- ------------------------------------------------------------------------------
Oppenheimer Disciplined Allocation Fund
- ------------------------------------------------------------------------------

Two World Trade Center, New York, New York 10048-0203
1-800-525-7048


Statement of Additional Information dated March 1, 1999,
Revised May 1, 1999


      This  Statement  of  Additional  Information  is  not a  Prospectus.  This
document  contains  additional   information  about  the  Fund  and  supplements
information  in the  Prospectus  dated March 1, 1999. It should be read together
with the  Prospectus,  which may be obtained  by writing to the Fund's  Transfer
Agent,  OppenheimerFunds  Services, at P.O. Box 5270, Denver, Colorado 80217, or
by calling  the  Transfer  Agent at the  toll-free  number  shown  above,  or by
downloading    it   from   the    OppenheimerFunds    Internet   web   site   at
www.oppenheimerfunds.com.

Contents
                                                                            Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks.. 2
    The Fund's Investment Policies..................................... 2
    Other Investment Techniques and Strategies......................... 12
    Investment Restrictions............................................ 28
How the Fund is Managed ............................................... 31
    Organization and History........................................... 31
    Directors and Officers............................................. 33
    The Manager........................................................ 38
Brokerage Policies of the Fund......................................... 39
Distribution and Service Plans......................................... 41
Performance of the Fund................................................ 45

About Your Account
How To Buy Shares...................................................... 49
How To Sell Shares..................................................... 58
How To Exchange Shares................................................. 62
Dividends, Capital Gains and Taxes..................................... 64
Additional Information About the Fund.................................. 66

Financial Information About the Fund
Independent Auditors' Report........................................... 67
Financial Statements................................................... 68

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




                                     124
- ------------------------------------------------------------------------------

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

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

Additional Information About the Fund's Investment Policies and Risks

      The investment  objective,  the principal investment policies and the main
risks of the Fund are described in the Prospectus.  This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund's  investment  Manager,  OppenheimerFunds,
Inc., 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 Manger may use in selecting  portfolio
securities  will  vary over  time.  The Fund is not  required  to use all of the
investment techniques and strategies described below at all times in seeking its
goal. It may use some of the special  investment  techniques  and  strategies at
some times or not at all.

      |X| Value  Investing.  In  selecting  equity  investments  for the  Fund's
portfolio,  the portfolio managers currently use a value investing style coupled
with fundamental  analysis of issuers.  In using a value approach,  the managers
look for  stocks  and other  equity  securities  that  appear to be  temporarily
undervalued, by various measures, such as price/earnings ratios. Value investing
seeks  stocks  having  prices  that are low in  relation  to their real worth or
future prospects,  with the expectation that the Fund will realize  appreciation
in the value of its holdings when other investors realize the intrinsic value of
the stock.

      Using value  investing  requires  research as to the  issuer's  underlying
financial  condition and prospects.  Some of the measures used to identify these
securities include, among others:
      o Price/Earnings ratio, which is the stock's price divided by its earnings
per share.  A stock  having a  price/earnings  ratio  lower than its  historical
range,  or lower  than the market as a whole or that of  similar  companies  may
offer attractive investment opportunities.
      o  Price/book  value ratio,  which is the stock price  divided by the book
value of the  company  per share.  It  measures  the  company's  stock  price in
relation to its asset value.
      o Dividend Yield, which is measured by dividing the annual dividend by the
stock price per share.
      o Valuation of Assets  which  compares the stock price to the value of the
company's underlying assets,  including their projected value in the marketplace
and liquidation value.


      n 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.  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.







Investments in Stocks and Other Equity  Securities.  The Fund does not limit its
investments in equity securities to issuers having a market  capitalization of a
specified size or range, and therefore may invest in securities of small-,  mid-
and  large-capitalization  issuers.  At  times,  the Fund  may have  substantial
amounts  of its  assets  invested  in  securities  of  issuers  in  one or  more
capitalization ranges, based upon the Manager's use of its investment strategies
and its judgment of where the best market  opportunities  are to seek the Fund's
objective.

      At times,  the market  may favor or  disfavor  securities  of issuers of a
particular  capitalization range. Securities of small capitalization issuers may
be subject to greater  price  volatility  in general than  securities  of larger
companies.  Therefore,  if the  Fund  has  substantial  investments  in  smaller
capitalization  companies at times of market volatility,  the Fund's share price
may fluctuate more than that of funds focusing on larger capitalization issuers.

      At times,  the Fund may  increase  the  emphasis of its  investments  in a
particular  industry.  Therefore,  it may be subject to the risks that economic,
political or other events can have a negative effect on the values of issuers in
that  particular  industry (this is referred to as "industry  risk").  Stocks of
issuers  in a  particular  industry  may be  affected  by  changes  in  economic
conditions that affect that industry more than others,  or changes in government
regulations,  availability of basic resources or supplies,  or other events.  To
the extent that the Fund is emphasizing  investments  in a particular  industry,
its share values may fluctuate in response to events affecting that industry.


      o Rights and Warrants. The Fund can invest up to 5% of its total assets in
warrants or rights.  That limit does not apply to  warrants  and rights that the
Fund has acquired as part of units of  securities  or that are attached to other
securities.  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.

      o Convertible Securities.  While some convertible securities are a form of
debt security,  in some cases their conversion feature (allowing conversion into
equity   securities)   causes  the  Manager  to  regard  them  more  as  "equity
equivalents."  In those  cases,  the rating  assigned to the  security  has less
impact on the Manager's  investment decision than in the case of non-convertible
fixed income securities.  To determine whether convertible  securities should be
regarded as "equity  equivalents,"  the Manager examines the following  factors:
(1) whether, at the option of the investor, the convertible security can be

            exchanged  for a fixed  number of  shares  of common  stock of the
            issuer,
(2)         whether the issuer of the  convertible  securities  has restated its
            earnings  per  share  of  common  stock  on a  fully  diluted  basis
            (considering   the   effect  of   conversion   of  the   convertible
            securities), and
(3)         the  extent to which the  convertible  security  may be a  defensive
            "equity  substitute,"  providing the ability to  participate  in any
            appreciation in the price of the issuer's common stock.

      o  Preferred  Stocks.  Preferred  stocks  are equity  securities  but have
certain attributes of debt securities. 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 the issuer can pay dividends on common shares.

      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 for their call
or redemption prior to maturity which can have a negative effect on their prices
when  interest  prior  to  maturity  rates  decline.   Preferred  stock  may  be
"participating"  stock,  which  means  that  it may be  entitled  to a  dividend
exceeding the stated dividend in certain cases.

      Preferred  stocks are equity  securities  because they do not constitute a
liability of the issuer and therefore do not offer the same degree of protection
of capital as debt  securities and may not offer the same degree of assurance of
continued  income  as  debt  securities.   The  rights  of  preferred  stock  on
distribution  of a  corporation's  assets  in the event of its  liquidation  are
generally  subordinate  to  the  rights  associated  with a  corporation's  debt
securities.  Preferred stock generally has a preference over common stock on the
distribution of a corporation's assets in the event of its liquidation.

Investments in Bonds and Other Debt Securities. The Fund can invest in a variety
of bonds,  debentures and other debt  securities to seek its objective.  It will
invest at least 25% of its assets in  fixed-income  senior  securities and could
have a larger portion of its assets in debt investments.

      The   Fund's   debt   investments   can   include   investment-grade   and
non-investment-grade   bonds   (commonly   referred   to   as   "junk   bonds").
Investment-grade  bonds  are bonds  rated at least  "Baa" by  Moody's  Investors
Service,  Inc., or at least "BBB" by Standard & Poor's Rating  Service or Duff &
Phelps,  Inc., or that have comparable ratings by another  nationally-recognized
rating organization.  In making investments in debt securities,  the Manager may
rely to some  extent on the ratings of ratings  organizations  or it may use its
own research to evaluate a security's credit-worthiness.  If the securities that
the Fund buys are  unrated,  to be  considered  part of the Fund's  holdings  of
investment-grade  securities,  they  must  be  judged  by the  Manager  to be of
comparable quality to bonds rated as investment grade by a rating organization.

      o Special Risks of Lower-Grade Securities.  It is not anticipated that the
Fund will  normally  invest a substantial  portion of its assets in  lower-grade
debt securities. Because lower-grade securities tend to offer higher yields than
investment-grade  securities,  the Fund may invest in lower grade  securities if
the  Manager  is trying to achieve  greater  income  (and,  in some  cases,  the
appreciation  possibilities of lower-grade securities might be a reason they are
selected for the Fund's portfolio). High-yield convertible debt securities might
be selected as "equity substitutes," as described above.

      "Lower-grade"  debt securities are those rated below  "investment  grade,"
which  means they have a rating  lower than "Baa" by Moody's or lower than "BBB"
by  Standard  & Poor's or Duff & Phelps,  or  similar  ratings  by other  rating
organizations.  If they are unrated,  and are determined by the Manager to be of
comparable  quality to debt securities  rated below investment  grade,  they are
included in the  limitation  on the  percentage of the Fund's assets that can be
invested in lower-grade  securities.  The Fund can invest in securities rated as
low as "B" at the time the Fund buys them.
      Some of the special credit risks of  lower-grade  securities are discussed
in the  Prospectus.  There is a greater  risk that the issuer may default on its
obligation to pay interest or to repay  principal than in the case of investment
grade securities.  The issuer's low  creditworthiness may increase the potential
for its  insolvency.  An overall decline in values in the high yield bond market
is also more likely during a period of a general economic downturn.  An economic
downturn or an increase in interest rates could severely  disrupt the market for
high yield bonds, adversely affecting the values of outstanding bonds as well as
the  ability of  issuers  to pay  interest  or repay  principal.  In the case of
foreign  high yield bonds,  these risks are in addition to the special  risks of
foreign  investing  discussed  in  the  Prospectus  and  in  this  Statement  of
Additional Information.

      However, the Fund's limitations on buying these investments may reduce the
risks to the Fund, as will the Fund's policy of  diversifying  its  investments.
Additionally,  to the  extent  they can be  converted  into  stock,  convertible
securities may be less subject to some of these risks than  non-convertible high
yield bonds,  since stock may be more liquid and less  affected by some of these
risk factors.

      While  securities  rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are  investment  grade and are not  regarded as junk bonds,  those
securities  may  be  subject  to  greater  risks  than  other   investment-grade
securities, and have some speculative  characteristics.  Definitions of the debt
security  ratings  categories of Moody's,  S&P, Fitch IBCA and Duff & Phelps are
included in Appendix A to this Statement of Additional Information.


      o Interest  Rate Risk.  Interest rate risk refers to the  fluctuations  in
value of fixed-income securities resulting from the inverse relationship between
price and yield. For example, an increase in general interest rates will tend to
reduce  the  market  value of  already-issued  fixed-income  investments,  and a
decline  in  general  interest  rates  will tend to  increase  their  value.  In
addition,  debt  securities  with longer  maturities,  which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.


      Fluctuations in the market value of fixed-income securities after the Fund
buys them will not  affect  the  interest  income  payable  on those  securities
(unless the security  pays  interest at a variable  rate pegged to interest rate
changes).  However, those price fluctuations will be reflected in the valuations
of the securities, and therefore the Fund's net asset values will be affected by
those fluctuations.

      n Mortgage-Related  Securities.  Mortgage-related securities are a form of
derivative  investment  collateralized  by pools of  commercial  or  residential
mortgages.  Pools of mortgage  loans are  assembled  as  securities  for sale to
investors  by  government  agencies  or entities  or by private  issuers.  These
securities  include  collateralized  mortgage  obligations  ("CMOs"),   mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real   estate   mortgage   investment   conduits   ("REMICs")   and  other  real
estate-related securities.

      Mortgage-related  securities  that are issued or guaranteed by agencies or
instrumentalities  of the U.S.  government  have  relatively  little credit risk
(depending  on the nature of the issuer) but are subject to interest  rate risks
and prepayment risks, as described in the Prospectus.

      As with other debt securities,  the prices of mortgage-related  securities
tend  to  move  inversely  to  changes  in  interest  rates.  The  Fund  can buy
mortgage-related  securities  that have  interest  rates that move  inversely to
changes in general  interest  rates,  based on a multiple  of a specific  index.
Although the value of a  mortgage-related  security  may decline  when  interest
rates rise, the converse is not always the case.

      In periods of declining  interest  rates,  mortgages are more likely to be
prepaid.  Therefore, a mortgage-related  security's maturity can be shortened by
unscheduled  prepayments  on  the  underlying  mortgages.  Therefore,  it is not
possible to predict  accurately  the  security's  yield.  The principal  that is
returned  earlier than expected may have to be  reinvested in other  investments
having a lower yield than the prepaid security.  Therefore, these securities may
be less  effective  as a means of "locking  in"  attractive  long-term  interest
rates,  and they may have less  potential  for  appreciation  during  periods of
declining  interest  rates,  than  conventional  bonds  with  comparable  stated
maturities.

      Prepayment  risks can lead to substantial  fluctuations  in the value of a
mortgage  related  security.  In turn,  this can  affect the value of the Fund's
shares. If a mortgage-related  security has been purchased at a premium,  all or
part of the  premium  the Fund  paid may be lost if  there is a  decline  in the
market value of the security, whether that results from interest rate changes or
prepayments   on  the   underlying   mortgages.   In  the   case   of   stripped
mortgage-related securities, if they experience greater rates of prepayment than
were  anticipated,  the Fund may fail to recoup its  initial  investment  on the
security.

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

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


            o  Collateralized  Mortgage  Obligations.   CMOs  are  multi-class
bonds  that are backed by pools of  mortgage  loans or  mortgage  pass-through
certificates. They may be collateralized by:
(1)   pass-through  certificates  issued or guaranteed by Government  National

                  Mortgage Association,  Federal National Mortgage Association
                  or Federal Home Loan Mortgage Corporation,
(2)               unsecuritized  mortgage  loans insured by the Federal  Housing
                  Administration  or guaranteed  by the  Department of Veterans'
                  Affairs,
(3) unsecuritized conventional mortgages, (4) other mortgage-related securities,
or (5) any combination of these.

      Each class of CMO,  referred  to as a  "tranche,"  is issued at a specific
coupon rate and has a stated  maturity  or final  distribution  date.  Principal
prepayments  on the  underlying  mortgages  may cause the CMO to be retired much
earlier than the stated maturity or final  distribution  date. The principal and
interest on the underlying  mortgages may be allocated among the several classes
of a series of a CMO in  different  ways.  One or more  tranches may have coupon
rates that reset  periodically at a specified  increase over an index. These are
floating  rate  CMOs,  and  typically  have a cap on the  coupon  rate.  Inverse
floating rate CMOs have a coupon rate that moves in the reverse  direction to an
applicable  index.  The  coupon  rate on these  CMOs will  increase  as  general
interest  rates  decrease.  These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.


      n U.S. Government Securities. These are securities issued or guaranteed by
the U.S.  Treasury  or other U.S.  government  agencies  or  federally-chartered
corporate entities referred to as  "instrumentalities"  of the U.S.  government.
The obligations of U.S.  government agencies or  instrumentalities  in which the
Fund may invest may or may not be guaranteed or supported by the "full faith and
credit" of the United States.  "Full faith and credit" means  generally that the
taxing  power of the U.S.  government  is pledged to the payment of interest and
repayment of  principal  on a security.  If a security is not backed by the full
faith and  credit of the  United  States,  the owner of the  security  must look
principally to the agency issuing the obligation for repayment.  The owner might
not be able to assert a claim against the United States if the issuing agency or
instrumentality does not meet its commitment. The Fund will invest in securities
of  U.S.  government  agencies  and  instrumentalities  only if the  Manager  is
satisfied that the credit risk with respect to such instrumentality is minimal.


            o U.S. Treasury Obligations. These include Treasury bills (which are
maturities  of one  year  or less  when  issued),  Treasury  notes  (which  have
maturities of from one to ten years when issued), and Treasury bonds (which have
maturities of more than ten years when issued).  Treasury  securities are backed
by the full  faith and  credit of the  United  States as to timely  payments  of
interest  and  repayments  of  principal.  They also can include U. S.  Treasury
securities that have been "stripped" by a Federal Reserve Bank, zero-coupon U.S.
Treasury   securities   described  below,   and  Treasury   Inflation-Protection
Securities ("TIPS").

            o Treasury  Inflation-Protection  Securities. The Fund can buy these
U.S.  Treasury  securities,  called  "TIPS,"  that are  designed  to  provide an
investment  vehicle that is not vulnerable to inflation.  The interest rate paid
by TIPS is fixed.  The  principal  value rises or falls  semi-annually  based on
changes  in the  published  Consumer  Price  Index.  If  inflation  occurs,  the
principal and interest  payments on TIPS are adjusted to protect  investors from
inflationary loss. If deflation occurs, the principal and interest payments will
be adjusted downward, although the principal will not fall below its face amount
at maturity.

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

            |_|  U.S.  Government  Mortgage-Related  Securities.  The Fund can
invest in a variety  of  mortgage-related  securities  that are issued by U.S.
Government agencies or instrumentalities, some of which are described below.


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

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

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

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

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

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

                  o Federal Home Loan Mortgage Corporation Certificates.  FHLMC,
a corporate  instrumentality  of the United  States,  issues FHLMC  Certificates
representing  interests in mortgage loans.  FHLMC  guarantees to each registered
holder of a FHLMC  Certificate  timely  payment of the  amounts  representing  a
holder's  proportionate  share in: (i)  interest  payments  less  servicing  and
guarantee fees, (ii) principal  prepayments and (iii) the ultimate collection of
amounts representing the holder's
                      proportionate   interest  in  principal  payments  on  the
                      mortgage  loans  in the  pool  represented  by  the  FHLMC
                      Certificate,  in each case whether or not such amounts are
                      actually received.

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

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

                  o Zero-Coupon  U.S.  Government  Securities.  The Fund can buy
zero-coupon U.S.  government  securities.  These will typically be U.S. Treasury
Notes and Bonds that have been stripped of their unmatured interest coupons, the
coupons  themselves,  or certificates  representing  interests in those stripped
debt obligations and coupons.

      Zero-coupon securities do not make periodic interest payments and are sold
at a deep  discount  from their face value at maturity.  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.  The discount
typically decreases as the maturity date approaches.

      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 that pay interest.  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.

      The Fund's  investment  in  zero-coupon  securities  may 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 may 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.

      n Commercial  (Privately-Issued) Mortgage Related Securities. The Fund can
invest in commercial  mortgage related  securities  issued by private  entities.
Generally these are  multi-class  debt or pass through  certificates  secured by
mortgage loans on commercial properties.  They are subject to the credit risk of
the issuer.  These securities  typically are structured to provide protection to
investors in senior classes from possible losses on the underlying  loans.  They
do so by having holders of subordinated classes take the first loss if there are
defaults on the underlying  loans.  They may also be protected to some extent by
guarantees, reserve funds or additional collateralization mechanisms.


            |_| Asset-Backed Securities.  Asset-backed securities are fractional
interests in pools of assets,  typically accounts  receivable or consumer loans.
They are issued by trusts or special-purpose  corporations.  They are similar to
mortgage-backed securities,  described above, and are backed by a pool of assets
that consist of obligations of individual borrowers. The income from the pool is
passed through to the holders of participation  interest in the pools. The pools
may  offer a credit  enhancement,  such as a bank  letter of  credit,  to try to
reduce the risks that the underlying debtors will not pay their obligations when
due.


      The value of an  asset-backed  security  is  affected  by  changes  in the
market's perception of the asset backing the security,  the  creditworthiness of
the  servicing  agent for the loan pool,  the  originator  of the loans,  or the
financial institution providing any credit enhancement,  and is also affected if
any  credit   enhancement  has  been  exhausted.   The  risks  of  investing  in
asset-backed  securities are ultimately  related to payment of consumer loans by
the individual borrowers.  As a purchaser of an asset-backed  security, the Fund
would  generally have no recourse to the entity that originated the loans in the
event of default by a borrower. The underlying loans are subject to prepayments,
which may shorten the weighted  average life of asset-backed  securities and may
lower  their  return,  in the  same  manner  as in the  case of  mortgage-backed
securities and CMOs, described above.

      |X|  Municipal  Securities.  The Fund can buy  municipal  bonds and notes,
tax-exempt  commercial paper,  certificates of participation in municipal leases
and other debt obligations. These debt obligations are issued by the governments
of states, as well as their political  subdivisions  (such as cities,  towns and
counties),  or by the District of Columbia and their  agencies and  authorities.
The Fund can also buy  securities  issued by any  commonwealths,  territories or
possessions   of   the   United   States,   or   their   respective    agencies,
instrumentalities or authorities.  The Fund would invest in municipal securities
because of the income and portfolio  diversification  they offer rather than for
the tax-exempt nature of the income they pay.
      The Fund can buy  both  long-term  and  short-term  municipal  securities.
Long-term  securities  have a  maturity  of more  than one  year.  In  selecting
municipal securities the Fund would normally focus on longer-term securities, to
seek  higher  income.  In  general,  the  values of  longer-term  bonds are more
affected by changes in interest rates than are short-term bonds.

      Municipal  securities are issued to raise money for a variety of public or
private  purposes,  including  financing state or local  governments,  financing
specific  projects  or  public  facilities.  The Fund can  invest  in  municipal
securities that are "general obligations," secured by the issuer's pledge of its
full faith, credit and taxing power for the payment of principal and interest.

      The Fund  can  also  buy  "revenue  obligations,"  payable  only  from the
revenues  derived  from a  particular  facility  or  class of  facilities,  or a
specific excise tax or other revenue source.  Some of these revenue  obligations
are private  activity  bonds that pay interest that may be a tax  preference for
investors subject to alternative minimum tax.


            o Municipal Lease  Obligations.  Municipal  leases are used by state
and local government  authorities to obtain funds to acquire land,  equipment or
facilities.  The Fund may invest in certificates of participation that represent
a proportionate interest in payments made under municipal lease obligations.  If
the government  stops making payments or transfers its payment  obligations to a
private entity, the obligation could lose value or become taxable.


Money Market Instruments and Short-Term Debt Obligations. The Fund can invest in
a  variety  of  high  quality  money  market  instruments  and  short-term  debt
obligations, both under normal market conditions and for defensive purposes. The
following is a brief  description  of the types of money market  securities  and
short-term  debt  obligations  the  Fund  can  invest  in.  Those  money  market
securities are high-quality,  short-term debt instruments that are issued by the
U.S.  government,  corporations,  banks or other entities.  They may have fixed,
variable or floating  interest  rates.  The Fund's  investments in foreign money
market  instruments and short-term debt obligations are subject to its limits on
investing in foreign  securities and the risks of foreign  investing,  described
above.


      o  U.S.  Government  Securities.   These  include  obligations  issued  or
guaranteed by the U.S. government or any of its agencies or instrumentalities.

            |_|   Bank   Obligations.   The  Fund   can  buy  time   deposits,
certificates of deposit and bankers' acceptances. They must be :

               obligations  issued or  guaranteed  by a domestic or foreign bank
                  (including a foreign  branch of a domestic  bank) having total
                  assets of at least $1 billion,
               banker's  acceptances  (which  may or may not be  supported  by
                  letters of credit) only if guaranteed  by a U.S.  commercial
                  bank with total assets of at least U.S. $1 billion.

      The Fund can make time deposits.  These are  non-negotiable  deposits in a
bank for a  specified  period of time.  They may be subject to early  withdrawal
penalties.  Time  deposits  that are subject to early  withdrawal  penalties are
subject to the Fund's  limits on illiquid  investments,  unless the time deposit
matures in seven days or less. "Banks" include  commercial banks,  savings banks
and savings and loan associations.
            |_| Commercial  Paper. The Fund can invest in commercial paper if it
is rated within the top two rating  categories of Standard & Poor's and Moody's.
If the paper is not rated,  it may be purchased if issued by a company  having a
credit rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.

      The Fund  can buy  commercial  paper,  including  U.S.  dollar-denominated
securities of foreign  branches of U.S.  banks,  issued by other entities if the
commercial  paper  is  guaranteed  as  to  principal  and  interest  by a  bank,
government or corporation whose  certificates of deposit or commercial paper may
otherwise be purchased by the Fund.


            oVariable  Amount  Master  Demand  Notes.  Master  demand  notes are
corporate  obligations that permit the investment of fluctuating  amounts by the
Fund at varying rates of interest under direct arrangements between the Fund, as
lender, and the borrower. They permit daily changes in the amounts borrowed. The
Fund has the right to increase  the amount  under the note at any time up to the
full amount  provided by the note  agreement,  or to  decrease  the amount.  The
borrower  may prepay up to the full amount of the note  without  penalty.  These
notes may or may not be backed by bank letters of credit.


      Because these notes are direct lending arrangements between the lender and
borrower, it is not expected that there will be a trading market for them. There
is no secondary  market for these notes,  although they are redeemable (and thus
are  immediately  repayable by the borrower) at principal  amount,  plus accrued
interest,  at any time.  Accordingly,  the Fund's  right to redeem such notes is
dependent  upon the ability of the  borrower to pay  principal  and  interest on
demand.

      The Fund has no  limitations  on the type of issuer  from whom these notes
will be purchased.  However, in connection with such purchases and on an ongoing
basis,  the  Manager  will  consider  the  earning  power,  cash  flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand,  including  a  situation  in which all holders of such notes made demand
simultaneously. Investments in master demand notes are subject to the limitation
on investments by the Fund in illiquid securities,  described in the Prospectus.
Currently,  the Fund does not intend that its  investments  in  variable  amount
master demand notes will exceed 5% of its total assets.

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.

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

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

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

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


            G Risks of Foreign Investing.  Investments in foreign securities may
offer special  opportunities  for investing but also present special  additional
risks and considerations  not typically  associated with investments in domestic
securities. Some of these additional risks are:

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

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


       o Risks of Conversion to Euro.  On January 1, 1999,  eleven  countries in
the European Union adopted the euro as their official currency.  However,  their
current  currencies (for example,  the franc,  the mark, and the lira) will also
continue in use until January 1, 2002. After that date, it is expected that only
the euro will be used in those  countries.  A common  currency  is  expected  to
confer some benefits in those markets,  by  consolidating  the  government  debt
market for those  countries and reducing some currency risks and costs.  But the
conversion to the new currency will affect the Fund  operationally  and also has
potential  risks,  some of which are  listed  below.  Among  other  things,  the
conversion will affect:

            o  issuers  in which the Fund  invests,  because  of  changes in the
               competitive  environment from a consolidated  currency market and
               greater  operational  costs from  converting to the new currency.
               This might depress securities values.
            o  vendors the Fund  depends on to carry out its  business,  such as
               its Custodian (which holds the foreign securities the Fund buys),
               the Manager (which must price the Fund's investments to deal with
               the  conversion  to the euro) and  brokers,  foreign  markets and
               securities depositories. If they are not prepared, there could be
               delays in settlements and additional costs to the Fund.
            o  exchange  contracts and derivatives  that are outstanding  during
               the transition to the euro.

      The lack of currency rate calculations between the affected currencies and
the need to update the Fund's contracts could pose extra costs to the Fund.

      The Manager is upgrading  (at its  expense)  its computer and  bookkeeping
systems to deal with the conversion.  The Fund's  custodian bank has advised the
Manager of its plans to deal with the  conversion,  including how it will update
its record keeping systems and handle the redenomination of outstanding  foreign
debt.  The  Fund's  portfolio  manager  will also  monitor  the  effects  of the
conversion  on the issuers in which the Fund  invests.  The  possible  effect of
these factors on the Fund's  investments  cannot be determined with certainty at
this time,  but they may reduce  the value of some of the  Fund's  holdings  and
increase its operational costs.


            o Special Risks of Emerging Markets. Emerging and developing markets
abroad may also  offer  special  opportunities  for  growth  investing  but have
greater  risks than more  developed  foreign  markets,  such as those in Europe,
Canada,  Australia,  New Zealand and Japan.  There may be even less liquidity in
their securities  markets,  and settlements of purchases and sales of securities
may be subject  to  additional  delays.  They are  subject  to greater  risks of
limitations  on the  repatriation  of income and  profits  because  of  currency
restrictions  imposed by local governments.  Those countries may also be subject
to the risk of greater  political  and economic  instability,  which can greatly
affect the  volatility of prices of securities in those  countries.  The Manager
will consider these factors when evaluating securities in these markets.

            o  Foreign  Debt  Obligations.   The  debt  obligations  of  foreign
governments  and  entities  may or may not be  supported  by the full  faith and
credit of the foreign government.  The Fund may buy securities issued by certain
"supra-national"  entities,  which include  entities  designated or supported by
governments to promote  economic  reconstruction  or development,  international
banking  organizations  and  related  government  agencies.   Examples  are  the
International  Bank for  Reconstruction  and  Development  (commonly  called the
"World Bank"),  the Asian  Development bank and the  Inter-American  Development
Bank.

      The   governmental   members   of   these   supranational   entities   are
"stockholders" that typically make capital contributions and may be committed to
make  additional  capital  contributions  if the  entity  is unable to repay its
borrowings.  A supra-national  entity's  lending  activities may be limited to a
percentage  of its  total  capital,  reserves  and net  income.  There can be no
assurance that the constituent  foreign  governments will continue to be able or
willing to honor their capitalization commitments for those entities.

      n Floating Rate and Variable Rate  Obligations.  Variable rate obligations
may have a demand  feature that allows the Fund to tender the  obligation to the
issuer or a third  party prior to its  maturity.  The tender may be at par value
plus accrued interest, according to the terms of the obligations.

      The  interest  rate on a  floating  rate  note is  adjusted  automatically
according to a stated  prevailing  market rate, such as a bank's prime rate, the
91-day U.S. Treasury Bill rate, or some other standard. The instrument's rate is
adjusted automatically each time the base rate is adjusted. The interest rate on
a variable  rate note is also based on a stated  prevailing  market  rate but is
adjusted  automatically  at  specified  intervals  of not less  than  one  year.
Generally,  the  changes  in the  interest  rate on such  securities  reduce the
fluctuation in their market value.  As interest rates decrease or increase,  the
potential  for  capital  appreciation  or  depreciation  is less  than  that for
fixed-rate  obligations of the same maturity.  The Manager may determine that an
unrated  floating  rate or variable  rate  obligation  meets the Fund's  quality
standards  if it is backed by a letter of credit or  guarantee  issued by a bank
that meets those quality standards.

      Floating rate and variable  rate demand notes that have a stated  maturity
in excess of one year may have demand features that permit the holder to recover
the principal amount of the underlying  security at specified intervals and upon
notice.  The issuer of that type of note normally has a  corresponding  right in
its discretion, after a given period, to prepay the outstanding principal amount
of the note plus accrued interest. Generally the issuer must provide a specified
number of days' notice to the holder.


      n "Stripped" Mortgage Related Securities.  The Fund may invest in stripped
mortgage-related  securities that are created by segregating the cash flows from
underlying  mortgage  loans or  mortgage  securities  to create  two or more new
securities.  Each  has a  specified  percentage  of  the  underlying  security's
principal or interest payments. These are a form of derivative investment.


      Mortgage  securities may be partially stripped so that each class receives
some interest and some principal.  However,  they may be completely stripped. In
that case all of the interest is distributed to holders of one type of security,
known as an  "interest-only"  security,  or "I/O," and all of the  principal  is
distributed to holders of another type of security,  known as a "principal-only"
security or "P/O." Strips can be created for pass-through certificates or CMOs.

      The yields to maturity of I/Os and P/Os are very  sensitive  to  principal
repayments  (including   prepayments)  on  the  underlying  mortgages.   If  the
underlying  mortgages   experience  greater  than  anticipated   prepayments  of
principal,  the Fund might not fully  recoup its  investment  in an I/O based on
those  assets.  If  underlying   mortgages   experience  less  than  anticipated
prepayments  of  principal,  the yield on the P/Os based on them  could  decline
substantially.

      n Participation Interests. The Fund may invest in participation interests,
subject to the Fund's  limitation  on  investments  in illiquid  investments.  A
participation  interest is an  undivided  interest in a loan made by the issuing
financial  institution in the proportion that the buyers participation  interest
bears to the total  principal  amount of the loan. No more than 5% of the Fund's
net assets can be invested in participation  interests of the same borrower. The
issuing  financial  institution may have no obligation to the Fund other than to
pay the Fund the proportionate  amount of the principal and interest payments it
receives.


      Participation  interests are primarily dependent upon the creditworthiness
of the borrowing  corporation,  which is obligated to make payments of principal
and interest on the loan.  There is a risk that a borrower  may have  difficulty
making  payments.  If a borrower  fails to pay  scheduled  interest or principal
payments, the Fund could experience a reduction in its income. The value of that
participation  interest  might also  decline,  which could  affect the net asset
value of the  Fund's  shares.  If the  issuing  financial  institution  fails to
perform its obligations under the participation  agreement, the Fund might incur
costs and delays in  realizing  payment  and suffer a loss of  principal  and/or
interest.


      n Forward Rolls. The Fund can enter into "forward roll"  transactions with
respect to mortgage related  securities.  These are limited to 10% of the Fund's
total assets.  In this type of  transaction,  the Fund sells a mortgage  related
security to a buyer and  simultaneously  agrees to repurchase a similar security
(the same type of security,  and having the same coupon and maturity) at a later
date at a set price.  The  securities  that are  repurchased  will have the same
interest  rate  as  the  securities   that  are  sold,  but  typically  will  be
collateralized  by  different  pools of  mortgages  (with  different  prepayment
histories) than the securities  that have been sold.  Proceeds from the sale are
invested in short-term  instruments,  such as repurchase agreements.  The income
from those  investments,  plus the fees from the forward roll  transaction,  are
expected to generate income to the Fund in excess of the yield on the securities
that have been sold.


      The Fund will only  enter  into  "covered"  rolls.  To assure  its  future
payment of the purchase  price,  the Fund will identify on its books cash,  U.S.
government  securities or other high-grade debt securities in an amount equal to
the payment obligation under the roll.

      These transactions have risks.  During the period between the sale and the
repurchase,  the Fund will not be entitled  to receive  interest  and  principal
payments on the  securities  that have been sold. It is possible that the market
value of the  securities the Fund sells may decline below the price at which the
Fund is obligated to repurchase securities.


      n When-Issued and  Delayed-Delivery  Transactions.  The Fund may invest in
securities  on a  "when-issued"  basis and can purchase or sell  securities on a
"delayed-delivery"   (or   "forward   commitment")   basis.    When-issued   and
delayed-delivery  are terms that refer to  securities  whose terms and indenture
are  available  and for which a market  exists,  but which are not available for
immediate delivery.


      When such  transactions  are  negotiated,  the price  (which is  generally
expressed in yield terms) is fixed at the time the commitment is made.  Delivery
and payment for the securities take place at a later date  (generally  within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement.  The value at
delivery may be less than the purchase price.  For example,  changes in interest
rates in a direction  other than that expected by the Manager before  settlement
will  affect  the  value of such  securities  and may  cause a loss to the Fund.
During the period  between  purchase and  settlement,  no payment is made by the
Fund to the issuer and no interest  accrues to the Fund from the investment.  No
income  begins to accrue to the Fund on a  when-issued  security  until the Fund
receives the security at settlement of the trade.

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

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

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

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

      n  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 defensive purposes.

      In  a  repurchase  transaction,   the  Fund  buys  a  security  from,  and
simultaneously  resells it to, an approved vendor for delivery on an agreed-upon
future  date.  The resale  price  exceeds the  purchase  price by an amount that
reflects an agreed-upon  interest rate effective for the period during which the
repurchase  agreement is in effect.  Approved  vendors  include U.S.  commercial
banks,  U.S.  branches  of  foreign  banks,  or  broker-dealers  that  have been
designated as primary  dealers in government  securities.  They must meet credit
requirements set by the Fund's Board of Directors 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  fundamental  policy  limits on holding  illiquid  investments.  The Fund
cannot  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 monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will  continuously  monitor the collateral's
value.


      n Illiquid and  Restricted  Securities.  Under the policies and procedures
established  by the  Fund's  Board of  Directors,  the  Manager  determines  the
liquidity  of certain of the Fund's  investments.  Investments  may be  illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable  price. A restricted  security
is one that has a contractual  restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933.


      As a  fundamental  policy,  the Fund will not invest  more than 10% of its
total  assets  in  illiquid  or  restricted  securities,   including  repurchase
agreements having a maturity beyond seven days,  portfolio  securities for which
market  quotations  are not readily  available  and time deposits that mature in
more than 2 days. Certain restricted  securities that are eligible for resale to
qualified  institutional  purchasers,  as described below, may not be subject to
that limit. The Fund currently applies that limitation to 10% of its net assets,
as  a  non-fundamental   policy.  The  Manager  monitors  holdings  of  illiquid
securities  on an ongoing  basis to  determine  whether to sell any  holdings to
maintain adequate liquidity.

       To enable the Fund to sell its  holdings  of a  restricted  security  not
registered  under the  Securities  Act of 1933, the Fund may have to cause those
securities to be registered.  The expenses of registering  restricted securities
may be  negotiated  by the Fund  with the  issuer  at the time the Fund buys the
securities.  When the Fund must arrange  registration because the Fund wishes to
sell the  security,  a  considerable  period  may  elapse  between  the time the
decision is made to sell the security and the time the security is registered so
that the Fund could sell it. The Fund would bear the risks of any downward price
fluctuation during that period.

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

      n  Loans  of  Portfolio  Securities.  The  Fund  can  lend  its  portfolio
securities  to certain  types of  eligible  borrowers  approved  by the Board of
Directors.  It may do so to try to provide income or to raise cash for liquidity
purposes.  As a fundamental policy,  these loans are limited to not more than 33
1/3% of the value 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.  The Fund presently does not intend to engage in loans of securities
but may do so in the future.

      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.

      n Derivatives.  The Fund may invest in a variety of derivative investments
to seek income for  liquidity  needs or for hedging  purposes.  Some  derivative
investments the Fund may use are the hedging instruments described below in this
Statement of Additional Information.

      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.

      Other derivative investments the Fund may invest in include "index-linked"
notes.  Principal  and/or  interest  payments  on  these  notes  depend  on  the
performance  of an underlying  index.  Currency-indexed  securities  are another
derivative the Fund may use. Typically these are short-term or intermediate-term
debt  securities.  Their value at maturity or the rates at which they pay income
are  determined  by the change in value of the U.S.  dollar  against one or more
foreign  currencies  or an index.  In some cases,  these  securities  may pay an
amount at maturity  based on a multiple of the amount of the  relative  currency
movements. This type of index security offers the potential for increased income
or principal payments but at a greater risk of loss than a typical debt security
of the same maturity and credit quality.

            o "Structured" Notes. The Fund can buy "structured" notes, which are
specially-designed  derivative  debt  investments  with  principal  payments  or
interest  payments  that are linked to the value of an index (such as a currency
or  securities  index)  or  commodity.  The  terms  of  the  instrument  may  be
"structured" by the purchaser (the Fund) and the borrower issuing the note.

      The principal and/or interest payments depend on the performance of one or
more other  securities or indices,  and the values of these notes will therefore
fall or rise in response to the changes in the values of the underlying security
or index.  They are subject to both credit and interest rate risks and therefore
the Fund could receive more or less than it  originally  invested when the notes
mature,  or it might receive less interest than the stated coupon payment if the
underlying investment or index does not perform as anticipated. There values may
be very volatile and they may have a limited trading market, making it difficult
for the Fund to sell its investment at an acceptable price.

            o "Inverse  Floaters." Certain types of variable rate bonds known as
"inverse  floaters"  pay  interest  at rates that vary as the  yields  generally
available on short-term tax-exempt bonds change.  However, the yields on inverse
floaters  move in the  opposite  direction  of  yields  on  short-term  bonds in
response to market changes.  As interest rates rise,  inverse  floaters  produce
less  current  income,  and their  market  value can  become  volatile.  Inverse
floaters  are a type of  "derivative  security."  Some  have a "cap," so that if
interest  rates  rise above the "cap," the  security  pays  additional  interest
income.  If rates do not rise  above  the  "cap,"  the Fund  will  have  paid an
additional amount for a feature that proves worthless.  The Fund will not invest
more than 5% of its total assets in inverse floaters.

      n Hedging. The Fund can use hedging to attempt to protect against declines
in the  market  value of the  Fund's  portfolio,  to  permit  the Fund to retain
unrealized gains in the value of portfolio securities which have appreciated, or
to facilitate  selling  securities  for investment  reasons.  To do so, the Fund
could:
         o  sell futures contracts, or
o           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.


      The Fund is not  obligated to use hedging  instruments,  even though it is
permitted  to use them in the  Manager's  discretion,  as described  below.  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  and  its
fundamental policies.


            o  Futures.  The  Fund  can buy  and  sell  exchange-traded  futures
contracts that relate to (1) broadly-based stock indices ("stock index futures")
(2) debt  securities  (these are referred to as "interest  rate  futures"),  (3)
other  broadly-based  securities  indices  (these are referred to as  "financial
futures"),   (4)  foreign   currencies   (these  are  referred  to  as  "forward
contracts"), or (5) securities.


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

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

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

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


            o Writing Covered Call Options.  Under its fundamental policies, the
Fund is permitted to write (that is, sell) covered calls on securities, indices,
futures  and  forward  contracts.  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 20% 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  bank,  or a  securities  depository  acting for the
Custodian,  will act as the Fund's escrow agent,  through the  facilities of the
Options Clearing  Corporation  ("OCC"),  as to the investments on which the Fund
has  written  calls  traded  on  exchanges  or as  to  other  acceptable  escrow
securities.  In that way, no margin will be required for such transactions.  OCC
will release the  securities  on the  expiration  of the option or when the Fund
enters into a closing transaction.

      If 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.

      The  Fund  may  realize  a  profit  if  a  call  it  has  written  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.
Because of the Fund's  fundamental  policies  prohibiting  the  purchase of call
options, the Fund cannot effect closing purchase transactions to terminate calls
it has written.

      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  identifying  on its
books 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.


            o Selling  Call  Options  on Foreign  Currencies.  The Fund can sell
calls on foreign  currencies.  They include  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 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 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 on that  foreign
currency.  However, the currency rates could fluctuate in a direction adverse to
the Fund's position.

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

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

      o  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 Fund could pay a brokerage  commission  each time it sells a call,  or
sells an underlying  investment in connection with the exercise of a call. 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,  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.

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

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

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

      The Fund can use  hedging  instruments  to  establish  a  position  in the
securities  markets as a temporary  substitute  for the  purchase of  individual
securities  (long hedging) by buying futures.  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.


            o 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  might  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 may 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."  Normally,  the  Fund  will  not use
cross-hedging.

      The Fund will cover its short  positions in these cases by  identifying to
its Custodian  bank assets  having a value equal to the aggregate  amount of the
Fund's commitment under forward contracts.  The Fund will not enter into forward
contracts or maintain a net exposure to such  contracts if the  consummation  of
the contracts  would obligate the Fund to deliver an amount of foreign  currency
in  excess of the  value of the  Fund's  portfolio  securities  or other  assets
denominated  in that  currency  or another  currency  that is the subject of the
hedge. However, to avoid excess transactions and transaction costs, the Fund may
maintain  a net  exposure  to  forward  contracts  in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess.

      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 Interest Rate Swap Transactions.  The Fund can enter into interest
rate swap  agreements.  In an interest  rate swap,  the Fund and  another  party
exchange  their  right to  receive  or their  obligation  to pay  interest  on a
security.  For  example,  they  might swap the right to  receive  floating  rate
payments  for  fixed  rate  payments.  The Fund can  enter  into  swaps  only on
securities that it owns. The Fund will not enter into swaps with respect to more
than 25% of its total assets.  Also, the Fund will segregate liquid assets (such
as cash or U.S.  government  securities) to cover any amounts it could owe under
swaps that exceed the amounts it is entitled to receive, and it will adjust that
amount daily, as needed.


      Swap agreements entail both interest rate risk and credit risk. There is a
risk that, based on movements of interest rates in the future, the payments made
by the  Fund  under a swap  agreement  will be  greater  than  the  payments  it
received.  Credit risk arises from the possibility  that the  counterparty  will
default. If the counterparty  defaults,  the Fund's loss will consist of the net
amount of contractual interest payments that the Fund has not yet received.  The
Manager  will  monitor  the  creditworthiness  of  counterparties  to the Fund's
interest rate swap transactions on an ongoing basis.

      The Fund can enter  into swap  transactions  with  certain  counterparties
pursuant to master netting agreements.  A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral  agreement.  If amounts are payable on a  particular  date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that  currency  shall be the net amount.  In  addition,  the master
netting  agreement  may provide that if one party  defaults  generally or on one
swap, the counterparty can terminate all of the swaps with that party.

      Under these  agreements,  if a default results in a loss to one party, the
measure of that party's  damages is  calculated by reference to the average cost
of a replacement swap for each swap. It is measured by the mark-to-market  value
at the time of the  termination  of each swap. The gains and losses on all swaps
are  then  netted,  and  the  result  is the  counterparty's  gain  or  loss  on
termination. The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."


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

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

      Under the  Investment  Company Act, when the Fund  purchases a future,  it
must  identify on its books liquid assets in an amount equal to the market value
of the securities  underlying the future,  less the margin deposit applicable to
it.


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


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

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

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

Investment Restrictions

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

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

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

      |_| The Fund cannot issue senior securities. However, it can make payments
or deposits of margin in connection with options or futures  transactions,  lend
its portfolio  securities,  enter into repurchase  agreements,  borrow money and
pledge its assets as permitted by its other fundamental  policies.  For purposes
of this restriction,  the issuance of shares of common stock in multiple classes
or series,  the purchase or sale of options,  futures  contracts  and options on
futures contracts,  forward commitments,  and repurchase agreements entered into
in accordance with the Fund's investment policies,  and the pledge,  mortgage or
hypothecation of the Fund's assets are not deemed to be senior securities.

      |_| The Fund  cannot  invest  more than 5% of its total  assets  (taken at
market  value at the time of each  investment)  in the  securities  (other  than
securities  of the U.S.  government or its agencies) of any one issuer or invest
more  than 15% of its  total  assets in the  obligations  of any one bank.  This
restriction  applies  to  repurchase  agreements  with any one  bank or  dealer.
Additionally,  the Fund cannot  purchase  more than either 10% of the  principal
amount  of  the  outstanding  debt  securities  of an  issuer,  or  10%  of  the
outstanding voting securities of an issuer.  This restriction shall not apply to
securities  issued or  guaranteed by the U.S.  government or its agencies,  bank
money market instruments or bank repurchase agreements.

      |_| The Fund cannot  invest more than 25% of the value of its total assets
in the securities of issuers in any single  industry.  However,  this limitation
shall not apply to the purchase of obligations  issued or guaranteed by the U.S.
government,  its  agencies  or  instrumentalities.   For  the  purpose  of  this
restriction,  each utility that provides a separate  service (for example,  gas,
gas  transmission,  electric or telephone)  shall be considered to be a separate
industry. This test shall be applied on a pro forma basis using the market value
of all  assets  immediately  prior  to  making  any  investment.  The  Fund  has
undertaken as a matter of  non-fundamental  policy to apply this  restriction to
25% or more of its total assets.

      |_| The Fund cannot, by itself or together with any other fund,  portfolio
or portfolios,  make investments for the purpose of exercising  control over, or
management of, any issuer.

      |_| The Fund cannot  purchase  securities of other  investment  companies,
except   in   connection   with  a   merger,   consolidation,   acquisition   or
reorganization. It can also purchase in the open market securities of closed-end
investment  companies if no underwriter or dealer's commission or profit,  other
than the  customary  broker's  commission  is involved  and only if  immediately
thereafter not more than 10% of the Fund's total assets,  taken at market value,
would be invested in such securities.

      |_| The  Fund  cannot  purchase  or sell  interests  in oil,  gas or other
mineral exploration or development programs, commodities, commodity contracts or
real estate. However, the Fund can purchase securities of issuers that invest or
deal an any of the above  interests  and can  invest  for  hedging  purposes  in
futures contracts on securities,  financial instruments and indices, and foreign
currency, as are approved for trading on a registered exchange.

      |_| The Fund cannot  purchase any securities on margin or make short sales
of securities or maintain a short  position.  However,  the Fund can obtain such
short- term credits as may be necessary for the clearance of purchases and sales
of  portfolio  securities.  The  deposit  or  payment  by the Fund of initial or
maintenance  margin in  connection  with futures  contracts  or related  options
transactions is not considered to be the purchase of a security on margin.

      |_| The Fund  cannot  make  loans.  However,  the Fund may lend  portfolio
securities in accordance  with the Fund's  investment  policies up to 33 1/3% of
the Fund's  total  assets  taken at market  value.  The Fund can also enter into
repurchase  agreements,  and  purchase  all or a portion of an issue of publicly
distributed   debt  securities,   bank  loan   participation   interests,   bank
certificates of deposit,  bankers' acceptances,  debentures or other securities,
whether  or  not  the  purchase  is  made  upon  the  original  issuance  of the
securities.

      |_| The Fund cannot  borrow  amounts in excess of 10% of its total assets,
taken at market  value at the time of the  borrowing.  It can  borrow  only from
banks as a temporary measure for extraordinary or emergency purposes.  It cannot
make  investments  in portfolio  securities  while such  outstanding  borrowings
exceed 5% of its total assets.

      o The Fund cannot allow its current  obligations under reverse  repurchase
agreements,  together with  borrowings,  to exceed 1/3 of the value of its total
assets (less all its liabilities other than the obligations under borrowings and
such agreements).

      o The Fund cannot mortgage, pledge, hypothecate or in any manner transfer,
as security for indebtedness, any securities owned or held by the Fund except as
may be necessary in connection  with  borrowings as mentioned in its restriction
on borrowing, above. In that case such mortgaging, pledging or hypothecating may
not exceed 10% of the Fund's total assets,  taken at market value at the time of
the borrowing.  The deposit of cash, cash equivalents and liquid debt securities
in a segregated  account with the Fund's  custodian bank and/or with a broker in
connection  with  futures  contracts  or related  options  transactions  and the
purchase of securities on a "when-issued" basis are not deemed to be pledges.

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

      o The Fund  cannot  write,  purchase or sell puts,  calls or  combinations
thereof, except that it can write covered call options.

      o The Fund cannot invest in  securities of foreign  issuers if at the time
of acquisition  more than 10% of its total assets,  taken at market value at the
time of the investment, would be invested in such securities. However, up to 25%
of the  total  assets  of the  Fund may be  invested  in the  aggregate  in such
securities that are (i) issued, assumed or guaranteed by foreign governments, or
political subdivisions or instrumentalities  thereof, (ii) assumed or guaranteed
by domestic issuers (including Eurodollar securities),  or (iii) issued, assumed
or guaranteed by foreign issuers having a class of securities listed for trading
on The New York Stock Exchange.

      o The Fund cannot  invest more than 10% in the  aggregate  of the value of
its total assets in repurchase agreements maturing in more than seven days, time
deposits maturing in more than two days,  portfolio  securities that do not have
readily available market quotations and all other illiquid assets.

      For purposes of the fundamental investment restrictions, the term "borrow"
does not include mortgage dollar rolls, reverse repurchase agreements or lending
portfolio securities.  The terms "illiquid securities" and "portfolio securities
that  do not  have  readily  available  market  quotations"  include  restricted
securities.  However,  reverse repurchase  agreements are treated as borrowings,
master demand notes may be deemed to be illiquid  securities and mortgage dollar
rolls are sales transactions and not financings.

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

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


How the Fund is Managed

Organization  and  History.  The Fund is one of two  investment  portfolios,  or
"series," of  Oppenheimer  Series Fund,  Inc. That  corporation  is an open-end,
management  investment company organized as a Maryland  corporation in 1981, and
was called  Connecticut Mutual Investment  Accounts,  Inc. until March 18, 1996,
when the Manager became the Fund's investment adviser. The Fund is a diversified
mutual fund, and until March 18, 1996 was called Connecticut Mutual Total Return
Account.

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

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

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

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

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

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

      Shareholders of the Fund and of its parent corporation's other series vote
together in the aggregate on certain matters at  shareholders'  meetings.  Those
matters include the election of Directors and ratification of appointment of the
independent  auditors.  Shareholders  of  a  particular  series  or  class  vote
separately  on  proposals  that affect that series or class.  Shareholders  of a
series or class that is not  affected by a proposal  are not entitled to vote on
the proposal.  For example, only shareholders of a particular series vote on any
material amendment to the investment  advisory  agreement for that series.  Only
shareholders of a particular class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect only that class.

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






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

      Ms. Macaskill and Messrs. Spiro, Donohue,  Wixted, Zack, Bishop and Farrar
respectively  hold the same  offices with the other New  York-based  Oppenheimer
funds as with the Fund.  As of February 1, 1999,  the  Directors and officers of
the Fund as a group owned of record or  beneficially  less than 1% of each class
of shares of the Fund.  The foregoing  statement  does not reflect  ownership of
shares of the Fund held of record by an employee  benefit plan for  employees of
the  Manager,  other than the shares  beneficially  owned  under the plan by the
officers of the Fund listed above. Ms. Macaskill and Mr. Donohue are trustees of
that plan.

1 Ms.  Macaskill is not a Director of Oppenheimer  Money Market Fund, Inc.



Leon  Levy,  Chairman  of the  Board  of
Directors, Age 73
280 Park Avenue, New York, NY 10017
General  Partner  of  Odyssey  Partners,
L.P.  (investment   partnership)  (since
1982) and  Chairman of Avatar  Holdings,
Inc. (real estate development).

Robert G. Galli, Director, Age 65
19750  Beach  Road,  Jupiter  Island,  FL 33469 A Trustee or  Director  of other
Oppenheimer funds.  Formerly he held the following  positions:  Vice Chairman of
the  Manager,  OppenheimerFunds,  Inc.  (October  1995 to December  1997);  Vice
President  (June  1990  to  March  1994)  and  General  Counsel  of  Oppenheimer
Acquisition  Corp.,  the  Manager's  parent  holding  company;   Executive  Vice
President  (December  1977 to  October  1995),  General  Counsel  and a director
(December  1975 to October 1993) of the Manager;  Executive Vice President and a
director  (July 1978 to October  1993) and General  Counsel of the  Distributor,
OppenheimerFunds  Distributor,  Inc.;  Executive  Vice  President and a director
(April 1986 to October 1995) of HarbourView Asset Management  Corporation;  Vice
President and a director  (October  1988 to October  1993) of  Centennial  Asset
Management  Corporation,  (HarbourView  and Centennial  are  investment  adviser
subsidiaries of the Manager); and an officer of other Oppenheimer funds.

Benjamin Lipstein, Director, Age 75
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor   Emeritus   of   Marketing,   Stern   Graduate   School  of  Business
Administration, New York University.

Bridget  A.  Macaskill,   President  and Director *, Age 50
Two World Trade Center,  34th Floor,  New York, NY 10048-0203
President (since June 1991),  Chief Executive Officer (since September 1995) and
a Director (since  December 1994) of the Manager;  President and director (since
June 1991) of HarbourView  Asset  Management  Corp.;  Chairman and a director of
Shareholder  Services,  Inc.  (since August  1994),  and  Shareholder  Financial
Services,  Inc. (since September 1995) (both are transfer agent  subsidiaries of
the Manager);  President  (since  September  1995) and a director (since October
1990) of Oppenheimer  Acquisition Corp.;  President (since September 1995) and a
director  (since  November 1989) of Oppenheimer  Partnership  Holdings,  Inc., a
holding  company  subsidiary  of the  Manager;  a director  (since July 1996) of
Oppenheimer Real Asset Management,  Inc., an investment  advisory  subsidiary of
the Manager;  President and a director (since October 1997) of  OppenheimerFunds
International  Ltd., an offshore fund  management  subsidiary of the Manager and
Oppenheimer Millennium Funds plc; President (since October, 1997); President and
a director  or trustee  of other  Oppenheimer  funds;  a director  of  Hillsdown
Holdings plc (a U.K. food company).

Elizabeth B. Moynihan, Director, Age 69
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author  and  architectural  historian;  a trustee  of the Freer  Gallery  of Art
(Smithsonian Institute), and a member of the Executive Committee of the Board of
Trustees of the National  Building  Museum;  a member of the  Trustees  Council,
Preservation League of New York State.

Kenneth A. Randall, Director, Age 71
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion  Resources,  Inc.  (electric  utility  holding  company),
Dominion  Energy,  Inc.  (electric  power and oil and gas  producer),  and Prime
Retail,  Inc.  (real estate  investment  trust);  formerly  President  and Chief
Executive  Officer of The Conference  Board,  Inc.  (international  economic and
business  research)  and a  director  of  Lumbermens  Mutual  Casualty  Company,
American Motorists Insurance Company and American Manufacturers Mutual Insurance
Company.

Edward V.  Regan,  Director,  Age 68
40 Park  Avenue,  New York,  New York 10016
Chairman of Municipal  Assistance  Corporation for the City of New York;  Senior
Fellow of Jerome Levy Economics Institute,  Bard College; a director of RB Asset
(real  estate  manager)  and  OffitBank;   a  Trustee  of  Financial  Accounting
Foundation (FASB and GASB); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund. Russell S. Reynolds, Jr., Director, Age 68
8 Sound Shore Drive,  Greenwich,  Connecticut  06830 Retired Founder Chairman of
Russell  Reynolds   Associates,   Inc.  (executive   recruiting);   Chairman  of
Directorship Inc. (corporate governance consulting);  a director of Professional
Staff Limited (U.K); a trustee of Mystic Seaport Museum, International House and
Greenwich Historical Society.

Donald W. Spiro, Vice Chairman and Director *, Age 73
Two World Trade Center,  34th Floor, New York, NY 10048-0203  Chairman  Emeritus
(since August 1991) and a director (since January 1969) of the Manager; formerly
Chairman of the Manager and the Distributor.

Pauline Trigere, Director, Age 86
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of P.T. Concept (design and sale of women's
fashions).

Clayton K. Yeutter, Director, Age 68
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of  Counsel,  Hogan & Hartson  (a law  firm);  a  director  of Zurich  Financial
Services (financial  services),  Caterpillar,  Inc.  (machinery),  ConAgra, Inc.
(food and agricultural  products),  Farmers Insurance Company  (insurance),  FMC
Corp.  (chemicals  and  machinery) and Texas  Instruments,  Inc.  (electronics);
formerly (in descending  chronological  order) Counselor to the President (Bush)
for Domestic Policy, Chairman of the Republican National Committee, Secretary of
the U.S. Department of Agriculture, and U.S. Trade Representative;  and formerly
a director of B.A.T.  Industries,  Ltd.  (tobacco and financial  services),  IMC
Global  (fertilizer   producer)  and  Lindsay  Mfg.  Co.  (maker  of  irrigation
equipment).

Peter M. Antos, Vice President and Portfolio Manager, Age: 53.
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered   Financial  Analyst;   Senior  Vice  President  of  the  Manager  and
HarbourView  Asset Management Corp. (since March 1996); an officer and portfolio
manager  of other  Oppenheimer  funds;  previously  Vice  President  and  Senior
Portfolio Manager, Equities of Connecticut Mutual Life Insurance Company and its
subsidiary, G.R. Phelps & Co. (1989-1996).

Stephen F. Libera, Vice President and Portfolio Manager, Age: 48.
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Vice President of the Manager and HarbourView Asset
Management  Corp.  (since March 1996);  an officer of other  Oppenheimer  funds;
previously  a Vice  President  and Senior  Portfolio  Manager,  Fixed Income for
Connecticut Mutual Life Insurance Company and G.R. Phelps & Co. (1985-1996).

Michael C. Strathearn, Vice President and Portfolio Manager, Age: 46.
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Vice President of the Manager and HarbourView Asset
Management  Corp (since  March  1996);  an officer of other  Oppenheimer  funds;
previously a Portfolio Manager,  Equities,  of Connecticut Mutual Life Insurance
Company (1988-1996).

Kenneth B. White, Vice President and Portfolio Manager, Age: 47.
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Vice President of the Manager and HarbourView Asset
Management  Corp.  (since March 1996);  an officer of other  Oppenheimer  funds;
previously a Portfolio Manager,  Equities,  of Connecticut Mutual Life Insurance
Company (1992-1996).

Arthur J. Zimmer, Vice President and Portfolio Manager, Age: 52
6803 South Tucson Way, Englewood, Colorado 80112
Senior Vice  President  of the Manager  (since June  1997);  Vice  President  of
Centennial Asset Management  Corporation,  an investment  advisory subsidiary of
the Manager (since  September  1991),;  an officer of other  Oppenheimer  funds;
formerly Vice President of the Manager (October 1990 - June 1997).

Andrew J. Donohue, Secretary, Age 48
Two World Trade Center, 34th Floor, New York, NY 10048-0203

Executive Vice President  (since January 1993),  General  Counsel (since October
1991) and a Director  (since  September  1995) of the  Manager;  Executive  Vice
President  and General  Counsel  (since  September  1993) and a director  (since
January 1992) of the Distributor;  Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corp.,  Shareholder  Services,  Inc.,
Shareholder Financial Services,  Inc. and Oppenheimer Partnership Holdings, Inc.
(since September 1995);  President and a director of Centennial Asset Management
Corp.  (since  September  1995);  President,  General  Counsel and a director of
Oppenheimer  Real Asset  Management,  Inc.  (since July 1996);  General  Counsel
(since May 1996) and  Secretary  (since April 1997) of  Oppenheimer  Acquisition
Corp.;  Vice President of  OppenheimerFunds  International  Ltd. and Oppenheimer
Millennium  Funds plc (since  October  1997);  an  officer of other  Oppenheimer
funds.


Brian W. Wixted, Treasurer; Age: 39.
6803  South   Tucson   Way,   Englewood,

Colorado 80112

Senior Vice President and Treasurer (since April 1999) of the Manager;  formerly
Principal  and Chief  Operating  Officer,  Bankers  Trust  Company - Mutual Fund
Services Division (1995-1999);  Vice President and Chief Financial Officer of CS
First Boston  Investment  Management Corp.  (1991-1995);  and Vice President and
Accounting Manager, Merrill Lynch Asset Management (1987-1991).


Robert G. Zack, Assistant Secretary, Age 50
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Senior Vice President (since May 1985) and Associate  General Counsel (since May
1981) of the Manager;  Assistant Secretary of Shareholder Services,  Inc. (since
May 1985),  and  Shareholder  Financial  Services,  Inc.  (since November 1989);
Assistant  Secretary of  OppenheimerFunds  International  Ltd.  and  Oppenheimer
Millennium  Funds plc (since  October  1997);  an  officer of other  Oppenheimer
funds.

Robert J. Bishop, Assistant Treasurer, Age 40
6803 South Tucson Way, Englewood, Colorado 80112
Vice  President  of the  Manager/Mutual  Fund  Accounting  (since May 1996);  an
officer of other Oppenheimer funds;  formerly an Assistant Vice President of the
Manager/Mutual  Fund Accounting (April 1994-May 1996), and a Fund Controller for
the Manager. Scott T. Farrar, Assistant Treasurer, Age 33 6803 South Tucson Way,
Englewood,  Colorado 80112 Vice President of the Manager/Mutual  Fund Accounting
(since May 1996); Assistant Treasurer of OppenheimerFunds International Ltd. and
Oppenheimer  Millennium  Funds plc  (since  October  1997);  an officer of other
Oppenheimer  funds;  formerly an Assistant Vice President of the  Manager/Mutual
Fund Accounting (April 1994-May 1996), and a Fund Controller for the Manager.

      |X|  Remuneration  of  Directors.  The  officers  of the Fund and  certain
Directors of the Fund's parent corporation (Ms. Macaskill and Mr. Spiro) who are
affiliated  with the  Manager  receive  no  salary  or fee from  the  Fund.  The
remaining Directors received the compensation shown below. The compensation from
the  Fund was paid  during  its  fiscal  period  ended  October  31,  1998.  The
compensation  from all of the New York-based  Oppenheimer  funds  (including the
Fund) was received as a director, trustee or member of a committee of the boards
of those funds during the calendar year 1998.






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

                                                                           Total
                                                                    Compensation
                                             Retirement       From all
                                             Benefits         New York based
                            Aggregate        Accrued as Part  Oppenheimer
Director's Name             Compensation     of Fund          Funds (21
and Other Positions         from Fund1       Expenses         Funds)2

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Leon Levy                        $6,044            $810           $162,600
Chairman
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Robert G. Galli                  $1,976            None           $113,383
Study Committee Member3
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Benjamin Lipstein
Study Committee Chairman,       $ 5,661           $1,137          $140,550
Audit Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Elizabeth B. Moynihan            $3,187            None           $99,000
Study Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Kenneth A. Randall               $3,458            $535           $90,800
Audit Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Edward V. Regan
Proxy Committee Chairman,        $2,890            None           $89,800
Audit Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Russell S. Reynolds, Jr.         $2,310            $147           $67,200
Proxy Committee Member
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

Pauline Trigere                  $2,310            $379           $60,000

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Clayton K. Yeutter              $2,1634            None           $67,200
Proxy Committee Member
- -------------------------------------------------------------------------------
Aggregate  compensation  includes  fees,  deferred  compensation,  if  any,  and
   retirement plan benefits accrued for a Director.
For the 1998 calendar year.
Aggregate  compensation  from the Fund  reflects  fees from 1/1/98 to  10/31/98.
   Total compensation for the 1998 calendar year includes  compensation received
   for serving as Trustee or Director of 11 other Oppenheimer funds.
Committee  position  held during a portion of the period  shown.  Includes  $465
deferred under Deferred Compensation Plan described below.






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

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

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

    n Major Shareholders.  As of February 1, 1999, the only persons who owned of
record or were known by the Fund to own  beneficially 5% or more of any class of
the Fund's outstanding shares were:

    Massachusetts Mutual Life Insurance Co., 1295 State Street,  Springfield, MA
    01111-0001,  which owned 3,348,849.565 Class A shares  (approximately 17.40%
    of the outstanding Class A shares) for the benefit of its clients.

    Merrill  Lynch,  Pierce,  Fenner & Smith,  Inc.,  4800 Deer Lake Drive East,
    Jacksonville, FL 32246, which owned 34,281.139 Class C shares (approximately
    9.02% of the outstanding Class C shares) for the benefit of its clients.

The Manager.  The Manager is  wholly-owned by Oppenheimer  Acquisition  Corp., a
holding company controlled by Massachusetts  Mutual Life Insurance Company.  The
Manager and the Fund 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.
Compliance  with the Code of Ethics is carefully  monitored  and enforced by the
Manager.

      n 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. Other members
of the Manager's Equity Portfolio Department provide the portfolio managers with
counsel and support in managing the Fund's portfolio.

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

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

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

 Fiscal Year ended 10/31:    Management Fees Paid to OppenheimerFunds, Inc.

 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           19961                                $ 909,829
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           1997                                $1,535,343
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           1998                                $1,774,240
 ------------------------------------------------------------------------------
 1.Fiscal  period  from  1/1/96  to  10/31/96.  For the  period  from  1/1/96 to
   3/18/96, fees paid to the Fund's prior investment adviser were $287,424.

      The investment  advisory  agreement  states that in the absence of willful
misfeasance,  bad faith,  gross  negligence in the  performance of its duties or
reckless  disregard of its obligations and duties under the investment  advisory
agreement,  the Manager is not liable for any loss  resulting  from a good faith
error or  omission  on its part  with  respect  to any of its  duties  under the
agreement.

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


Brokerage Policies of the Fund

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

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

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

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

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

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


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

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

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

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

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

 Fiscal Year Ended 10/31:     Total Brokerage Commissions Paid by the Fund1

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
          1996 2                                $118,259
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
           1997                                 $385,963
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
           1998                                 $457,2633
- -------------------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal  transactions on a
   net trade basis.
2. For the fiscal period from 1/1/96 to 10/31/96.
3. In the fiscal year ended  10/31/98,  the amount of  transactions  directed to
   brokers  for  research  services  was  $220,375,253  and  the  amount  of the
   commissions paid to broker-dealers for those services was $332,848.


Distribution and Service Plans

The  Distributor.  Under its  General  Distributor's  Agreement  with the Fund's
parent corporation,  the Distributor acts as the Fund's principal underwriter in
the continuous  public offering of the different  classes of shares of the Fund.
The Distributor is not obligated to sell a specific  number of shares.  Expenses
normally attributable to sales are borne by the Distributor.


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








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

          Aggregate    Class A
          Front-End    Front-End     Commissions    Commissions  Commissions
Fiscal    Sales        Sales         on Class A     on Class B   on Class C
Year      Charges on   Charges       Shares         Shares       Shares
Ended     Class A      Retained by   Advanced by    Advanced by  Advanced by
10/31:    Shares       Distributor   Distributor1   Distributor1 Distributor1

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
  19962     $703,460     $501,951       $84,457       $ 93,675      $ 1,236
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
  1997      $468,073     $456,768       $10,843       $175,997      $10,881
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
  1998      $481,886     $397,054       $27,571       $316,680      $21,560
- -------------------------------------------------------------------------------
1. The Distributor  advances commission payments to dealers for certain sales of
   Class A  shares  and for  sales of  Class B and  Class C shares  from its own
   resources at the time of sale.
2. Fiscal  period  from  1/1/86 to  10/31/96.  Excludes  amounts  paid to and/or
   retained by the Fund's prior general  distributor  for the period from 1/1/96
   to 3/18/96.

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

Fiscal     Class A Contingent    Class B Contingent
Year       Deferred Sales        Deferred Sales        Class C Contingent
Ended      Charges Retained by   Charges Retained by   Deferred Sales Charges
10/31      Distributor           Distributor           Retained by Distributor

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
   1998            None                 $30,404                $2,562
- -------------------------------------------------------------------------------

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

      Each plan has been approved by a vote of the Board of Directors, including
a majority of the Independent Directors2, cast in person at a meeting called for
the  purpose of voting on that  plan.  Each plan has also been  approved  by the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of the applicable  class.  The shareholder vote for the Distribution and Service
Plan for Class C shares was cast by the  Manager as the sole  initial  holder of
Class C shares of the Fund.

2. In  accordance  with  Rule  12b-1 of the  Investment  Company  Act,  the term
"Independent  Directors" in this Statement of Additional  Information  refers to
those  Directors  who are not  "interested  persons"  of the Fund (or its parent
corporation)  and who do not have any direct or indirect  financial  interest in
the operation of the distribution plan or any agreement under the plan.

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

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

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

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

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

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

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

      For the fiscal year ended October 31, 1998 payments under the Class A plan
totaled $671,280,  all of which was paid by the Distributor to recipients.  That
included $557,688 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 and Class C Service  and  Distribution  Plan Fees.  Under each
plan,  service fees and distribution fees are computed on the average of the net
asset value of shares in the  respective  class,  determined  as of the close of
each  regular  business  day  during the  period.  The Class B and Class C plans
provide for the  Distributor to be compensated  for its services at a flat rate,
whether the Distributor's  costs in distributing  Class B and Class C shares and
servicing  accounts are more or less than the amounts paid by the Fund under the
plan  during the period for which the fee is paid.  The types of  services  that
recipients  provide  are  similar  to the  services  provided  under the Class A
service plan, described above.

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

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

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


      For the fiscal year ended  October 31,  1998,  payments  under the Class B
plan  totaled  $141,994   (including   $11,835  paid  to  an  affiliate  of  the
Distributor's  parent).  The Distributor  retained $122,183 of the total amount.
For the fiscal year ended  October  31,  1998,  payments  under the Class C plan
totaled  $28,515  (including  $3,586 paid to an affiliate  of the  Distributor's
parent). The Distributor retained $22,102 of the total amount.

      The  Distributor's  actual  expenses in selling Class B and Class C shares
may be more than the payments it receives  from the  contingent  deferred  sales
charges  collected on redeemed  shares and from the Fund under the plans.  As of
October 31, 1998, the Distributor had incurred  unreimbursed  expenses under the
Class B plan in the amount of $623,479  (equal to 2.87% of the Fund's net assets
represented by Class B shares on that date) and unreimbursed  expenses under the
Class C plan of $52,326 (equal to 1.08% of the Fund's net assets  represented by
Class C shares  on that  date).  If  either  the  Class B or the Class C plan is
terminated  by the Fund,  the Board of Directors  may allow the Fund to continue
payments of the asset-based  sales charge to the  Distributor  for  distributing
shares before the plan was terminated.

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


Performance of the Fund

Explanation  of  Performance  Terminology.  The Fund uses a variety  of terms to
illustrate its investment  performance.  Those terms include  "cumulative  total
return,"  "average  annual total  return,"  "average  annual total return at net
asset value" and "total return at net asset value." An  explanation of how total
returns are  calculated  is set forth  below.  The charts  below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance  information by calling the Fund's Transfer Agent at  1-800-525-7048
or    by    visiting    the    OppenheimerFunds    Internet    web    site    at
http://www.oppenheimerfunds.com.

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

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

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

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

      In calculating total returns for Class A shares, the current maximum sales
charge of 5.75% (as a  percentage  of the offering  price) is deducted  from the
initial  investment  ("P") (unless the return is shown without sales charge,  as
described  below).  For Class B shares,  payment  of the  applicable  contingent
deferred  sales charge is applied,  depending on the period for which the return
is shown: 5.0% in the first year, 4.0% in the second year, 3.0% in the third and
fourth  years,  2.0%  in the  fifth  year,  1.0%  in the  sixth  year  and  none
thereafter.  For Class C shares,  the 1%  contingent  deferred  sales  charge is
deducted for returns for the 1-year period.

            |_| 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 )


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

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


            |_| Total Returns at Net Asset Value. From time to time the Fund may
also quote a cumulative  or an average  annual total return "at net asset value"
(without  deducting sales charges) for Class A, Class B or Class C 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 10/31/98

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

          Cumulative Total
          Returns (10
Class of  years
Shares    or Life of
          Class)                      Average Annual Total Returns

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

                                                  5-Year           10-Year
                                                    (or              (or
                                1-Year        life-of-class)   life-of-class)

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

          After   Without  After    Without  After    Without  After    Without
          Sales   Sales    Sales    Sales    Sales    Sales    Sales    Sales
          Charge  Charge   Charge   Charge   Charge   Charge   Charge   Charge

- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class A   205.52% 224.16%  -0.17%   5.92%      8.86%  10.16%   11.82%1  12.48%1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class B    34.26%  37.26%   0.50%   5.10%    10.03%2  10.83%2  N/A      N/A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Class C    29.01%  29.01%   4.19%   5.10%    10.72%3  10.72%3  N/A      N/A
- -------------------------------------------------------------------------------
1. Inception of Class A:      9/16/85
2. Inception of Class B:      10/2/95
3. Inception of Class C:      5/1/96

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.

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

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

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

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

      n 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.


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

A B O U T  Y O U R  A C C O U N T

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

How to Buy Shares

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

AccountLink.  When shares are purchased through AccountLink,  each purchase must
be at least $25.  Shares  will be  purchased  on the  regular  business  day the
Distributor  is  instructed  to initiate the  Automated  Clearing  House ("ACH")
transfer to buy the shares.  Dividends will begin to accrue on shares  purchased
with the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase  through the ACH system  before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular  business  day. The proceeds of ACH  transfers  are normally
received by the Fund 3 days after the transfers are initiated.  The  Distributor
and the Fund are not responsible for any delays in purchasing  shares  resulting
from delays in ACH transmissions.

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

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

         o  Class  A and  Class  B  shares  you  purchase  for  your  individual
            accounts,  or for your  joint  accounts,  or for trust or  custodial
            accounts on behalf of your children who are minors, and
         current  purchases  of Class A and Class B shares of the Fund and other
            Oppenheimer  funds to reduce the sales  charge rate that  applies to
            current purchases of Class A shares, and
o           Class A and  Class B shares  of  Oppenheimer  funds  you  previously
            purchased subject to an initial or contingent  deferred sales charge
            to reduce the sales  charge  rate for current  purchases  of Class A
            shares,  provided that you still hold your  investment in one of the
            Oppenheimer funds.

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

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


Oppenheimer Bond Fund                   Oppenheimer Large Cap Growth Fund
Oppenheimer California Municipal Fund   Oppenheimer Limited-Term Government Fund
Oppenheimer Capital Appreciation Fund   Oppenheimer   Main   Street   California
                                        Municipal Fund
Oppenheimer Capital Income Fund         Oppenheimer  Main Street Growth & Income
                                      Fund
Oppenheimer Champion Income Fund Oppenheimer MidCap Fund Oppenheimer Convertible
Securities Fund  Oppenheimer  Multiple  Strategies Fund  Oppenheimer  Developing
Markets Fund Oppenheimer Municipal Bond Fund Oppenheimer  Disciplined Allocation
Fund  Oppenheimer  New York Municipal Fund  Oppenheimer  Disciplined  Value Fund
Oppenheimer New Jersey  Municipal Fund  Oppenheimer  Discovery Fund  Oppenheimer
Pennsylvania  Municipal  Fund  Oppenheimer  Enterprise  Fund  Oppenheimer  Quest
Balanced  Value Fund  Oppenheimer  Europe Fund  Oppenheimer  Quest Capital Value
Fund,

                                      Inc.
Oppenheimer Florida Municipal Fund      Oppenheimer  Quest  Global  Value  Fund,
                                      Inc.
Oppenheimer Global Fund                 Oppenheimer Quest Opportunity Value Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Quest Small Cap Value Fund
Oppenheimer  Gold  &  Special  Minerals Oppenheimer Quest Value Fund, Inc.
Fund
Oppenheimer Growth Fund                 Oppenheimer Real Asset Fund
Oppenheimer High Yield Fund             Oppenheimer Strategic Income Fund
Oppenheimer Insured Municipal Fund      Oppenheimer Total Return Fund, Inc.
Oppenheimer Intermediate Municipal Fund Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund     Oppenheimer World Bond Fund
Oppenheimer International Growth Fund   Limited-Term New York Municipal Fund
Oppenheimer     International     Small Rochester Fund Municipals
Company Fund

and the following money market funds:

Centennial America Fund, L. P.          Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust  Centennial Tax Exempt Trust
Centennial Government Trust             Oppenheimer Cash Reserves
Centennial Money Market Trust           Oppenheimer Money Market Fund, Inc.
      There is an initial sales charge on the purchase of Class A shares of each
of  the  Oppenheimer  funds  except  the  money  market  funds.   Under  certain
circumstances described in this Statement of Additional Information,  redemption
proceeds of certain  money  market  fund  shares may be subject to a  contingent
deferred sales charge.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Asset Builder Plans.  To establish an Asset Builder Plan to buy shares  directly
from a bank  account,  you must  enclose a check  (minimum  $25) for the initial
purchase with your application.  Shares purchased by Asset Builder Plan payments
from bank  accounts  are  subject  to the  redemption  restrictions  for  recent
purchases  described  in  the  Prospectus.   Asset  Builder  Plans  also  enable
shareholders  of  Oppenheimer  Cash  Reserves to use their fund  account to make
monthly automatic purchases of shares of up to four other Oppenheimer funds.

      If you make  payments  from your bank  account to  purchase  shares of the
Fund,  your bank account will be  automatically  debited,  normally four to five
business days prior to the investment dates selected in the Application. Neither
the  Distributor,  the Transfer Agent nor the Fund shall be responsible  for any
delays in purchasing shares resulting from delays in ACH transmissions.

      Before  initiating  Asset  Builder  payments,  obtain a prospectus  of the
selected  fund(s) from the Distributor or your financial  advisor and request an
application from the  Distributor,  complete it and return it. The amount of the
Asset  Builder  investment  may be changed or the automatic  investments  may be
terminated  at any time by writing to the Transfer  Agent.  The  Transfer  Agent
requires a  reasonable  period  (approximately  15 days)  after  receipt of such
instructions to implement  them. The Fund reserves the right to amend,  suspend,
or discontinue offering Asset Builder plans at any time without prior notice.

Retirement  Plans.  Certain types of  retirement  plans are entitled to purchase
shares of the Fund without  sales charge or at reduced  sales charge  rates,  as
described in Appendix C to this  Statement of  Additional  Information.  Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily  valuation  basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent  record keeper that has a contract
or special  arrangement  with  Merrill  Lynch.  If on the date the plan  sponsor
signed the Merrill Lynch record keeping service agreement the plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable  investments,  then the retirement  plan may purchase only Class B
shares of the  Oppenheimer  funds.  Any  retirement  plans in that category that
currently  invest in Class B shares of the Fund will have  their  Class B shares
converted to Class A shares of the Fund when the Plan's  applicable  investments
reach $5 million.  Cancellation  of Purchase  Orders.  Cancellation  of purchase
orders for the Fund's shares (for example,  when a purchase check is returned to
the Fund  unpaid)  causes a loss to be incurred  when the net asset value of the
Fund's shares on the  cancellation  date is less than on the purchase date. That
loss is equal to the  amount of the  decline  in the net  asset  value per share
multiplied  by the  number of shares in the  purchase  order.  The  investor  is
responsible  for that loss. If the investor fails to compensate the Fund for the
loss, the  Distributor  will do so. The Fund may reimburse the  Distributor  for
that amount by redeeming  shares from any account  registered in that investor's
name, or the Fund or the Distributor may seek other redress.

Classes of Shares.  Each class of shares of the Fund  represents  an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder  privileges and features.  The net income attributable to Class B or
Class C shares and the  dividends  payable on Class B or Class C shares  will be
reduced by  incremental  expenses  borne  solely by that class.  Those  expenses
include the asset-based sales charges to which Class B and Class C 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 and
Class C shares have no initial sales charge,  the purpose of the deferred  sales
charge and asset-based sales charge on Class B and Class C shares is the same as
that  of the  initial  sales  charge  on  Class A  shares  - to  compensate  the
Distributor and brokers,  dealers and financial institutions that sell shares of
the Fund. A salesperson who is entitled to receive  compensation from his or her
firm for selling Fund shares may receive  different  levels of compensation  for
selling one class of shares rather than another.

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

      n Class B Conversion.  The  conversion of Class B shares to Class A shares
after six years is subject to the  continuing  availability  of a private letter
ruling  from the  Internal  Revenue  Service,  or an  opinion  of counsel or tax
adviser, to the effect that the conversion of Class B shares does not constitute
a taxable  event for the  shareholder  under  Federal  income tax law. If such a
revenue  ruling or  opinion is no longer  available,  the  automatic  conversion
feature  may be  suspended,  in which  event no further  conversions  of Class B
shares would occur while such  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.

      n Allocation  of  Expenses.  The Fund pays  expenses  related to its daily
operations, such as custodian fees, Directors' fees, transfer agency fees, legal
fees and auditing  costs.  Those  expenses are paid out of the Fund's assets and
are not paid directly by  shareholders.  However,  those expenses reduce the net
asset  value of shares,  and  therefore  are  indirectly  borne by  shareholders
through their investment.
      The  methodology  for  calculating  the net  asset  value,  dividends  and
distributions  of the Fund's  share  classes  recognizes  two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class,  and
then  equally to each  outstanding  share  within a given  class.  Such  general
expenses include  management fees, legal,  bookkeeping and audit fees,  printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current  shareholders,  fees to unaffiliated
Directors,  custodian expenses, share issuance costs,  organization and start-up
costs, interest,  taxes and brokerage commissions,  and non-recurring  expenses,
such as litigation costs.

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

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

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

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

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

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

      In the case of U.S.  government  securities,  mortgage-backed  securities,
corporate bonds and foreign government securities, when last sale information is
not generally  available,  the Manager may use pricing services  approved by the
Board of  Directors.  The pricing  service may use "matrix"  comparisons  to the
prices for comparable  instruments on the basis of quality,  yield and maturity.
Other  special  factors may be involved  (such as the  tax-exempt  status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing  services.  That  monitoring may include  comparing  prices used for
portfolio valuation to actual sales prices of selected securities.
      The closing prices in the London foreign  exchange  market on a particular
business  day that are  provided  to the  Manager  by a bank,  dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.

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

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


How to Sell Shares

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

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

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


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

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

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

Involuntary  Redemptions.  The Fund's Board of Directors  has the right to cause
the  involuntary  redemption  of the shares  held in any  account if the account
holds fewer than 100 shares.  If the Board exercises this right, it may also fix
the requirements for any notice to be given to the shareholders in question (not
less  than 30  days).  The  Board may  alternatively  set  requirements  for the
shareholder  to increase the  investment,  or set other terms and  conditions so
that the shares would not be involuntarily redeemed.

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

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

Sending  Redemption  Proceeds by Wire.  The 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 wire.

Distributions   From  Retirement   Plans.   Requests  for   distributions   from
OppenheimerFunds-sponsored  IRAs,  403(b)(7)  custodial  plans,  401(k) plans or
pension   or   profit-sharing   plans   should   be   addressed   to   "Trustee,
OppenheimerFunds Retirement Plans," c/o the Transfer Agent at its address listed
in "How To Sell Shares" in the Prospectus or on the back cover of this Statement
of  Additional  Information.  The  request  must:  (1) state the  reason for the
distribution;   (2)  state  the  owner's  awareness  of  tax  penalties  if  the
distribution is
         premature; and
(3)      conform to the requirements of the plan and the Fund's other redemption
         requirements.
      Participants      (other      than      self-employed      persons)     in
OppenheimerFunds-sponsored  pension or  profit-sharing  plans with shares of the
Fund  held in the name of the plan or its  fiduciary  may not  directly  request
redemption of their accounts.  The plan administrator or fiduciary must sign the
request.

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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


How to Exchange Shares

      As stated in the Prospectus,  shares of a particular  class of Oppenheimer
funds having more than one class of shares may be  exchanged  only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class  designation are deemed "Class A" shares for this
purpose.  You can obtain a current list showing  which funds offer which classes
by calling the Distributor at 1-800-525-7048.
      |_| All of the  Oppenheimer  funds currently offer Class A, B and C shares
except  Oppenheimer  Money Market Fund,  Inc.,  Centennial  Money Market  Trust,
Centennial Tax Exempt Trust,  Centennial  Government Trust,  Centennial New York
Tax Exempt Trust, Centennial California Tax Exempt Trust, and Centennial America
Fund, L.P., which only offer Class A shares.
      |_| Oppenheimer  Main Street  California  Municipal Fund currently  offers
only Class A and Class B shares.
      |_| 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.
      |_| Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for
shares of any other Fund.

      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
a contingent deferred sales charge.

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

      For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Convertible Securities Fund, Class M shares can be exchanged only
for Class A shares of other  Oppenheimer  funds.  Exchanges to Class M shares of
Oppenheimer  Convertible  Securities  Fund are permitted  from Class A shares of
Oppenheimer  Money Market Fund,  Inc. or  Oppenheimer  Cash  Reserves  that were
acquired by exchange of Class M shares.  No other exchanges may be made to Class
M shares.
      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.

      |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.  However,  when Class A shares
acquired  by  exchange of Class A shares of other  Oppenheimer  funds  purchased
subject to a Class A contingent  deferred  sales  charge are redeemed  within 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares,  the Class A contingent  deferred sales charge is imposed on the
redeemed  shares.  The Class B  contingent  deferred  sales charge is imposed on
Class B shares  acquired by exchange if they are redeemed  within 6 years of the
initial  purchase  of the  exchanged  Class B  shares.  The  Class C  contingent
deferred sales charge is imposed on Class C shares  acquired by exchange if they
are redeemed  within 12 months of the initial  purchase of the exchanged Class C
shares.

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

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

      n 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.  For full or partial  exchanges of
an account made by telephone, any special account features such as Asset Builder
Plans and Automatic  Withdrawal Plans will be switched to the new account unless
the Transfer  Agent is instructed  otherwise.  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.

      n 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.
      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 and Class C shares
are expected to be lower than  dividends  on Class A shares.  That is because of
the effect of the asset-based sales charge on Class B and Class C shares.  Those
dividends  will also differ in amount as a consequence  of any difference in the
net asset values of the different classes of shares.

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

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

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

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

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

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

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






Additional Information About the Fund

The Distributor.  The Fund's shares are sold through dealers,  brokers and other
financial  institutions  that  have  a  sales  agreement  with  OppenheimerFunds
Distributor,  Inc.,  a  subsidiary  of the  Manager  that  acts  as  the  Fund's
Distributor.  The Distributor also distributes  shares of the other  Oppenheimer
funds and is  sub-distributor  for funds managed by a subsidiary of the Manager.
The Transfer Agent.  OppenheimerFunds  Services, the Fund's Transfer Agent, is a
division  of  the  Manager.   It  is  responsible  for  maintaining  the  Fund's
shareholder  registry  and  shareholder   accounting  records,  and  for  paying
dividends  and  distributions  to  shareholders.  It  also  handles  shareholder
servicing and administrative  functions.  It acts on an "at-cost" basis. It also
acts as

shareholder servicing agent for the other Oppenheimer funds. Shareholders should
direct  inquiries  about their accounts to the Transfer Agent at the address and
toll-free numbers shown on the back cover.

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

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






- --------------------------------------------------------------------------------
 Independent Auditors' Report
- --------------------------------------------------------------------------------


================================================================================
The Board of Directors and Shareholders of
Oppenheimer Disciplined Allocation Fund:

We have  audited  the  accompanying  statements  of  investments  and assets and
liabilities of Oppenheimer  Disciplined  Allocation Fund as of October 31, 1998,
the related  statement of operations for the year then ended,  the statements of
changes in net assets for each of the years in the  two-year  period then ended,
and the financial  highlights for each of the years in the two-year  period then
ended and the ten months ended October 31, 1996. 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. The financial  highlights for each of
the years in the three-year period ended December 31, 1995 were audited by other
auditors whose report dated February 9, 1996,  expressed an unqualified  opinion
on this information.

            We  conducted  our  audits in  accordance  with  generally  accepted
auditing  standards.  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 October 31, 1998, by correspondence  with the custodian and brokers;
and where  confirmations  were not received  from  brokers,  we performed  other
auditing procedures.  An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion.

            In our opinion,  the financial  statements and financial  highlights
referred to above  present  fairly,  in all  material  respects,  the  financial
position of Oppenheimer  Disciplined Allocation Fund as of October 31, 1998, the
results of its operations for the year then ended, the changes in its net assets
for each of the years in the  two-year  period  then  ended,  and the  financial
highlights  for each of the years in the two-year  period then ended and the ten
months ended October 31, 1996, in conformity with generally accepted  accounting
principles.


KPMG Peat Marwick LLP

Denver, Colorado
November 20, 1998








- --------------------------------------------------------------------------------
 Statement of Investments  October 31, 1998
- --------------------------------------------------------------------------------




Market Value

Shares                See Note 1
====================================================================================================================================

                   
Common Stocks--49.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Materials--0.8%
- ------------------------------------------------------------------------------------------------------------------------------------
Metals--0.8%
Aluminum Co. of
America
33,300                $  2,639,025
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--6.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Autos & Housing--2.5%
Federal-Mogul
Corp.
58,300                   3,159,131
- ------------------------------------------------------------------------------------------------------------------------------------
Hertz Corp., Cl.
A
20,700                     741,319
- ------------------------------------------------------------------------------------------------------------------------------------
Maytag
Corp.
57,700                   2,852,544
- ------------------------------------------------------------------------------------------------------------------------------------
Republic Industries,
Inc.(1)
41,100                     660,169
- ------------------------------------------------------------------------------------------------------------------------------------
Whirlpool
Corp.
15,500                     794,375

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

8,207,538

- ------------------------------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--1.7%
Alaska Air Group,
Inc.(1)
17,200                     618,125
- ------------------------------------------------------------------------------------------------------------------------------------
AMR
Corp.(1)
18,800                   1,259,600
- ------------------------------------------------------------------------------------------------------------------------------------
Delta Air Lines,
Inc.
4,600                     485,587
- ------------------------------------------------------------------------------------------------------------------------------------
Eastman Kodak
Co.
28,200                   2,185,500
- ------------------------------------------------------------------------------------------------------------------------------------
Hasbro,
Inc.
20,000                     701,250
- ------------------------------------------------------------------------------------------------------------------------------------
Outback Steakhouse,
Inc.(1)
7,200                     249,300
- ------------------------------------------------------------------------------------------------------------------------------------
Wendy's International,
Inc.
1,200                      25,200

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

5,524,562

- ------------------------------------------------------------------------------------------------------------------------------------
Retail: General--1.8%
Dayton Hudson
Corp.
31,600                   1,339,050
- ------------------------------------------------------------------------------------------------------------------------------------
Federated Department Stores,
Inc.(1)
24,800                     953,250
- ------------------------------------------------------------------------------------------------------------------------------------
Fruit of the Loom, Inc., Cl.
A(1)
31,700                     483,425
- ------------------------------------------------------------------------------------------------------------------------------------
K Mart
Corp.(1)
33,700                     476,012
- ------------------------------------------------------------------------------------------------------------------------------------
Nordstrom,
Inc.
19,200                     524,400
- ------------------------------------------------------------------------------------------------------------------------------------
Sears Roebuck &
Co.
48,000                   2,157,000

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

5,933,137

- ------------------------------------------------------------------------------------------------------------------------------------
Retail: Specialty--0.3%
Payless ShoeSource,
Inc.(1)
21,900                   1,027,931



                   13 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Statement of Investments  (Continued)
- --------------------------------------------------------------------------------




Market Value

Shares                 See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------

                    
Consumer Non-Cyclicals--11.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Beverages--0.7%
Anheuser-Busch Cos.,
Inc.
40,200                $  2,389,387
- ------------------------------------------------------------------------------------------------------------------------------------
Food--3.7%
Albertson's,
Inc.
42,000                   2,333,625
- ------------------------------------------------------------------------------------------------------------------------------------
General Mills,
Inc.
28,000                   2,058,000
- ------------------------------------------------------------------------------------------------------------------------------------
IBP,
Inc.
85,200                   2,305,725
- ------------------------------------------------------------------------------------------------------------------------------------
Kroger
Co.(1)
58,100                   3,224,550
- ------------------------------------------------------------------------------------------------------------------------------------
Safeway,
Inc.(1)
41,500                   1,984,219

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

11,906,119

- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare/Drugs--2.6%
Amgen,
Inc.(1)
53,900                   4,234,519
- ------------------------------------------------------------------------------------------------------------------------------------
Genzyme Corp. (General
Division)(1)
100,500                   4,227,281

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

8,461,800

- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--1.9%
Bard (C.R.),
Inc.
57,400                   2,450,262
- ------------------------------------------------------------------------------------------------------------------------------------
Tenet Healthcare
Corp.(1)
86,930                   2,428,607
- ------------------------------------------------------------------------------------------------------------------------------------
WellPoint Health Networks,
Inc.(1)
18,500                   1,362,062

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

6,240,931

- ------------------------------------------------------------------------------------------------------------------------------------
Household Goods--2.7%
Dial Corp.
(The)
83,400                   2,298,712
- ------------------------------------------------------------------------------------------------------------------------------------
Fort James
Corp.
89,350                   3,601,922
- ------------------------------------------------------------------------------------------------------------------------------------
Premark International,
Inc.
91,500                   2,899,406

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

8,800,040

- ------------------------------------------------------------------------------------------------------------------------------------
Energy--1.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Oil-Integrated--1.1%
Exxon
Corp.
32,100                   2,287,125
- ------------------------------------------------------------------------------------------------------------------------------------
Mobil
Corp.
18,800                   1,422,925

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

3,710,050

- ------------------------------------------------------------------------------------------------------------------------------------
Financial--6.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Banks--3.8%
Bank One
Corp.
67,300                   3,289,287
- ------------------------------------------------------------------------------------------------------------------------------------
BankBoston
Corp.
77,000                   2,834,562
- ------------------------------------------------------------------------------------------------------------------------------------
First Union
Corp.
59,500                   3,451,000
- ------------------------------------------------------------------------------------------------------------------------------------
Golden West Financial
Corp.
30,200                   2,738,762

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

12,313,611



                   14 Oppenheimer Disciplined Allocation Fund


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

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




Market Value

Shares                See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------

                   
Insurance--2.8%
ACE
Ltd.
29,600               $  1,002,700
- ------------------------------------------------------------------------------------------------------------------------------------
Allstate
Corp.
41,900                  1,804,319
- ------------------------------------------------------------------------------------------------------------------------------------
American International Group,
Inc.
31,100                  2,651,275
- ------------------------------------------------------------------------------------------------------------------------------------
Conseco,
Inc.
40,300                  1,397,906
- ------------------------------------------------------------------------------------------------------------------------------------
Equitable Cos.,
Inc.
18,600                    911,400
- ------------------------------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl.
A
43,500                  1,334,906

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

9,102,506

- ------------------------------------------------------------------------------------------------------------------------------------
Industrial--5.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Materials--1.0%
Owens
Corning
37,300                  1,354,456
- ------------------------------------------------------------------------------------------------------------------------------------
USG
Corp.
37,500                  1,788,281

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

3,142,737

- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Services--1.2%
Viad
Corp.
70,500                  1,934,344
- ------------------------------------------------------------------------------------------------------------------------------------
Waste Management, Inc.
(New)
40,165                  1,812,446

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

3,746,790

- ------------------------------------------------------------------------------------------------------------------------------------
Manufacturing--3.3%
Ingersoll-Rand
Co.
55,650                  2,810,325
- ------------------------------------------------------------------------------------------------------------------------------------
PACCAR,
Inc.
32,400                  1,413,450
- ------------------------------------------------------------------------------------------------------------------------------------
Textron,
Inc.
49,000                  3,644,375
- ------------------------------------------------------------------------------------------------------------------------------------
United Technologies
Corp.
28,600                  2,724,150

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

10,592,300

- ------------------------------------------------------------------------------------------------------------------------------------
Technology--9.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--1.6%
General Dynamics
Corp.
58,000                  3,432,875
- ------------------------------------------------------------------------------------------------------------------------------------
Lockheed Martin
Corp.
17,371                  1,934,695

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

5,367,570

- ------------------------------------------------------------------------------------------------------------------------------------
Computer Hardware--6.4%
Apple Computer,
Inc.(1)
66,300                  2,461,387
- ------------------------------------------------------------------------------------------------------------------------------------
Compaq Computer
Corp.
119,500                  3,779,188
- ------------------------------------------------------------------------------------------------------------------------------------
International Business Machines
Corp.
40,100                  5,952,344
- ------------------------------------------------------------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl.
A(1)
24,700                  1,727,456
- ------------------------------------------------------------------------------------------------------------------------------------
Seagate Technology,
Inc.(1)
42,300                  1,115,663
- ------------------------------------------------------------------------------------------------------------------------------------
Storage Technology Corp.
(New)(1)
68,800                  2,300,500
- ------------------------------------------------------------------------------------------------------------------------------------
Xerox
Corp.
34,700                  3,361,563

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

20,698,101



                   15 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Statement of Investments  (Continued)
- --------------------------------------------------------------------------------




Market Value

Shares           See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------

              
Computer Software/Services--1.0%
First Data
Corp.
38,200           $  1,012,300
- ------------------------------------------------------------------------------------------------------------------------------------
Network Associates,
Inc.(1)
49,300              2,095,250

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

3,107,550

- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications/Technology--0.6%
3Com
Corp.(1)
55,500              2,001,469
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities--8.4%
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Utilities--2.5%
Baltimore Gas & Electric
Co.
51,500              1,615,813
- ------------------------------------------------------------------------------------------------------------------------------------
Edison
International
61,100              1,611,513
- ------------------------------------------------------------------------------------------------------------------------------------
FPL Group,
Inc.
49,000              3,065,563
- ------------------------------------------------------------------------------------------------------------------------------------
Montana Power
Co.
44,100              1,910,081

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

8,202,970

- ------------------------------------------------------------------------------------------------------------------------------------
Gas Utilities--1.1%
Columbia Energy
Group
63,650              3,683,744
- ------------------------------------------------------------------------------------------------------------------------------------
Telephone Utilities--4.8%
AT&T
Corp.
70,100              4,363,725
- ------------------------------------------------------------------------------------------------------------------------------------
Bell Atlantic
Corp.
78,360              4,162,875
- ------------------------------------------------------------------------------------------------------------------------------------
Century Telephone Enterprises,
Inc.
17,600                999,900
- ------------------------------------------------------------------------------------------------------------------------------------
Frontier
Corp.
39,000              1,172,438
- ------------------------------------------------------------------------------------------------------------------------------------
US West,
Inc.
83,900              4,813,763

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

15,512,701

- ------------
Total Common Stocks (Cost
$145,694,225)
162,312,569

====================================================================================================================================
Other Securities--0.2%
- ------------------------------------------------------------------------------------------------------------------------------------
Ingersoll-Rand International Finance Corp. I, 6.22% Preferred
Redeemable Increased Dividend Equity Securities, 5/16/01
(Cost
$750,000)
30,000                785,625


Units
====================================================================================================================================
Rights, Warrants and Certificates--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp.
12/07(2)
100                 10,000
- ------------------------------------------------------------------------------------------------------------------------------------
Dairy Mart Convenience Stores, Inc. Wts., Exp.
12/01(2)
666                    173
- ------------------------------------------------------------------------------------------------------------------------------------
Intermedia Communications, Inc. Wts., Exp.
6/00(2)
100                  6,948
- ------------------------------------------------------------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp.
6/06(2)
500                  9,063
- ------------------------------------------------------------------------------------------------------------------------------------
Nextel International Ltd. Wts., Exp.
4/07(2)
100                    263
- ------------------------------------------------------------------------------------------------------------------------------------
Price Communications Corp. Wts., Exp.
8/07(2)
516                 15,480
- ------------------------------------------------------------------------------------------------------------------------------------
Signature Brands, Inc. Wts., Exp.
12/49(2)
100                  2,012

- ------------
Total Rights, Warrants and Certificates (Cost
$8,004)
43,939



                   16 Oppenheimer Disciplined Allocation Fund


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

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




Face                Market Value

Amount              See Note 1
====================================================================================================================================

                 
Asset-Backed Securities--1.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Dayton Hudson Credit Card Master Trust, Asset-Backed
Certificates, Series 1997-1, Cl. A, 6.25%,
8/25/05                                                  $  125,000
$    128,476
- ------------------------------------------------------------------------------------------------------------------------------------
Housing Securities, Inc., Series 1993-G, Cl. G4, 6.625%,
1/25/09                                       750,000               754,448
- ------------------------------------------------------------------------------------------------------------------------------------
IROQUOIS Trust, Asset-Backed Amortizing Nts.,
Series 1997-2, Cl. A, 6.752%,
6/25/07(2)
1,175,000             1,194,736
- ------------------------------------------------------------------------------------------------------------------------------------
Olympic Automobile Receivables Trust, Automobile
Receivables-Backed Nts., Series 1997-A, Cl. A-5, 6.80%,
2/15/05                                      1,150,000             1,173,180

- ------------
Total Asset-Backed Securities (Cost
$3,203,513)
3,250,840

====================================================================================================================================
Mortgage-Backed Obligations--5.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., Commercial
Mtg. Obligations, Series 1996-1, Cl. A2, 7.60%,
3/18/06                                              1,500,000
1,622,813
- ------------------------------------------------------------------------------------------------------------------------------------
Countrywide Funding Corp., Mtg. Pass-Through Certificates,
Series 1994-10, Cl. A3, 6%,
5/25/09
250,000               251,483
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank, Medium-Term Nts., 5.24%,
10/1/08                                           1,750,000
1,733,197
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Collateralized Mtg.
Obligations, Gtd. Multiclass Mtg. Participation Certificates:
Series 1711, Cl. EA, 7%,
3/15/24
200,000               204,686
Series 1987, Cl. K, 7.50%,
9/15/27(2)
176,576               176,577
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Multiclass Mtg.
Participation Certificates:
6%,
3/1/09
814,446               820,083
Series 1337, Cl. D, 6%,
8/15/07
1,000,000             1,000,620
Series 1820, Cl. PL, 5.75%,
7/15/06
1,000,000             1,005,930
Series 1843, Cl. VB, 7%,
4/15/03
65,000                67,051
Series 1849, Cl. VA, 6%,
12/15/10
824,531               837,411
Series 1994-43, Cl. PE, 6%,
12/25/19
800,000               805,000
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Interest-Only
Stripped Mtg.-Backed Security:
Series 1542, Cl. QC, 7.937%,
10/15/20(3)
400,000                51,250
Series 1583, Cl. IC, 6.762%-7.846%,
1/15/20(3)
2,518,751               201,500
Series 1661, Cl. PK, 9.687%,
11/15/06(3)
511,906                31,994
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%,
12/1/03
685,614               688,665
6.50%,
3/1/26-4/1/26
765,210               771,624
7%,
4/1/00
45,722                46,016
7.50%,
1/1/08-6/1/08
670,390               688,478



                   17 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Statement of Investments  (Continued)
- --------------------------------------------------------------------------------




Face                 Market Value

Amount               See Note 1
====================================================================================================================================

                  
Mortgage-Backed Obligations (continued)
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Multiclass Mtg. Participation Certificates, Trust 1992-15,
Cl. KZ, 7%,
2/25/22
$   796,254          $    808,938
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg. Obligations,
Gtd. Real Estate Mtg. Investment Conduit Pass-Through Certificates:
Trust 1993-181, Cl. C, 5.40%,
10/25/02
46,188                46,030
Trust 1993-190, Cl. Z, 5.85%,
7/25/08
410,432               412,099
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Interest-Only Stripped
Mtg.-Backed Security, Trust 1993-223, Cl. PM, 7.448%,
10/25/23(3)                                    1,587,257               201,375
- ------------------------------------------------------------------------------------------------------------------------------------
GE Capital Mortgage Services, Inc., Gtd. Real Estate Mtg.
Investment Conduit Pass-Through Certificates, Series 1994-7,
Cl. A18, 6%,
2/25/09
1,143,592             1,092,840
- ------------------------------------------------------------------------------------------------------------------------------------
Government National Mortgage Assn.:
7%,
4/15/09-2/15/24
1,275,446             1,306,816
7.50%,
3/15/09
494,780               509,213
8%,
5/15/17
378,404               395,716
- ------------------------------------------------------------------------------------------------------------------------------------
IMC Home Equity Trust, Asset-Backed Home Equity
Securities, Series 1998-3, Cl. A5, 6.36%,
8/20/22(4)
700,000               701,094
- ------------------------------------------------------------------------------------------------------------------------------------
Norwest Asset Securities Corp., Mtg. Pass-Through Certificates,
Series 1997-14, Cl. A-3, 6.75%,
10/25/27
1,000,000             1,007,810
- ------------------------------------------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., Mtg. Asset-Backed Pass-Through
Certificates, Series 1997-QS9, Cl. 2, 6.75%,
9/25/27
875,000               873,626

- ------------
Total Mortgage-Backed Obligations (Cost
$18,051,958)
18,359,935

====================================================================================================================================
U.S. Government Obligations--9.3%
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
6%,
2/15/26
7,050,000             7,702,132
7.50%,
11/15/16(5)
2,000,000             2,495,626
8.75%,
5/15/17(5)
8,250,000            11,537,113
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
5.625%,
2/15/06
5,600,000             5,990,253
6.125%,
8/15/07
1,250,000             1,378,908
6.50%,
8/15/05
1,000,000             1,115,938

- ------------
Total U.S. Government Obligations (Cost
$26,507,430)
30,219,970



                   18 Oppenheimer Disciplined Allocation Fund


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

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




Face               Market Value

Amount             See Note 1
====================================================================================================================================

                
Foreign Government Obligations--0.1%
- ------------------------------------------------------------------------------------------------------------------------------------
United Mexican States Bonds, 6.97%, 8/12/00 (Cost
$246,255)                                          $  250,000         $
237,500

====================================================================================================================================
Municipal Bonds and Notes--0.3%
- ------------------------------------------------------------------------------------------------------------------------------------
CA Infrastructure & ED Bank Special Purpose Trust Certificates,
Series 1997-1, 6.28%, 9/25/05 (Cost
$1,001,493)
1,000,000            1,021,900

====================================================================================================================================
Non-Convertible Corporate Bonds and Notes--20.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Materials--0.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals--0.4%
Morton International, Inc., 9.25% Credit Sensitive Nts.,
6/1/20                                         565,000              757,817
- ------------------------------------------------------------------------------------------------------------------------------------
PPG Industries, Inc., 9% Debs.,
5/1/21
315,000              405,259

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

1,163,076

- ------------------------------------------------------------------------------------------------------------------------------------
Metals--0.3%
Alcan Aluminum Ltd., 9.625% Debs.,
7/15/19
975,000            1,048,700
- ------------------------------------------------------------------------------------------------------------------------------------
Paper--0.2%
Aracruz Celulose SA, 10.375% Debs.,
1/31/02(2)
750,000              613,125
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Cyclicals--2.0%
- ------------------------------------------------------------------------------------------------------------------------------------
Autos & Housing--0.3%
Black & Decker Corp., 6.625% Nts.,
11/15/00
810,000              834,181
- ------------------------------------------------------------------------------------------------------------------------------------
Leisure & Entertainment--0.6%
Hilton Hotels Corp., 7.375% Nts.,
6/1/02
50,000               49,724
- ------------------------------------------------------------------------------------------------------------------------------------
Paramount Communications, Inc., 7.50% Sr. Nts.,
1/15/02                                                 750,000
796,754
- ------------------------------------------------------------------------------------------------------------------------------------
Tricon Global Restaurants, Inc., 7.45% Sr. Unsec. Nts.,
5/15/05                                       1,000,000            1,020,025

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

1,866,503

- ------------------------------------------------------------------------------------------------------------------------------------
Media--0.7%
Reed Elsevier, Inc., 6.625% Nts.,
10/15/23(6)
400,000              420,432
- ------------------------------------------------------------------------------------------------------------------------------------
TCI Communications, Inc., 6.375% Sr. Unsub. Nts.,
5/1/03                                                500,000
517,696
- ------------------------------------------------------------------------------------------------------------------------------------
TKR Cable I, Inc., 10.50% Sr. Debs.,
10/30/07
875,000              960,371
- ------------------------------------------------------------------------------------------------------------------------------------
Viacom, Inc., 6.75% Sr. Unsec. Nts.,
1/15/03
500,000              513,945

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

2,412,444

- ------------------------------------------------------------------------------------------------------------------------------------
Retail: General--0.4%
Federated Department Stores, Inc., 6.125% Cv. Sub. Nts.,
9/1/01(4)                                      750,000              764,002
- ------------------------------------------------------------------------------------------------------------------------------------
Price/Costco Cos., Inc., 7.125% Sr. Nts.,
6/15/05
550,000              593,571

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

1,357,573



                   19 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Statement of Investments  (Continued)
- --------------------------------------------------------------------------------




Face               Market Value

Amount             See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------

                
Consumer Non-Cyclicals--2.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Food--1.1%
CPC International, Inc., 6.15% Unsec. Nts., Series C,
1/15/06                                        $  500,000         $    521,454
- ------------------------------------------------------------------------------------------------------------------------------------
Dole Food Co. Inc., 6.75% Nts.,
7/15/00
650,000              658,562
- ------------------------------------------------------------------------------------------------------------------------------------
Grand Metro Inventory Corp., 7.125% Nts.,
9/15/04
1,250,000            1,343,149
- ------------------------------------------------------------------------------------------------------------------------------------
RACERS-Kellogg-98-1, 5.75% Nts.,
2/2/01(6)
1,000,000            1,013,108

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

3,536,273

- ------------------------------------------------------------------------------------------------------------------------------------
Healthcare/Supplies & Services--0.3%
Columbia/HCA Healthcare Corp., 6.875% Nts.,
7/15/01
120,000              117,307
- ------------------------------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.:
8% Sr. Nts.,
1/15/05
325,000              332,898
8.625% Sr. Unsec. Nts.,
12/1/03
500,000              526,252

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

976,457

- ------------------------------------------------------------------------------------------------------------------------------------
Household Goods--0.9%
Dial Corp. (The), 5.89% Medium-Term Nts., Series A,
10/22/01                                            750,000
760,060
- ------------------------------------------------------------------------------------------------------------------------------------
Fort James Corp.:
6.234% Nts.,
3/15/01
250,000              256,723
6.875% Sr. Nts.,
9/15/07
1,000,000            1,035,441
- ------------------------------------------------------------------------------------------------------------------------------------
Kimberly-Clark Corp., 7.875% Debs.,
2/1/23
355,000              391,805
- ------------------------------------------------------------------------------------------------------------------------------------
Procter & Gamble Co., 9.36% Debs., Series A,
1/1/21
250,000              324,914

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

2,768,943

- ------------------------------------------------------------------------------------------------------------------------------------
Energy--2.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Services & Producers--1.4%
Chesapeake Energy Corp., 7.875% Sr. Nts., Series B,
3/15/04                                             750,000
596,250
- ------------------------------------------------------------------------------------------------------------------------------------
Coastal Corp.:
8.125% Sr. Nts.,
9/15/02
565,000              607,175
8.75% Sr. Nts.,
5/15/99
35,000               35,550
- ------------------------------------------------------------------------------------------------------------------------------------
Columbia Gas System, Inc., 6.80% Nts., Series C,
11/28/05                                               500,000
529,402
- ------------------------------------------------------------------------------------------------------------------------------------
Louisiana Land & Exploration Co., 7.65% Debs.,
12/1/23                                                  990,000
1,052,200
- ------------------------------------------------------------------------------------------------------------------------------------
Petroliam Nasional Berhad, 6.875% Nts.,
7/1/03(2)
500,000              396,183
- ------------------------------------------------------------------------------------------------------------------------------------
TransCanada PipeLines Ltd., 9.875% Debs.,
1/1/21
500,000              649,985
- ------------------------------------------------------------------------------------------------------------------------------------
Williams Holdings of Delaware, Inc., 6.25% Sr. Unsec. Debs.,
2/1/06                                     750,000              771,638

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

4,638,383



                   20 Oppenheimer Disciplined Allocation Fund


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

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




Face               Market Value

Amount             See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------

                
Oil-Integrated--0.9%
Gulf Canada Resources Ltd.:
8.25% Sr. Nts.,
3/15/17
$  575,000         $    538,703
9% Debs.,
8/15/99
325,000              326,370
- ------------------------------------------------------------------------------------------------------------------------------------
Norcen Energy Resources Ltd., 6.80% Debs.,
7/2/02
1,000,000            1,011,783
- ------------------------------------------------------------------------------------------------------------------------------------
Petroleum Geo-Services ASA, 7.50% Nts.,
3/31/07
825,000              876,614
- ------------------------------------------------------------------------------------------------------------------------------------
Standard Oil Co., 9% Debs.,
6/1/19
65,000               66,309

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

2,819,779

- ------------------------------------------------------------------------------------------------------------------------------------
Financial--5.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Banks--1.2%
Capital One Bank, Inc., 6.375% Sr. Nts.,
2/15/03
500,000              507,079
- ------------------------------------------------------------------------------------------------------------------------------------
Chase Manhattan Corp. (New), 10.125% Sub. Nts.,
11/1/00                                                 250,000
272,634
- ------------------------------------------------------------------------------------------------------------------------------------
Citicorp, 5.625% Sr. Nts.,
2/15/01
635,000              640,479
- ------------------------------------------------------------------------------------------------------------------------------------
Fleet Mtg./Norstar Group, Inc., 9.90% Sub. Nts.,
6/15/01                                                360,000
400,320
- ------------------------------------------------------------------------------------------------------------------------------------
Greenpoint Bank (Brooklyn, New York), 6.70% Medium-Term
Sr. Bank Nts.,
7/15/02
1,000,000            1,036,424
- ------------------------------------------------------------------------------------------------------------------------------------
Integra Financial Corp., 6.50% Sub. Nts.,
4/15/00
110,000              112,067
- ------------------------------------------------------------------------------------------------------------------------------------
People's Bank of Bridgeport (Connecticut), 7.20% Sub. Nts.,
12/1/06                                   1,000,000            1,064,668

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

4,033,671

- ------------------------------------------------------------------------------------------------------------------------------------
Diversified Financial--2.5%
American General Institutional Capital B, 8.125% Bonds,
Series B,
3/15/46(6)
575,000              629,447
- ------------------------------------------------------------------------------------------------------------------------------------
Capital One Financial Corp., 7.25% Nts.,
12/1/03
480,000              480,757
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Credit Co., 5.55% Unsec. Nts.,
2/15/01
1,130,000            1,134,696
- ------------------------------------------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.05% Medium-Term Nts.,
Series D,
3/1/01
700,000              706,383
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., Medium-Term Nts., 6.56%,
11/13/01                                      100,000              100,156
- ------------------------------------------------------------------------------------------------------------------------------------
Fleet Mtg. Group, Inc., 6.50% Nts.,
9/15/99
250,000              252,138
- ------------------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 6% Sr. Unsec. Nts.,
1/14/03
1,000,000            1,012,104
- ------------------------------------------------------------------------------------------------------------------------------------
General Electric Capital Corp., 5.77% Nts., Series A,
8/27/01                                         1,000,000            1,023,930
- ------------------------------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.625% Nts.,
2/15/01
162,000              163,311
- ------------------------------------------------------------------------------------------------------------------------------------
GS Escrow Corp., 6.75% Sr. Nts.,
8/1/01(6)
1,000,000              979,418
- ------------------------------------------------------------------------------------------------------------------------------------
Norsk Hydro AS, 8.75% Bonds,
10/23/01
500,000              549,063
- ------------------------------------------------------------------------------------------------------------------------------------
PHH Corp., 6.50% Nts.,
2/1/00
350,000              355,076
- ------------------------------------------------------------------------------------------------------------------------------------
Sears Roebuck Acceptance Corp., 6% Unsec. Bonds,
3/20/03                                                750,000
764,951

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

8,151,430



                   21 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Statement of Investments  (Continued)
- --------------------------------------------------------------------------------




Face              Market Value

Amount            See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------

               
Insurance--1.2%
Cigna Corp., 7.90% Nts.,
12/14/98
$  120,000        $    120,318
- ------------------------------------------------------------------------------------------------------------------------------------
Conseco Financing Trust III, 8.796% Bonds,
4/1/27
850,000             872,073
- ------------------------------------------------------------------------------------------------------------------------------------
Conseco, Inc., 6.40% Nts.,
6/15/01
500,000             494,985
- ------------------------------------------------------------------------------------------------------------------------------------
Equitable Life Assurance Society (U.S.A.), 6.95% Surplus Nts.,
12/1/05(6)                                500,000             532,530
- ------------------------------------------------------------------------------------------------------------------------------------
GenAmerica Capital I, 8.525% Nts.,
6/30/27(6)
750,000             751,860
- ------------------------------------------------------------------------------------------------------------------------------------
Life Re Capital Trust I, 8.72% Nts.,
6/15/27(6)
500,000             568,117
- ------------------------------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 6.75% Nts.,
4/15/01                                                   615,000
638,951

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

3,978,834

- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts--0.6%
Chelsea GCA Realty Partner, Inc., 7.75% Unsec. Nts.,
1/26/01                                           1,050,000
1,061,944
- ------------------------------------------------------------------------------------------------------------------------------------
First Industrial LP, 7.15% Bonds,
5/15/27
560,000             558,605
- ------------------------------------------------------------------------------------------------------------------------------------
Simon DeBartolo Group, Inc., 6.625% Nts.,
6/15/03(6)
500,000             489,531

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

2,110,080

- ------------------------------------------------------------------------------------------------------------------------------------
Industrial--3.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Materials--0.3%
American Standard Cos., Inc., 10.875% Sr. Nts.,
5/15/99(2)                                               840,000
858,900
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Services--2.4%
Fred Meyer, Inc., 7.375% Sr. Nts.,
3/1/05
1,250,000           1,318,801
- ------------------------------------------------------------------------------------------------------------------------------------
Norse CBO Ltd., 6.515% Collateralized Bond Obligations,
Series 1A, Cl. A3,
8/13/10(2)
1,000,000             995,000
- ------------------------------------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc., 7.15% Sr. Nts.,
5/15/05
1,000,000           1,006,326
- ------------------------------------------------------------------------------------------------------------------------------------
Raytheon Co., 6.45% Nts.,
8/15/02
500,000             517,909
- ------------------------------------------------------------------------------------------------------------------------------------
Sony Corp., 6.125% Bonds,
3/4/03
750,000             766,075
- ------------------------------------------------------------------------------------------------------------------------------------
Sun Co., Inc., 7.95% Debs.,
12/15/01
1,175,000           1,258,041
- ------------------------------------------------------------------------------------------------------------------------------------
Tyco International Group SA, 6.125% Nts.,
11/1/08(6)
500,000             495,590
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Industries, Inc., 7.125% Sr. Nts.,
10/15/03(2)
500,000             501,550
- ------------------------------------------------------------------------------------------------------------------------------------
USI American Holdings, Inc., 7.25% Sr. Nts., Series B,
12/1/06                                           830,000             855,974

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

7,715,266



                   22 Oppenheimer Disciplined Allocation Fund


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

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




Face                Market Value

Amount              See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------

                 
Manufacturing--0.3%
U.S. Filter Corp., 6.375% Bonds,
5/15/01(6)
$1,000,000          $    999,626
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation--0.6%
CSX Corp., 7.05% Debs.,
5/1/02
145,000               152,181
- ------------------------------------------------------------------------------------------------------------------------------------
Federal-Mogul Corp., 7.50% Nts.,
7/1/04
500,000               492,548
- ------------------------------------------------------------------------------------------------------------------------------------
Norfolk Southern Corp., 7.35% Nts.,
5/15/07
125,000               137,152
- ------------------------------------------------------------------------------------------------------------------------------------
Union Pacific Corp.:
7% Nts.,
6/15/00
605,000               619,538
7.60% Nts.,
5/1/05
500,000               538,732

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

1,940,151

- ------------------------------------------------------------------------------------------------------------------------------------
Technology--1.3%
- ------------------------------------------------------------------------------------------------------------------------------------
Aerospace/Defense--0.6%
Lockheed Martin Corp., 6.85% Unsec. Nts.,
5/15/01
1,250,000             1,300,543
- ------------------------------------------------------------------------------------------------------------------------------------
Northwest Airlines Corp., 8.375% Unsec. Nts.,
3/15/04
750,000               764,492

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

2,065,035

- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications/Technology--0.7%
AT&T Capital Corp., 6.25% Medium-Term Nts., Series F,
5/15/01                                          725,000               710,878
- ------------------------------------------------------------------------------------------------------------------------------------
US West Capital Funding, Inc., 6.125% Nts.,
7/15/02
500,000               516,008
- ------------------------------------------------------------------------------------------------------------------------------------
Worldcom, Inc., 6.25% Sr. Unsec. Nts.,
8/15/03
1,000,000             1,038,171

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

2,265,057

- ------------------------------------------------------------------------------------------------------------------------------------
Utilities--2.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Electric Utilities--0.8%
El Paso Electric Co., 8.25% First Mtg. Bonds, Series C,
2/1/03                                         500,000               530,000
- ------------------------------------------------------------------------------------------------------------------------------------
Hawaiian Electric Industries, Inc., 6.31% Medium-Term Nts.,
Series B,
2/19/02
1,000,000             1,022,482
- ------------------------------------------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 7.125% Sr. Unsec. Nts.,
Series C,
7/1/01
1,000,000             1,018,321

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

2,570,803



                   23 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Statement of Investments  (Continued)
- --------------------------------------------------------------------------------




Face                Market Value

Amount              See Note 1
- ------------------------------------------------------------------------------------------------------------------------------------

                 
Gas Utilities--1.0%
Northern Illinois Gas Co., 6.45% First Mtg. Bonds,
8/1/01                                           $    680,000        $
697,281
- ------------------------------------------------------------------------------------------------------------------------------------
Southern California Gas Co., 6.38% Medium-Term Nts.,
10/29/01                                            500,000
518,700
- ------------------------------------------------------------------------------------------------------------------------------------
Tennessee Gas Pipeline Co., 7.50% Bonds,
4/1/17
825,000             861,861
- ------------------------------------------------------------------------------------------------------------------------------------
Williams Cos., Inc., 6.20% Nts.,
8/1/02
1,250,000           1,273,985

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

3,351,827

- ------------------------------------------------------------------------------------------------------------------------------------
Telephone Utilities--0.3%
Ameritech Capital Funding Corp., 5.65% Unsec. Nts.,
1/15/01                                              850,000
868,185

- ------------
Total Non-Convertible Corporate Bonds and Notes (Cost
$63,833,000)                                                        64,944,302

====================================================================================================================================
Convertible Corporate Bonds and Notes--0.0%
- ------------------------------------------------------------------------------------------------------------------------------------
BankAmerica Corp. (New), 8.50% Sub. Capital Nts.,
3/1/99                                                  40,000
40,388
- ------------------------------------------------------------------------------------------------------------------------------------
Geotek Communications, Inc., 12% Cv. Sr. Sub. Nts.,
2/15/01(7)                                           100,000
- --

- ------------
Total Convertible Corporate Bonds and Notes (Cost
$135,112)
40,388

====================================================================================================================================
Short-Term Notes--8.8% (8)
- ------------------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
4.78%,
11/4/98
8,000,000           7,996,813
5.14%,
11/12/98
5,600,000           5,591,290
5.425%,
11/17/98
10,000,000           9,978,756
- ------------------------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.145%,
11/10/98
5,000,000           4,993,569

- ------------
Total Short-Term Notes (Cost
$28,560,428)
28,560,428

====================================================================================================================================
Repurchase Agreements--2.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreement with Zion First National Bank, 5.38%, dated 10/30/98, to be
repurchased  at $8,703,901 on 11/2/98,  collateralized  by U.S.  Treasury  Nts.,
7.50%, 11/15/01, with a value of $8,887,611 (Cost
$8,700,000)
8,700,000           8,700,000

- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments, at Value (Cost
$296,691,418)
98.0%        318,477,396
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets Net of
Liabilities
2.0           6,658,836

- ------------        ------------
Net
Assets
100.0%       $325,136,232

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



                   24 Oppenheimer Disciplined Allocation Fund


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

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


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

1. Non-income producing security.

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

3.  Interest-Only  Strips  represent  the right to receive the monthly  interest
payments on an underlying pool of mortgage  loans.  These  securities  typically
decline in price as interest rates decline.  Most other fixed income  securities
increase in price when  interest  rates  decline.  The  principal  amount of the
underlying  pool  represents  the notional  amount on which current  interest is
calculated. The price of these securities is typically more sensitive to changes
in prepayment  rates than traditional  mortgage-backed  securities (for example,
GNMA  pass-throughs).  Interest rates disclosed  represent  current yields based
upon the  current  cost basis and  estimated  timing  and amount of future  cash
flows.

4. Represents the current interest rate for a variable rate security.

5.  Securities  with  an  aggregate  market  value  of  $3,202,415  are  held in
collateralized  accounts to cover initial  margin  requirements  on open futures
sales contracts. See Note 5 of Notes to Financial Statements.

6.  Represents   securities  sold  under  Rule  144A,   which  are  exempt  from
registration under the Securities Act of 1933, as amended. These securities have
been  determined  to be  liquid  under  guidelines  established  by the Board of
Directors. These securities amount to $6,879,659 or 2.12% of the Fund's net
assets as of October 31, 1998.

7. Non-income producing security--issuer is in default.

8. Short-term  notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.

See accompanying Notes to Financial Statements.


                   25 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Statement of Assets and Liabilities  October 31, 1998
- --------------------------------------------------------------------------------


================================================================================
Assets
Investments, at value (cost $296,691,418)--see accompanying
statement
$318,477,396
- --------------------------------------------------------------------------------
Cash
119,647
- --------------------------------------------------------------------------------
Receivables and other assets:
Investments sold
5,804,204
Interest,  dividends and principal paydowns 2,225,440 Daily variation on futures
contracts--Note 5 311,025 Shares of capital stock sold 165,252 Other 6,538

- ------------
Total assets
327,109,502

================================================================================
Liabilities
Payables and other liabilities:
Investments purchased
1,286,460
Shares  of  capital  stock  redeemed  350,875  Directors'  fees--Note  1 126,704
Distribution  and service plan fees 68,641  Shareholder  reports 46,648 Transfer
and shareholder servicing agent fees 39,052 Other 54,890

- ------------
Total liabilities
1,973,270

================================================================================
Net Assets
$325,136,232

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

================================================================================
Composition of Net Assets
Par value of shares of capital stock                                $
21,031
- --------------------------------------------------------------------------------
Additional paid-in capital
294,014,624
- --------------------------------------------------------------------------------
Undistributed net investment income
986,365
- --------------------------------------------------------------------------------
Accumulated net realized gain on investments and
foreign currency transactions
4,944,552
- --------------------------------------------------------------------------------
Net unrealized appreciation on investments and translation of
assets and liabilities denominated in foreign currencies
25,169,660

- ------------
Net assets
$325,136,232

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


                   26 Oppenheimer Disciplined Allocation Fund


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

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


================================================================================
Net Asset Value Per Share
Class A Shares:
Net  asset  value  and  redemption  price  per  share  (based  on net  assets of
$298,558,127 and 19,323,008 shares of capital stock outstanding) $15.45

Maximum  offering price per share (net asset value plus sales charge of 5.75% of
offering price) $16.39

- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and  offering  price per share (based on net assets of  $21,753,878  and
1,392,591 shares of capital stock outstanding) $15.62

- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and  offering  price per share  (based on net assets of  $4,824,227  and
315,163 shares of capital stock outstanding) $15.31

See accompanying Notes to Financial Statements.


                   27 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Statement of Operations For the Year Ended October 31, 1998
- --------------------------------------------------------------------------------


===============================================================================
Investment Income
Interest                                                           $
9,484,998
- -------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $17,270)
1,929,206

- ------------
Total income
11,414,204

===============================================================================
Expenses
Management fees--Note 4
1,774,240
- -------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A
671,280
Class B
141,994
Class C
28,515
- -------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4
258,679
- -------------------------------------------------------------------------------
Shareholder reports
67,412
- -------------------------------------------------------------------------------
Directors' fees and expenses--Note 1
30,000
- -------------------------------------------------------------------------------
Legal, auditing and other professional fees
29,150
- -------------------------------------------------------------------------------
Registration and filing fees:
Class A
19,750
Class B
3,812
Class C
962
- -------------------------------------------------------------------------------
Accounting service fees--Note 4
15,000
- -------------------------------------------------------------------------------
Custodian fees and expenses
11,183
- -------------------------------------------------------------------------------
Insurance expenses
9,762
- -------------------------------------------------------------------------------
Other
36,942

- ------------
Total expenses
3,098,681

===============================================================================
Net Investment Income
8,315,523

================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments
4,973,557
Closing of futures contracts
76,396
Foreign currency transactions
(2,730)

- ------------
Net realized gain
5,047,223
- -------------------------------------------------------------------------------

Net change in unrealized appreciation or depreciation on
investments:
Investments
233,468
Translation of assets and liabilities denominated in foreign
currencies
579

- ------------
Net change
234,047

- ------------
Net realized and unrealized gain
5,281,270

===============================================================================
Net Increase in Net Assets Resulting from Operations               $
13,596,793

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

See accompanying Notes to Financial Statements.


                   28 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Statements of Changes in Net Assets
- --------------------------------------------------------------------------------



                                                                            Year
Ended October 31,

1998             1997
===================================================================================================

              
Operations
Net investment income                                                $
8,315,523    $   7,729,813
- ---------------------------------------------------------------------------------------------------
Net realized gain
5,047,223       27,308,175
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
234,047        7,070,415

- -------------    -------------
Net increase in net assets resulting from operations
13,596,793       42,108,403

===================================================================================================
Dividends  and  Distributions  to  Shareholders  Dividends  from net  investment
income:
Class A
(7,782,493)      (8,280,055)
Class B
(326,896)        (168,085)
Class C
(68,904)         (21,190)
- ---------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A
(26,053,041)     (19,860,930)
Class B
(1,001,059)        (389,052)
Class C
(171,534)         (21,246)

===================================================================================================
Capital Stock Transactions
Net  increase   (decrease)   in  net  assets   resulting   from  capital   stock
transactions--Note 2:
Class A
75,962,031       (2,888,598)
Class B
13,987,615        4,390,846
Class C
3,532,579        1,194,708

===================================================================================================
Net Assets
Total increase
71,675,091       16,064,801
- ---------------------------------------------------------------------------------------------------
Beginning of period
253,461,141      237,396,340

- -------------    -------------
End of period (including undistributed net investment
income of $986,365 and $828,581, respectively)                       $
325,136,232    $ 253,461,141

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


See accompanying Notes to Financial Statements.


                   29 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Financial Highlights
- --------------------------------------------------------------------------------



                                               Class A

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

                                               Year Ended October 31,
                                               1998
1997              1996(3)
=========================================================================================
                                            
               
Per Share Operating Data
Net asset value, beginning of period             $16.81
$16.00            $15.46
- -----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                               .45
 .51(4)            .46
Net realized and unrealized gain (loss)             .45
2.25(4)            .49
                                                 ------
- ------            ------
Total income (loss) from investment
operations                                          .90
2.76               .95

- -----------------------------------------------------------------------------------------
Dividends and distributions
to shareholders:
Dividends from net investment income               (.45)
(.56)             (.36)
Distributions from net realized gain              (1.81)
(1.39)             (.05)
                                                 ------
- ------            ------
Total dividends and distributions
to shareholders                                   (2.26)
(1.95)             (.41)
- -----------------------------------------------------------------------------------------
Net asset value, end of period                   $15.45
$16.81            $16.00
                                                 ======
======            ======

=========================================================================================
Total Return, at Net Asset Value(5)                5.93%
18.82%             6.27%

=========================================================================================
Ratios/Supplemental Data
Net assets, end of period
(in thousands)                                 $298,558
$243,267          $233,289
- -----------------------------------------------------------------------------------------
Average net assets (in thousands)              $268,715
$238,821          $228,203
- -----------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income                              2.96%
3.17%             3.52%(6)
Expenses                                           1.04%
1.11%             1.11%(6)
- -----------------------------------------------------------------------------------------
Portfolio turnover rate(7)                         96.9%
98.0%             85.4%





                                               Class A

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

                                               Year Ended December 31,
                                               1995
1994            1993
=======================================================================================
                                            
             
Per Share Operating Data
Net asset value, beginning of period             $13.44
$14.54          $13.81
- ---------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                               .60
 .55             .48
Net realized and unrealized gain (loss)            2.59
(.86)           1.70
                                                 ------
- ------          ------
Total income (loss) from
investment
operations                                         3.19
(.31)           2.18

- ---------------------------------------------------------------------------------------
Dividends and
distributions
to
shareholders:
Dividends from net investment income               (.60)
(.55)           (.48)
Distributions from net realized gain               (.57)
(.24)           (.97)
                                                 ------
- ------          ------
Total dividends and
distributions
to shareholders                                   (1.17)
(.79)          (1.45)
- ---------------------------------------------------------------------------------------
Net asset value, end of period                   $15.46
$13.44          $14.54
                                                 ======
======          ======

=======================================================================================
Total Return, at Net Asset Value(5)               23.95%
(2.11)%         15.89%

=======================================================================================
Ratios/Supplemental
Data
Net assets, end of
period
(in thousands)                                 $218,099
$177,904        $171,205
- ---------------------------------------------------------------------------------------
Average net assets (in thousands)              $200,172
$187,655        $138,629
- ---------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income                              4.00%
3.80%           3.40%
Expenses                                           1.17%
0.96%           1.02%
- ---------------------------------------------------------------------------------------
Portfolio turnover rate(7)                         55.2%
115.0%          155.2%


1. For the period from May 1, 1996 (inception of offering) to October 31, 1996.

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

3. For the ten months ended  October 31, 1996.  The Fund changed its fiscal year
end from December 31 to October 31. On March 18, 1996, OppenheimerFunds, Inc.
became the investment advisor to the Fund.

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

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


                   30 Oppenheimer Disciplined Allocation Fund


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

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



                                                Class B

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

Period Ended
                                                Year Ended October
31,                                December 31,
                                                1998
1997              1996(3)            1995(2)
============================================================================================================
                                             
                               
Per Share Operating Data
Net asset value, beginning of period             $16.99
$16.16            $15.66             $15.48
- ------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                               .36
 .40(4)            .31                .07
Net realized and unrealized gain (loss)             .43
2.27(4)            .54                .70
                                                 ------
- ------            ------             ------
Total income (loss) from
investment
operations                                          .79
2.67               .85                .77

- ------------------------------------------------------------------------------------------------------------
Dividends and
distributions
to
shareholders:
Dividends from net investment income               (.35)
(.45)             (.30)              (.07)
Distributions from net realized gain              (1.81)
(1.39)             (.05)              (.52)
                                                 ------
- ------            ------             ------
Total dividends and
distributions
to shareholders                                   (2.16)
(1.84)             (.35)              (.59)
- ------------------------------------------------------------------------------------------------------------
Net asset value, end of period                   $15.62
$16.99            $16.16             $15.66
                                                 ======
======            ======             ======

============================================================================================================
Total Return, at Net Asset Value(5)                5.10%
17.96%             5.51%              4.93%

============================================================================================================
Ratios/Supplemental
Data
Net assets, end of
period
(in thousands)                                  $21,754
$8,720            $3,919               $650
- ------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)               $14,235
$6,183            $2,324               $375
- ------------------------------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income                              2.19%
2.32%             2.86%(6)           0.73%(6)
Expenses                                           1.80%
1.89%             1.85%(6)           1.92%(6)
- ------------------------------------------------------------------------------------------------------------
Portfolio turnover rate(7)                         96.9%
98.0%             85.4%              55.2%




                                                 Class C

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

                                                 Year Ended October 31,
                                                 1998
1997              1996(1)
=========================================================================================
                                              
               
Per Share Operating Data
Net asset value, beginning of period             $16.70
$15.93            $15.71
- -----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                               .37
 .44(4)            .30
Net realized and unrealized gain (loss)             .40
2.19(4)            .32
                                                 ------
- ------            ------
Total income (loss) from
investment
operations                                          .77
2.63               .62

- -----------------------------------------------------------------------------------------
Dividends and
distributions
to
shareholders:
Dividends from net investment income               (.35)
(.47)             (.35)
Distributions from net realized gain              (1.81)
(1.39)             (.05)
                                                 ------
- ------            ------
Total dividends and
distributions
to shareholders                                   (2.16)
(1.86)             (.40)
- -----------------------------------------------------------------------------------------
Net asset value, end of period                   $15.31
$16.70            $15.93
                                                 ======
======            ======

=========================================================================================
Total Return, at Net Asset Value(5)                5.10%
17.93%             4.08%

=========================================================================================
Ratios/Supplemental
Data
Net assets, end of
period
(in thousands)                                   $4,824
$1,473              $188
- -----------------------------------------------------------------------------------------
Average net assets (in thousands)                $2,861          $
805              $ 57
- -----------------------------------------------------------------------------------------
Ratios to average net
assets:
Net investment income                              2.18%
2.18%             2.90%(6)
Expenses                                           1.80%
1.92%             1.87%(6)
- -----------------------------------------------------------------------------------------
Portfolio turnover rate(7)                         96.9%
98.0%             85.4%


6. Annualized.

7. The  lesser  of  purchases  or sales of  portfolio  securities  for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period.  Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term  securities) for the period
ended October 31, 1998 were $257,540,992 and $247,354,113, respectively.

See accompanying Notes to Financial Statements.


                   31 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Notes to Financial Statements
- --------------------------------------------------------------------------------


================================================================================
1. Significant Accounting Policies

Oppenheimer  Disciplined  Allocation  Fund (the Fund),  a series of  Oppenheimer
Series Fund, Inc. (the Company),  is registered under the Investment Company Act
of 1940, as amended, as a diversified,  open-end management  investment company.
The Fund's  investment  objective is to seek to maximize total investment return
(including both capital  appreciation and income)  principally by allocating its
assets among stocks,  corporate  bonds,  U.S.  Government  securities  and money
market  instruments   according  to  changing  market  conditions.   The  Fund's
investment  advisor is  OppenheimerFunds,  Inc. (the  Manager).  The Fund offers
Class A, Class B and Class C shares.  Class A shares  are sold with a  front-end
sales charge. Class B and Class C shares may be subject to a contingent deferred
sales charge.  All classes of shares have identical  rights to earnings,  assets
and voting  privileges,  except that each class has its own distribution  and/or
service plan, expenses directly  attributable to that class and exclusive voting
rights  with  respect to  matters  affecting  that  class.  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.

- --------------------------------------------------------------------------------
Investment  Valuation.  Portfolio  securities are valued at the close of the New
York Stock  Exchange on each trading day.  Listed and  unlisted  securities  for
which such  information is regularly  reported are valued at the last sale price
of the day or, in the  absence of sales,  at values  based on the closing bid or
the  last  sale  price  on the  prior  trading  day.  Long-term  and  short-term
"non-money  market" debt  securities are valued by a portfolio  pricing  service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using  dealer-supplied  valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and  that  the  quotes  reflect  current  market  value,  or  are  valued  under
consistently  applied  procedures  established  by the  Board  of  Directors  to
determine  fair  value  in good  faith.  Short-term  "money  market  type"  debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last  determined  market  value)  adjusted for  amortization  to maturity of any
premium or discount.

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

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


                   32 Oppenheimer Disciplined Allocation Fund


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

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


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

- --------------------------------------------------------------------------------
Allocation of Income,  Expenses,  Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each  class  of  shares  based  upon  the  relative  proportion  of  net  assets
represented  by  such  class.  Operating  expenses  directly  attributable  to a
specific class are charged against the operations of that class.

- --------------------------------------------------------------------------------
Directors' Fees and Expenses.  The Fund has adopted a nonfunded  retirement plan
for the Fund's independent directors. Benefits are based on years of service and
fees paid to each  director  during the years of service.  During the year ended
October  31,  1998,  a  provision  of $3,008 was made for the  Fund's  projected
benefit  obligations  and  payments  of $4,526  were made to retired  directors,
resulting in an accumulated liability of $124,637 as of October 31, 1998.

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

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

- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.


                   33 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Notes to Financial Statements  (Continued)
- --------------------------------------------------------------------------------


================================================================================
1. Significant Accounting Policies (continued)

Classification  of Distributions to Shareholders.  Net investment  income (loss)
and net realized gain (loss) may differ for financial statement and tax purposes
primarily  because of paydown  gains and losses and the  recognition  of certain
foreign currency gains (losses) as ordinary income (loss) for tax purposes.  The
character of  distributions  made during the year from net investment  income or
net  realized  gains may differ from its ultimate  characterization  for federal
income tax purposes.  Also, due to timing of dividend distributions,  the fiscal
year in which amounts are  distributed  may differ from the fiscal year in which
the income or realized gain was recorded by the Fund.

            The Fund adjusts the classification of distributions to shareholders
to reflect the differences between financial statement amounts and distributions
determined in accordance with income tax  regulations.  Accordingly,  during the
year  ended  October  31,  1998,  amounts  have been  reclassified  to reflect a
decrease in additional paid-in capital of $21,580,  an increase in undistributed
net investment  income of $20,554,  and an increase in accumulated  net realized
gain on investments of $1,026.

- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased  or  sold  (trade  date)  and  dividend  income  is  recorded  on  the
ex-dividend date. Discount on securities purchased is amortized over the life of
the respective  securities,  in accordance with federal income tax requirements.
Realized  gains and  losses  on  investments  and  unrealized  appreciation  and
depreciation are determined on an identified cost basis, which is the same basis
used for federal income tax purposes.

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


                   34 Oppenheimer Disciplined Allocation Fund


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

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


================================================================================
2. Shares of Capital Stock

The Fund has authorized 450 million of $0.001 par value shares of capital stock.
Transactions in shares of capital stock were as follows:



                                 Year Ended October 31, 1998     Year Ended
October 31, 1997
                                 ----------------------------
- ----------------------------
                                 Shares          Amount
Shares          Amount
- ---------------------------------------------------------------------------------------------
                                           
             
Class A:
Sold                                1,454,634    $ 22,895,924
1,295,002    $ 20,645,750
Dividends and
distributions reinvested            2,193,655      33,253,817
1,821,876      27,715,425
Issued in connection with the
acquisition of Oppenheimer
LifeSpan Balanced Fund--Note 7      4,023,572      64,135,741
- --              --
Redeemed                           (2,818,335)    (44,323,451)
(3,224,574)    (51,249,773)
                                 ------------    ------------
- ------------    ------------
Net increase (decrease)             4,853,526    $ 75,962,031
(107,696)   $ (2,888,598)
                                 ============    ============
============    ============

- ---------------------------------------------------------------------------------------------
Class B:
Sold                                  589,123    $  9,351,049
279,134    $  4,555,544
Dividends and
distributions reinvested               84,350       1,293,844
35,724         551,096
Issued in connection with the
acquisition of Oppenheimer
LifeSpan Balanced Fund--Note 7        328,973       5,299,757
- --              --
Redeemed                             (123,259)     (1,957,035)
(43,911)       (715,794)
                                 ------------    ------------
- ------------    ------------
Net increase                          879,187    $ 13,987,615
270,947    $  4,390,846
                                 ============    ============
============    ============

- ---------------------------------------------------------------------------------------------
Class C:
Sold                                  193,669    $  2,998,346
80,502    $  1,266,698
Dividends and
distributions reinvested               15,173         228,310
2,629          40,489
Issued in connection with the
acquisition of Oppenheimer
LifeSpan Balanced Fund--Note 7         70,016       1,105,546
- --              --
Redeemed                              (51,932)       (799,623)
(6,697)       (112,479)
                                 ------------    ------------
- ------------    ------------
Net increase                          226,926    $  3,532,579
76,434    $  1,194,708
                                 ============    ============
============    ============


================================================================================
3. Unrealized Gains and Losses on Investments

As  of  October  31,  1998,  net  unrealized   appreciation  on  investments  of
$21,785,978  was  composed  of gross  appreciation  of  $27,458,842,  and  gross
depreciation of $5,672,864.


                   35 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Notes to Financial Statements  (Continued)
- --------------------------------------------------------------------------------


================================================================================
4. Management Fees and Other Transactions with Affiliates

Management  fees  paid to the  Manager  are in  accordance  with the  investment
advisory agreement with the Fund which provides for a fee of 0.625% of the first
$300  million of average  annual net assets,  0.50% of the next $100 million and
0.45% of average  annual net assets in excess of $400 million.  The Manager acts
as the  accounting  agent  for  the  Fund  at an  annual  fee of  $15,000,  plus
out-of-pocket costs and expenses reasonably incurred.  The Fund's management fee
for the year ended  October 31, 1998 was 0.62% of the average  annual net assets
for Class A, Class B and Class C shares.

            For the year ended October 31, 1998, commissions (sales charges paid
by investors) on sales of Class A shares totaled $481,886, of which $397,054 was
retained by  OppenheimerFunds  Distributor,  Inc.  (OFDI),  a subsidiary  of the
Manager,  as general  distributor,  and by an  affiliated  broker/dealer.  Sales
charges advanced to broker/dealers by OFDI on sales of the Fund's Class A, Class
B and  Class C shares  totaled  $27,571,  $316,680  and  $21,560,  respectively.
Amounts paid to an affiliated  broker/dealer for Class B and Class C shares were
$111,293 and $5,503, respectively.  During the year ended October 31, 1998, OFDI
received contingent deferred sales charges of $30,404 and $2,562,  respectively,
upon  redemption  of  Class B and  Class C shares  as  reimbursement  for  sales
commissions advanced by OFDI at the time of sale of such shares.

            OppenheimerFunds  Services (OFS), a division of the Manager,  is the
transfer  and  shareholder  servicing  agent for the Fund and other  Oppenheimer
funds.  OFS's total costs of providing  such services are  allocated  ratably to
these funds.

            The Fund has adopted a Service  Plan for Class A shares to reimburse
OFDI for a portion of its costs incurred in connection with the personal service
and maintenance of shareholder accounts that hold Class A shares.  Reimbursement
is made  quarterly  at an annual  rate that may not exceed  0.25% of the average
annual net assets of Class A shares of the Fund.  OFDI uses the  service  fee to
reimburse brokers, dealers, banks and other financial institutions quarterly for
providing  personal  service and maintenance of accounts of their customers that
hold Class A shares.  During the year ended October 31, 1998, OFDI paid $557,688
to an affiliated broker/dealer as reimbursement for Class A personal service and
maintenance expenses.


                   36 Oppenheimer Disciplined Allocation Fund


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

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


================================================================================
The Fund has  adopted  Distribution  and  Service  Plans for Class B and Class C
shares  to  compensate  OFDI for its costs in  distributing  Class B and Class C
shares and  servicing  accounts.  Under the Plans,  the Fund pays OFDI an annual
asset-based  sales  charge of 0.75% per year on Class B and Class C shares,  for
its  services  rendered in  distributing  Class B and Class C shares.  OFDI also
receives a service fee of 0.25% per year to  compensate  dealers  for  providing
personal services for accounts that hold Class B and Class C shares. Each fee is
computed  on the  average  annual  net  assets  of  Class B or  Class C  shares,
determined as of the close of each regular  business day.  During the year ended
October 31, 1998, OFDI paid $11,835 and $3,586,  respectively,  to an affiliated
broker/dealer  as  compensation  for Class B and Class C  personal  service  and
maintenance  expenses  and  retained  $122,183  and  $22,102,  respectively,  as
compensation for Class B and Class C sales commissions and service fee advances,
as well as financing  costs. If either Plan is terminated by the Fund, the Board
of Directors may allow the Fund to continue  payments of the  asset-based  sales
charge to OFDI for  distributing  shares before the Plan was  terminated.  As of
October 31, 1998, OFDI had incurred excess  distribution  and servicing costs of
$623,479 for Class B and $52,326 for Class C.

================================================================================
5. Futures Contracts

The Fund may buy and sell index  futures  contracts in order to gain exposure to
or protect against changes in interest rates. The Fund may also buy or write put
or call options on these futures contracts.

            The  Fund  generally  sells  futures   contracts  to  hedge  against
increases in interest  rates and the resulting  negative  effect on the value of
fixed rate portfolio securities. The Fund may also purchase futures contracts to
gain exposure to changes in interest  rates as it may be more  efficient or cost
effective than actually buying fixed income securities.

            Upon  entering  into a futures  contract,  the Fund is  required  to
deposit  either  cash or  securities  (initial  margin) in an amount  equal to a
certain percentage of the contract value. Subsequent payments (variation margin)
are made or received by the Fund each day.  The  variation  margin  payments are
equal to the daily changes in the contract  value and are recorded as unrealized
gains and losses.  The Fund recognizes a realized gain or loss when the contract
is closed or expires.

            Securities held in  collateralized  accounts to cover initial margin
requirements   on  open  futures   contracts  are  noted  in  the  Statement  of
Investments.  The  Statement  of Assets and  Liabilities  reflects a  receivable
and/or payable for the daily mark to market for variation margin.

            Risks of entering  into  futures  contracts  (and  related  options)
include the  possibility  that there may be an illiquid market and that a change
in the value of the  contract or option may not  correlate  with  changes in the
value of the underlying securities.


                   37 Oppenheimer Disciplined Allocation Fund


- --------------------------------------------------------------------------------
 Notes to Financial Statements  (Continued)
- --------------------------------------------------------------------------------


================================================================================
5. Futures Contracts  (continued)

As of October 31, 1998, the Fund had outstanding futures contracts as follows:



                                                  Number of    Valuation as
of     Unrealized
Contract Description           Expiration Date    Contracts    October 31,
1998    Appreciation
- -----------------------------------------------------------------------------------------------
Contracts to Purchase
                                            
                 
Standard & Poor's 500 Index    12/98              143
$39,510,900         $3,383,103

==========


================================================================================
6. Illiquid and Restricted Securities

As of October 31,  1998,  investments  in  securities  included  issues that are
illiquid or restricted.  Restricted  securities  are often  purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual  restrictions on resale,  and are valued under methods approved
by the Board of Directors as reflecting fair value. A security may be considered
illiquid  if it lacks a readily  available  market or if its  valuation  has not
changed for a certain  period of time.  The Fund  intends to invest no more than
10% of its  net  assets  (determined  at  the  time  of  purchase  and  reviewed
periodically)  in  illiquid  or  restricted   securities.   Certain   restricted
securities,  eligible for resale to qualified institutional  investors,  are not
subject to that limit. The aggregate value of illiquid or restricted  securities
subject to this  limitation  as of  October  31,  1998,  was  $4,780,010,  which
represents 1.47% of the Fund's net assets.

================================================================================
7. Acquisition of Oppenheimer LifeSpan Balanced Fund

On June 12, 1998, the Fund acquired all the net assets of  Oppenheimer  LifeSpan
Balanced Fund,  pursuant to an agreement and plan of reorganization  approved by
the Oppenheimer  LifeSpan  Balanced Fund  shareholders on June 9, 1998. The Fund
issued (at an exchange  ratio of 0.711330 for Class A,  0.789560 for Class B and
0.716167 for Class C of the Fund to one share of Oppenheimer  LifeSpan  Balanced
Fund) 4,023,572, 328,973 and 70,016 shares of capital stock for Class A, Class B
and Class C, respectively,  valued at $64,135,741,  $5,299,757 and $1,105,546 in
exchange  for the net  assets,  resulting  in  combined  Class A net  assets  of
$313,743,282,  Class B net  assets  of  $18,371,573  and  Class C net  assets of
$3,985,465 on June 12, 1998.  The net assets  acquired  included net  unrealized
appreciation of $3,969,222.  The exchange qualified as a tax-free reorganization
for federal income tax purposes.


                   38 Oppenheimer Disciplined Allocation Fund


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

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


================================================================================
8. Bank Borrowings

The Fund may borrow from a bank for temporary or emergency  purposes  including,
without limitation,  funding of shareholder  redemptions provided asset coverage
for  borrowings  exceeds  300%.  The Fund has entered  into an  agreement  which
enables it to participate with other  Oppenheimer  funds in an unsecured line of
credit with a bank, which permits  borrowings up to $400 million,  collectively.
Interest is charged to each fund,  based on its  borrowings,  at a rate equal to
the  Federal  Funds Rate plus 0.35%.  Borrowings  are payable 30 days after such
loan is  executed.  The Fund  also pays a  commitment  fee equal to its pro rata
share of the  average  unutilized  amount of the  credit  facility  at a rate of
0.0575% per annum.

            The Fund had no borrowings outstanding during the year ended
October
31, 1998.


                   39 Oppenheimer Disciplined Allocation Fund







                                       A-5
                                   Appendix A

- ------------------------------------------------------------------------------
                               RATINGS DEFINITIONS
- ------------------------------------------------------------------------------

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

Moody's Investors Service, Inc.
- ------------------------------------------------------------------------------

Long-Term (Taxable) Bond Ratings

Aaa: Bonds rated Aaa are judged to be the best quality.  They carry the smallest
degree of investment risk.  Interest  payments are protected by a large or by an
exceptionally   stable  margin  and  principal  is  secure.  While  the  various
protective  elements are likely to change,  the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.

Aa: Bonds rated Aa are judged to be of high quality by all  standards.  Together
with the Aaa group,  they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because  margins of protection  may not
be as large as with Aaa securities or fluctuation of protective  elements may be
of  greater  amplitude  or there may be other  elements  present  which make the
long-term risks appear somewhat larger than those of Aaa securities.

A: Bonds rated A possess  many  favorable  investment  attributes  and are to be
considered  as  upper-medium  grade  obligations.  Factors  giving  security  to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa: Bonds rated Baa are considered medium grade obligations;  that is, they are
neither highly  protected nor poorly  secured.  Interest  payments and principal
security appear adequate for the present but certain protective  elements may be
lacking or may be  characteristically  unreliable over any great length of time.
Such bonds lack  outstanding  investment  characteristics  and have  speculative
characteristics as well.

Ba: Bonds rated Ba are judged to have speculative elements.  Their future cannot
be  considered  well-assured.  Often the  protection  of interest and  principal
payments may be very moderate and not well safeguarded  during both good and bad
times over the  future.  Uncertainty  of  position  characterizes  bonds in this
class.

B:  Bonds  rated B  generally  lack  characteristics  of  desirable  investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa:  Bonds rated Caa are of poor  standing and may be in default or there may
be present elements of danger with respect to principal or interest.

Ca:  Bonds rated Ca  represent  obligations  which are  speculative  in a high
degree and are often in default or have other marked shortcomings.

C: Bonds  rated C are the lowest  class of rated  bonds and can be  regarded  as
having extremely poor prospects of ever attaining any real investment standing.

Moody's  applies  numerical  modifiers  1,  2,  and  3 in  each  generic  rating
classification  from Aa  through  Caa.  The  modifier  "1"  indicates  that  the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range  ranking and the modifier "3"  indicates a ranking in the lower end of
the category.

Short-Term Ratings - Taxable Debt

These  ratings apply to the ability of issuers to repay  punctually  senior debt
obligations having an original maturity not exceeding one year:

Prime-1:  Issuer has a superior ability for repayment of senior  short-term debt
obligations.

Prime-2:  Issuer has a strong  ability for repayment of senior  short-term  debt
obligations.  Earnings  trends  and  coverage,  while  sound,  may be subject to
variation.  Capitalization  characteristics,  while  appropriate,  may  be  more
affected by external conditions. Ample alternate liquidity is maintained.

Prime-3:  Issuer has an acceptable  ability for  repayment of senior  short-term
obligations.  The effect of industry characteristics and market compositions may
be more  pronounced.  Variability  in earnings and  profitability  may result in
changes in the level of debt protection  measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.

Not Prime: Issuer does not fall within any Prime rating category.


Standard & Poor's Rating Services
- ------------------------------------------------------------------------------

Long-Term Credit Ratings

AAA: Bonds rated "AAA" have the highest rating  assigned by Standard & Poor's.
The obligor's  capacity to meet its financial  commitment on the obligation is
extremely strong.

AA: Bonds rated "AA" differ from the highest rated  obligations  only in small
degree.  The  obligor's  capacity  to meet  its  financial  commitment  on the
obligation is very strong.

A: Bonds rated "A" are somewhat more  susceptible to adverse  effects of changes
in  circumstances  and economic  conditions  than  obligations  in  higher-rated
categories.  However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.

BBB: Bonds rated BBB exhibit adequate protection  parameters.  However,  adverse
economic  conditions  or  changing  circumstances  are more  likely to lead to a
weakened  capacity  of the  obligor  to meet  its  financial  commitment  on the
obligation.

Bonds rated BB, B, CCC, CC and C are regarded as having significant  speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While  such   obligations   will  likely  have  some   quality  and   protective
characteristics,  these  may be  outweighed  by  large  uncertainties  or  major
exposures to adverse conditions.

BB: Bonds rated BB are less  vulnerable  to  nonpayment  than other  speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial,  or economic conditions which could lead to the obligor's  inadequate
capacity to meet its financial commitment on the obligation.

B: A bond rated B is more vulnerable to nonpayment than an obligation  rated BB,
but the obligor  currently has the capacity to meet its financial  commitment on
the obligation.

CCC: A bond rated CCC is currently vulnerable to nonpayment,  and is dependent
upon favorable  business,  financial,  and economic conditions for the obligor
to meet its financial commitment on the obligation. In the

event of adverse business,  financial or economic conditions, the obligor is not
likely to have the capacity to meet its financial commitment on the obligation.

CC: An obligation rated CC is currently highly vulnerable to nonpayment.

C: The C rating may used where a  bankruptcy  petition has been filed or similar
action has been taken, but payments on this obligation are being continued.

D: Bonds rated D are in  default.  Payments  on the  obligation  are not being
made on the date due.

The  ratings  from AA to CCC may be  modified  by the  addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant  noncredit
risks.

Short-Term Issue Credit Ratings

A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong.  Within this  category,  a plus (+) sign
designation  indicates the issuer's capacity to meet its financial obligation is
very strong.

A-2:  Obligation is somewhat more  susceptible to the adverse effects of changes
in  circumstances  and economic  conditions  than  obligations  in higher rating
categories.  However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.

A-3:  Exhibits  adequate  protection  parameters.   However,   adverse  economic
conditions  or  changing  circumstances  are more  likely to lead to a  weakened
capacity of the obligor to meet its financial commitment on the obligation.

B:  Regarded  as having  significant  speculative  characteristics.  The obligor
currently has the capacity to meet its financial  commitment on the  obligation.
However, it faces major ongoing  uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.

C:  Currently  vulnerable  to  nonpayment  and  is  dependent  upon  favorable
business,  financial,  and  economic  conditions  for the  obligor to meet its
financial commitment on the obligation.

D: In payment  default.  Payments on the obligation  have not been made on the
due date. The rating may also be used if a bankruptcy  petition has been filed
or similar actions jeopardize payments on the obligation.


Fitch IBCA, Inc.
- ------------------------------------------------------------------------------

International Long-Term Credit Ratings

Investment Grade:
AAA:  Highest Credit Quality.  "AAA" ratings denote the lowest  expectation of
credit  risk.  They  are  assigned  only in the case of  exceptionally  strong
capacity for timely payment of financial commitments.  This capacity is highly
unlikely to be adversely affected by foreseeable events.

AA: Very High Credit  Quality.  "AA" ratings denote a very low  expectation of
credit  risk.  They  indicate a very  strong  capacity  for timely  payment of
financial  commitments.  This  capacity  is not  significantly  vulnerable  to
foreseeable events.
A: High Credit  Quality.  "A" ratings denote a low expectation of credit risk.
The  capacity  for  timely  payment of  financial  commitments  is  considered
strong.  This capacity  may,  nevertheless,  be more  vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.
BBB: Good Credit  Quality.  "BBB"  ratings  indicate that there is currently a
low  expectation  of credit risk. The capacity for timely payment of financial
commitments is considered  adequate,  but adverse changes in circumstances and
in economic  conditions are more likely to impair this  capacity.  This is the
lowest investment-grade category.

Speculative Grade:

BB:  Speculative.  "BB" ratings indicate that there is a possibility of credit
risk  developing,  particularly as the result of adverse  economic change over
time.  However,  business or financial  alternatives may be available to allow
financial commitments to be met.

B: Highly  Speculative.  "B" ratings indicate that significant  credit risk is
present,  but a limited margin of safety  remains.  Financial  commitments are
currently  being met.  However,  capacity for continued  payment is contingent
upon a sustained, favorable business and economic environment.

CCC, CC C: High  Default  Risk.  Default is a real  possibility.  Capacity for
meeting  financial  commitments  is solely reliant upon  sustained,  favorable
business or economic  developments.  A "CC" rating  indicates  that default of
some kind appears probable. "C" ratings signal imminent default.

DDD, DD, and D: Default.  Securities are not meeting  current  obligations and
are  extremely  speculative.   "DDD"  designates  the  highest  potential  for
recovery of amounts outstanding on any securities involved.

Plus (+) and  minus  (-)  signs  may be  appended  to a rating  symbol to denote
relative status within the rating  category.  Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."

International Short-Term Credit Ratings

F1: Highest credit quality.  Strongest capacity for timely payment.  May have an
added "+" to denote exceptionally strong credit feature.

F2: Good credit quality.  A satisfactory  capacity for timely  payment,  but the
margin of safety is not as great as in higher ratings.

F3: Fair credit  quality.  Capacity  for timely  payment is  adequate.  However,
near-term adverse changes could result in a reduction to non-investment grade.

B:  Speculative.  Minimal capacity for timely payment,  plus  vulnerability to
near-term adverse changes in financial and economic conditions.

C: High  default  risk.  Default is a real  possibility,  Capacity for meeting
financial  commitments is solely reliant upon a sustained,  favorable business
and economic environment.

D:   Default. Denotes actual or imminent payment default.

Duff & Phelps Credit Rating Co. Ratings

Long-Term Debt and Preferred Stock

AAA:  Highest  credit  quality.  The risk factors are  negligible,  being only
slightly more than for risk-free U.S. Treasury debt.

AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.

A+, A & A-: Protection factors are average but adequate.  However,  risk factors
are more variable in periods of greater economic stress.

BBB+,  BBB &  BBB-:  Below  average  protection  factors  but  still  considered
sufficient  for  prudent  investment.  Considerable  variability  in risk during
economic cycles.

BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective  financial protection factors fluctuate according to
industry  conditions.  Overall quality may move up or down frequently within the
category.

B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles,  industry conditions and/or company fortunes.  Potential exists
for  frequent  changes in the rating  within  this  category or into a higher of
lower rating grade.

CCC: Well below investment-grade securities.  Considerable uncertainty exists as
to timely  payment of  principal,  interest or preferred  dividends.  Protection
factors   are   narrow   and   risk   can  be   substantial   with   unfavorable
economic/industry conditions, and/or with unfavorable company developments.

DD:  Defaulted debt  obligations.  Issuer failed to meet  scheduled  principal
and/or interest payments.

DP: Preferred stock with dividend arrearages.

Short-Term Debt:

High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free
U.S. Treasury short-term debt.

D-1: Very high certainty of timely payment. Risk factors are minor.

D-1-: High certainty of timely payment. Risk factors are very small.

Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.

Satisfactory Grade:
D-3:  Satisfactory  liquidity and other protection  factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.

Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.

Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.





                                       B-2
                                   Appendix B

- ------------------------------------------------------------------------------
                            Industry Classifications
- ------------------------------------------------------------------------------


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








                                      C-18
                                   Appendix C

        OppenheimerFunds Special Sales Charge Arrangements and Waivers


      In certain  cases,  the initial  sales charge that applies to purchases of
Class A shares1 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.  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 that were merged into
or became Oppenheimer funds.

      For the  purposes  of  some  of the  waivers  described  below  and in the
Prospectus and Statement of Additional Information of the applicable Oppenheimer
funds,  the term  "Retirement  Plan" refers to the following types of plans: (1)
plans qualified under Sections 401(a) or 401(k) of the Internal
         Revenue Code,

(2) non-qualified  deferred  compensation plans, (3) employee benefit plans2 (4)
Group  Retirement  Plans3 (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.
- --------------

1.    Certain   waivers   also  apply  to  Class  M.  shares  of   Oppenheimer
   Convertible Securities Fund.

2. An "employee  benefit plan" means any plan or arrangement,  whether or not it
   is "qualified" under the Internal Revenue Code, under which Class A 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.
3. 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  Class A 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  Class A 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
   enabling  those  plans to  purchase  Class A shares  at net  asset  value but
   subject to the Class A contingent deferred sales charge.

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


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


      There is no initial  sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent  deferred  sales charge if redeemed  within 18
months of the end of the calendar month of their  purchase,  as described in the
Prospectus (unless a waiver described  elsewhere in this Appendix applies to the
redemption).  Additionally,  on shares  purchased  under these  waivers that are
subject to the Class A contingent  deferred sales charge,  the Distributor  will
pay the  applicable  commission  described  in the  Prospectus  under  "Class  A
Contingent  Deferred  Sales  Charge."1  This  waiver  provision  applies  to:

1 However,  that commission
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.

o Purchases of Class A shares aggregating $1 million or more.

o Purchases by a Retirement Plan (other than an IRA or 403(b)(7) custodial plan)
that:

(1)   buys shares costing $500,000 or more, or
(2)         has, at the time of  purchase,  100 or more  eligible  employees  or
            total plan assets of $500,000 or more, or

(3)         certifies  to the  Distributor  that it projects to have annual plan
            purchases of $200,000 or more.
o     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.
o        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 Asset
            Management,  L.P.  ("MLAM"),  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 MLAM (the funds  described  in (a) and (b) are referred
            to as "Applicable Investments").
(2)   The record  keeping  for the  Retirement  Plan is  performed  on a daily
            valuation  basis by a record  keeper  whose  services are provided
            under a contract or arrangement  between the  Retirement  Plan and
            Merrill  Lynch.  On the date the plan  sponsor  signs  the  record
            keeping service  agreement with Merrill Lynch,  the Plan must have
            $3 million or more of its assets  (excluding  assets  invested  in
            money market funds) invested in Applicable Investments.
(3)         The record keeping for a Retirement  Plan is handled under a service
            agreement  with Merrill Lynch and on the date the plan sponsor signs
            that  agreement,  the Plan has 500 or more  eligible  employees  (as
            determined by the Merrill Lynch plan conversion manager).

      Purchases by a Retirement  Plan whose record keeper had a  cost-allocation
         agreement with the Transfer Agent on or before May 1, 1999.











          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  commissions  are  paid  by the  Distributor  on such
purchases):
      The Manager or its affiliates.

      Present or former officers,  directors,  trustees and employees (and their
         "immediate families") of the Fund, the Manager and its affiliates,  and
         retirement  plans  established  by them for their  employees.  The term
         "immediate  family"  refers to one's spouse,  children,  grandchildren,
         grandparents, parents, parents-in-law,  brothers and sisters, sons- and
         daughters-in-law,  a  sibling's  spouse,  a spouse's  siblings,  aunts,
         uncles,  nieces  and  nephews;  relatives  by  virtue  of a  remarriage
         (step-children, step-parents, etc.) are included.

      Registered  management  investment  companies,  or  separate  accounts  of
         insurance  companies  having  an  agreement  with  the  Manager  or the
         Distributor for that purpose.
      Dealers or brokers that have a sales  agreement with the  Distributor,  if
         they purchase shares for their own accounts or for retirement plans for
         their employees.
      Employees and registered representatives (and their spouses) of dealers or
         brokers  described  above or financial  institutions  that have entered
         into sales  arrangements  with such  dealers or brokers  (and which are
         identified as such to the  Distributor)  or with the  Distributor.  The
         purchaser must certify to the  Distributor at the time of purchase that
         the purchase is for the  purchaser's own account (or for the benefit of
         such employee's spouse or minor children).
      Dealers,  brokers,  banks or  registered  investment  advisors  that  have
         entered into an agreement with the Distributor  providing  specifically
         for the use of shares  of the Fund in  particular  investment  products
         made  available  to their  clients.  Those  clients  may be  charged  a
         transaction  fee by  their  dealer,  broker,  bank or  advisor  for the
         purchase or sale of Fund shares.
      Investment  advisors  and  financial  planners  who have  entered  into an
         agreement  for this  purpose  with the  Distributor  and who  charge an
         advisory, consulting or other fee for their services and buy shares for
         their own accounts or the accounts of their clients.
      "Rabbi trusts" that buy shares for their own  accounts,  if the  purchases
         are made through a broker or agent or other financial intermediary that
         has made special arrangements with the Distributor for those purchases.

      Clients of investment  advisors or financial  planners  (that have entered
         into an agreement for this purpose with the Distributor) who buy shares
         for their own accounts may also  purchase  shares  without sales charge
         but only if their  accounts  are  linked to a master  account  of their
         investment advisor or financial planner on the books and records of the
         broker, agent or financial  intermediary with which the Distributor has
         made such special arrangements . Each of these investors may be charged
         a fee by the broker,  agent or financial  intermediary  for  purchasing
         shares.

      Directors, trustees,  officers or full-time employees of OpCap Advisors or
         its affiliates,  their relatives or any trust, pension,  profit sharing
         or other benefit plan which beneficially owns shares for those persons.
      Accounts  for  which  Oppenheimer   Capital  (or  its  successor)  is  the
         investment   advisor   (the   Distributor   must  be  advised  of  this
         arrangement)  and persons who are  directors or trustees of the company
         or trust which is the beneficial owner of such accounts.
      A  unit  investment  trust that has entered into an appropriate  agreement
         with the Distributor.
      Dealers,  brokers,  banks,  or  registered  investment  advisers that have
         entered  into an  agreement  with the  Distributor  to sell  shares  to
         defined  contribution  employee  retirement plans for which the dealer,
         broker or investment adviser provides administration services.






      Retirement Plans and deferred  compensation  plans and trusts used to fund
those plans (including,  for example,  plans qualified or created under sections
401(a), 401(k), 403(b) or 457 of the Internal Revenue Code), in each

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


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


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

      Shares purchased  through a broker-dealer  that has entered into a special
         agreement  with the  Distributor  to allow the  broker's  customers  to
         purchase and pay for shares of Oppenheimer  funds using the proceeds of
         shares  redeemed  in the prior 30 days from a mutual fund (other than a
         fund  managed by the  Manager or any of its  subsidiaries)  on which an
         initial sales charge or contingent deferred sales charge was paid. This
         waiver  also  applies  to shares  purchased  by  exchange  of shares of
         Oppenheimer Money Market Fund, Inc. that were purchased and paid for in
         this manner.  This waiver must be requested  when the purchase order is
         placed for shares of the Fund, and the Distributor may require evidence
         of qualification for this waiver.

      Shares  purchased  with the  proceeds of maturing  principal  units of any
         Qualified Unit Investment Liquid Trust Series.
      Shares purchased by the  reinvestment  of loan repayments by a participant
         in a  Retirement  Plan for which the  Manager or an  affiliate  acts as
         sponsor.


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


The Class A contingent deferred sales charge is also waived if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed in the
following cases:

      To make Automatic Withdrawal Plan payments that are limited annually to no
         more than 12% of the  account  value  measured  at the time the Plan is
         established, 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).

      Fordistributions  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.2

2 This provision does not apply to IRAs.

(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.3

3 This provision does not apply to 403(b)(7)  custodial plans if the participant
is less than age 55, nor to IRAs.

(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.

         Fordistributions  from  Retirement  Plans  having 500 or more  eligible
            employees,  except  distributions  due to  termination of all of the
            Oppenheimer funds as an investment option under the Plan.

         Fordistributions  from 401(k) plans  sponsored by  broker-dealers  that
            have entered into a special agreement with the Distributor  allowing
            this waiver.



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


The Class B and Class C 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 and Class C  contingent  deferred  sales  charges will be waived for
redemptions of shares in the following cases: Shares redeemed involuntarily,  as
described  in  "Shareholder  Account  Rules  and  Policies,"  in the  applicable
Prospectus.
      Redemptions from accounts other than Retirement  Plans following the death
         or disability of the last surviving shareholder, including a trustee of
         a grantor trust or revocable living trust for which the trustee is also
         the sole beneficiary.  The death or disability must have occurred after
         the  account  was  established,  and for  disability  you must  provide
         evidence  of a  determination  of  disability  by the  Social  Security
         Administration.

      Distributions  from  accounts  for which the  broker-dealer  of record has
         entered into a special  agreement  with the  Distributor  allowing this
         waiver.

      Redemptions of Class B shares held by  Retirement  Plans whose records are
         maintained  on  a  daily   valuation  basis  by  Merrill  Lynch  or  an
         independent record keeper under a contract with Merrill Lynch.
      Redemptions of Class C shares of Oppenheimer  U.S.  Government  Trust from
         accounts of clients of financial  institutions that have entered into a
         special arrangement with the Distributor for this purpose.

o        Redemptions  requested in writing by a Retirement Plan sponsor of Class
         C shares of an  Oppenheimer  fund in amounts of $1 million or more held
         by the  Retirement  Plan for  more  than one  year,  if the  redemption
         proceeds  are  invested  in Class A shares  of one or more  Oppenheimer
         funds.
o        Distributions 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.4

4 This provision does not apply to IRAs.

(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.5

5 This provision does not apply to loans from 403(b)(7) custodial plans.

(9) On account of the participant's separation from service.6

6 This provision does not apply to 403(b)(7)  custodial plans if the participant
is less than age 55, nor to IRAs.

(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)            Distributions  from Retirement Plans having 500 or more eligible
                employees,  but  excluding  distributions  made  because  of the
                Plan's  elimination as investment  options under the Plan of all
                of the Oppenheimer funds that had been offered.
(13)            For  distributions   from  a  participant's   account  under  an
                Automatic  Withdrawal  Plan after the  participant  reaches  age
                59 1/2,  as long as the aggregate  value of the  distributions
                does not exceed 10% of the account's  value  annually  (measured
                from the establishment of the Automatic Withdrawal Plan).

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.










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  Quest  Small Cap Value
                                      Fund
  Oppenheimer  Quest  Balanced  Value Oppenheimer Quest Global Value Fund
  Fund
  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 Quest  for  Value  New York  Tax-Exempt
Fund                                    Fund
Quest  for  Value  Investment   Quality Quest  for  Value  National  Tax-Exempt
Income Fund                             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
 Number of Eligible   Charge as a % of    Charge as a % of    Commission as %
Employees or Members   Offering Price    Net Amount Invested of Offering 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:
      Shareholders who were  shareholders of the AMA Family of Funds on February
         28, 1991 and who  acquired  shares of any of the Former Quest for Value
         Funds by merger of a portfolio of the AMA Family of Funds.

      Shareholders  who  acquired  shares of any Former  Quest for Value Fund by
         merger of any of the portfolios of the Unified Funds.

      |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:
      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, and
      liquidation of a shareholder's account if the aggregate net asset value of
         shares held in the account is less than the required  minimum  value of
         such accounts.

      |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:
      redemptions  following the death or disability of the shareholder(s) (as
         evidenced by a determination  of total  disability by the U.S. Social
         Security Administration);
      withdrawals  under an automatic  withdrawal  plan (but only for Class B or
         Class C shares) where the annual  withdrawals  do not exceed 10% of the
         initial value of the account; and
      liquidation of a shareholder's account if the aggregate net asset value of
         shares held in the account is less than the  required  minimum  account
         value.

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


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

                                 Accounts, Inc.


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

      n 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.

      n 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)




      anypurchaser,  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 commission in connection  with the purchase of
         shares of any registered investment management company;
(6)      in  connection  with  the  redemption  of  shares  of the Fund due to a
         combination  with  another  investment  company  by virtue of a merger,
         acquisition or similar reorganization transaction;
(7)      in  connection  with  the  Fund's  right  to  involuntarily  redeem  or
         liquidate the Fund;
(8)




        in connection  with automatic  redemptions of Class A shares and Class B
         shares in certain  retirement  plan  accounts  pursuant to an Automatic
         Withdrawal  Plan but limited to no more than 12% of the original  value
         annually; or
(9)      as  involuntary  redemptions  of shares by  operation  of law, or under
         procedures  set forth in the Fund's  Articles of  Incorporation,  or as
         adopted by the Board of Directors of the Fund.


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

Shareholders of Oppenheimer  Municipal Bond Fund,  Oppenheimer  U.S.  Government
Trust,  Oppenheimer Strategic Income Fund and Oppenheimer Equity 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:

o     the Manager and its affiliates,
o        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,
o        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,
o        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,
o        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,
o     dealers, brokers, or registered investment advisors that had entered
         into an agreement with the Distributor or the prior distributor of
         the Fund specifically providing for the use of Class M shares of the
         Fund in specific investment products made available to their
         clients, and dealers, brokers or registered investment advisors that
         had entered into an agreement with the Distributor or prior
         distributor of the Fund's shares to sell shares to defined
         contribution employee retirement plans for which the dealer, broker,
         or investment advisor provides administrative services.





- ------------------------------------------------------------------------------
Oppenheimer Disciplined Allocation Fund
- ------------------------------------------------------------------------------

Internet Web Site:
      www.oppenheimerfunds.com

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

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

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

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

Independent Auditors
      KPMG LLP
      707 Seventeenth Street
      Denver, Colorado 80202

Legal Counsel
      Gordon Altman Butowsky Weitzen Shalov & Wein
      114 West 47th Street
      New York, New York 10036
67890






PX205.0399 (Rev. 5/99)
- ------------------------------------------------------------------------------





Oppenheimer Disciplined Value Fund
- ------------------------------------------------------------------------------

Two World Trade Center, New York, New York 10048-0203
1-800-525-7048


Statement of Additional Information dated March 1, 1999
Revised May 1, 1999


      This  Statement  of  Additional  Information  is  not a  Prospectus.  This
document  contains  additional   information  about  the  Fund  and  supplements
information  in the  Prospectus  dated March 1, 1999. It should be read together
with the  Prospectus,  which may be obtained  by writing to the Fund's  Transfer
Agent,  OppenheimerFunds  Services, at P.O. Box 5270, Denver, Colorado 80217, or
by calling  the  Transfer  Agent at the  toll-free  number  shown  above,  or by
downloading    it   from   the    OppenheimerFunds    Internet   web   site   at
www.oppenheimerfunds.com.

Contents
                                                                            Page
About the Fund

Additional Information About the Fund's Investment Policies and Risks.. 2
    The Fund's Investment Policies..................................... 2
    Other Investment Techniques and Strategies......................... 6
    Investment Restrictions............................................ 25
How the Fund is Managed ............................................... 28
    Organization and History........................................... 28
    Directors and Officers............................................. 29
    The Manager........................................................ 34
Brokerage Policies of the Fund......................................... 36
Distribution and Service Plans......................................... 38
Performance of the Fund................................................ 41


About Your Account

How To Buy Shares...................................................... 45
How To Sell Shares..................................................... 53
How To Exchange Shares................................................. 58
Dividends, Capital Gains and Taxes..................................... 60
Additional Information About the Fund.................................. 62


Financial Information About the Fund
Independent Auditors' Report........................................... 63
Financial Statements................................................... 64

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





                                      99
- ------------------------------------------------------------------------------

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

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

Additional Information About the Fund's Investment Policies and Risks

      The investment  objective,  the principal investment policies and the main
risks of the Fund are described in the Prospectus.  This Statement of Additional
Information contains supplemental information about those policies and risks and
the types of securities that the Fund's  investment  Manager,  OppenheimerFunds,
Inc., 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 Manger may use in selecting  portfolio
securities  will vary over time.  The Fund is not required to use the investment
techniques and strategies  described  below at all times in seeking its goal. It
may use some of the special  investment  techniques and strategies at some times
or not at all.

      In selecting equity  investments for the Fund's  portfolio,  the portfolio
managers currently use a value investing style coupled with fundamental analysis
of issuers.  In using a value  approach,  the managers look for stocks and other
securities that appear to be temporarily undervalued,  by various measures, such
as  price/earnings  ratios.  Value investing seeks stocks having prices that are
low in  relation to their real worth or future  prospects,  in the hope that the
Fund will realize appreciation in the value of its holdings when other investors
realize the intrinsic value of the stock.

      Using value  investing  requires  research as to the  issuer's  underlying
financial  condition and prospects.  Some of the measures used to identify these
securities include, among others:

      |_|  Price/Earnings  ratio,  which is the  stock's  price  divided  by its
earnings  per  share.  A stock  having a  price/earnings  ratio  lower  than its
historical  range,  or lower  than  the  market  as a whole  or that of  similar
companies may offer attractive investment opportunities.
      |_| Price/book  value ratio,  which is the stock price divided by the book
value of the  company  per share.  It  measures  the  company's  stock  price in
relation to its asset value.
      |_| Dividend  Yield,  which is measured by dividing the annual dividend by
the stock price per share.
      |_| Valuation of Assets which compares the stock price to the value of the
company's underlying assets,  including their projected value in the marketplace
and liquidation value.

      |X|  Investments  in  Equity  Securities.  The  Fund  does not  limit  its
investments in equity securities to issuers having a market  capitalization of a
specified size or range, and therefore may invest in securities of small-,  mid-
and  large-capitalization  issuers.  At  times,  the Fund  may have  substantial
amounts  of its  assets  invested  in  securities  of  issuers  in  one or  more
capitalization ranges, based upon the Manager's use of its investment strategies
and its judgment of where the best market  opportunities  are to seek the Fund's
objective.


      At times,  the market  may favor or  disfavor  securities  of issuers of a
particular  capitalization range. Securities of small capitalization issuers may
be subject to greater  price  volatility  in general than  securities  of larger
companies.  Therefore,  if the  Fund  has  substantial  investments  in  smaller
capitalization  companies at times of market volatility,  the Fund's share price
may fluctuate more than that of funds focusing on larger capitalization issuers.


            |_| Rights and  Warrants.  The Fund can invest up to 5% of its total
assets in warrants or rights.  That limit does not apply to warrants  and rights
that the Fund has acquired as part of units of  securities  or that are attached
to other securities.  No more than 2% of the Fund's total assets may be invested
in  warrants  that are not listed on either The New York Stock  Exchange  or The
American  Stock  Exchange.  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.

            o Convertible  Securities.  While many convertible  securities are a
form  of debt  security,  in  some  cases  their  conversion  feature  (allowing
conversion  into  equity  securities)  causes the Manager to regard them more as
"equity  equivalents."  In those cases,  the rating assigned to the security has
less  impact  on  the  Manager's   investment  decision  than  in  the  case  of
non-convertible  fixed  income  securities.  To  determine  whether  convertible
securities should be regarded as "equity  equivalents," the Manager examines the
following factors:  (1) whether, at the option of the investor,  the convertible
security can be

               exchanged  for a fixed  number of shares of common stock of the
               issuer,
(2)            whether the issuer of the convertible securities has restated its
               earnings  per  share of  common  stock on a fully  diluted  basis
               (considering   the  effect  of  conversion  of  the   convertible
               securities), and
(3)            the extent to which the  convertible  security may be a defensive
               "equity substitute,"  providing the ability to participate in any
               appreciation in the price of the issuer's common stock.


            o Preferred Stocks.  Preferred stocks are equity securities but have
certain attributes of debt securities. 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 the issuer can pay dividends on common shares.


      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 for their call
or  redemption  prior to  maturity,  which can have a  negative  effect on their
prices when  interest  rates  decline.  Preferred  stock may be  "participating"
stock,  which means that it may be entitled to a dividend  exceeding  the stated
dividend in certain cases.

      Preferred  stocks are equity  securities  because they do not constitute a
liability of the issuer and therefore do not offer the same degree of protection
of capital as debt  securities and may not offer the same degree of assurance of
continued  income  as  debt  securities.   The  rights  of  preferred  stock  on
distribution  of a  corporation's  assets  in the event of its  liquidation  are
generally  subordinate  to  the  rights  associated  with a  corporation's  debt
securities.  Preferred stock generally has a preference over common stock on the
distribution of a corporation's assets in the event of its liquidation.

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


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

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


         |_| Risks of Foreign  Investing.  Investments in foreign securities may
offer special  opportunities  for investing but also present special  additional
risks and considerations  not typically  associated with investments in domestic
securities. Some of these additional risks are:

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

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


            o Risks of Conversion to Euro. On January 1, 1999,  eleven countries
in the European  Union  adopted the euro as their  official  currency.  However,
their current  currencies (for example,  the franc, the mark, and the lira) will
also continue in use until January 1, 2002. After that date, it is expected that
only the euro will be used in those countries.  A common currency is expected to
confer some benefits in those markets,  by  consolidating  the  government  debt
market for those  countries and reducing some currency risks and costs.  But the
conversion to the new currency will affect the Fund  operationally  and also has
potential  risks,  some of which are  listed  below.  Among  other  things,  the
conversion will affect:

               o  issuers in which the Fund  invests,  because of changes in the
                  competitive  environment  from a consolidated  currency market
                  and  greater  operational  costs  from  converting  to the new
                  currency. This might depress stock values.
               o  vendors the Fund depends on to carry out its business, such as
                  its  Custodian  (which holds the foreign  securities  the Fund
                  buys), the Manager (which must price the Fund's investments to
                  deal with the  conversion  to the euro) and  brokers,  foreign
                  markets and securities depositories. If they are not prepared,
                  there could be delays in settlements  and additional  costs to
                  the Fund.
               o  exchange contracts and derivatives that are outstanding during
                  the  transition  to  the  euro.  The  lack  of  currency  rate
                  calculations  between the affected  currencies and the need to
                  update the  Fund's  contracts  could  pose extra  costs to the
                  Fund.

      The Manager is upgrading  (at its  expense)  its computer and  bookkeeping
systems  to deal with the  conversion.  The Fund's  Custodian  has  advised  the
Manager of its plans to deal with the  conversion,  including how it will update
its record keeping systems and handle the redenomination of outstanding  foreign
debt.  The  Fund's  portfolio  manager  will also  monitor  the  effects  of the
conversion  on the issuers in which the Fund  invests.  The  possible  effect of
these factors on the Fund's  investments  cannot be determined with certainty at
this time,  but they may reduce  the value of some of the  Fund's  holdings  and
increase its operational costs.


            o Special Risks of Emerging Markets. Emerging and developing markets
abroad may also offer special opportunities for investing but have greater risks
than more developed foreign markets, such as those in Europe, Canada, Australia,
New  Zealand and Japan.  There may be even less  liquidity  in their  securities
markets,  and settlements of purchases and sales of securities may be subject to
additional  delays.  They are  subject to greater  risks of  limitations  on the
repatriation of income and profits because of currency  restrictions  imposed by
local  governments.  Those  countries may also be subject to the risk of greater
political and economic  instability,  which can greatly affect the volatility of
prices of securities in those countries. The Manager will consider these factors
when evaluating securities in these markets.

      n 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. The Fund does not expect to have a portfolio turnover rate of
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.

      n Investments in Bonds and Other Debt  Securities.  The Fund can invest in
bonds,  debentures  and other debt  securities  under normal market  conditions.
Because the Fund currently emphasizes investments in equity securities,  such as
stocks, it is not anticipated that significant amounts of the Fund's assets will
be invested in debt securities.  However, if market conditions suggest that debt
securities may offer better growth  opportunities than stocks, or if the Manager
determines  to seek a higher income for  liquidity  purposes,  the Manager might
shift up to 10% of the Fund's net assets into debt securities.

      The   Fund's   debt   investments   can   include   investment-grade   and
non-investment-grade   bonds   (commonly   referred   to   as   "junk   bonds").
Investment-grade  bonds  are bonds  rated at least  "Baa" by  Moody's  Investors
Service,  Inc., or at least "BBB" by Standard & Poor's Rating  Service or Duff &
Phelps,  Inc., or that have comparable ratings by another  nationally-recognized
rating organization.  In making investments in debt securities,  the Manager may
rely to some  extent on the ratings of ratings  organizations  or it may use its
own research to evaluate a security's credit-worthiness.  If the securities that
the Fund buys are  unrated,  to be  considered  part of the Fund's  holdings  of
investment-grade  securities,  they  must  be  judged  by the  Manager  to be of
comparable quality to bonds rated as investment grade by a rating organization.


            o  Floating  Rate  and  Variable  Rate  Obligations.  Variable  rate
obligations  may have a demand  feature  that  allows  the  Fund to  tender  the
obligation to the issuer or a third party prior to its maturity.  The tender may
be  at  par  value  plus  accrued  interest,  according  to  the  terms  of  the
obligations.


      The  interest  rate on a  floating  rate  note is  adjusted  automatically
according to a stated  prevailing  market rate, such as a bank's prime rate, the
91-day U.S. Treasury Bill rate, or some other standard.  The instruments rate is
adjusted automatically each time the base rate is adjusted. The interest rate on
a variable  rate note is also based on a stated  prevailing  market  rate but is
adjusted  automatically  at  specified  intervals  of not less  than  one  year.
Generally,  the  changes  in the  interest  rate on such  securities  reduce the
fluctuation in their market value.  As interest rates decrease or increase,  the
potential  for  capital  appreciation  or  depreciation  is less  than  that for
fixed-rate  obligations of the same maturity.  The Manager may determine that an
unrated  floating  rate or variable  rate  obligation  meets the Fund's  quality
standards  if it is backed by a letter of credit or  guarantee  issued by a bank
that meets those quality standards.

      Floating  rate and  variable  rate  notes that have a stated  maturity  in
excess of one year may have  demand  features  that permit the holder to recover
the principal amount of the underlying  security at specified intervals and upon
notice.  The issuer of that type of note normally has a  corresponding  right in
its discretion, after a given period, to prepay the outstanding principal amount
of the note plus accrued interest. Generally the issuer must provide a specified
number of days' notice to the holder.

            o Special Risks of  Lower-Grade  Securities.  It is not  anticipated
that the Fund will  invest a  substantial  portion of its assets in  lower-grade
debt securities. Because lower-grade securities tend to offer higher yields than
investment-grade  securities, the Fund might invest in lower grade securities if
the  Manager  is trying to achieve  greater  income  (and,  in some  cases,  the
appreciation  possibilities of lower-grade securities might be a reason they are
selected for the Fund's portfolio).


      "Lower-grade"  debt securities are those rated below  "investment  grade,"
which  means they have a rating  lower than "Baa" by Moody's or lower than "BBB"
by  Standard  & Poor's or Duff & Phelps,  or  similar  ratings  by other  rating
organizations.  If they are unrated,  and are determined by the Manager to be of
comparable  quality to debt securities  rated below investment  grade,  they are
included in the  limitation  on the  percentage of the Fund's assets that can be
invested in lower-grade  securities.  The Fund can invest in securities rated as
low as "B" at the time the Fund buys them.

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

      However, the Fund's limitations on buying these investments may reduce the
risks to the Fund, as will the Fund's policy of  diversifying  its  investments.
Additionally,  to the  extent  they can be  converted  into  stock,  convertible
securities may be less subject to some of these risks than  non-convertible high
yield bonds,  since stock may be more liquid and less  affected by some of these
risk factors.

      While  securities  rated "Baa" by Moody's or "BBB" by Standard & Poor's or
Duff & Phelps are  investment  grade and are not  regarded as junk bonds,  those
securities  may  be  subject  to  greater  risks  than  other   investment-grade
securities, and have some speculative  characteristics.  Definitions of the debt
security  ratings  categories of Moody's,  S&P, Fitch IBCA and Duff & Phelps are
included in Appendix A to this Statement of Additional Information.


            o Interest Rate Risk.  Interest rate risk refers to the fluctuations
in value of  fixed-income  securities  resulting  from the inverse  relationship
between price and yield. For example, an increase in general interest rates will
tend to reduce the market value of already-issued fixed-income investments,  and
a decline in  general  interest  rates will tend to  increase  their  value.  In
addition,  debt  securities  with longer  maturities,  which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes in
interest rates than obligations with shorter maturities.


      Fluctuations in the market value of fixed-income securities after the Fund
buys them will not  affect  the  interest  income  payable  on those  securities
(unless the security  pays  interest at a variable  rate pegged to interest rate
changes).  However, those price fluctuations will be reflected in the valuations
of the securities, and therefore the Fund's net asset values will be affected by
those fluctuations.


      n Mortgage-Related  Securities.  Mortgage-related securities are a form of
derivative  investment  collateralized  by pools of  commercial  or  residential
mortgages.  Pools of mortgage  loans are  assembled  as  securities  for sale to
investors  by  government  agencies  or entities  or by private  issuers.  These
securities  include  collateralized  mortgage  obligations  ("CMOs"),   mortgage
pass-through securities, stripped mortgage pass-through securities, interests in
real  estate  mortgage  investment  conduits  ("REMICs")  and other  real-estate
related securities.


      Mortgage-related  securities  that are issued or guaranteed by agencies or
instrumentalities  of the U.S.  government  have  relatively  little credit risk
(depending  on the nature of the issuer) but are subject to interest  rate risks
and prepayment risks, as described in the Prospectus.

      As with other debt securities,  the prices of mortgage-related  securities
tend  to  move  inversely  to  changes  in  interest  rates.  The  Fund  can buy
mortgage-related  securities  that have  interest  rates that move  inversely to
changes in general  interest  rates,  based on a multiple  of a specific  index.
Although the value of a  mortgage-related  security  may decline  when  interest
rates rise, the converse is not always the case.

      In periods of declining  interest  rates,  mortgages are more likely to be
prepaid.  Therefore, a mortgage-related  security's maturity can be shortened by
unscheduled  prepayments  on  the  underlying  mortgages.  Therefore,  it is not
possible to predict  accurately  the  security's  yield.  The principal  that is
returned  earlier than expected may have to be  reinvested in other  investments
having a lower yield than the prepaid security.  Therefore, these securities may
be less  effective  as a means of "locking  in"  attractive  long-term  interest
rates,  and they may have less  potential  for  appreciation  during  periods of
declining  interest  rates,  than  conventional  bonds  with  comparable  stated
maturities.

      Prepayment  risks can lead to substantial  fluctuations  in the value of a
mortgage  related  security.  In turn,  this can  affect the value of the Fund's
shares. If a mortgage-related  security has been purchased at a premium,  all or
part of the  premium  the Fund  paid may be lost if  there is a  decline  in the
market value of the security, whether that results from interest rate changes or
prepayments   on  the   underlying   mortgages.   In  the   case   of   stripped
mortgage-related securities, if they experience greater rates of prepayment than
were  anticipated,  the Fund may fail to recoup its  initial  investment  on the
security.

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

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

            o Collateralized  Mortgage  Obligations.  CMOs are multi-class bonds
that  are  backed  by  pools  of  mortgage   loans  or   mortgage   pass-through
certificates. They may be collateralized by:

               (1)
                  pass-through    certificates   issued   or   guaranteed   by
                  Government National Mortgage  Association,  Federal National
                  Mortgage   Association,   or  Federal  Home  Loan   Mortgage
                  Corporation,
               (2)
                  unsecuritized  mortgage loans insured by the Federal Housing
                  Administration  or guaranteed by the Department of Veterans'
                  Affairs,
               (3)
                  unsecuritized conventional mortgages,
               (4)                                                      other
                  mortgage-related securities, or
               (5)                                                      any
                  combination of these.

      Each class of CMO,  referred  to as a  "tranche,"  is issued at a specific
coupon rate and has a stated  maturity  or final  distribution  date.  Principal
prepayments  on the  underlying  mortgages  may cause the CMO to be retired much
earlier than the stated maturity or final  distribution  date. The principal and
interest on the underlying  mortgages may be allocated among the several classes
of a series of a CMO in  different  ways.  One or more  tranches may have coupon
rates that reset  periodically at a specified  increase over an index. These are
floating  rate  CMOs,  and  typically  have a cap on the  coupon  rate.  Inverse
floating rate CMOs have a coupon rate that moves in the reverse  direction to an
applicable  index.  The  coupon  rate on these  CMOs will  increase  as  general
interest  rates  decrease.  These are usually much more volatile than fixed rate
CMOs or floating rate CMOs.


      n U.S. Government Securities. These are securities issued or guaranteed by
the U.S.  Treasury  or other U.S.  government  agencies  or  corporate  entities
referred to as  "instrumentalities"  of the U.S. government.  The obligations of
U.S. government agencies or  instrumentalities  in which the Fund may invest may
or may not be  guaranteed  or  supported  by the "full  faith and credit" of the
United States.  "Full faith and credit" means generally that the taxing power of
the U.S.  government  is pledged to the payment of  interest  and  repayment  of
principal  on a  security.  If a  security  is not  backed by the full faith and
credit of the United States,  the owner of the security must look principally to
the agency issuing the obligation for repayment.  The owner might not be able to
assert  a  claim   against  the  United   States  if  the   issuing   agency  or
instrumentality does not meet its commitment. The Fund will invest in securities
of  U.S.  government  agencies  and  instrumentalities  only if the  Manager  is
satisfied that the credit risk with respect to such instrumentality is minimal.

            o  U.S.   Treasury   Obligations.   These  include   Treasury  bills
(maturities of one year or less when issued), Treasury notes (maturities of from
one to ten years when issued),  and Treasury bonds  (maturities of more than ten
years when issued).  Treasury securities are backed by the full faith and credit
of the  United  States as to timely  payments  of  interest  and  repayments  of
principal.  They  also can  include  U. S.  Treasury  securities  that have been
"stripped"  by a Federal  Reserve Bank,  zero-coupon  U.S.  Treasury  securities
described below, and Treasury Inflation-Protection Securities ("TIPS").

            o Treasury  Inflation-Protection  Securities. The Fund can buy these
U.S.  Treasury  securities,  called  "TIPS,"  that are  designed  to  provide an
investment  vehicle that is not vulnerable to inflation.  The interest rate paid
by TIPS is fixed.  The  principal  value rises or falls  semi-annually  based on
changes  in the  published  Consumer  Price  Index.  If  inflation  occurs,  the
principal and interest  payments on TIPS are adjusted to protect  investors from
inflationary loss. If deflation occurs, the principal and interest payments will
be adjusted downward, although the principal will not fall below its face amount
at maturity.

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

            o U.S. Government  Mortgage-Related  Securities. The Fund can invest
in a variety of  mortgage-related  securities that are issued by U.S. Government
agencies or instrumentalities, some of which are described below.

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


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

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

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

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

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


            o Federal Home Loan  Mortgage  Corporation  Certificates.  FHLMC,  a
corporate  instrumentality  of the  United  States,  issues  FHLMC  Certificates
representing  interests in mortgage loans.  FHLMC  guarantees to each registered
holder of a FHLMC  Certificate  timely  payment of the  amounts  representing  a
holder's  proportionate  share in: (iv)  interest  payments  less  servicing and
guarantee fees, (v) principal  prepayments,  and (vi) the ultimate collection of
amounts representing the holder's

                  proportionate  interest in principal  payments on the mortgage
                  loans in the pool  represented  by the FHLMC  Certificate,  in
                  each case whether or not such amounts are actually received.

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


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


            o  Zero-Coupon  U.S.  Government   Securities.   The  Fund  can  buy
zero-coupon U.S.  government  securities.  These will typically be U.S. Treasury
Notes and Bonds that have been stripped of their unmatured interest coupons, the
coupons  themselves,  or certificates  representing  interests in those stripped
debt obligations and coupons.


      Zero-coupon securities do not make periodic interest payments and are sold
at a deep  discount  from their face value at maturity.  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.  The discount
typically decreases as the maturity date approaches.

      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 that pay interest.  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.

      The Fund's  investment  in  zero-coupon  securities  may 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 may 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.


      n "Stripped" Mortgage Related Securities.  The Fund can invest in stripped
mortgage-related  securities that are created by segregating the cash flows from
underlying  mortgage  loans or  mortgage  securities  to create  two or more new
securities.  Each  has a  specified  percentage  of  the  underlying  security's
principal or interest payments. These are a form of derivative investment.


      Mortgage  securities may be partially stripped so that each class receives
some interest and some principal.  However,  they may be completely stripped. In
that case all of the interest is distributed to holders of one type of security,
known as an  "interest-only"  security,  or "I/O," and all of the  principal  is
distributed to holders of another type of security,  known as a "principal-only"
security or "P/O." Strips can be created for pass-through certificates or CMOs.

      The yields to maturity of I/Os and P/Os are very  sensitive  to  principal
repayments  (including   prepayments)  on  the  underlying  mortgages.   If  the
underlying  mortgages   experience  greater  than  anticipated   prepayments  of
principal,  the Fund might not fully  recoup its  investment  in an I/O based on
those  assets.  If  underlying   mortgages   experience  less  than  anticipated
prepayments  of  principal,  the yield on the P/Os based on them  could  decline
substantially.


      n Cash  Equivalents.  For  defensive  purposes  the Fund can  invest  in a
variety  of   "cash-equivalents,"   which  are  high  quality   short-term  debt
instruments.  The following is a brief  description of the types of money market
securities  the Fund may invest in. Money market  securities  are  high-quality,
short-term  debt  instruments  that  may  be  issued  by  the  U.S.  Government,
corporations, banks or other entities. They may have fixed, variable or floating
interest rates.
            o  U.S.  Government  Securities.  These include obligations issued
or   guaranteed   by  the  U.S.   Government   or  any  of  its   agencies  or
instrumentalities, described above.

            o Bank Obligations. The Fund may buy time deposits,  certificates of
deposit and bankers' acceptances. They must be :

               l  obligations issued or guaranteed by a domestic or foreign bank
                  (including a foreign  branch of a domestic  bank) having total
                  assets of at least $1 billion,
               l  banker's  acceptances  (which may or may not be  supported  by
                  letters of credit)  only if  guaranteed  by a U.S.  commercial
                  bank with total assets of at least U.S. $1 billion.

               The  Fund  can  make  time  deposits.  These  are  non-negotiable
deposits in a bank for a specified  period of time. They may be subject to early
withdrawal  penalties.  Time  deposits  that are  subject  to  early  withdrawal
penalties are subject to the Fund's limits on illiquid  investments,  unless the
time deposit matures in seven days or less.  "Banks" include  commercial  banks,
savings banks and savings and loan associations.


            o Commercial  Paper. The Fund may invest in commercial  paper, if it
is rated within the top two rating  categories of Standard & Poor's and Moody's.
If the paper is not rated,  it may be purchased if issued by a company  having a
credit rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.


      The Fund  may buy  commercial  paper,  including  U.S.  dollar-denominated
securities of foreign  branches of U.S.  banks,  issued by other entities if the
commercial  paper  is  guaranteed  as  to  principal  and  interest  by a  bank,
government or corporation whose  certificates of deposit or commercial paper may
otherwise be purchased by the Fund.


            o Variable  Amount  Master  Demand  Notes.  Master  demand notes are
corporate  obligations that permit the investment of fluctuating  amounts by the
Fund at varying rates of interest under direct arrangements between the Fund, as
lender, and the borrower. They permit daily changes in the amounts borrowed. The
Fund has the right to increase  the amount  under the note at any time up to the
full amount  provided by the note  agreement,  or to  decrease  the amount.  The
borrower  may prepay up to the full amount of the note  without  penalty.  These
notes may or may not be backed by bank letters of credit.


      Because these notes are direct lending arrangements between the lender and
borrower, it is not expected that there will be a trading market for them. There
is no secondary  market for these notes,  although they are redeemable (and thus
are  immediately  repayable by the borrower) at principal  amount,  plus accrued
interest,  at any time.  Accordingly,  the Fund's  right to redeem such notes is
dependent  upon the ability of the  borrower to pay  principal  and  interest on
demand.

      The Fund has no  limitations  on the type of issuer  from whom these notes
will be purchased.  However, in connection with such purchases and on an ongoing
basis,  the  Manager  will  consider  the  earning  power,  cash  flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest on
demand,  including  a  situation  in which all holders of such notes made demand
simultaneously. Investments in master demand notes are subject to the limitation
on investments by the Fund in illiquid securities,  described in the Prospectus.
Currently,  the Fund does not intend that its  investments  in  variable  amount
master demand notes will exceed 5% of its total assets.


      n When-Issued and  Delayed-Delivery  Transactions.  The Fund can invest in
securities  on a  "when-issued"  basis and may purchase or sell  securities on a
"delayed-delivery"   (or    "forward-commitment")    basis.    When-issued   and
delayed-delivery  are terms that refer to  securities  whose terms and indenture
are  available  and for which a market  exists,  but which are not available for
immediate delivery.

      When such  transactions  are  negotiated,  the price  (which is  generally
expressed in yield terms) is fixed at the time the commitment is made.  Delivery
and payment for the securities take place at a later date  (generally  within 45
days of the date the offer is accepted). The securities are subject to change in
value from market fluctuations during the period until settlement.  The value at
delivery may be less than the purchase price.  For example,  changes in interest
rates in a direction  other than that expected by the Manager before  settlement
will  affect  the  value of such  securities  and may  cause a loss to the Fund.
During the period  between  purchase and  settlement,  no payment is made by the
Fund to the issuer and no interest  accrues to the Fund from the investment.  No
income  begins to accrue to the Fund on a  when-issued  security  until the Fund
receives the security at settlement of the trade.

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

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

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

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

      n  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 defensive purposes.


      In  a  repurchase  transaction,   the  Fund  buys  a  security  from,  and
simultaneously  resells it to, an approved vendor for delivery on an agreed-upon
future  date.  The resale  price  exceeds the  purchase  price by an amount that
reflects an agreed-upon  interest rate effective for the period during which the
repurchase  agreement is in effect.  Approved  vendors  include U.S.  commercial
banks,  U.S.  branches  of  foreign  banks,  or  broker-dealers  that  have been
designated as primary  dealers in government  securities.  They must meet credit
requirements set by the Fund's Board of Directors 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  fundamental  policy  limits on holding  illiquid  investments.  The Fund
cannot  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 monitor the vendor's creditworthiness to confirm that
the vendor is financially sound and will  continuously  monitor the collateral's
value.


      n Illiquid and  Restricted  Securities.  Under the policies and procedures
established  by the  Fund's  Board of  Directors,  the  Manager  determines  the
liquidity  of certain of the Fund's  investments.  Investments  may be  illiquid
because of the absence of an active trading market, making it difficult to value
them or dispose of them promptly at an acceptable  price. A restricted  security
is one that has a contractual  restriction on its resale or which cannot be sold
publicly until it is registered under the Securities Act of 1933.


      As a  fundamental  policy,  the Fund will not invest  more than 10% of its
total  assets  in  illiquid  or  restricted  securities,   including  repurchase
agreements having a maturity beyond seven days,  portfolio  securities for which
market  quotations  are not readily  available  and time deposits that mature in
more than 2 days. Certain restricted  securities that are eligible for resale to
qualified  institutional  purchasers,  as described below, may not be subject to
that  limit.  The Fund  currently  does not intend to invest more than 5% of its
total  assets in  illiquid  and  restricted  securities.  The  Manager  monitors
holdings of illiquid securities on an ongoing basis to determine whether to sell
any holdings to maintain adequate liquidity.

      To enable  the Fund to sell its  holdings  of a  restricted  security  not
registered  under the  Securities  Act of 1933, the Fund may have to cause those
securities to be registered.  The expenses of registering  restricted securities
may be  negotiated  by the Fund  with the  issuer  at the time the Fund buys the
securities.  When the Fund must arrange  registration because the Fund wishes to
sell the  security,  a  considerable  period  may  elapse  between  the time the
decision is made to sell the security and the time the security is registered so
that the Fund could sell it. The Fund would bear the risks of any downward price
fluctuation during that period.

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


      n  Loans  of  Portfolio  Securities.  The  Fund  can  lend  its  portfolio
securities  to certain  types of  eligible  borrowers  approved  by the Board of
Directors.  It may do so to try to provide income or to raise cash for liquidity
purposes.  As a fundamental policy,  these loans are limited to not more than 33
1/3% of the value 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.  The Fund presently does not intend to engage in loans of securities
but may do so in the future.


      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.


      n Hedging. The Fund can use hedging to attempt to protect against declines
in the  market  value of the  Fund's  portfolio,  to  permit  the Fund to retain
unrealized gains in the value of portfolio securities which have appreciated, or
to facilitate  selling  securities  for investment  reasons.  To do so, the Fund
could:

         o  sell futures contracts, or
o           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.

      The Fund is not  obligated to use hedging  instruments,  even though it is
permitted  to use them in the  Manager's  discretion,  as described  below.  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  and  its
fundamental policies.


            o  Futures.  The  Fund  can buy  and  sell  exchange-traded  futures
contracts that relate to (1) broadly-based stock indices ("stock index futures")
(2) debt  securities  (these are referred to as "interest  rate  futures"),  (3)
other  broadly-based  securities  indices  (these are referred to as  "financial
futures"),   (4)  foreign   currencies   (these  are  referred  to  as  "forward
contracts"), or (5) securities.


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

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

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

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


            o Writing Covered Call Options.  Under its fundamental policies, the
Fund is permitted to write (that is, sell) covered calls on securities, indices,
futures  and  forward  contracts.  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 calls on  futures  and  indices,  the call may be
covered  by  segregating  liquid  assets  to  enable  the  Fund to  satisfy  its
obligations  if the call is exercised.  Up to 20% 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  bank,  or a  securities  depository  acting for the
Custodian,  will act as the Fund's escrow agent,  through the  facilities of the
Options Clearing  Corporation  ("OCC"),  as to the investments on which the Fund
has  written  calls  traded  on  exchanges  or as  to  other  acceptable  escrow
securities.  In that way, no margin will be required for such transactions.  OCC
will release the  securities  on the  expiration  of the option or when the Fund
enters into a closing transaction.

      If 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.

      The  Fund  may  realize  a  profit  if  a  call  it  has  written  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.
Because of the Fund's  fundamental  policies  prohibiting  the  purchase of call
options, the Fund cannot effect closing purchase transactions to terminate calls
it has written.

      The Fund can 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  identifying  on its
books 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.


            o Selling  Call  Options  on Foreign  Currencies.  The Fund can sell
calls on foreign  currencies.  They include  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 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 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 on that  foreign
currency.  However, the currency rates could fluctuate in a direction adverse to
the Fund's position.

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

      The Fund  could  write a call on a  foreign  currency  to  provide a hedge
against a decline in the U.S.  dollar value of a security which the Fund owns or
has the right to acquire and which is denominated in the currency underlying the
option.  That decline might be one that occurs due to an expected adverse change
in the exchange  rate.  This is known as a  "cross-hedging"  strategy.  In those
circumstances,  the Fund covers the option by  identifying  on its books  liquid
assets 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 Fund could pay a brokerage  commission  each time it sells a call,  or
sells an underlying  investment in connection with the exercise of a call. 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,  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.

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

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

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

      The Fund can use  hedging  instruments  to  establish  a  position  in the
securities  markets as a temporary  substitute  for the  purchase of  individual
securities  (long hedging) by buying futures.  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.


            o 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  might  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 may suffer a substantial  decline  against a foreign  currency,  it
could enter into a forward  contract to buy that  foreign  currency  for a fixed
dollar amount.  Alternatively,  the Fund could enter into a forward  contract to
sell a different  foreign  currency for a fixed U.S.  dollar  amount if the Fund
believes that the U.S. dollar value of the foreign  currency to be sold pursuant
to its forward contract will fall whenever there is a decline in the U.S. dollar
value of the currency in which portfolio securities of the Fund are denominated.
That is referred to as a "cross hedge."

      The Fund will cover its short  positions in these cases by  identifying to
its Custodian  bank assets  having a value equal to the aggregate  amount of the
Fund's commitment under forward contracts.  The Fund will not enter into forward
contracts or maintain a net exposure to such  contracts if the  consummation  of
the contracts  would obligate the Fund to deliver an amount of foreign  currency
in  excess of the  value of the  Fund's  portfolio  securities  or other  assets
denominated  in that  currency  or another  currency  that is the subject of the
hedge. However, to avoid excess transactions and transaction costs, the Fund may
maintain  a net  exposure  to  forward  contracts  in excess of the value of the
Fund's portfolio securities or other assets denominated in foreign currencies if
the excess amount is "covered" by liquid securities denominated in any currency.
The cover must be at least equal at all times to the amount of that excess.

      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 Interest Rate Swap Transactions.  The Fund can enter into interest
rate swap  agreements.  In an interest  rate swap,  the Fund and  another  party
exchange  their  right to  receive  or their  obligation  to pay  interest  on a
security.  For  example,  they  might swap the right to  receive  floating  rate
payments  for  fixed  rate  payments.  The Fund can  enter  into  swaps  only on
securities that it owns. Also, the Fund will identify on its books liquid assets
(such as cash or U.S.  government  securities) to cover any amounts it could owe
under swaps that  exceed the  amounts it is  entitled  to  receive,  and it will
adjust that amount daily, as needed.


      Swap agreements entail both interest rate risk and credit risk. There is a
risk that, based on movements of interest rates in the future, the payments made
by the  Fund  under a swap  agreement  will be  greater  than  the  payments  it
received.  Credit risk arises from the possibility  that the  counterparty  will
default. If the counterparty  defaults,  the Fund's loss will consist of the net
amount of contractual interest payments that the Fund has not yet received.  The
Manager  will  monitor  the  creditworthiness  of  counterparties  to the Fund's
interest rate swap transactions on an ongoing basis.

      The Fund can enter  into swap  transactions  with  certain  counterparties
pursuant to master netting agreements.  A master netting agreement provides that
all swaps done between the Fund and that counterparty shall be regarded as parts
of an integral  agreement.  If amounts are payable on a  particular  date in the
same currency in respect of one or more swap transactions, the amount payable on
that date in that  currency  shall be the net amount.  In  addition,  the master
netting  agreement  may provide that if one party  defaults  generally or on one
swap, the counterparty can terminate all of the swaps with that party.

      Under these  agreements,  if a default results in a loss to one party, the
measure of that party's  damages is  calculated by reference to the average cost
of a replacement swap for each swap. It is measured by the mark-to-market  value
at the time of the  termination  of each swap. The gains and losses on all swaps
are  then  netted,  and  the  result  is the  counterparty's  gain  or  loss  on
termination. The termination of all swaps and the netting of gains and losses on
termination is generally referred to as "aggregation."


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


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

      Under the  Investment  Company Act, when the Fund  purchases a future,  it
must maintain  cash or readily  marketable  short-term  debt  instruments  in an
amount equal to the market value of the securities  underlying the future,  less
the margin deposit applicable to it.


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


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

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

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

Investment Restrictions

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

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

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

      |_| The Fund cannot issue senior securities. However, it can make payments
or deposits of margin in connection with options or futures  transactions,  lend
its portfolio  securities,  enter into repurchase  agreements,  borrow money and
pledge its assets as permitted by its other fundamental  policies.  For purposes
of this restriction,  the issuance of shares of common stock in multiple classes
or series,  the purchase or sale of options,  futures  contracts  and options on
futures contracts,  forward commitments,  and repurchase agreements entered into
in accordance with the Fund's investment policies,  and the pledge,  mortgage or
hypothecation of the Fund's assets are not deemed to be senior securities.

      |_| The Fund  cannot  invest  more than 5% of its total  assets  (taken at
market  value at the time of each  investment)  in the  securities  (other  than
securities  of the U.S.  government or its agencies) of any one issuer or invest
more  than 15% of its  total  assets in the  obligations  of any one bank.  This
restriction  applies  to  repurchase  agreements  with any one  bank or  dealer.
Additionally,  the Fund cannot purchase more than either 10% principal amount of
the outstanding debt securities of an issuer,  or 10% of the outstanding  voting
securities of an issuer.  This restriction  shall not apply to securities issued
or guaranteed by the U.S.  government or its agencies,  bank instruments or bank
repurchase agreements.

      |_| The Fund cannot  invest more than 25% of the value of its total assets
in the securities of issuers in any single  industry.  However,  this limitation
shall not apply to the purchase of obligations  issued or guaranteed by the U.S.
government,  its  agencies  or  instrumentalities.   For  the  purpose  of  this
restriction,  each utility that provides a separate  service (for example,  gas,
gas  transmission,  electric or telephone)  shall be considered to be a separate
industry. This test shall be applied on a pro forma basis using the market value
of all  assets  immediately  prior  to  making  any  investment.  The  Fund  has
undertaken as a matter of  non-fundamental  policy to apply this  restriction to
25% or more of its total assets.

      |_| The Fund cannot, by itself or together with any other fund,  portfolio
or portfolios,  make investments for the purpose of exercising  control over, or
management of, any issuer.

      |_| The Fund cannot  purchase  securities of other  investment  companies,
except   in   connection   with  a   merger,   consolidation,   acquisition   or
reorganization. It can also purchase in the open market securities of closed-end
investment  companies if no underwriter or dealer's commission or profit,  other
than the  customary  broker's  commission  is involved  and only if  immediately
thereafter not more than 10% of the Fund's total assets,  taken at market value,
would be invested in such securities.

      |_| The  Fund  cannot  purchase  or sell  interests  in oil,  gas or other
mineral exploration or development programs, commodities, commodity contracts or
real estate. However, the Fund can purchase securities of issuers that invest or
deal an any of the above  interests  and can  invest  for  hedging  purposes  in
futures contracts on securities,  financial instruments and indices, and foreign
currency, as are approved for trading on a registered exchange.

      |_| The Fund cannot  purchase any securities on margin or make short sales
of securities or maintain a short  position.  However,  the Fund can obtain such
short- term credits as may be necessary for the clearance of purchases and sales
of  portfolio  securities.  The  deposit  or  payment  by the Fund of initial or
maintenance  margin in  connection  with futures  contracts  or related  options
transactions is not considered to be the purchase of a security on margin.

      |_| The Fund  cannot  make  loans.  However,  the Fund may lend  portfolio
securities in accordance  with the Fund's  investment  policies up to 33 1/3% of
the Fund's  total  assets  taken at market  value.  The Fund can also enter into
repurchase  agreements,  and  purchase  all or a portion of an issue of publicly
distributed   debt  securities,   bank  loan   participation   interests,   bank
certificates of deposit,  bankers' acceptances,  debentures or other securities,
whether  or  not  the  purchase  is  made  upon  the  original  issuance  of the
securities.

      |_| The Fund cannot  borrow  amounts in excess of 10% of its total assets,
taken at market  value at the time of the  borrowing.  It can  borrow  only from
banks as a temporary measure for extraordinary or emergency purposes.  It cannot
make  investments  in portfolio  securities  while such  outstanding  borrowings
exceed 5% of its total assets.

      o The Fund cannot allow its current  obligations under reverse  repurchase
agreements,  together with  borrowings,  to exceed 1/3 of the value of its total
assets (less all its liabilities other than the obligations under borrowings and
such agreements).

      |_|  The  Fund  cannot  mortgage,  pledge,  hypothecate  or in any  manner
transfer, as security for indebtedness, any securities owned or held by the Fund
except as may be necessary in  connection  with  borrowings  as mentioned in its
restriction  on  borrowing,  above.  In that case such  mortgaging,  pledging or
hypothecating  may not exceed 10% of the Fund's  total  assets,  taken at market
value at the time of the borrowing.  The deposit of cash,  cash  equivalents and
liquid debt  securities in a segregated  account with the Fund's  custodian bank
and/or with a broker in  connection  with futures  contracts or related  options
transactions  and the purchase of  securities on a  "when-issued"  basis are not
deemed to be pledges.

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

      o The Fund  cannot  write,  purchase or sell puts,  calls or  combinations
thereof, except that it can write covered call options.

      o The Fund cannot invest in  securities of foreign  issuers if at the time
of acquisition  more than 10% of its total assets,  taken at market value at the
time of the investment, would be invested in such securities. However, up to 25%
of the  total  assets  of the  Fund may be  invested  in the  aggregate  in such
securities that are (i) issued, assumed or guaranteed by foreign governments, or
political subdivisions or instrumentalities  thereof, (ii) assumed or guaranteed
by domestic issuers (including Eurodollar securities),  or (iii) issued, assumed
or guaranteed by foreign issuers having a class of securities listed for trading
on The New York Stock Exchange.

      o The Fund cannot  invest more than 10% in the  aggregate  of the value of
its total assets in repurchase agreements maturing in more than seven days, time
deposits maturing in more than two days,  portfolio  securities that do not have
readily available market quotations and all other illiquid assets.

      For purposes of the fundamental investment restrictions, the term "borrow"
does not include mortgage dollar rolls, reverse repurchase agreements or lending
portfolio securities.  The terms "illiquid securities" and "portfolio securities
that  do not  have  readily  available  market  quotations"  include  restricted
securities.  However,  reverse repurchase  agreements are treated as borrowings,
master demand notes may be deemed to be illiquid  securities and mortgage dollar
rolls are sales transactions and not financings.
      Unless the Prospectus or this Statement of Additional  Information  states
that a percentage  restriction  applies on an ongoing basis,  it applies only at
the time the Fund makes an investment. The Fund need not sell securities to meet
the percentage limits if the value of the investment  increases in proportion to
the size of the Fund.

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


How the Fund is Managed

Organization  and  History.  The Fund is one of two  investment  portfolios,  or
"series," of  Oppenheimer  Series Fund,  Inc. That  corporation  is an open-end,
management  investment company organized as a Maryland  corporation in 1981, and
was called  Connecticut Mutual Investment  Accounts,  Inc. until March 18, 1996,
when the Manager became the Fund's investment adviser. The Fund is a diversified
mutual  fund,  and until March 18,  1996 was called  Connecticut  Mutual  Growth
Account.

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


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

            class are different from interests of another class,  and o votes as
a class on matters that affect that class alone.

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

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

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

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

      Shareholders of the Fund and of its parent corporation's other series vote
together in the aggregate on certain matters at  shareholders'  meetings.  Those
matters include the election of Directors and ratification of appointment of the
independent  auditors.  Shareholders  of  a  particular  series  or  class  vote
separately  on  proposals  that affect that series or class.  Shareholders  of a
series or class that is not  affected by a proposal  are not entitled to vote on
the proposal.  For example, only shareholders of a particular series vote on any
material amendment to the investment  advisory  agreement for that series.  Only
shareholders of a particular class of a series vote on certain amendments to the
Distribution and/or Service Plans if the amendments affect only that class.

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







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

      Ms. Macaskill and Messrs. Spiro, Donohue,  Wixted, Zack, Bishop and Farrar
respectively  hold the same  offices with the other New  York-based  Oppenheimer
funds as with the Fund.  As of February 1, 1999,  the  Directors and officers of
the Fund as a group owned of record or  beneficially  less than 1% of each class
of shares of the Fund.  The foregoing  statement  does not reflect  ownership of
shares of the Fund held of record by an employee  benefit plan for  employees of
the  Manager,  other than the shares  beneficially  owned  under the plan by the
officers of the Fund listed above. Ms. Macaskill and Mr. Donohue are trustees of
that plan.

1 Ms. Macaskill is not a Director of Oppenheimer Money Market Fund, Inc.



Leon Levy, Chairman of the Board of Directors, Age 73
280 Park Avenue, New York, NY 10017
General Partner of Odyssey Partners, L.P. (investment  partnership) (since 1982)
and Chairman of Avatar Holdings, Inc. (real estate development).

Robert G. Galli, Director, Age 65
19750  Beach  Road,  Jupiter  Island,  FL 33469
A Trustee or Director of other Oppenheimer funds. Formerly he held the following
positions: Vice Chairman of the Manager, OppenheimerFunds, Inc. (October 1995 to
December 1997);  Vice President (June 1990 to March 1994) and General Counsel of
Oppenheimer  Acquisition Corp., the Manager's parent holding company;  Executive
Vice President  (December 1977 to October 1995),  General Counsel and a director
(December  1975 to October 1993) of the Manager;  Executive Vice President and a
director  (July 1978 to October  1993) and General  Counsel of the  Distributor,
OppenheimerFunds  Distributor,  Inc.;  Executive  Vice  President and a director
(April 1986 to October 1995) of HarbourView Asset Management  Corporation;  Vice
President and a director  (October  1988 to October  1993) of  Centennial  Asset
Management  Corporation,  (HarbourView  and Centennial  are  investment  adviser
subsidiaries of the Manager); and an officer of other Oppenheimer funds.

Benjamin Lipstein, Director, Age 75
591 Breezy Hill Road, Hillsdale, N.Y. 12529
Professor   Emeritus   of   Marketing,   Stern   Graduate   School  of  Business
Administration, New York University.

Bridget A. Macaskill, President and Director *, Age 50
Two World Trade Center,  34th Floor,  New York, NY 10048-0203
President (since June 1991),  Chief Executive Officer (since September 1995) and
a Director (since  December 1994) of the Manager;  President and director (since
June 1991) of HarbourView  Asset  Management  Corp.;  Chairman and a director of
Shareholder  Services,  Inc.  (since August  1994),  and  Shareholder  Financial
Services,  Inc. (since September 1995) (both are transfer agent  subsidiaries of
the Manager);  President  (since  September  1995) and a director (since October
1990) of Oppenheimer  Acquisition Corp.;  President (since September 1995) and a
director  (since  November 1989) of Oppenheimer  Partnership  Holdings,  Inc., a
holding  company  subsidiary  of the  Manager;  a director  (since July 1996) of
Oppenheimer Real Asset Management,  Inc., and investment  advisory subsidiary of
the Manager;  President and a director (since October 1997) of  OppenheimerFunds
International  Ltd.,  an offshore  fund  management  subsidiary  of the Manager;
Chairman,  President  and of  Oppenheimer  Millennium  Funds  plc;  an  offshore
investment  company;  President  and a director or trustee of other  Oppenheimer
funds; a director of Hillsdown Holdings plc (a U.K. food company).

Elizabeth B. Moynihan, Director, Age 69
801 Pennsylvania Avenue, N.W., Washington, D.C. 20004
Author  and  architectural  historian;  a trustee  of the Freer  Gallery  of Art
(Smithsonian Institute), and a member of the Executive Committee of the Board of
Trustees of the National  Building  Museum;  a member of the  Trustees  Council,
Preservation League of New York State.

Kenneth A. Randall, Director, Age 71
6 Whittaker's Mill, Williamsburg, Virginia 23185
A director of Dominion  Resources,  Inc.  (electric  utility  holding  company),
Dominion  Energy,  Inc.  (electric  power and oil and gas  producer),  and Prime
Retail,  Inc.  (real estate  investment  trust);  formerly  President  and Chief
Executive  Officer of The Conference  Board,  Inc.  (international  economic and
business  research)  and a  director  of  Lumbermens  Mutual  Casualty  Company,
American Motorists Insurance Company and American Manufacturers Mutual Insurance
Company.

Edward V.  Regan,  Director,  Age 68
40 Park  Avenue,  New York,  New York 10016
Chairman of Municipal  Assistance  Corporation for the City of New York;  Senior
Fellow of Jerome Levy Economics Institute,  Bard College; a director of RB Asset
(real  estate  manager)  and  OffitBank;   a  Trustee  of  Financial  Accounting
Foundation (FASB and GASB); formerly New York State Comptroller and trustee, New
York State and Local Retirement Fund.

Russell S. Reynolds, Jr., Director, Age 68
8 Sound Shore Drive, Greenwich, Connecticut 06830
Retired  Founder  Chairman  of  Russell  Reynolds  Associates,  Inc.  (executive
recruiting);  Chairman of Directorship Inc. (corporate governance consulting); a
director  of  Professional  Staff  Limited  (U.K);  a trustee of Mystic  Seaport
Museum, International House and Greenwich Historical Society.

Donald W. Spiro, Vice Chairman and Directors*, Age 73
Two World Trade Center,  34th Floor, New York, NY 10048-0203
Chairman Emeritus (since August 1991) and a director (since January 1969) of the
Manager; formerly Chairman of the Manager and the Distributor.

Pauline Trigere, Director, Age 86
498 Seventh Avenue, New York, New York 10018
Chairman and Chief Executive Officer of P.T. Concept (design and sale of women's
fashions).

Clayton K. Yeutter, Director, Age 68
10475 E. Laurel Lane, Scottsdale, Arizona 85259
Of  Counsel,  Hogan & Hartson  (a law  firm);  a  director  of Zurich  Financial
Services (financial  services),  Caterpillar,  Inc.  (machinery),  ConAgra, Inc.
(food and agricultural  products),  Farmers Insurance Company  (insurance),  FMC
Corp.  (chemicals  and  machinery) and Texas  Instruments,  Inc.  (electronics);
formerly (in descending  chronological  order) Counselor to the President (Bush)
for Domestic Policy, Chairman of the Republican National Committee, Secretary of
the U.S. Department of Agriculture, and U.S. Trade Representative;  and formerly
a director of B.A.T.  Industries,  Ltd.  (tobacco and financial  services),  IMC
Global  (fertilizer   producer)  and  Lindsay  Mfg.  Co.  (maker  of  irrigation
equipment).






Peter M. Antos, Vice President and Portfolio Manager, Age: 53.
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered   Financial  Analyst;   Senior  Vice  President  of  the  Manager  and
HarbourView  Asset Management Corp. (since March 1996); an officer and portfolio
manager  of other  Oppenheimer  funds;  previously  Vice  President  and  Senior
Portfolio Manager, Equities of Connecticut Mutual Life Insurance Company and its
subsidiary, G.R. Phelps & Co. (1989-1996).

Michael C. Strathearn, Vice President and Portfolio Manager, Age: 46.
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Vice President of the Manager and HarbourView Asset
Management  Corp (since  March  1996);  an officer of other  Oppenheimer  funds;
previously a Portfolio Manager,  Equities,  of Connecticut Mutual Life Insurance
Company (1988-1996).

Kenneth B. White, Vice President and Portfolio Manager, Age: 47.
One Financial Plaza, 755 Main Street, Hartford, Connecticut 06103
Chartered Financial Analyst; Vice President of the Manager and HarbourView Asset
Management  Corp.  (since March 1996);  an officer of other  Oppenheimer  funds;
previously a Portfolio Manager,  Equities,  of Connecticut Mutual Life Insurance
Company (1992-1996).

Andrew J. Donohue, Secretary, Age 48
Two World Trade  Center,  34th Floor,  New York, NY  10048-0203
Executive Vice President  (since January 1993),  General  Counsel (since October
1991) and a Director  (since  September  1995) of the  Manager;  Executive  Vice
President  and General  Counsel  (since  September  1993) and a director  (since
January 1992) of the Distributor;  Executive Vice President, General Counsel and
a director of HarbourView Asset Management Corp.,  Shareholder  Services,  Inc.,
Shareholder Financial Services,  Inc. and Oppenheimer Partnership Holdings, Inc.
(since September 1995);  President and a director of Centennial Asset Management
Corp.  (since  September  1995);  President,  General  Counsel and a director of
Oppenheimer  Real Asset  Management,  Inc.  (since July 1996);  General  Counsel
(since May 1996) and  Secretary  (since April 1997) of  Oppenheimer  Acquisition
Corp.; Vice President and a director of OppenheimerFunds  International Ltd. and
Oppenheimer  Millennium  Funds plc  (since  October  1997);  an officer of other
Oppenheimer funds.


Brian W. Wixted, Treasurer; Age: 39.
6803  South   Tucson   Way,   Englewood,

Colorado 80112

Senior Vice President and Treasurer (since April 1999) of the Manager;  formerly
Principal  and Chief  Operating  Officer,  Bankers  Trust  Company - Mutual Fund
Services Division (1995-1999);  Vice President and Chief Financial Officer of CS
First Boston  Investment  Management Corp.  (1991-1995);  and Vice President and
Accounting Manager, Merrill Lynch Asset Management (1987-1991).


Robert G. Zack, Assistant Secretary, Age 50
Two World Trade Center, 34th Floor, New York, NY 10048-0203
Senior Vice President (since May 1985) and Associate  General Counsel (since May
1981) of the Manager;  Assistant Secretary of Shareholder Services,  Inc. (since
May 1985),  and  Shareholder  Financial  Services,  Inc.  (since November 1989);
Assistant  Secretary of  OppenheimerFunds  International  Ltd.  and  Oppenheimer
Millennium  Funds plc (since  October  1997);  an  officer of other  Oppenheimer
funds.  Robert J.  Bishop,  Assistant  Treasurer,  Age 40 6803 South Tucson Way,
Englewood,  Colorado 80112 Vice President of the Manager/Mutual  Fund Accounting
(since May 1996); an officer of other Oppenheimer  funds;  formerly an Assistant
Vice President of the Manager/Mutual  Fund Accounting (April 1994-May 1996), and
a Fund Controller for the Manager.

Scott T. Farrar, Assistant Treasurer, Age 33
6803 South Tucson Way, Englewood, Colorado 80112
Vice President of the Manager/Mutual Fund Accounting (since May 1996); Assistant
Treasurer of  OppenheimerFunds  International  Ltd. and  Oppenheimer  Millennium
Funds plc (since October 1997); an officer of other Oppenheimer funds;  formerly
an  Assistant  Vice  President  of the  Manager/Mutual  Fund  Accounting  (April
1994-May 1996), and a Fund Controller for the Manager.

      |X|  Remuneration  of  Directors.  The  officers  of the Fund and  certain
Directors of the Fund's parent corporation (Ms. Macaskill and Mr. Spiro) who are
affiliated  with the  Manager  receive  no  salary  or fee from  the  Fund.  The
remaining Directors received the compensation shown below. The compensation from
the  Fund was paid  during  its  fiscal  period  ended  October  31,  1998.  The
compensation  from all of the New York-based  Oppenheimer  funds  (including the
Fund) was received as a director, trustee or member of a committee of the boards
of those funds during the calendar year 1998.






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

                                                            Total
                                           Retirement       Compensation
                                           Benefits         From all
                          Aggregate        Accrued as Part  New York based
 Director's Name          Compensation     of Fund          Oppenheimer
 and Other Positions      from Fund1       Expenses         Funds (21 Funds)2

 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Leon Levy                     $6,652           $2,270           $162,600
 Chairman
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Robert G. Galli               $1,655            None            $113,383
 Study Committee Member3
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Benjamin Lipstein
 Study Committee
 Chairman,                     $6,973           $3,185           $140,550
 Audit Committee Member
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Elizabeth B. Moynihan         $2,668            None            $99,000
 Study Committee Member
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Kenneth A. Randall            $3,947           $1,500           $90,800
 Audit Committee Member
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Edward V. Regan
 Proxy Committee
 Chairman, Audit               $2,420            None            $89,800
 Committee Member
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Russell S. Reynolds, Jr.      $2,223            $412            $67,200
 Proxy Committee Member
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------

 Pauline Trigere               $2,679           $1,062           $60,000

 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Clayton K. Yeutter           $1,8114            $-0-            $67,200
 Proxy Committee Member
 ------------------------------------------------------------------------------
 Aggregate  compensation  includes  fees,  deferred  compensation,  if any,  and
    retirement plan benefits accrued for a Director.
 For the 1998 calendar year.
 Aggregate  compensation  from the Fund  reflects  fees from 1/1/98 to 10/31/98.
   Total Compensation for the 1998 calendar year includes  compensation received
   for serving as Trustee or Director of 11 other Oppenheimer funds.

 Includes $381 deferred under Deferred Compensation Plan described below.
      |X|   Retirement   Plan  for   Directors.   The  Fund  and  its   parent

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


      n  Deferred  Compensation  Plan.  The  Board of  Directors  has  adopted a
Deferred  Compensation  Plan for  disinterested  directors  that enables them to
elect to defer  receipt of all or a portion of the annual fees they are entitled
to  receive  from the Fund.  Under  the plan,  the  compensation  deferred  by a
Director is periodically adjusted as though an equivalent amount had


been  invested  in  shares  of one or more  Oppenheimer  funds  selected  by the
Director.  The amount  paid to the  Director  under the plan will be  determined
based upon the performance of the selected funds.


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

      n Major  Shareholders.  As of February 1, 1999, the only persons who owned
of record or were known by the Fund to own  beneficially 5% or more of any class
of the Fund's outstanding shares were:

      MML Securities Corporation,  1414, Springfield,  MA 01144-1008 which owned
      1,886,597.974 Class A shares (approximately 8.56% of the outstanding Class
      A shares) for the benefit of its clients.

      Mass  Mutual  Life  Insurance  Co.,  1295 State  Street,  Springfield,  MA
      01111-0001, which owned 3,250,135.739 Class A shares (approximately 14.74%
      of the outstanding Class A shares) and 6,094,682.587  Class Y shares (100%
      of the outstanding Class Y shares) for the benefit of its clients.

The Manager.  The Manager is  wholly-owned by Oppenheimer  Acquisition  Corp., a
holding company controlled by Massachusetts  Mutual Life Insurance Company.  The
Manager and the Fund 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.
Compliance  with the Code of Ethics is carefully  monitored  and enforced by the
Manager.

      n 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. Other members
of the Manager's Equity Portfolio Department provide the portfolio managers with
counsel and support in managing the Fund's portfolio.

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

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

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

 Fiscal Year ended 10/31:    Management Fees Paid to OppenheimerFunds, Inc.

 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           19961                                $ 559,197
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           1997                                $1,850,924
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           1998                                $3,658,650
 ------------------------------------------------------------------------------
 1.Fiscal period from 1/1/96 to 10/31/96.  For the period from 1/1/96 to 3/18/96
   fees paid to the Fund's prior investment adviser were $159,989.

      The investment  advisory  agreement  states that in the absence of willful
misfeasance,  bad faith,  gross  negligence in the  performance of its duties or
reckless  disregard of its obligations and duties under the investment  advisory
agreement,  the Manager is not liable for any loss  resulting  from a good faith
error or  omission  on its part  with  respect  to any of its  duties  under the
agreement.

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







Brokerage Policies of the Fund

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

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

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

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

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

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

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

      Investment   research   services  include   information  and  analysis  on
particular  companies and  industries  as well as market or economic  trends and
portfolio  strategy,  market quotations for portfolio  evaluations,  information
systems,  computer  hardware and similar  products and  services.  If a research
service also assists the Manager in a non-research capacity (such as bookkeeping
or other administrative  functions),  then only the percentage or component that
provides assistance to the Manager in the investment decision-making process may
be paid in commission dollars.
      The Board of Directors  permits the Manager to use stated  commissions  on
secondary fixed-income agency trades to obtain research if the broker represents
to the  Manager  that:  (i)  the  trade  is not  from or for  the  broker's  own
inventory,  (ii) the trade was  executed by the broker on an agency basis at the
stated commission,  and (iii) the trade is not a riskless principal transaction.
The Board of Directors  permits the Manager to use  concessions  on  fixed-price
offerings  to obtain  research,  in the same manner as is  permitted  for agency
transactions.

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

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

 Fiscal Year Ended 10/31:     Total Brokerage Commissions Paid by the Fund1

 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
          1996 2                                $173,513
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           1997                                 $892,947
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
           1998                                $2,003,6383
 ------------------------------------------------------------------------------
4. Amounts do not include spreads or concessions on principal  transactions on a
   net trade basis.
5. For the fiscal period from 1/1/96 to 10/31/96.
6. In the fiscal year ended  10/31/98,  the amount of  transactions  directed to
   brokers  for  research  services  was  $903,289,168  and  the  amount  of the
   commissions paid to broker-dealers for those services was $1,372,485



Distribution and Service Plans

The  Distributor.  Under its  General  Distributor's  Agreement  with the Fund's
parent corporation,  the Distributor acts as the Fund's principal underwriter in
the continuous  public offering of the different  classes of shares of the Fund.
The Distributor is not obligated to sell a specific  number of shares.  Expenses
normally attributable to sales are borne by the Distributor.

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








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

          Aggregate    Class A
          Front-End    Front-End     Commissions    Commissions  Commissions
Fiscal    Sales        Sales         on Class A     on Class B   on Class C
Year      Charges on   Charges       Shares         Shares       Shares
Ended     Class A      Retained by   Advanced by    Advanced by  Advanced by
10/31:    Shares       Distributor   Distributor1   Distributor1 Distributor1

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
  19962    $ 534,988     $341,543       $ 11,222     $ 149,781      $ 6,734
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
  1997     $ 885,737     $558,864       $ 18,532     $ 836,130     $ 55,829
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
  1998     $1,667,118    $789,178       $178,820     $1,811,143    $100,603
- -------------------------------------------------------------------------------
3. The Distributor  advances commission payments to dealers for certain sales of
   Class A  shares  and for  sales of  Class B and  Class C shares  from its own
   resources at the time of sale.
4. Fiscal  period  from  1/1/86 to  10/31/96.  Excludes  amounts  paid to and/or
   retained by the Fund's prior general  distributor  for the period from 1/1/96
   to 3/18/96.

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

Fiscal     Class A Contingent    Class B Contingent
Year       Deferred Sales        Deferred Sales        Class C Contingent
Ended      Charges Retained by   Charges Retained by   Deferred Sales Charges
10/31      Distributor           Distributor           Retained by Distributor

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
   1998             N/A                $202,849                $10,623
- -------------------------------------------------------------------------------

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

      Each plan has been approved by a vote of the Board of Directors, including
a majority of the Independent Directors2, cast in person at a meeting called for
the  purpose of voting on that  plan.  Each plan has also been  approved  by the
holders of a "majority" (as defined in the Investment Company Act) of the shares
of the applicable  class.  The shareholder vote for the Distribution and Service
Plan for Class C shares was cast by the  Manager as the sole  initial  holder of
Class C shares of the Fund.

2. In  accordance  with  Rule  12b-1 of the  Investment  Company  Act,  the term
"Independent  Directors" in this Statement of Additional  Information  refers to
those  Directors  who are not  "interested  persons"  of the Fund (or its parent
corporation)  and who do not have any direct or indirect  financial  interest in
the operation of the distribution plan or any agreement under the plan.

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

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

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

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

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

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

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

      For the fiscal year ended October 31, 1998 payments under the Class A Plan
totaled $1,102,621, all of which was paid by the Distributor to recipients. That
included $667,521 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.

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

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

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

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

o       bears the costs of sales literature, advertising and prospectuses (other
        than those  furnished  to  current  shareholders)  and state  "blue sky"
        registration fees and certain other distribution expenses.

      For the fiscal year ended  October 31,  1998,  payments  under the Class B
plan  totaled  $1,101,303  (including  $42,263  paid  to  an  affiliate  of  the
Distributor's  parent).  The Distributor  retained $933,605 of the total amount.
For the fiscal year ended  October  31,  1998,  payments  under the Class C plan
totaled $153,334  (including  $12,392 paid to an affiliate of the  Distributor's
parent). The Distributor retained $110,797 of the total amount.

      The  Distributor's  actual  expenses in selling Class B and Class C shares
may be more than the payments it receives  from the  contingent  deferred  sales
charges  collected on redeemed  shares and from the Fund under the plans.  As of
October 31, 1998, the Distributor had incurred  unreimbursed  expenses under the
Class B plan in the  amount  of  $3,212,917  (equal to 2.61% of the  Fund's  net
assets  represented  by Class B shares on that date) and  unreimbursed  expenses
under the Class C plan of  $219,766  (equal to 1.21% of the  Fund's  net  assets
represented by Class C shares on that date).  If either the Class B or the Class
C plan is terminated  by the Fund,  the Board of Directors may allow the Fund to
continue  payments  of the  asset-based  sales  charge  to the  Distributor  for
distributing shares before the plan was terminated.

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


Performance of the Fund

Explanation  of  Performance  Terminology.  The Fund uses a variety  of terms to
illustrate its investment  performance.  Those terms include  "cumulative  total
return,"  "average  annual total  return,"  "average  annual total return at net
asset value" and "total return at net asset value." An  explanation of how total
returns are  calculated  is set forth  below.  The charts  below show the Fund's
performance as of the Fund's most recent fiscal year end. You can obtain current
performance  information by calling the Fund's Transfer Agent at  1-800-525-7048
or    by    visiting    the    OppenheimerFunds    Internet    web    site    at
http://www.oppenheimerfunds.com.

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

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


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


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

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

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


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


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



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


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



         |_| Total  Returns at Net Asset  Value.  From time to time the Fund may
also quote a cumulative  or an average  annual total return "at net asset value"
(without  deducting sales charges) for Class A, Class B or Class C 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 10/31/98

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

          Cumulative
          Total
Class of  Returns (10
Shares    years
          or Life of
          Class)                       Average Annual Total Returns

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

                                                  5-Year           10-Year
                                                    (or              (or
                                1-Year        life-of-class)    life-of-class)

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

          After    Without After    Without  After    Without  After    Without
          Sales    Sales   Sales    Sales    Sales    Sales    Sales    Sales
          Charge   Charge  Charge   Charge   Charge   Charge   Charge   Charge

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A1  328.64%  354.79%  -3.64%  2.24%    13.24%   14.59%   15.67%   16.35%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B    50.27%   53.27%  -3.00%  1.47%    14.13%2  14.87%2  N/A      N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C    35.37%   35.37%   0.57%  1.47%    12.88%3  12.88%3  N/A      N/A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class Y   N/A       26.87% N/A      2.63%    N/A      13.53%4  N/A      N/A
- --------------------------------------------------------------------------------
1. Inception of Class A:      9/16/85.
2. Inception of Class B:      10/2/95.
3. Inception of Class C:      5/1/96.
4. Inception of Class Y:      12/16/96.

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.

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

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

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

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

      n 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.


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

A B O U T  Y O U R  A C C O U N T

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

How to Buy Shares

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

AccountLink.  When shares are purchased through AccountLink,  each purchase must
be at least $25.  Shares  will be  purchased  on the  regular  business  day the
Distributor  is  instructed  to initiate the  Automated  Clearing  House ("ACH")
transfer to buy the shares.  Dividends will begin to accrue on shares  purchased
with the proceeds of ACH transfers on the business day the Fund receives Federal
Funds for the purchase  through the ACH system  before the close of The New York
Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier
on certain days. If Federal Funds are received on a business day after the close
of the Exchange, the shares will be purchased and dividends will begin to accrue
on the next regular  business  day. The proceeds of ACH  transfers  are normally
received by the Fund 3 days after the transfers are initiated.  The  Distributor
and the Fund are not responsible for any delays in purchasing  shares  resulting
from delays in ACH transmissions.

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

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

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

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


Oppenheimer Bond Fund                   Oppenheimer Large Cap Growth Fund
Oppenheimer California Municipal Fund   Oppenheimer Limited-Term Government Fund
Oppenheimer Capital Appreciation Fund   Oppenheimer   Main   Street   California

                                        Municipal Fund

Oppenheimer Capital Income Fund         Oppenheimer  Main Street Growth & Income
                                      Fund
Oppenheimer Champion Income Fund Oppenheimer MidCap Fund Oppenheimer Convertible
Securities Fund  Oppenheimer  Multiple  Strategies Fund  Oppenheimer  Developing
Markets Fund Oppenheimer Municipal Bond Fund Oppenheimer  Disciplined Allocation
Fund  Oppenheimer  New York Municipal Fund  Oppenheimer  Disciplined  Value Fund
Oppenheimer New Jersey  Municipal Fund  Oppenheimer  Discovery Fund  Oppenheimer
Pennsylvania  Municipal  Fund  Oppenheimer  Enterprise  Fund  Oppenheimer  Quest
Balanced  Value Fund  Oppenheimer  Europe Fund  Oppenheimer  Quest Capital Value
Fund,
                                      Inc.

Oppenheimer Florida Municipal Fund      Oppenheimer  Quest  Global  Value  Fund,
                                      Inc.
Oppenheimer Global Fund                 Oppenheimer Quest Opportunity Value Fund
Oppenheimer Global Growth & Income Fund Oppenheimer Quest Small Cap Value Fund
Oppenheimer  Gold  &  Special  Minerals Oppenheimer Quest Value Fund, Inc.
Fund
Oppenheimer Growth Fund                 Oppenheimer Real Asset Fund
Oppenheimer High Yield Fund             Oppenheimer Strategic Income Fund
Oppenheimer Insured Municipal Fund      Oppenheimer Total Return Fund, Inc.
Oppenheimer Intermediate Municipal Fund Oppenheimer U.S. Government Trust
Oppenheimer International Bond Fund     Oppenheimer World Bond Fund
Oppenheimer International Growth Fund   Limited-Term New York Municipal Fund
Oppenheimer     International     Small Rochester Fund Municipals
Company Fund

and the following money market funds:

Centennial America Fund, L. P.          Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust  Centennial Tax Exempt Trust
Centennial Government Trust             Oppenheimer Cash Reserves
Centennial Money Market Trust           Oppenheimer Money Market Fund, Inc.
      There is an initial sales charge on the purchase of Class A shares of each
of  the  Oppenheimer  funds  except  the  money  market  funds.   Under  certain
circumstances described in this Statement of Additional Information,  redemption
proceeds of certain  money  market  fund  shares may be subject to a  contingent
deferred sales charge.

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

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

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

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

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

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

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

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

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

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

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

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


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

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

Asset Builder Plans.  To establish an Asset Builder Plan to buy shares  directly
from a bank  account,  you must  enclose a check  (minimum  $25) for the initial
purchase with your application.  Shares purchased by Asset Builder Plan payments
from bank  accounts  are  subject  to the  redemption  restrictions  for  recent
purchases  described  in  the  Prospectus.   Asset  Builder  Plans  also  enable
shareholders  of  Oppenheimer  Cash  Reserves to use their fund  account to make
monthly automatic purchases of shares of up to four other Oppenheimer funds.

      If you make  payments  from your bank  account to  purchase  shares of the
Fund,  your bank account will be  automatically  debited,  normally four to five
business days prior to the investment dates selected in the Application. Neither
the  Distributor,  the Transfer Agent nor the Fund shall be responsible  for any
delays in purchasing shares resulting from delays in ACH transmissions.

      Before  initiating  Asset  Builder  payments,  obtain a prospectus  of the
selected  fund(s) from the Distributor or your financial  advisor and request an
application from the  Distributor,  complete it and return it. The amount of the
Asset  Builder  investment  may be changed or the automatic  investments  may be
terminated  at any time by writing to the Transfer  Agent.  The  Transfer  Agent
requires a  reasonable  period  (approximately  15 days)  after  receipt of such
instructions to implement  them. The Fund reserves the right to amend,  suspend,
or discontinue offering Asset Builder plans at any time without prior notice.

Retirement  Plans.  Certain types of  Retirement  Plans are entitled to purchase
shares of the Fund without  sales charge or at reduced  sales charge  rates,  as
described in Appendix C to this  Statement of  Additional  Information.  Certain
special sales charge arrangements described in that Appendix apply to retirement
plans whose records are maintained on a daily  valuation  basis by Merrill Lynch
Pierce Fenner & Smith, Inc. or an independent  record keeper that has a contract
or special  arrangement  with  Merrill  Lynch.  If on the date the plan  sponsor
signed the Merrill Lynch record keeping service agreement the Plan has less than
$3 million in assets (other than assets invested in money market funds) invested
in applicable  investments,  then the retirement  plan may purchase only Class B
shares of the  Oppenheimer  funds.  Any  retirement  plans in that category that
currently  invest in Class B shares of the Fund will have  their  Class B shares
converted to Class A shares of the Fund when the Plan's  applicable  investments
reach $5 million.  Cancellation  of Purchase  Orders.  Cancellation  of purchase
orders for the Fund's shares (for example,  when a purchase check is returned to
the Fund  unpaid)  causes a loss to be incurred  when the net asset value of the
Fund's shares on the  cancellation  date is less than on the purchase date. That
loss is equal to the  amount of the  decline  in the net  asset  value per share
multiplied  by the  number of shares in the  purchase  order.  The  investor  is
responsible  for that loss. If the investor fails to compensate the Fund for the
loss, the  Distributor  will do so. The Fund may reimburse the  Distributor  for
that amount by redeeming  shares from any account  registered in that investor's
name, or the Fund or the Distributor may seek other redress.

Classes of Shares.  Each class of shares of the Fund  represents  an interest in
the same portfolio of investments of the Fund. However, each class has different
shareholder  privileges and features.  The net income attributable to Class B or
Class C shares and the  dividends  payable on Class B or Class C shares  will be
reduced by  incremental  expenses  borne  solely by that class.  Those  expenses
include the asset-based sales charges to which Class B and Class C 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 and
Class C shares have no initial sales charge,  the purpose of the deferred  sales
charge and asset-based sales charge on Class B and Class C 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 than another.

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

      n Class B Conversion.  The  conversion of Class B shares to Class A shares
after six years is subject to the  continuing  availability  of a private letter
ruling  from the  Internal  Revenue  Service,  or an  opinion  of counsel or tax
adviser, to the effect that the conversion of Class B shares does not constitute
a taxable  event for the  shareholder  under  Federal  income tax law. If such a
revenue  ruling or  opinion is no longer  available,  the  automatic  conversion
feature  may be  suspended,  in which  event no further  conversions  of Class B
shares would occur while such  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.

      n Allocation  of  Expenses.  The Fund pays  expenses  related to its daily
operations, such as custodian fees, Directors' fees, transfer agency fees, legal
fees and auditing  costs.  Those  expenses are paid out of the Fund's assets and
are not paid directly by  shareholders.  However,  those expenses reduce the net
asset  value of shares,  and  therefore  are  indirectly  borne by  shareholders
through their investment.
      The  methodology  for  calculating  the net  asset  value,  dividends  and
distributions  of the Fund's  share  classes  recognizes  two types of expenses.
General expenses that do not pertain specifically to any one class are allocated
pro rata to the shares of all classes. The allocation is based on the percentage
of the Fund's total assets that is represented by the assets of each class,  and
then  equally to each  outstanding  share  within a given  class.  Such  general
expenses include  management fees, legal,  bookkeeping and audit fees,  printing
and mailing costs of shareholder reports, Prospectuses, Statements of Additional
Information and other materials for current  shareholders,  fees to unaffiliated
Directors,  custodian expenses, share issuance costs,  organization and start-up
costs, interest,  taxes and brokerage commissions,  and non-recurring  expenses,
such as litigation costs.

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

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

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

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


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

         o Equity securities traded on a U.S.  securities  exchange or on NASDAQ
are valued as follows: (3) if last sale information is regularly reported,  they
are valued at the

               last  reported  sale price on the  principal  exchange on which
               they are traded or on NASDAQ, as applicable, on that day, or
(4)            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: (4) at the last sale price available to
the pricing service approved by the

               Board of Directors, or
(5)            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
(6)            at the mean between the "bid" and "asked"  prices  obtained  from
               the principal exchange on which the security is traded or, on the
               basis of  reasonable  inquiry,  from  two  market  makers  in the
               security.

         o Long-term debt securities having a remaining maturity in excess of 60
days  are  valued  based  on the mean  between  the  "bid"  and  "asked"  prices
determined  by a  portfolio  pricing  service  approved  by the Fund's  Board of
Directors  or  obtained  by the  Manager  from two active  market  makers in the
security on the basis of reasonable inquiry.
         o The following securities are valued at the mean between the "bid" and
"asked" prices  determined by a pricing service  approved by the Fund's Board of
Directors  or  obtained  by the  Manager  from two active  market  makers in the
security on the basis of reasonable  inquiry:  (4) debt  instruments that have a
maturity of more than 397 days when

               issued,
(5)            debt  instruments  that had a  maturity  of 397 days or less when
               issued and have a remaining maturity of more than 60 days, and
(6)            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:  (3) 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
(4)            debt  instruments  held  by a  money  market  fund  that  have  a
               remaining maturity of 397 days or less.

         o   Securities   (including    restricted    securities)   not   having
readily-available  market  quotations are valued at fair value  determined under
the Board's  procedures.  If the  Manager is unable to locate two market  makers
willing to give  quotes,  a security may be priced at the mean between the "bid"
and "asked"  prices  provided by a single  active market maker (which in certain
cases may be the "bid" price if no "asked" price is available).


      In the case of U.S.  government  securities,  mortgage-backed  securities,
corporate bonds and foreign government securities, when last sale information is
not generally  available,  the Manager may use pricing services  approved by the
Board of  Directors.  The pricing  service may use "matrix"  comparisons  to the
prices for comparable  instruments on the basis of quality,  yield and maturity.
Other  special  factors may be involved  (such as the  tax-exempt  status of the
interest paid by municipal securities). The Manager will monitor the accuracy of
the pricing  services.  That  monitoring may include  comparing  prices used for
portfolio valuation to actual sales prices of selected securities.
      The closing prices in the London foreign  exchange  market on a particular
business  day that are  provided  to the  Manager  by a bank,  dealer or pricing
service that the Manager has determined to be reliable are used to value foreign
currency, including forward contracts, and to convert to U.S. dollars securities
that are denominated in foreign currency.

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

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


How to Sell Shares

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

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

      The  reinvestment  may be made without sales charge only in Class A shares
of the Fund or any of the other  Oppenheimer funds into which shares of the Fund
are  exchangeable as described in "How to Exchange  Shares" below.  Reinvestment
will be at the net asset value next computed  after the Transfer  Agent receives
the  reinvestment  order.  The shareholder  must ask the Transfer Agent for that
privilege at the time of reinvestment.  This privilege does not apply to Class C
or  Class Y  shares.  The  Fund  may  amend,  suspend  or  cease  offering  this
reinvestment  privilege at any time as to shares redeemed after the date of such
amendment, suspension or cessation.
      Any  capital  gain that was  realized  when the shares  were  redeemed  is
taxable,  and reinvestment  will not alter any capital gains tax payable on that
gain.  If there has been a capital  loss on the  redemption,  some or all of the
loss may not be tax  deductible,  depending  on the  timing  and  amount  of the
reinvestment.  Under the Internal  Revenue Code, if the  redemption  proceeds of
Fund  shares on which a sales  charge was paid are  reinvested  in shares of the
Fund or another of the Oppenheimer  funds within 90 days of payment of the sales
charge, the shareholder's basis in the shares of the Fund that were redeemed may
not include the amount of the sales charge  paid.  That would reduce the loss or
increase the gain  recognized  from the  redemption.  However,  in that case the
sales  charge  would  be  added  to the  basis  of the  shares  acquired  by the
reinvestment of the redemption proceeds.

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

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

Involuntary  Redemptions.  The Fund's Board of Directors  has the right to cause
the  involuntary  redemption  of the shares  held in any  account if the account
holds fewer than 100 shares.  If the Board exercises this right, it may also fix
the requirements for any notice to be given to the shareholders in question (not
less  than 30  days).  The  Board may  alternatively  set  requirements  for the
shareholder  to increase the  investment,  or set other terms and  conditions so
that the shares would not be involuntarily redeemed.

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

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

Sending  Redemption  Proceeds by Wire.  The 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 wire.

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

How to Exchange Shares

      As stated in the Prospectus,  shares of a particular  class of Oppenheimer
funds having more than one class of shares may be  exchanged  only for shares of
the same class of other Oppenheimer funds. Shares of Oppenheimer funds that have
a single class without a class  designation are deemed "Class A" shares for this
purpose.  You can obtain a current list showing  which funds offer which classes
by calling the Distributor at 1-800-525-7048.
      o All of the  Oppenheimer  funds  currently  offer Class A, B and C shares
except  Oppenheimer  Money Market Fund,  Inc.,  Centennial  Money Market  Trust,
Centennial Tax Exempt Trust,  Centennial  Government Trust,  Centennial New York
Tax Exempt Trust, Centennial California Tax Exempt Trust, and Centennial America
Fund, L.P., which only offer Class A shares.
      o Oppenheimer Main Street California  Municipal Fund currently offers only
Class A and Class B shares.
      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 Y shares of  Oppenheimer  Real Asset Fund may not be exchanged for
shares of any other Fund.

      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
a contingent deferred sales charge.

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

      For accounts established on or before March 8, 1996 holding Class M shares
of Oppenheimer Convertible Securities Fund, Class M shares can be exchanged only
for Class A shares of other  Oppenheimer  funds.  Exchanges to Class M shares of
Oppenheimer  Convertible  Securities  Fund are permitted  from Class A shares of
Oppenheimer  Money Market Fund,  Inc. or  Oppenheimer  Cash  Reserves  that were
acquired by exchange of Class M shares.  No other exchanges may be made to Class
M shares.
      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.

      n How Exchanges Affect  Contingent  Deferred Sales Charges.  No contingent
deferred  sales charge is imposed on exchanges of shares of any class  purchased
subject to a contingent  deferred  sales  charge.  However,  when Class A shares
acquired  by  exchange of Class A shares of other  Oppenheimer  funds  purchased
subject to a Class A contingent  deferred  sales  charge are redeemed  within 18
months of the end of the calendar month of the initial purchase of the exchanged
Class A shares,  the Class A contingent  deferred sales charge is imposed on the
redeemed  shares.  The Class B  contingent  deferred  sales charge is imposed on
Class B shares  acquired by exchange if they are redeemed  within 6 years of the
initial  purchase  of the  exchanged  Class B  shares.  The  Class C  contingent
deferred sales charge is imposed on Class C shares  acquired by exchange if they
are redeemed  within 12 months of the initial  purchase of the exchanged Class C
shares.

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

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

      n 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.  For full or partial  exchanges of
an account made by telephone, any special account features such as Asset Builder
Plans and Automatic  Withdrawal Plans will be switched to the new account unless
the Transfer  Agent is instructed  otherwise.  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.

      n 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.

      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 and Class C 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 and Class C
shares.  Those  dividends  will also  differ in amount as a  consequence  of any
difference in the net asset values of the different classes of shares.

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

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

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

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

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

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

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







Additional Information About the Fund

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

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

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

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






- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------

================================================================================
The Board of Directors and Shareholders of
Oppenheimer Disciplined Value Fund:

We have  audited  the  accompanying  statements  of  investments  and assets and
liabilities  of Oppenheimer  Disciplined  Value Fund as of October 31, 1998, and
the related  statement of operations for the year then ended,  the statements of
changes in net assets for each of the years in the  two-year  period  then ended
and the financial  highlights for each of the years in the two-year  period then
ended and the ten months ended October 31, 1996. 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. The financial  highlights for each of
the years in the  three-year  period ended  December  31, 1995,  were audited by
other  auditors  whose report dated  February 9, 1996,  expressed an unqualified
opinion on this information.

            We  conducted  our  audits in  accordance  with  generally  accepted
auditing  standards.  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 October 31, 1998 by  correspondence  with the custodian and brokers;
and where  confirmations  were not received  from  brokers,  we performed  other
auditing procedures.  An audit also includes assessing the accounting principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audits provide a
reasonable basis for our opinion.

            In our opinion,  the financial  statements and financial  highlights
referred to above  present  fairly,  in all  material  respects,  the  financial
position  of  Oppenheimer  Disciplined  Value Fund as of October 31,  1998,  the
results of its operations for the year then ended, the changes in its net assets
for each of the years in the  two-year  period  then  ended,  and the  financial
highlights  for each of the years in the two-year  period then ended October 31,
1998,  and the ten months ended October 31, 1996, in conformity  with  generally
accepted accounting principles.


KPMG Peat Marwick LLP

Denver, Colorado
November 20, 1998








- --------------------------------------------------------------------------------
Statement of Investments October 31, 1998
- --------------------------------------------------------------------------------

                                                                          Market
Value
                                                          Shares    See Note 1
================================================================================
Common Stocks--93.5%
- --------------------------------------------------------------------------------
Basic Materials--1.4%
- --------------------------------------------------------------------------------
Metals--1.4%
Aluminum Co. of America                                   133,700   $
10,595,725
- --------------------------------------------------------------------------------
Consumer Cyclicals--13.5%
- --------------------------------------------------------------------------------
Autos & Housing--5.5%
Federal-Mogul Corp.                                       275,900
14,950,331
- --------------------------------------------------------------------------------
Ford Motor Co.                                             73,100
3,965,675
- --------------------------------------------------------------------------------
Hertz Corp., Cl. A                                        100,100
3,584,831
- --------------------------------------------------------------------------------
Maytag Corp.                                              231,100
11,425,006
- --------------------------------------------------------------------------------
Republic Industries, Inc./(1)/                            184,100
2,957,106
- --------------------------------------------------------------------------------
Whirlpool Corp.                                            70,400
3,608,000

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

40,490,949

- --------------------------------------------------------------------------------
Leisure & Entertainment--3.7%
Alaska Air Group, Inc./(1)/                                51,100
1,836,406
- --------------------------------------------------------------------------------
AMR Corp./(1)/                                             90,300
6,050,100
- --------------------------------------------------------------------------------
Delta Air Lines, Inc.                                      32,000
3,378,000
- --------------------------------------------------------------------------------
Eastman Kodak Co.                                         134,800
10,447,000
- --------------------------------------------------------------------------------
Hasbro, Inc.                                              103,900
3,642,994
- --------------------------------------------------------------------------------
Outback Steakhouse, Inc./(1)/                              41,600
1,440,400
- --------------------------------------------------------------------------------
Wendy's International, Inc.                                 4,800
100,800

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

26,895,700

- --------------------------------------------------------------------------------
Retail: General--3.6%
Dayton Hudson Corp.                                       126,300
5,351,962
- --------------------------------------------------------------------------------
Federated Department Stores, Inc./(1)/                     95,600
3,674,625
- --------------------------------------------------------------------------------
Fruit of the Loom, Inc., Cl. A/(1)/                       195,400
2,979,850
- --------------------------------------------------------------------------------
K Mart Corp./(1)/                                         239,400
3,381,525
- --------------------------------------------------------------------------------
Nordstrom, Inc.                                            82,000
2,239,625
- --------------------------------------------------------------------------------
Sears Roebuck & Co.                                       191,500
8,605,531

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

26,233,118

- --------------------------------------------------------------------------------
Retail: Specialty--0.7%
Payless ShoeSource, Inc./(1)/                             104,300
4,895,581
- --------------------------------------------------------------------------------
Consumer Non-Cyclicals--21.8%
- --------------------------------------------------------------------------------
Beverages--1.4%
Anheuser-Busch Cos., Inc.                                 168,800
10,033,050


                      13 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------

                                                                          Market
Value
                                                          Shares    See Note 1
- --------------------------------------------------------------------------------
Food--6.8%
Albertson's, Inc.                                         168,000   $
9,334,500
- --------------------------------------------------------------------------------
General Mills, Inc.                                       116,400
8,555,400
- --------------------------------------------------------------------------------
IBP, Inc.                                                 352,700
9,544,944
- --------------------------------------------------------------------------------
Kroger Co./(1)/                                           227,300
12,615,150
- --------------------------------------------------------------------------------
Safeway, Inc./(1)/                                        207,600
9,925,875

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

49,975,869

- --------------------------------------------------------------------------------
Healthcare/Drugs--4.7%
Amgen, Inc./(1)/                                          198,500
15,594,656
- --------------------------------------------------------------------------------
Genzyme Corp. (General Division)/(1)/                     452,600
19,037,487

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

34,632,143

- --------------------------------------------------------------------------------
Healthcare/Supplies & Services--3.9%
Bard (C.R.), Inc.                                         275,900
11,777,481
- --------------------------------------------------------------------------------
Tenet Healthcare Corp./(1)/                               377,180
10,537,466
- --------------------------------------------------------------------------------
WellPoint Health Networks, Inc./(1)/                       83,000
6,110,875

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

28,425,822

- --------------------------------------------------------------------------------
Household Goods--5.0%
Dial Corp. (The)                                          316,700
8,729,044
- --------------------------------------------------------------------------------
Fort James Corp.                                          427,187
17,220,976
- --------------------------------------------------------------------------------
Premark International, Inc.                               351,000
11,122,312

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

37,072,332

- --------------------------------------------------------------------------------
Energy--1.7%
- --------------------------------------------------------------------------------
Oil-Integrated--1.7%
Exxon Corp.                                               115,800
8,250,750
- --------------------------------------------------------------------------------
Mobil Corp.                                                57,900
4,382,306

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

12,633,056

- --------------------------------------------------------------------------------
Financial--11.9%
- --------------------------------------------------------------------------------
Banks--6.9%
Bank One Corp.                                            304,500
14,882,437
- --------------------------------------------------------------------------------
BankBoston Corp.                                          273,200
10,057,175
- --------------------------------------------------------------------------------
First Union Corp.                                         257,500
14,935,000
- --------------------------------------------------------------------------------
Golden West Financial Corp.                               116,700
10,583,231

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

50,457,843

- --------------------------------------------------------------------------------
Insurance--5.0%
ACE Ltd.                                                  137,000
4,640,875
- --------------------------------------------------------------------------------
Allstate Corp.                                            176,800
7,613,450
- --------------------------------------------------------------------------------
American International Group, Inc.                        127,100
10,835,275


                      14 Oppenheimer Disciplined Value Fund


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

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

                                                                          Market
Value
                                                          Shares    See Note 1
- --------------------------------------------------------------------------------
Insurance (continued)
Conseco, Inc.                                             152,000   $
5,272,500
- --------------------------------------------------------------------------------
Equitable Cos., Inc.                                       72,000
3,528,000
- --------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl. A                  167,000
5,124,812

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

37,014,912

- --------------------------------------------------------------------------------
Industrial--10.1%
- --------------------------------------------------------------------------------
Industrial Materials--2.0%
Owens Corning                                             191,000
6,935,687
- --------------------------------------------------------------------------------
USG Corp.                                                 156,900
7,482,169

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

14,417,856

- --------------------------------------------------------------------------------
Industrial Services--2.4%
Viad Corp.                                                322,600
8,851,338
- --------------------------------------------------------------------------------
Waste Management, Inc. (New)                              195,685
8,830,286

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

17,681,624

- --------------------------------------------------------------------------------
Manufacturing--5.7%
Ingersoll-Rand Co.                                        243,800
12,311,900
- --------------------------------------------------------------------------------
PACCAR, Inc.                                               74,800
3,263,150
- --------------------------------------------------------------------------------
Textron, Inc.                                             215,800
16,050,125
- --------------------------------------------------------------------------------
United Technologies Corp.                                 110,200
10,496,550

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

42,121,725

- --------------------------------------------------------------------------------
Technology--18.3%
- --------------------------------------------------------------------------------
Aerospace/Defense--2.7%
General Dynamics Corp.                                    208,800
12,358,350
- --------------------------------------------------------------------------------
Lockheed Martin Corp.                                      70,371
7,837,570

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

20,195,920

- --------------------------------------------------------------------------------
Computer Hardware--12.5%
Apple Computer, Inc./(1)/                                 263,300
9,775,013
- --------------------------------------------------------------------------------
Compaq Computer Corp.                                     447,900
14,164,838
- --------------------------------------------------------------------------------
International Business Machines Corp.                     187,300
27,802,344
- --------------------------------------------------------------------------------
Lexmark International Group, Inc., Cl. A/(1)/             127,700
8,931,019
- --------------------------------------------------------------------------------
Seagate Technology, Inc./(1)/                             202,400
5,338,300
- --------------------------------------------------------------------------------
Storage Technology Corp. (New)/(1)/                       297,000
9,930,938
- --------------------------------------------------------------------------------
Xerox Corp.                                               166,100
16,090,938

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

92,033,390


                      15 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Statement of Investments (Continued)
- --------------------------------------------------------------------------------

                                                                          Market
Value
                                                          Shares    See Note 1
- --------------------------------------------------------------------------------
Computer Software/Services--2.0%
First Data Corp.                                          146,800   $
3,890,200
- --------------------------------------------------------------------------------
Network Associates, Inc./(1)/                             247,000
10,497,500

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

14,387,700

- --------------------------------------------------------------------------------
Telecommunications/Technology--1.1%
3Com Corp./(1)/                                           222,900
8,038,331
- --------------------------------------------------------------------------------
Utilities--14.8%
- --------------------------------------------------------------------------------
Electric Utilities--4.9%
Baltimore Gas & Electric Co.                              258,000
8,094,750
- --------------------------------------------------------------------------------
Edison International                                      255,300
6,733,538
- --------------------------------------------------------------------------------
FPL Group, Inc.                                           196,200
12,274,763
- --------------------------------------------------------------------------------
Montana Power Co.                                         215,000
9,312,188

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

36,415,239

- --------------------------------------------------------------------------------
Gas Utilities--2.1%
Columbia Energy Group                                     263,250
15,235,594
- --------------------------------------------------------------------------------
Telephone Utilities--7.8%
AT&T Corp.                                                267,400
16,645,650
- --------------------------------------------------------------------------------
Bell Atlantic Corp.                                       273,928
14,552,425
- --------------------------------------------------------------------------------
Century Telephone Enterprises, Inc.                        96,200
5,465,363
- --------------------------------------------------------------------------------
Frontier Corp.                                             96,500
2,901,031
- --------------------------------------------------------------------------------
US West, Inc.                                             304,400
17,464,950

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

57,029,419

- ------------
Total Common Stocks (Cost $628,728,114)
686,912,898

                                                          Units
================================================================================
Rights, Warrants and Certificates--0.0%
- --------------------------------------------------------------------------------
Concentric Network Corp. Wts., Exp. 12/07/(2)/                100
10,000
- --------------------------------------------------------------------------------
Dairy Mart Convenience Stores, Inc. Wts., Exp. 12/01/(2)/     333
87
- --------------------------------------------------------------------------------
Intermedia Communications, Inc. Wts., Exp. 6/00/(2)/           50
3,474
- --------------------------------------------------------------------------------
Microcell Telecommunications, Inc. Wts., Exp. 6/06/(2)/       500
9,062
- --------------------------------------------------------------------------------
Price Communications Corp. Wts., Exp. 8/07/(2)/               344
10,320
- --------------------------------------------------------------------------------
Signature Brands, Inc. Wts., Exp. 12/49/(2)/                   50
1,006

- ------------
Total Rights, Warrants and Certificates (Cost $7,533)
33,949


                      16 Oppenheimer Disciplined Value Fund


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

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

                                                         Face       Market
Value
                                                         Amount     See Note 1
================================================================================
Mortgage-Backed Obligations--0.0%
- --------------------------------------------------------------------------------
Federal National Mortgage Assn., Collateralized Mtg.
Obligations, Gtd. Real Estate Mtg. Investment Conduit
Pass-Through Certificates, Trust 1993-181,
Cl. C, 5.40%, 10/25/02                                $     7,105   $
7,082
- --------------------------------------------------------------------------------
Federal National Mortgage Assn., Medium-Term Nts.,
6.56%, 11/13/01                                           100,000
100,156

- ------------
Total Mortgage-Backed Obligations (Cost $107,106)
107,238

================================================================================
Non-Convertible Corporate Bonds and Notes--0.0%
- --------------------------------------------------------------------------------
American Standard Cos., Inc., 10.875% Sr. Nts.,
5/15/99/(2)/                                               60,000
61,350
- --------------------------------------------------------------------------------
Cigna Corp., 7.90% Nts., 12/14/98                          40,000
40,106

- ------------
Total Non-Convertible Corporate Bonds and Notes
(Cost $105,259)
101,456

================================================================================
Convertible Corporate Bonds and Notes--0.0%
- --------------------------------------------------------------------------------
Geotek Communications, Inc., 12% Cv. Sr. Sub. Nts.,
2/15/01/(3)/ (Cost $46,270)                                50,000
- --

================================================================================
Short-Term Notes--2.5%
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.78%, 11/4/98/(4)/   8,000,000
7,996,813
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.78%, 11/23/98/(4)/ 10,000,000
9,970,789

- ------------
Total Short-Term Notes (Cost $17,967,602)
17,967,602

================================================================================
Repurchase Agreements--1.7%
- --------------------------------------------------------------------------------
Repurchase agreement with Zion First National Bank, 5.38%, dated 10/30/98, to be
repurchased  at $12,605,649 on 11/2/98,  collateralized  by U.S.  Treasury Nts.,
7.50%, 11/15/01, with a value of $12,871,713 (Cost $12,600,000) 12,600,000
12,600,000

- --------------------------------------------------------------------------------
Total Investments, at Value (Cost $659,561,884)              97.7%
717,723,143
- --------------------------------------------------------------------------------
Other Assets Net of Liabilities                               2.3
16,734,052
                                                      -----------
- ------------
Net Assets                                                  100.0%
$734,457,195
                                                      ===========
============

1. Non-income producing security.

2.  Identifies  issues  considered to be illiquid or  restricted--See  Note 5 of
Notes to Financial Statements.

3. Non-income producing--issuer is in default.

4. Short-term  notes are generally traded on a discount basis; the interest rate
is the discount rate received by the Fund at the time of purchase.

See accompanying Notes to Financial Statements.


                      17 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Statement of Assets and Liabilities October 31, 1998
- --------------------------------------------------------------------------------



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


Assets
Investments, at value (cost $659,561,884)--see accompanying statement
$717,723,143
- ------------------------------------------------------------------------------------
Cash
81,753
- ------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold
20,241,887
Interest and dividends
875,178
Shares of capital stock sold
483,843
Other
16,729

- ------------
Total assets
739,422,533

====================================================================================
Liabilities
Payables and other liabilities:
Investments purchased
4,073,944
Shares of capital  stock  redeemed  408,965  Distribution  and service plan fees
127,942 Directors' fees--Note 1 101,737 Transfer and shareholder servicing agent
fees 38,171 Other 214,579

- ------------
Total liabilities
4,965,338

====================================================================================
Net Assets
$734,457,195

============
====================================================================================
Composition of Net Assets
Par value of shares of capital stock                                    $
35,139
- ------------------------------------------------------------------------------------
Additional paid-in capital
642,468,835
- ------------------------------------------------------------------------------------
Undistributed net investment income
5,144,211
- ------------------------------------------------------------------------------------
Accumulated net realized gain on investments
and foreign currency transactions
28,647,751
- ------------------------------------------------------------------------------------
Net unrealized appreciation on investments--Note 3
58,161,259

- ------------
Net assets
$734,457,195

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



                      18 Oppenheimer Disciplined Value Fund


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

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

================================================================================
Net Asset Value Per Share
Class A Shares:
Net  asset  value  and  redemption  price  per  share  (based  on net  assets of
$456,263,913 and 21,816,729 shares of capital stock outstanding) $20.91

Maximum  offering price per share (net asset value plus sales charge of 5.75% of
offering price) $22.19

- --------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and offering  price per share (based on net assets of  $123,259,656  and
5,917,043 shares of capital stock outstanding) $20.83

- --------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred sales
charge) and  offering  price per share (based on net assets of  $18,204,294  and
883,681 shares of capital stock outstanding) $20.60

- --------------------------------------------------------------------------------
Class Y Shares:
Net asset value,  redemption  price and  offering  price per share (based on net
assets of $136,729,332 and 6,521,712 shares of capital stock outstanding) $20.97

See accompanying Notes to Financial Statements.


                      19 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Statement of Operations For the Year Ended October 31, 1998
- --------------------------------------------------------------------------------



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


Investment Income
Dividends (net of foreign withholding taxes of $18,139)                $
7,861,416
- -----------------------------------------------------------------------------------
Interest
4,555,195

- ------------
Total income
12,416,611

===================================================================================
Expenses
Management fees--Note 4
3,658,650
- -----------------------------------------------------------------------------------
Distribution and service plan fees--Note 4:
Class A
1,102,621
Class B
1,101,303
Class C
153,334
- -----------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees--Note 4:
Class A
607,058 Class B 151,719 Class C 21,360 Class Y 33,197
- -----------------------------------------------------------------------------------
Shareholder reports
204,758
- -----------------------------------------------------------------------------------
Registration and filing fees:
Class A 35,710 Class B 14,300 Class C 2,658 Class Y 15,602
- -----------------------------------------------------------------------------------
Directors' fees and expenses--Note 1
31,027
- -----------------------------------------------------------------------------------
Legal, auditing and other professional fees
30,931
- -----------------------------------------------------------------------------------
Custodian fees and expenses
20,050
- -----------------------------------------------------------------------------------
Accounting service fees--Note 4
15,000
- -----------------------------------------------------------------------------------
Insurance expenses
9,067
- -----------------------------------------------------------------------------------
Other
15,415

- ------------
Total expenses
7,223,760

===================================================================================
Net Investment Income
5,192,851

===================================================================================
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments
28,718,400
Foreign currency transactions
(2,593)

- ------------
Net realized gain
28,715,807

- -----------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation on investments
(34,730,525)

- ------------
Net realized and unrealized loss
(6,014,718)

===================================================================================
Net Decrease in Net Assets Resulting from Operations                   $
(821,867)

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


See accompanying Notes to Financial Statements.


                      20 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------



                                                                      Year Ended
October 31,

1998             1997
================================================================================================

              
Operations
Net investment income                                             $
5,192,851    $   3,074,306
- ------------------------------------------------------------------------------------------------
Net realized gain
28,715,807       67,704,492
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
(34,730,525)     (16,812,534)

- -------------    -------------
Net increase (decrease) in net assets resulting from operations
(821,867)      53,966,264

================================================================================================
Dividends  and  Distributions  to  Shareholders  Dividends  from net  investment
income:
Class A
(2,053,090)        (641,547)
Class B
(205,567)         (12,589)
Class C
(16,094)          (1,655)
Class Y
(722,961)              (3)
- ------------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A
(44,818,463)     (12,873,125)
Class B
(10,405,845)        (496,006)
Class C
(1,243,556)         (63,782)
Class Y
(11,174,826)             (69)

================================================================================================
Capital Stock  Transactions  Net increase in net assets  resulting  from capital
stock transactions--Note 2:
Class A
131,069,760      164,714,499
Class B
52,155,257       75,670,149
Class C
9,659,857        8,998,996
Class Y
56,697,598       79,722,352

================================================================================================
Net Assets
Total increase
178,120,203      368,983,484
- ------------------------------------------------------------------------------------------------
Beginning of period
556,336,992      187,353,508

- -------------    -------------
End of period (including undistributed net investment
income of $5,144,211 and $2,934,887, respectively)                $
734,457,195    $ 556,336,992

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


See accompanying Notes to Financial Statements.


                      21 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------



                                                 Class
A

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

Year

Ended
                                                 Year Ended October
31,                      Dec. 31,
                                                 1998         1997
1996/(4)/       1995
========================================================================================================
                                                        
             
Per Share Operating Data
Net asset value, beginning of period               $23.31
$19.65         $17.84          $14.20
- --------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                                 .16
 .23/(5)/       .15             .25
Net realized and unrealized gain (loss)               .32
4.91/(5)/      1.88            4.88
                                                 --------     --------
- --------        --------
Total income (loss) from investment operations        .48
5.14           2.03            5.13

- --------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income                 (.12)
(.07)          (.10)           (.25)
Distributions from net realized gain                (2.76)
(1.41)          (.12)          (1.24)
                                                 --------     --------
- --------        --------
Total dividends and distributions
to shareholders                                     (2.88)
(1.48)          (.22)          (1.49)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period                     $20.91
$23.31         $19.65          $17.84
                                                 ========     ========
========        ========
========================================================================================================
Total Return, at Net Asset Value /(6)/               2.24%
27.60%         11.41%          36.40%

========================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands)         $456,264     $371,810
$180,784        $118,118
- --------------------------------------------------------------------------------------------------------
Average net assets (in thousands)                $442,138     $234,314
$135,940        $ 98,063
- --------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income                                0.84%
1.05%          1.01%/(7)/      1.53%
Expenses                                             0.98%
1.07%          1.13%/(7)/      1.22%
- --------------------------------------------------------------------------------------------------------
Portfolio turnover rate /(8)/                       106.3%
103.1%          73.9%           69.7%


1. For the period from December 16, 1996  (inception of offering) to October 31,
1997. 2. For the period from May 1, 1996  (inception of offering) to October 31,
1996. 3. For the period from October 2, 1995 (inception of offering) to December
31,  1995.  4. For the ten months ended  October 31, 1996.  The Fund changed its
fiscal  year  end  from   December  31  to  October  31.  On  March  18,   1996,
OppenheimerFunds, Inc. became the investment advisor to the Fund.


                      22 Oppenheimer Disciplined Value Fund


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

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



                          Class B
- ---------------------     -----------------------------------------------
                                                                          Period
                                                                           Ended
                          Year Ended October 31,                  Dec. 31,
  1994        1993        1998         1997          1996/(4)/      1995/(3)/
=========================================================================
                                                    

   $15.14      $14.20       $23.32      $19.77       $18.08        $17.83
- -------------------------------------------------------------------------

      .22         .30          .02         .09/(5)/     .05           .02
     (.32)       2.64          .30        4.91/(5)/    1.83          1.40
  -------     -------     --------     -------       ------        ------
     (.10)       2.94          .32        5.00         1.88          1.42

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

     (.22)       (.30)        (.05)       (.04)        (.07)         (.02)
     (.62)      (1.70)       (2.76)      (1.41)        (.12)        (1.15)
  -------     -------     --------     -------       ------        ------

     (.84)      (2.00)       (2.81)      (1.45)        (.19)        (1.17)
- -------------------------------------------------------------------------
  $ 14.20     $ 15.14     $  20.83     $ 23.32       $19.77        $18.08
  =======     =======     ========     =======       ======        ======
=========================================================================
    (0.65)%     20.91%        1.47%      26.61%       10.43%         8.04%

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

  $78,390     $64,495     $123,260     $83,291       $5,854        $  717
- -------------------------------------------------------------------------
  $71,956     $54,682     $110,240     $30,019       $2,903        $  306
- -------------------------------------------------------------------------

     1.50%       1.95%        0.08%       0.22%        0.22%/(7)/
0.21%/(7)/
     1.02%       1.05%        1.73%       1.84%        1.88%/(7)/
1.97%/(7)/
- -------------------------------------------------------------------------
     98.5%       99.7%       106.3%      103.1%        73.9%         69.7%


5. Per share amounts  calculated based on the average shares  outstanding during
the period.  6. Assumes a  hypothetical  initial  investment on the business day
before the first day of the fiscal period (or  inception of offering),  with all
dividends and distributions  reinvested in additional shares on the reinvestment
date, and redemption at the net asset value  calculated on the last business day
of the fiscal  period.  Sales  charges are not  reflected in the total  returns.
Total returns are not annualized for periods of less than one full year.


                      23 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Financial Highlights (Continued)
- --------------------------------------------------------------------------------



                                               Class
C                                 Class Y

- ------------------------------------    -----------------------
                                               Year Ended October
31,                  Year Ended October 31,
                                               1998        1997
1996/(2)/       1998         1997/(1)/
==============================================================================================================
                                                     
                     
Per Share Operating Data
Net asset value, beginning of period            $23.07      $19.57
$18.79          $23.34      $20.31
- --------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income                              .01         .10(5)
 .06             .22         .31/(5)/
Net realized and unrealized gain (loss)            .31        4.85(5)
 .94             .34        4.20/(5)/
                                               -------     -------
- ------        --------     -------
Total income (loss) from investment
operations                                         .32        4.95
1.00             .56        4.51

- --------------------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders:
Dividends from net investment income              (.03)       (.04)
(.10)           (.17)       (.07)
Distributions from net realized gain             (2.76)      (1.41)
(.12)          (2.76)      (1.41)
                                               -------     -------
- ------        --------     -------
Total dividends and distributions
to shareholders                                  (2.79)      (1.45)
(.22)          (2.93)      (1.48)
- --------------------------------------------------------------------------------------------------------------
Net asset value, end of period                 $ 20.60     $ 23.07
$19.57        $  20.97     $ 23.34
                                               =======     =======
======        ========     =======

==============================================================================================================
Total Return, at Net Asset Value /(6)/            1.47%      26.64%
5.35%           2.63%      23.62%

==============================================================================================================
Ratios/Supplemental Data
Net assets, end of period (in thousands)       $18,204     $10,243       $
715        $136,729     $90,994
- --------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)              $15,355     $ 4,477       $
342        $118,010     $51,775
- --------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
Net investment income                             0.06%       0.17%
0.04%/(7)/      1.19%       1.21%/(7)/
Expenses                                          1.73%       1.86%
1.87%/(7)/      0.62%       0.78%/(7)/
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover rate /(8)/                    106.3%      103.1%
73.9%          106.3%      103.1%


7. Annualized.
8. The  lesser  of  purchases  or sales of  portfolio  securities  for a period,
divided by the monthly average of the market value of portfolio securities owned
during the period.  Securities with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation. Purchases and
sales of investment securities (excluding short-term  securities) for the period
ended October 31, 1998 were $812,485,864 and $637,725,479, respectively.

See accompanying Notes to Financial Statements.


                      24 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------

================================================================================
1. Significant Accounting Policies

Oppenheimer  Disciplined  Value Fund (the Fund), a series of Oppenheimer  Series
Fund,  Inc. (the Company),  is registered  under the  Investment  Company Act of
1940, as amended, as a diversified,  open-end management investment company. The
Fund's investment  objective is to seek long term growth of capital by investing
primarily   in   common    stocks   with   low    price-earnings    ratios   and
better-than-anticipated  earnings.  Realization of current income is a secondary
consideration.  The Fund's  investment  advisor is  OppenheimerFunds,  Inc. (the
Manager).  The Fund offers Class A, Class B, Class C and Class Y shares. Class A
shares are sold with a front-end sales charge. Class B and Class C shares may be
subject to a  contingent  deferred  sales  charge.  All  classes of shares  have
identical  rights to earnings,  assets and voting  privileges,  except that each
class has its own expenses  directly  attributable  to that class and  exclusive
voting rights with respect to matters  affecting that class.  Classes A, B and C
have separate  distribution  and/or service plans. No such plan has been adopted
for Class Y shares. Class B shares will automatically  convert to Class A shares
six years after the date of purchase.  The following is a summary of significant
accounting policies consistently followed by the Fund.

- --------------------------------------------------------------------------------
Investment  Valuation.  Portfolio  securities are valued at the close of the New
York Stock  Exchange on each trading day.  Listed and  unlisted  securities  for
which such  information is regularly  reported are valued at the last sale price
of the day or, in the  absence of sales,  at values  based on the closing bid or
the  last  sale  price  on the  prior  trading  day.  Long-term  and  short-term
"non-money  market" debt  securities are valued by a portfolio  pricing  service
approved by the Board of Directors. Such securities which cannot be valued by an
approved portfolio pricing service are valued using  dealer-supplied  valuations
provided the Manager is satisfied that the firm rendering the quotes is reliable
and  that  the  quotes  reflect  current  market  value,  or  are  valued  under
consistently  applied  procedures  established  by the  Board  of  Directors  to
determine  fair  value  in good  faith.  Short-term  "money  market  type"  debt
securities having a remaining maturity of 60 days or less are valued at cost (or
last  determined  market  value)  adjusted for  amortization  to maturity of any
premium or discount.

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

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


                      25 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------

================================================================================
1. Significant Accounting Policies (continued)

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

- --------------------------------------------------------------------------------
Allocation of Income,  Expenses,  Gains and Losses. Income, expenses (other than
those attributable to a specific class), gains and losses are allocated daily to
each  class  of  shares  based  upon  the  relative  proportion  of  net  assets
represented  by  such  class.  Operating  expenses  directly  attributable  to a
specific class are charged against the operations of that class.

- --------------------------------------------------------------------------------
Directors' Fees and Expenses.  The Fund has adopted a nonfunded  retirement plan
for the Fund's independent Directors. Benefits are based on years of service and
fees paid to each  Director  during the years of service.  During the year ended
October  31,  1998,  a  provision  of $8,429 was made for the  Fund's  projected
benefit  obligations  and  payments  of $3,017  were made to retired  Directors,
resulting in an accumulated liability of $99,833 as of October 31, 1998.

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

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

- --------------------------------------------------------------------------------
Distributions to Shareholders. Dividends and distributions to shareholders are
recorded on the ex-dividend date.


                      26 Oppenheimer Disciplined Value Fund


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

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

Classification  of Distributions to Shareholders.  Net investment  income (loss)
and net  realized  gain  (loss)  may  differ  for  financial  statement  and tax
purposes.  The  character  of the  distributions  made  during the year from net
investment   income  or  net  realized   gains  may  differ  from  its  ultimate
characterization  for  federal  income  tax  purposes.  Also,  due to  timing of
dividend  distributions,  the fiscal year in which amounts are  distributed  may
differ from the fiscal year in which the income or realized gain was recorded by
the Fund.

            The Fund adjusts the classification of distributions to shareholders
to reflect the differences between financial statement amounts and distributions
determined in accordance with income tax  regulations.  Accordingly,  during the
year  ended  October  31,  1998,  amounts  have been  reclassified  to reflect a
decrease in additional paid-in capital of $21,608,  an increase in undistributed
net investment  income of $14,185,  and an increase in accumulated  net realized
gain on investments of $7,423.

- --------------------------------------------------------------------------------
Other. Investment transactions are accounted for on the date the investments are
purchased  or  sold  (trade  date)  and  dividend  income  is  recorded  on  the
ex-dividend  date.  Realized  gains and  losses on  investments  and  unrealized
appreciation and depreciation are determined on an identified cost basis,  which
is the same basis used for federal income tax purposes.

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


                      27 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------

================================================================================
2. Shares of Capital Stock

The Fund has authorized 500 million of $0.001 par value shares of capital stock.
Transactions in shares of capital stock were as follows:



                                    Year Ended October 31, 1998       Year
Ended October 31, 1997
                                    ---------------------------
- ---------------------------
                                    Shares       Amount
Shares       Amount
- ------------------------------------------------------------------------------------------------
                                           
          
Class A:
Sold                                6,055,274    $ 134,355,655
3,692,585    $  80,366,467
Dividends and
distributions reinvested            1,943,840       40,173,794
682,565       13,378,298
Issued in connection with the
acquisition of:
Oppenheimer Value
Stock Fund--Note 7                         --               --
7,652,373      178,988,994
Oppenheimer LifeSpan
Growth Fund--Note 7                 2,464,057       55,909,466
- --               --
Redeemed                           (4,594,504)     (99,369,155)
(5,280,662)    (108,019,260)
                                   ----------    -------------
- ----------    -------------
Net increase                        5,868,667    $ 131,069,760
6,746,861    $ 164,714,499
                                   ==========    =============
==========    =============

- ------------------------------------------------------------------------------------------------
Class B:
Sold                                2,774,749    $  61,540,380
1,144,402    $  25,787,163
Dividends and
distributions reinvested              487,844       10,101,800
25,026          494,015
Issued in connection with the
acquisition of:
Oppenheimer Value
Stock Fund--Note 7                         --               --
2,351,076       55,109,219
Oppenheimer LifeSpan
Growth Fund--Note 7                   269,319        6,105,453
- --               --
Redeemed                           (1,187,193)     (25,592,376)
(244,280)      (5,720,248)
                                   ----------    -------------
- ----------    -------------
Net increase                        2,344,719    $  52,155,257
3,276,224    $  75,670,149
                                   ==========    =============
==========    =============

- ------------------------------------------------------------------------------------------------
Class C:
Sold                                  531,746    $  11,620,021
289,313    $   6,258,500
Dividends and
distributions reinvested               59,153        1,212,044
3,239           63,228
Issued in connection with the
acquisition of:
Oppenheimer Value Stock
Fund--Note 7                               --               --
150,017        3,478,897
Oppenheimer LifeSpan
Growth Fund--Note 7                    67,517        1,513,732
- --               --
Redeemed                             (218,753)      (4,685,940)
(35,084)        (801,629)
                                   ----------    -------------
- ----------    -------------
Net increase                          439,663    $   9,659,857
407,485    $   8,998,996
                                   ==========    =============
==========    =============



                      28 Oppenheimer Disciplined Value Fund


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

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



                                    Year Ended October 31, 1998       Period
Ended October 31, 1997/(1)/
                                    ---------------------------
- --------------------------------
                                    Shares       Amount
Shares       Amount
================================================================================================
                                           
          
Class Y:
Sold                                3,047,435    $  66,033,007
4,130,366    $  85,062,741
Dividends and distributions
reinvested                            575,974       11,897,787
- --               --
Redeemed                           (1,000,402)     (21,233,196)
(231,661)      (5,340,389)
                                   ----------    -------------
- ---------    -------------
Net increase                        2,623,007    $  56,697,598
3,898,705    $  79,722,352
                                   ==========    =============
=========    =============


1. For the period from December 16, 1996  (inception of offering) to October 31,
1997 for Class Y shares.

================================================================================
3. Unrealized Gains and Losses on Investments

As  of  October  31,  1998,  net  unrealized   appreciation  on  investments  of
$58,161,259  was  composed  of gross  appreciation  of  $82,540,289,  and  gross
depreciation of $24,379,030.

================================================================================
4. Management Fees and Other Transactions with Affiliates

Management  fees paid to the  Manager  were in  accordance  with the  investment
advisory agreement with the Fund which provides for a fee of 0.625% of the first
$300  million of average  annual net assets,  0.50% of the next $100 million and
0.45% of average  annual net assets in excess of $400 million.  The Manager acts
as the  accounting  agent  for  the  Fund  at an  annual  fee of  $15,000,  plus
out-of-pocket costs and expenses reasonably incurred.  The Fund's management fee
for the year ended  October 31, 1998 was 0.53% of the average  annual net assets
for Class A, Class B, Class C and Class Y shares.

            For the year ended October 31, 1998, commissions (sales charges paid
by investors) on sales of Class A shares totaled  $1,667,118,  of which $789,178
was retained by OppenheimerFunds  Distributor,  Inc. (OFDI), a subsidiary of the
Manager,  as general  distributor,  and by an  affiliated  broker/dealer.  Sales
charges  advanced to  broker/dealers  by OFDI on sales of the Fund's Class B and
Class C shares totaled $1,811,143 and $100,603,  respectively, of which $435,243
and $9,638,  respectively,  was paid to an affiliated  broker/dealer for Class B
and Class C shares.  During the year  ended  October  31,  1998,  OFDI  received
contingent  deferred sales charges of $202,849 and $10,623,  respectively,  upon
redemption of Class B and Class C shares, as reimbursement for sales commissions
advanced by OFDI at the time of sale of such shares.

            OppenheimerFunds  Services (OFS), a division of the Manager,  is the
transfer  and  shareholder  servicing  agent for the Fund and other  Oppenheimer
funds.  OFS's total costs of providing  such services are  allocated  ratably to
these funds.


                      29 Oppenheimer Disciplined Value Fund


- --------------------------------------------------------------------------------
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------

================================================================================
4. Management Fees and Other Transactions with Affiliates (continued)

The Fund has adopted a Service Plan for Class A shares to  reimburse  OFDI for a
portion of its costs  incurred  in  connection  with the  personal  service  and
maintenance of shareholder  accounts that hold Class A shares.  Reimbursement is
made quarterly at an annual rate that may not exceed 0.25% of the average annual
net assets of Class A shares of the Fund. OFDI uses the service fee to reimburse
brokers, dealers, banks and other financial institutions quarterly for providing
personal  service and maintenance of accounts of their customers that hold Class
A shares.  During the year ended  October  31,  1998,  OFDI paid  $667,521 to an
affiliated  broker/dealer  as  reimbursement  for Class A personal  service  and
maintenance expenses.

            The Fund has adopted  Distribution and Service Plans for Class B and
Class C shares  to  compensate  OFDI for its costs in  distributing  Class B and
Class C shares and servicing  accounts.  Under the Plans,  the Fund pays OFDI an
annual  asset-based  sales charge of 0.75% per year for its services rendered in
distributing  Class B and Class C shares.  OFDI also  receives a service  fee of
0.25%  per year to  compensate  dealers  for  providing  personal  services  for
accounts  that  hold  Class B and Class C shares.  Each fee is  computed  on the
average  annual  net assets of Class B or Class C shares,  determined  as of the
close of each regular business day. During the year ended October 31, 1998, OFDI
paid  $42,263 and  $12,392,  respectively,  to an  affiliated  broker/dealer  as
compensation for Class B and Class C personal  service and maintenance  expenses
and retained  $933,605 and $110,797,  respectively,  as compensation for Class B
and Class C sales  commissions  and service fee  advances,  as well as financing
costs.  If either Plan is  terminated  by the Fund,  the Board of Directors  may
allow the Fund to continue  payments of the asset-based sales charge to OFDI for
distributing shares before the Plan was terminated. As of October 31, 1998, OFDI
had incurred excess  distribution  and servicing costs of $3,212,917 for Class B
and $219,766 for Class C.

================================================================================
5. Illiquid and Restricted Securities

As of October 31,  1998,  investments  in  securities  included  issues that are
illiquid or restricted.  Restricted  securities  are often  purchased in private
placement transactions, are not registered under the Securities Act of 1933, may
have contractual  restrictions on resale,  and are valued under methods approved
by the Board of Directors as reflecting fair value. A security may be considered
illiquid  if it lacks a readily  available  market or if its  valuation  has not
changed for a certain  period of time.  The Fund  intends to invest no more than
10% of its  net  assets  (determined  at  the  time  of  purchase  and  reviewed
periodically)  in  illiquid  or  restricted   securities.   Certain   restricted
securities,  eligible for resale to qualified institutional  investors,  are not
subject to that limit. The aggregate value of illiquid or restricted  securities
subject to this limitation as of October 31, 1998, was $95,299, which represents
0.01% of the Fund's net assets.


                      30 Oppenheimer Disciplined Value Fund


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

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

================================================================================
6. Bank Borrowings

The Fund may borrow from a bank for temporary or emergency  purposes  including,
without limitation,  funding of shareholder  redemptions provided asset coverage
for  borrowings  exceeds  300%.  The Fund has entered  into an  agreement  which
enables it to participate with other  Oppenheimer  funds in an unsecured line of
credit with a bank, which permits  borrowings up to $400 million,  collectively.
Interest is charged to each fund,  based on its  borrowings,  at a rate equal to
the  Federal  Funds Rate plus 0.35%.  Borrowings  are payable 30 days after such
loan is  executed.  The Fund  also pays a  commitment  fee equal to its pro rata
share of the  average  unutilized  amount of the  credit  facility  at a rate of
0.0575% per annum.

            The Fund had no borrowings outstanding during the year ended
October
31, 1998.

================================================================================
7. Acquisition of Oppenheimer LifeSpan Growth Fund and Oppenheimer Value Stock
   Fund

On June 12, 1998, the Fund acquired all the net assets of  Oppenheimer  LifeSpan
Growth Fund, pursuant to an agreement and plan of reorganization approved by the
Oppenheimer  LifeSpan Growth Fund  shareholders on June 9, 1998. The Fund issued
(at an exchange ratio of 0.522101 for Class A, 0.523202 for Class B and
0.524279
for  Class C of the  Fund to one  share of  Oppenheimer  LifeSpan  Growth  Fund)
2,464,057,  269,319 and 67,517  shares of capital stock for Class A, Class B and
Class C,  respectively,  valued at $55,909,466,  $6,105,453 and  $1,513,732,  in
exchange  for the net  assets,  resulting  in  combined  Class A net  assets  of
$523,396,393,  Class B net  assets of  $128,631,768  and  Class C net  assets of
$19,081,033  on June 12, 1998. The net assets  acquired  included net unrealized
appreciation of $4,184,576.  The exchange qualified as a tax-free reorganization
for federal income tax purposes.

            On  July  25,  1997,  the  Fund  acquired  all  the  net  assets  of
Oppenheimer   Value  Stock  Fund,   pursuant  to  an   agreement   and  plan  of
reorganization approved by the Oppenheimer Value Stock Fund shareholders on July
21,  1997.  The Fund  issued  (at an  exchange  ratio of  0.922802  for Class A,
0.925875  for  Class B and  0.925875  for  Class C of the  Fund to one  share of
Oppenheimer Value Stock Fund) 7,652,373, 2,351,076 and 150,017 shares of capital
stock for Class A, Class B and Class C,  respectively,  valued at  $178,988,994,
$55,109,219  and  $3,478,897,  in  exchange  for the net  assets,  resulting  in
combined Class A net assets of  $356,598,856,  Class B net assets of $74,391,341
and Class C net assets of $8,707,171 on July 25, 1997.  The net assets  acquired
included net unrealized appreciation of $79,130,574. The exchange qualified as a
tax-free reorganization for federal income tax purposes.


                      31 Oppenheimer Disciplined Value Fund







                                       A-5
                                   Appendix A

- ------------------------------------------------------------------------------
                               RATINGS DEFINITIONS
- ------------------------------------------------------------------------------

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

Moody's Investors Service, Inc.
- ------------------------------------------------------------------------------

Long-Term (Taxable) Bond Ratings

Aaa: Bonds rated Aaa are judged to be the best quality.  They carry the smallest
degree of investment risk.  Interest  payments are protected by a large or by an
exceptionally   stable  margin  and  principal  is  secure.  While  the  various
protective  elements are likely to change,  the changes that can be expected are
most unlikely to impair the fundamentally strong position of such issues.

Aa: Bonds rated Aa are judged to be of high quality by all  standards.  Together
with the Aaa group,  they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because  margins of protection  may not
be as large as with Aaa securities or fluctuation of protective  elements may be
of  greater  amplitude  or there may be other  elements  present  which make the
long-term risks appear somewhat larger than those of Aaa securities.

A: Bonds rated A possess  many  favorable  investment  attributes  and are to be
considered  as  upper-medium  grade  obligations.  Factors  giving  security  to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Baa: Bonds rated Baa are considered medium grade obligations;  that is, they are
neither highly  protected nor poorly  secured.  Interest  payments and principal
security appear adequate for the present but certain protective  elements may be
lacking or may be  characteristically  unreliable over any great length of time.
Such bonds lack  outstanding  investment  characteristics  and have  speculative
characteristics as well.

Ba: Bonds rated Ba are judged to have speculative elements.  Their future cannot
be  considered  well-assured.  Often the  protection  of interest and  principal
payments may be very moderate and not well safeguarded  during both good and bad
times over the  future.  Uncertainty  of  position  characterizes  bonds in this
class.

B:  Bonds  rated B  generally  lack  characteristics  of  desirable  investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.

Caa:  Bonds rated Caa are of poor  standing and may be in default or there may
be present elements of danger with respect to principal or interest.

Ca:  Bonds rated Ca  represent  obligations  which are  speculative  in a high
degree and are often in default or have other marked shortcomings.

C: Bonds  rated C are the lowest  class of rated  bonds and can be  regarded  as
having extremely poor prospects of ever attaining any real investment standing.

Moody's  applies  numerical  modifiers  1,  2,  and  3 in  each  generic  rating
classification  from Aa  through  Caa.  The  modifier  "1"  indicates  that  the
obligation ranks in the higher end of its category; the modifier "2" indicates a
mid-range  ranking and the modifier "3"  indicates a ranking in the lower end of
the category.

Short-Term Ratings - Taxable Debt

These  ratings apply to the ability of issuers to repay  punctually  senior debt
obligations having an original maturity not exceeding one year:

Prime-1:  Issuer has a superior ability for repayment of senior  short-term debt
obligations.

Prime-2:  Issuer has a strong  ability for repayment of senior  short-term  debt
obligations.  Earnings  trends  and  coverage,  while  sound,  may be subject to
variation.  Capitalization  characteristics,  while  appropriate,  may  be  more
affected by external conditions. Ample alternate liquidity is maintained.

Prime-3:  Issuer has an acceptable  ability for  repayment of senior  short-term
obligations.  The effect of industry characteristics and market compositions may
be more  pronounced.  Variability  in earnings and  profitability  may result in
changes in the level of debt protection  measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.

Not Prime: Issuer does not fall within any Prime rating category.


Standard & Poor's Rating Services
- ------------------------------------------------------------------------------

Long-Term Credit Ratings

AAA: Bonds rated "AAA" have the highest rating  assigned by Standard & Poor's.
The obligor's  capacity to meet its financial  commitment on the obligation is
extremely strong.

AA: Bonds rated "AA" differ from the highest rated  obligations  only in small
degree.  The  obligor's  capacity  to meet  its  financial  commitment  on the
obligation is very strong.

A: Bonds rated "A" are somewhat more  susceptible to adverse  effects of changes
in  circumstances  and economic  conditions  than  obligations  in  higher-rated
categories.  However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.

BBB: Bonds rated BBB exhibit adequate protection  parameters.  However,  adverse
economic  conditions  or  changing  circumstances  are more  likely to lead to a
weakened  capacity  of the  obligor  to meet  its  financial  commitment  on the
obligation.

Bonds rated BB, B, CCC, CC and C are regarded as having significant  speculative
characteristics. BB indicates the least degree of speculation and C the highest.
While  such   obligations   will  likely  have  some   quality  and   protective
characteristics,  these  may be  outweighed  by  large  uncertainties  or  major
exposures to adverse conditions.

BB: Bonds rated BB are less  vulnerable  to  nonpayment  than other  speculative
issues. However, these face major uncertainties or exposure to adverse business,
financial,  or economic conditions which could lead to the obligor's  inadequate
capacity to meet its financial commitment on the obligation.

B: A bond rated B is more vulnerable to nonpayment than an obligation  rated BB,
but the obligor  currently has the capacity to meet its financial  commitment on
the obligation.

CCC: A bond rated CCC is currently  vulnerable to  nonpayment,  and is dependent
upon favorable business,  financial,  and economic conditions for the obligor to
meet its  financial  commitment  on the  obligation.  In the  event  of  adverse
business,  financial or economic  conditions,  the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.

CC: An obligation rated CC is currently highly vulnerable to nonpayment.

C: The C rating may used where a  bankruptcy  petition has been filed or similar
action has been taken, but payments on this obligation are being continued.

D: Bonds rated D are in  default.  Payments  on the  obligation  are not being
made on the date due.

The  ratings  from AA to CCC may be  modified  by the  addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories. The
"r" symbol is attached to the ratings of instruments with significant  noncredit
risks.

Short-Term Issue Credit Ratings

A-1: Rated in the highest category. The obligor's capacity to meet its financial
commitment on the obligation is strong.  Within this  category,  a plus (+) sign
designation  indicates the issuer's capacity to meet its financial obligation is
very strong.

A-2:  Obligation is somewhat more  susceptible to the adverse effects of changes
in  circumstances  and economic  conditions  than  obligations  in higher rating
categories.  However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.

A-3:  Exhibits  adequate  protection  parameters.   However,   adverse  economic
conditions  or  changing  circumstances  are more  likely to lead to a  weakened
capacity of the obligor to meet its financial commitment on the obligation.

B:  Regarded  as having  significant  speculative  characteristics.  The obligor
currently has the capacity to meet its financial  commitment on the  obligation.
However, it faces major ongoing  uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.

C:  Currently  vulnerable  to  nonpayment  and  is  dependent  upon  favorable
business,  financial,  and  economic  conditions  for the  obligor to meet its
financial commitment on the obligation.

D: In payment  default.  Payments on the obligation  have not been made on the
due date. The rating may also be used if a bankruptcy  petition has been filed
or similar actions jeopardize payments on the obligation.


Fitch IBCA, Inc.
- ------------------------------------------------------------------------------

International Long-Term Credit Ratings

Investment Grade:
AAA:  Highest Credit Quality.  "AAA" ratings denote the lowest  expectation of
credit  risk.  They  are  assigned  only in the case of  exceptionally  strong
capacity for timely payment of financial commitments.  This capacity is highly
unlikely to be adversely affected by foreseeable events.

AA: Very High Credit  Quality.  "AA" ratings denote a very low  expectation of
credit  risk.  They  indicate a very  strong  capacity  for timely  payment of
financial  commitments.  This  capacity  is not  significantly  vulnerable  to
foreseeable events.
A: High Credit  Quality.  "A" ratings denote a low expectation of credit risk.
The  capacity  for  timely  payment of  financial  commitments  is  considered
strong.  This capacity  may,  nevertheless,  be more  vulnerable to changes in
circumstances or in economic conditions than is the case for higher ratings.

BBB: Good Credit  Quality.  "BBB"  ratings  indicate that there is currently a
low  expectation  of credit risk. The capacity for timely payment of financial
commitments is considered  adequate,  but adverse changes in circumstances and
in economic  conditions are more likely to impair this  capacity.  This is the
lowest investment-grade category.

Speculative Grade:

BB:  Speculative.  "BB" ratings indicate that there is a possibility of credit
risk  developing,  particularly as the result of adverse  economic change over
time.  However,  business or financial  alternatives may be available to allow
financial commitments to be met.

B: Highly  Speculative.  "B" ratings indicate that significant  credit risk is
present,  but a limited margin of safety  remains.  Financial  commitments are
currently  being met.  However,  capacity for continued  payment is contingent
upon a sustained, favorable business and economic environment.

CCC, CC C: High  Default  Risk.  Default is a real  possibility.  Capacity for
meeting  financial  commitments  is solely reliant upon  sustained,  favorable
business or economic  developments.  A "CC" rating  indicates  that default of
some kind appears probable. "C" ratings signal imminent default.

DDD, DD, and D: Default.  Securities are not meeting  current  obligations and
are  extremely  speculative.   "DDD"  designates  the  highest  potential  for
recovery of amounts outstanding on any securities involved.

Plus (+) and  minus  (-)  signs  may be  appended  to a rating  symbol to denote
relative status within the rating  category.  Plus and minus signs are not added
to the "AAA" category or to categories below "CCC."

International Short-Term Credit Ratings

F1: Highest credit quality.  Strongest capacity for timely payment.  May have an
added "+" to denote exceptionally strong credit feature.

F2: Good credit quality.  A satisfactory  capacity for timely  payment,  but the
margin of safety is not as great as in higher ratings.

F3: Fair credit  quality.  Capacity  for timely  payment is  adequate.  However,
near-term adverse changes could result in a reduction to non-investment grade.

B:  Speculative.  Minimal capacity for timely payment,  plus  vulnerability to
near-term adverse changes in financial and economic conditions.

C: High  default  risk.  Default is a real  possibility,  Capacity for meeting
financial  commitments is solely reliant upon a sustained,  favorable business
and economic environment.

D:   Default. Denotes actual or imminent payment default.


Duff & Phelps Credit Rating Co. Ratings

Long-Term Debt and Preferred Stock

AAA:  Highest  credit  quality.  The risk factors are  negligible,  being only
slightly more than for risk-free U.S. Treasury debt.

AA+, AA, AA-: High credit quality. Protection factors are strong. Risk is modest
but may vary slightly from time to time because of economic conditions.

A+, A & A-: Protection factors are average but adequate.  However,  risk factors
are more variable in periods of greater economic stress.

BBB+,  BBB &  BBB-:  Below  average  protection  factors  but  still  considered
sufficient  for  prudent  investment.  Considerable  variability  in risk during
economic cycles.

BB+, BB & BB-: Below investment grade but deemed likely to meet obligations when
due. Present or prospective  financial protection factors fluctuate according to
industry  conditions.  Overall quality may move up or down frequently within the
category.

B+, B & B-: Below investment grade and possessing risk that obligations will not
be met when due. Financial protection factors will fluctuate widely according to
economic cycles,  industry conditions and/or company fortunes.  Potential exists
for  frequent  changes in the rating  within  this  category or into a higher of
lower rating grade.

CCC: Well below investment-grade securities.  Considerable uncertainty exists as
to timely  payment of  principal,  interest or preferred  dividends.  Protection
factors   are   narrow   and   risk   can  be   substantial   with   unfavorable
economic/industry conditions, and/or with unfavorable company developments.

DD:  Defaulted debt  obligations.  Issuer failed to meet  scheduled  principal
and/or interest payments.

DP: Preferred stock with dividend arrearages.

Short-Term Debt:

High Grade:
D-1+: Highest certainty of timely payment. Safety is just below risk-free
U.S. Treasury short-term debt.

D-1: Very high certainty of timely payment. Risk factors are minor.

D-1-: High certainty of timely payment. Risk factors are very small.

Good Grade:
D-2: Good certainty of timely payment. Risk factors are small.

Satisfactory Grade:
D-3:  Satisfactory  liquidity and other protection  factors qualify issues as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless, timely payment is expected.

Non-Investment Grade:
D-4: Speculative investment characteristics. Liquidity is not sufficient to
insure against disruption in debt service.

Default:
D-5: Issuer failed to meet scheduled principal and/or interest payments.





                                       B-1

                                   Appendix B

- ------------------------------------------------------------------------------
                            Industry Classifications
- ------------------------------------------------------------------------------


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






                                      C-14
                                   Appendix C

        OppenheimerFunds Special Sales Charge Arrangements and Waivers


      In certain  cases,  the initial  sales charge that applies to purchases of
Class A shares1 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.  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 that were merged into
or became Oppenheimer 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: (7)
plans qualified under Sections 401(a) or 401(k) of the Internal
         Revenue Code,

(8) non-qualified  deferred compensation plans, (9) employee benefit plans2 (10)
Group Retirement  Plans3 (11) 403(b)(7)  custodial plan accounts (12) 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.
- --------------

4.    Certain   waivers   also  apply  to  Class  M.  shares  of   Oppenheimer
   Convertible Securities Fund.

5. An "employee  benefit plan" means any plan or arrangement,  whether or not it
   is "qualified" under the Internal Revenue Code, under which Class A shares of
   an  Oppenheimer  fund  or  funds  are  purchased  by  a  fiduciary  or  other
   administrator  for the account of participants  who are employees of a single
   employer or of affiliated employers.  These may include, for example, medical
   savings accounts, payroll deduction plans or similar plans. The fund accounts
   must be registered in the name of the fiduciary or  administrator  purchasing
   the shares for the benefit of participants in the plan.
6. The term  "Group  Retirement  Plan"  means  any  qualified  or  non-qualified
   retirement  plan  for  employees  of a  corporation  or sole  proprietorship,
   members and  employees of a partnership  or  association  or other  organized
   group of persons  (the  members of which may include  other  groups),  if the
   group has made special  arrangements  with the Distributor and all members of
   the group  participating  in (or who are eligible to participate in) the plan
   purchase  Class A 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  Class A 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
   enabling  those  plans to  purchase  Class A shares  at net  asset  value but
   subject to the Class A contingent deferred sales charge.

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


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


      There is no initial  sales charge on purchases of Class A shares of any of
the Oppenheimer funds in the cases listed below. However, these purchases may be
subject to the Class A contingent  deferred  sales charge if redeemed  within 18
months of the end of the calendar month of their  purchase,  as described in the
Prospectus (unless a waiver described  elsewhere in this Appendix applies to the
redemption).  Additionally,  on shares  purchased  under these  waivers that are
subject to the Class A contingent  deferred sales charge,  the Distributor  will
pay the  applicable  commission  described  in the  Prospectus  under  "Class  A
Contingent  Deferred  Sales  Charge."1  This  waiver  provision  applies  to:

1 However,  that commission
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.

o Purchases of Class A shares aggregating $1 million or more.

o Purchases by a Retirement Plan (other than an IRA or 403(b)(7) custodial plan)
that:

(4)   buys shares costing $500,000 or more, or
(5)         has, at the time of  purchase,  100 or more  eligible  employees  or
            total plan assets of $500,000 or more, or

(6)         certifies  to the  Distributor  that it projects to have annual plan
            purchases of $200,000 or more.
o     Purchases  by  an   OppenheimerFunds-sponsored   Rollover  IRA,  if  the
         purchases are made:
(3)         through a broker, dealer, bank or registered investment adviser that
            has  made  special  arrangements  with  the  Distributor  for  those
            purchases, or
(4)         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.
o        Purchases  of Class A shares by  Retirement  Plans that have any of the
         following record-keeping arrangements:
(4)   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 Asset
            Management,  L.P.  ("MLAM"),  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 MLAM (the funds  described  in (a) and (b) are referred
            to as "Applicable Investments").
(5)   The record  keeping  for the  Retirement  Plan is  performed  on a daily
            valuation  basis by a record  keeper  whose  services are provided
            under a contract or arrangement  between the  Retirement  Plan and
            Merrill  Lynch.  On the date the plan  sponsor  signs  the  record
            keeping service  agreement with Merrill Lynch,  the Plan must have
            $3 million or more of its assets  (excluding  assets  invested  in
            money market funds) invested in Applicable Investments.
(6)         The record keeping for a Retirement  Plan is handled under a service
            agreement  with Merrill Lynch and on the date the plan sponsor signs
            that  agreement,  the Plan has 500 or more  eligible  employees  (as
            determined by the Merrill Lynch plan conversion manager).

      Purchases by a Retirement  Plan whose record keeper had a  cost-allocation
         agreement with the Transfer Agent on or before May 1, 1999.











          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  commissions  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.

o






      Retirement Plans and deferred  compensation  plans and trusts used to fund
         those plans (including,  for example,  plans qualified or created under
         sections 401(a),  401(k),  403(b) or 457 of the Internal Revenue Code),
         in each case if those  purchases  are made  through a broker,  agent or
         other financial  intermediary  that has made special  arrangements with
         the Distributor for those purchases.

      A  TRAC-2000  401(k)  plan  (sponsored  by  the  former  Quest  for  Value
         Advisors)  whose Class B or Class C shares of a Former  Quest for Value
         Fund  were  exchanged  for  Class  A  shares  of that  Fund  due to the
         termination  of the Class B and Class C  TRAC-2000  program on November
         24, 1995.
      A  qualified  Retirement  Plan that had agreed  with the former  Quest for
         Value Advisors to purchase  shares of any of the Former Quest for Value
         Funds  at  net  asset  value,  with  such  shares  to be  held  through
         DCXchange,  a sub-transfer  agency mutual fund  clearinghouse,  if that
         arrangement was  consummated and share purchases  commenced by December
         31, 1996.


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


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

      Shares purchased  through a broker-dealer  that has entered into a special
         agreement  with the  Distributor  to allow the  broker's  customers  to
         purchase and pay for shares of Oppenheimer  funds using the proceeds of
         shares  redeemed  in the prior 30 days from a mutual fund (other than a
         fund  managed by the  Manager or any of its  subsidiaries)  on which an
         initial sales charge or contingent deferred sales charge was paid. This
         waiver  also  applies  to shares  purchased  by  exchange  of shares of
         Oppenheimer Money Market Fund, Inc. that were purchased and paid for in
         this manner.  This waiver must be requested  when the purchase order is
         placed for shares of the Fund, and the Distributor may require evidence
         of qualification for this waiver.

      Shares  purchased  with the  proceeds of maturing  principal  units of any
         Qualified Unit Investment Liquid Trust Series.
      Shares purchased by the  reinvestment  of loan repayments by a participant
         in a  Retirement  Plan for which the  Manager or an  affiliate  acts as
         sponsor.


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


The Class A contingent deferred sales charge is also waived if shares that would
otherwise be subject to the contingent deferred sales charge are redeemed in the
following cases:

      To make Automatic Withdrawal Plan payments that are limited annually to no
         more than 12% of the  account  value  measured  at the time the Plan is
         established, 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).

      Fordistributions  from Retirement Plans,  deferred  compensation  plans or
         other employee benefit plans for any of the following purposes:
(10)        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.
(11) To return excess contributions.

(12) To  return  contributions  made due to a  mistake  of fact.

(13)  Hardship
withdrawals,  as defined in the plan.2

2 This provision does not apply to IRAs.

(14) 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.

(15)        To  meet  the  minimum  distribution  requirements  of the  Internal
            Revenue Code.

(16)        To make  "substantially  equal  periodic  payments"  as described in
            Section 72(t) of the Internal Revenue Code.
(17) For loans to participants or beneficiaries.

(18) Separation from service.3

3 This provision does not apply to 403(b)(7)  custodial plans if the participant
is less than age 55, nor to IRAs.


(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.

         Fordistributions  from  Retirement  Plans  having 500 or more  eligible
            employees,  except  distributions  due to  termination of all of the
            Oppenheimer funds as an investment option under the Plan.

         Fordistributions  from 401(k) plans  sponsored by  broker-dealers  that
            have entered into a special agreement with the Distributor  allowing
            this waiver.



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


The Class B and Class C 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 and Class C  contingent  deferred  sales  charges will be waived for
redemptions of shares in the following cases: Shares redeemed involuntarily,  as
described  in  "Shareholder  Account  Rules  and  Policies,"  in the  applicable
Prospectus.
      Redemptions from accounts other than Retirement  Plans following the death
         or disability of the last surviving shareholder, including a trustee of
         a grantor trust or revocable living trust for which the trustee is also
         the sole beneficiary.  The death or disability must have occurred after
         the  account  was  established,  and for  disability  you must  provide
         evidence  of a  determination  of  disability  by the  Social  Security
         Administration.

      Distributions  from  accounts  for which the  broker-dealer  of record has
         entered into a special  agreement  with the  Distributor  allowing this
         waiver.

      Redemptions of Class B shares held by  Retirement  Plans whose records are
         maintained  on  a  daily   valuation  basis  by  Merrill  Lynch  or  an
         independent record keeper under a contract with Merrill Lynch.
      Redemptions of Class C shares of Oppenheimer  U.S.  Government  Trust from
         accounts of clients of financial  institutions that have entered into a
         special arrangement with the Distributor for this purpose.

o        Redemptions  requested in writing by a Retirement Plan sponsor of Class
         C shares of an  Oppenheimer  fund in amounts of $1 million or more held
         by the  Retirement  Plan for  more  than one  year,  if the  redemption
         proceeds  are  invested  in Class A shares  of one or more  Oppenheimer
         funds.
o






      Distributions  from Retirement  Plans or other employee  benefit plans for
         any of the following purposes:
(14)            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.
(15) To return excess  contributions  made to a participant's  account.

(16) To return contributions made due to a mistake of fact.

(17) To make hardship withdrawals, as defined in the plan.4

4 This  provision  does  not  apply to IRAs.

(18) 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.
(19)            To meet the minimum  distribution  requirements  of the Internal
                Revenue Code.
(20)            To make "substantially  equal periodic payments" as described in
                Section 72(t) of the Internal Revenue Code.
(21)  For  loans to  participants  or  beneficiaries.5

5 This provision does not apply to loans from 403(b)(7) custodial plans.

(22) On  account  of the
participant's separation from service.6

6 This provision does not apply to 403(b)(7)  custodial plans if the participant
is less than age 55, nor to IRAs.

(23) 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.
(24)            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.
(25)            Distributions  from Retirement Plans having 500 or more eligible
                employees,  but  excluding  distributions  made  because  of the
                Plan's  elimination as investment  options under the Plan of all
                of the Oppenheimer funds that had been offered.
(26)            For  distributions   from  a  participant's   account  under  an
                Automatic  Withdrawal  Plan after the  participant  reaches  age
                59 1/2,  as long as the aggregate  value of the  distributions
                does not exceed 10% of the account's  value  annually  (measured
                from the establishment of the Automatic Withdrawal Plan).

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.










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  Quest  Small Cap Value
                                      Fund
  Oppenheimer  Quest  Balanced  Value Oppenheimer Quest Global Value Fund
  Fund
  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 Quest  for  Value  New York  Tax-Exempt
Fund                                    Fund
Quest  for  Value  Investment   Quality Quest  for  Value  National  Tax-Exempt
Income Fund                             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
 Number of Eligible   Charge as a % of    Charge as a % of    Commission as %
Employees or Members   Offering Price    Net Amount Invested of Offering 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:
      Shareholders who were  shareholders of the AMA Family of Funds on February
         28, 1991 and who  acquired  shares of any of the Former Quest for Value
         Funds by merger of a portfolio of the AMA Family of Funds.

      Shareholders  who  acquired  shares of any Former  Quest for Value Fund by
         merger of any of the portfolios of the Unified Funds.

      |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:
      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, and
      liquidation of a shareholder's account if the aggregate net asset value of
         shares held in the account is less than the required  minimum  value of
         such accounts.

      |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:
      redemptions  following the death or disability of the shareholder(s) (as
         evidenced by a determination  of total  disability by the U.S. Social
         Security Administration);
      withdrawals  under an automatic  withdrawal  plan (but only for Class B or
         Class C shares) where the annual  withdrawals  do not exceed 10% of the
         initial value of the account; and
      liquidation of a shareholder's account if the aggregate net asset value of
         shares held in the account is less than the  required  minimum  account
         value.

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


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

                                 Accounts, Inc.


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

      n 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: (3)
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
(4)      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.

      n 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: (7)




      anypurchaser,  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;
(8)      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;
(9)      Directors  of the  Fund or any one or  more of the  Former  Connecticut
         Mutual Funds and members of their immediate families;
(10)     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;
(11)     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
(12)     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: (10) by the estate of a deceased shareholder;
(11) upon the disability of a shareholder, as defined in Section 72(m)(7) of
         the Internal Revenue Code;
(12)     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;
(13)     as  tax-free  returns of excess  contributions  to such  retirement  or
         employee benefit plans;
(14)     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 commission in connection  with the purchase of
         shares of any registered investment management company;
(15)     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;
(16)     in  connection  with  the  Fund's  right  to  involuntarily  redeem  or
         liquidate the Fund;
(17)




      i  n 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
(18)     as  involuntary  redemptions  of shares by  operation  of law, or under
         procedures  set forth in the Fund's  Articles of  Incorporation,  or as
         adopted by the Board of Directors of the Fund.


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

Shareholders of Oppenheimer  Municipal Bond Fund,  Oppenheimer  U.S.  Government
Trust,  Oppenheimer Strategic Income Fund and Oppenheimer Equity 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:

o     the Manager and its affiliates,
o        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,
o        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,
o        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,
o        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,
o     dealers, brokers, or registered investment advisors that had entered
         into an agreement with the Distributor or the prior distributor of
         the Fund specifically providing for the use of Class M shares of the
         Fund in specific investment products made available to their
         clients, and dealers, brokers or registered investment advisors that
         had entered into an agreement with the Distributor or prior
         distributor of the Fund's shares to sell shares to defined
         contribution employee retirement plans for which the dealer, broker,
         or investment advisor provides administrative services.







- ------------------------------------------------------------------------------
Oppenheimer Disciplined Value Fund
- ------------------------------------------------------------------------------

Internet Web Site:
      www.oppenheimerfunds.com

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

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

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

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

Independent Auditors
      KPMG LLP
      707 Seventeenth Street
      Denver, Colorado 80202

Legal Counsel
      Gordon Altman Butowsky Weitzen
            Shalov & Wein
      114 West 47th Street
      New York, New York 10036
67890


PX375.0399 (Rev. 5/99)