark-to-market" gains).

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

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

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

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

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

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

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

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

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

Dividend Reinvestment in Another Fund. Shareholders of the Fund may elect to
reinvest all dividends and/or capital gains distributions in shares of the
same class of any of the other Oppenheimer funds listed above. Reinvestment
will be made without sales charge at the net asset value per share in effect
at the close of business on the payable date of the dividend or distribution.
To elect this option, the shareholder must notify the Transfer Agent in
writing and must have an existing account in the fund selected for
reinvestment. Otherwise the shareholder first must obtain a prospectus for
that fund and an application from the Distributor to establish an account.
Dividends and/or distributions from shares of certain other Oppenheimer funds
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 serves as the
independent registered public accounting firm for the Fund. KPMG LLP audits
the Fund's financial statements and performs other related audit services.
KPMG LLP also acts as the independent registered public accounting firm for
the Manager and certain other funds advised by the Manager and its
affiliates. Audit and non-audit services provided by KPMG LLP to the Fund
must be pre-approved by the Audit Committee.


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

- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER 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.


/s/ KPMG LLP
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.



                                  Appendix A

                           Industry Classifications

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



                                  Appendix B

OppenheimerFunds Special Sales Charge Arrangements and Waivers

In certain cases, the initial sales charge that applies to purchases of Class
A shares(2) of the Oppenheimer funds or the contingent deferred sales charge
that may apply to Class A, Class B or Class C shares may be waived.(3)  That
is because of the economies of sales efforts realized by OppenheimerFunds
Distributor, Inc., (referred to in this document as the "Distributor"), or by
dealers or other financial institutions that offer those shares to certain
classes of investors.

Not all waivers apply to all funds. For 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 created or qualified under Sections 401(a) or 401(k) of the
            Internal Revenue Code,
         2) non-qualified deferred compensation plans,
         3) employee benefit plans(4)
         4) Group Retirement Plans(5)
         5) 403(b)(7) custodial plan accounts
         6) Individual Retirement Accounts ("IRAs"), including traditional
            IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans

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

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

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

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

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

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

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

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



      Retirement Plans and deferred compensation plans and trusts used to
         fund those plans (including, for example, plans qualified or created
         under sections 401(a), 401(k), 403(b) or 457 of the Internal Revenue
         Code), in each case if those purchases are made through a broker,
         agent or other financial intermediary that has made special
         arrangements with the Distributor for those purchases.
|_|   A TRAC-2000 401(k) plan (sponsored by the former Quest for Value
         Advisors) whose Class B or Class C shares of a Former Quest for
         Value Fund were exchanged for Class A shares of that Fund due to the
         termination of the Class B and Class C TRAC-2000 program on November
         24, 1995.
|_|   A qualified Retirement Plan that had agreed with the former Quest for
         Value Advisors to purchase shares of any of the Former Quest for
         Value Funds at net asset value, with such shares to be held through
         DCXchange, a sub-transfer agency mutual fund clearinghouse, if that
         arrangement was consummated and share purchases commenced by
         December 31, 1996.
|_|   Effective October 1, 2005, taxable accounts established with the
         proceeds or Required Minimum Distributions from Retirement Plans.

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

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

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


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

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

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

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be
waived for redemptions of shares in the following cases:
|_|   Shares redeemed involuntarily, as described in "Shareholder Account
         Rules and Policies," in the applicable Prospectus.
|_|   Redemptions from accounts other than Retirement Plans following the
         death or disability of the last surviving shareholder. The death or
         disability must have occurred after the account was established, and
         for disability you must provide evidence of a determination of
         disability by the Social Security Administration.
|_|   The contingent deferred sales charges are generally not waived
         following the death or disability of a grantor or trustee for a
         trust account. The contingent deferred sales charges will only be
         waived in the limited case of the death of the trustee of a grantor
         trust or revocable living trust for which the trustee is also the
         sole beneficiary. The death or disability must have occurred after
         the account was established, and for disability you must provide
         evidence of a determination of disability (as defined in the
         Internal Revenue Code).
|_|   Distributions from accounts for which the broker-dealer of record has
         entered into a special agreement with the Distributor allowing this
         waiver.
|_|   Redemptions of Class B shares held by Retirement Plans whose records
         are maintained on a daily valuation basis by Merrill Lynch or an
         independent record keeper under a contract with Merrill Lynch.
|_|   Redemptions of Class C shares of Oppenheimer U.S. Government Trust from
         accounts of clients of financial institutions that have entered into
         a special arrangement with the Distributor for this purpose.
|_|   Redemptions of Class C shares of an Oppenheimer fund in amounts of $1
         million or more requested in writing by a Retirement Plan sponsor
         and submitted more than 12 months after the Retirement Plan's first
         purchase of Class C shares, if the redemption proceeds are invested
         to purchase Class N shares of one or more Oppenheimer funds.
|_|   Distributions(9) from Retirement Plans or other employee benefit plans
         for any of the following purposes:
         1) Following the death or disability (as defined in the Internal
            Revenue Code) of the participant or beneficiary. The death or
            disability must occur after the participant's account was
            established in an Oppenheimer fund.
         2) To return excess contributions made to a participant's account.
         3) To return contributions made due to a mistake of fact.
         4) To make hardship withdrawals, as defined in the plan.(10)
         5) To make distributions required under a Qualified Domestic
            Relations Order or, in the case of an IRA, a divorce or
            separation agreement described in Section 71(b) of the Internal
            Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
            Revenue Code.
         7) To make "substantially equal periodic payments" as described in
            Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.(11)
         9) On account of the participant's separation from service.(12)
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) offered as an investment option in a
            Retirement Plan if the plan has made special arrangements with
            the Distributor.
         11)      Distributions made on account of a plan termination or
            "in-service" distributions, if the redemption proceeds are rolled
            over directly to an OppenheimerFunds-sponsored IRA.
         12)      For distributions from a participant's account under an
            Automatic Withdrawal Plan after the participant reaches age 591/2,
            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- & Mid- Cap
   Value Fund
   Oppenheimer Quest Balanced Fund              Oppenheimer Quest
   International Value Fund, Inc.
   Oppenheimer Quest Opportunity Value Fund.

      These arrangements also apply to shareholders of the following funds
when they merged (were reorganized) into various Oppenheimer funds on
November 24, 1995:
   Quest for Value U.S. Government Income Fund  Quest for Value New York
   Tax-Exempt Fund
   Quest for Value Investment Quality Income Fund     Quest for Value
   National Tax-Exempt Fund
   Quest for Value Global Income Fund     Quest for Value California
   Tax-Exempt Fund

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

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

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

The initial and contingent deferred sale charge rates and waivers for Class A
and Class B shares described in the respective Prospectus (or this Appendix)
of the following Oppenheimer funds (each is referred to as a "Fund" in this
section):
   Oppenheimer U. S. Government Trust,
   Oppenheimer Core Bond Fund,
   Oppenheimer Value Fund and
   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.

(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.


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

(OppenheimerFunds logo)



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