485-b

485BPOS 1 pspsai.htm PROSPECTUS, SAI, PTC 485-b


                                                                                           Registration No. 2-33043
                                                                                                  File No. 811-1512

                                        SECURITIES AND EXCHANGE COMMISSION
                                               WASHINGTON, DC 20549

                                                     FORM N-1A


REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933                                                        [X]

Pre-Effective Amendment No. __                                                                                 [ ]


Post-Effective Amendment No. 57                                                                                 [X]


                                                      and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940                                                                                                     [X]


Amendment No. 41                                                                                                [X]



                                          OPPENHEIMER CAPITAL INCOME FUND
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                                (Exact Name of Registrant as Specified in Charter)


                              6803 South Tucson Way, Centennial, Colorado 80112-3924

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                                (Address of Principal Executive Offices) (Zip Code)

                                                   303-768-3200
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                               (Registrant's Telephone Number, including Area Code)

                                               Robert G. Zack, Esq.
                                              OppenheimerFunds, Inc.
                                   498 Seventh Avenue, New York, New York 10018
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                                      (Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box):


[   ]    Immediately upon filing pursuant to paragraph (b)
[ X ]    On October 23, 2002 pursuant to paragraph (b)
[   ]    60 days after filing pursuant to paragraph (a)(1)
[   ]    On _______________ pursuant to paragraph (a)(1)
[   ]    75 days after filing pursuant to paragraph (a)(2)
[   ]    On _______________ pursuant to paragraph (a)(2) of Rule 485


If appropriate, check the following box:

[   ]    This  post-effective  amendment  designates a new  effective  date for a previously  filed  post-effective
         amendment.

Oppenheimer
Capital Income Fund

Prospectus dated October 23, 2002

Oppenheimer Capital Income Fund is a mutual fund that
seeks current income compatible with prudent
investment. As a secondary objective it attempts to
conserve principal while providing an opportunity for
capital appreciation. It invests in both equity and
debt securities.
This Prospectus contains important information
about the Fund's objectives, its investment policies,
strategies and risks. It also contains important
information about how to buy and sell shares of the
Fund and other account features. Please read this
Prospectus carefully before you invest and keep it for
future reference about your account.

As with all mutual funds, the Securities and Exchange
Commission has not approved or disapproved the Fund's
securities nor has it determined that this Prospectus
is accurate or complete. It is a criminal offense to
represent otherwise.

1234

CONTENTS

A B O U T TH E F U N D

The Fund's Investment Objectives and Strategies

Main Risks of Investing in the Fund

The Fund's Past Performance

Fees and Expenses of the Fund

About the Fund's Investments

How the Fund is Managed

ABOUT YOUR ACCOUNT

How to Buy Shares
Class A Shares
Class B Shares
Class C Shares
Class N Shares

Special Investor Services
AccountLink
PhoneLink

OppenheimerFunds Internet Website
Retirement Plans

How to Sell Shares

By Wire
By Mail
By Telephone

How to Exchange Shares

Shareholder Account Rules and Policies

Dividends, Capital Gains and Taxes

Financial Highlights

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

The Fund's Investment Objectives and Strategies

WHAT ARE THE FUND'S INVESTMENT OBJECTIVES? The Fund's primary objective is to seek as much current income as is
compatible with prudent investment. The Fund has a secondary objective to conserve principal while providing an
opportunity for capital appreciation.

WHAT DOES THE FUND MAINLY INVEST IN? Under normal market conditions, the Fund invests 65% of its total assets in
equity and debt securities that are expected to generate income. The Fund focuses its investments in both debt
and equity securities, such as dividend-paying common stocks, preferred stocks and securities convertible into
common stock, of domestic and foreign issuers, of different capitalization ranges. The Fund also buys debt
securities, such as corporate and government bonds and debentures of domestic and foreign issuers. The Fund can
hold debt securities having short, intermediate or long maturities.

HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In selecting securities for the Fund, the
portfolio manager mainly relies on a value-oriented investing style for equity securities. Value investing
focuses on companies that may be currently out of favor in the market, or on opportunities in cyclical
industries. The portfolio manager looks for stocks trading at lower prices relative to the market and what is
believed to be their real worth. They may offer higher than average dividends. Value investors hope to realize
appreciation as other investors recognize the security's intrinsic value and the stock price rises as a result.

The portfolio manager generally uses a fundamental approach to analyzing issuers (for example,
price/earnings ratios and current balance sheet information), to select stocks he thinks are undervalued. While
this process and the factors used may change over time and its implementation may vary in particular cases, the
portfolio manager typically searches for:
o stocks of established issuers that have under-performed the market for a year or more, but have begun to
recover
o stocks that have high current income and are believed to have substantial earnings possibilities
o stocks with low price/earnings ratios relative to other securities
o stocks with a low price relative to the underlying value of the issuer's assets, earnings, cash flow or
other factors

In value investing there is always the risk that the market will not recognize a security's intrinsic
value or that the portfolio manager has not correctly assessed the relative value of the issuer's securities or
the issuer's worth.

In selecting debt securities, the portfolio manager looks for high current yields without taking undue
credit risks, although the Fund can invest in debt securities below investment grade.

While this process and the factors used may change over time and its implementation may vary in
particular cases, the portfolio manager typically searches for:
o Debt securities in market sectors that offer attractive relative value,
o Investment-grade securities that offer more income than U.S. treasury obligations with a good balance of
risk and return, high income potential from different types of corporate and government securities,
and
o Broad portfolio diversification to help reduce the volatility of the Fund's share prices.

WHO IS THE FUND DESIGNED FOR? The Fund is designed primarily for investors seeking current income with the
opportunity for some capital growth in their investment over the long term. Those investors should have a longer
investing horizon and be willing to assume the risks of short-term share price fluctuations that are typical for
a fund with substantial investments in equity securities. Since the Fund's income level will fluctuate, it is not
designed for investors needing an assured level of current income. Because of its primary focus on income and
long-term growth secondarily, the Fund may be appropriate for moderately conservative investors and for
retirement plans. However, the Fund is not a complete investment program.

Main Risks of Investing in the Fund

All investments have risks to some degree. The Fund's investments are subject to changes in their value from a
number of factors described below. There is also the risk that poor security selection by the Fund's investment
manager, OppenheimerFunds, Inc., will cause the Fund to underperform other funds having similar objectives.

RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and their short-term volatility at times may be great.
Because the Fund typically invests a substantial portion of its assets in common stocks and other equity
securities, the value of the Fund's portfolio will be affected by changes in the stock markets. Market risk will
affect the Fund's net asset values per share, which will fluctuate as the values of the Fund's portfolio
securities change.

A variety of factors can affect the price of a particular stock and the prices of individual stocks do
not all move in the same direction uniformly or at the same time. Different stock markets may behave differently
from each other. In particular, because the Fund currently focuses its stock investments in U.S. issuers, it will
be primarily affected by changes in U.S. stock markets.

The Manager may increase the relative emphasis of the Fund's investments in a particular industry from
time to time. To the extent that the Fund does so, its share values may fluctuate in response to events affecting
that industry, such as changes in economic conditions, government regulations, availability of basic resources or
supplies, or other events that affect that industry more than others.

Other factors can affect a particular stock's price, such as poor earnings reports by the issuer, loss
of major customers, major litigation against the issuer, or changes in government regulations affecting the
issuer or its industry. The Fund currently invests primarily in securities of large companies for their dividend
income but can also buy securities of small and medium-size companies, which may have more volatile prices than
stocks of large companies.

RISKS OF INVESTING IN DEBT SECURITIES.

PrePayment Risk. Mortgage-related securities are subject to the risks of unanticipated prepayment. The prices
and yields of CMOs are determined, in part, by assumptions about the cash flows from the rate of
payments of the underlying mortgages. Changes in interest rates may cause the rate of expected
prepayments of those mortgages to change. In general, prepayments increase when general interest rates
fall and decrease when interest rates rise.

If prepayments of mortgages underlying a CMO occur faster than expected when interest rates fall, the
market value and yield of the CMO could be reduced. Additionally, the Fund might have to reinvest the
prepayment proceeds in other securities paying interest at lower rates, which could reduce the Fund's
yield. The impact of prepayments on the price of a security may be difficult to predict and may increase
the volatility of the price. Additionally, the Fund may buy mortgage-related securities at a premium.
Accelerated prepayments on those securities could cause the Fund to lose a portion of its principal
investment represented by the premium the Fund paid.

When interest rates rise rapidly, and if prepayments occur more slowly than expected, a short- or
medium-term CMO can in effect become a long-term security, subject to greater fluctuations in value.
These prepayment risks can make the prices of CMOs very volatile when interest rates change. The prices
of longer-term debt securities tend to fluctuate more than those of shorter-term debt securities. That
volatility will affect the Fund's share prices.

CREDIT RISK. Debt securities are subject to credit risk. Credit risk is the risk that the issuer of a security
might not make interest and principal payments on the security as they become due. If the issuer fails to pay
interest, the Fund's income might be reduced and if the issuer fails to repay principal, the value of that
security and of the Fund's shares may be reduced. While the Fund's investments in U.S. government securities are
subject to little credit risk, the Fund's other investments in debt securities, particularly high-yield
lower-grade debt securities and debt securities of foreign governments and of domestic and foreign companies, are
subject to risks of default. A downgrade in an issuer's credit rating or other adverse news about an issuer can
reduce the value of that issuer's securities.

Special Risks of Lower-Grade Securities. Because the Fund can invest in securities below investment-grade to seek
high income, the Fund's credit risks are greater than those of funds that buy only investment-grade
bonds. Lower-grade debt securities (commonly called "junk bonds") may be subject to greater market
fluctuations and greater risks of loss of income and principal than investment-grade debt securities.
Securities that are (or that have fallen) below investment grade are exposed to a greater risk that the
issuers of those securities might not meet their debt obligations. These risks can reduce the Fund's
share prices and the income it earns.

INTEREST RATE RISKS. The values of debt securities are subject to change when prevailing interest rates change.
When interest rates fall, the values of already-issued debt securities generally rise. When interest rates rise,
the values of already-issued debt securities generally fall, and they may sell at a discount from their face
amount. The magnitude of these fluctuations will often be greater for longer-term debt securities than
shorter-term debt securities and at times the average maturity of the Fund's debt investments may be relatively
long-term. The Fund's share prices can go up or down when interest rates change because of the effect of the
changes in the value of the Fund's investments in debt securities.

HOW RISKY IS THE FUND OVERALL? In the short term, the stock markets can be volatile, and the price of the Fund's
shares can go up and down. The Fund's income-oriented investments may help cushion the Fund's total return from
changes in stock prices, but fixed-income securities have their own risks and changes in their values can also
affect the Fund's share prices. In the OppenheimerFunds spectrum, the Fund is generally less aggressive than
growth stock funds, but may be more volatile than investment-grade bond funds.

These risks collectively form the overall risk profile of the Fund and can affect the value of the
Fund's investments, its investment performance, and the prices of its shares. Particular investments and
investment strategies also have risks. These risks mean that you can lose money by investing in the Fund. When
you redeem your shares, they may be worth more or less than what you paid for them. There is no assurance that
the Fund will achieve its investment objectives.

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An investment in the Fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency.
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The Fund's Past Performance

The bar chart and table below show one measure of the risks of investing in the Fund, by showing changes in the
Fund's performance (for its Class A shares) from year to year for the last ten calendar years and by showing how the
average annual total returns of the Fund's shares, both before and after taxes, compare to those of a broad-based market index.
The after-tax returns are shown for Class A shares only and are calculated using the historical highest individual federal
marginal income tax rates in effect during the periods shown, and do not reflect the impact of state or local taxes. The
after-tax returns for the other classes of shares will vary. In certain cases, the figure representing "Return After Taxes on Distributions
and Sale of Fund Shares" may be higher than the other return figures for the same period. A higher after-tax
return results when a capital loss occurs upon redemption and translates into an assumed tax deduction that
benefits the shareholder. The after-tax returns are calculated based on certain assumptions mandated by
regulation and your actual after-tax returns may differ from those shown, depending on your individual tax
situation. The after-tax returns set forth below are not relevant to investors who hold their fund shares through
tax-deferred arrangements such as 401(k) plans or IRAs or to institutional investors not subject to tax. The
Fund's past investment performance, before and after taxes, is not necessarily an indication of how the Fund will
perform in the future.

Annual Total Returns (Class A) (as of 12/31 each year)

[See appendix to prospectus for data in bar chart showing annual total returns]

Sales charges and taxes are not included in the calculations of return in this bar chart, and if those charges
and taxes were included, the returns may be less than those shown.

For the period from 1/1/02 through 9/30/02, the cumulative return (not annualized) before taxes for Class A
shares was -21.62%. During the period shown in the bar chart, the highest return (not annualized) before taxes
for a calendar quarter was 11.30% (2nd Qtr '97) and the lowest return (not annualized) before taxes for a
calendar quarter was -11.36% (3rd Qtr'01).

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Average Annual Total Returns 10 Years
for the periods ended December 31, 2001 5 Years life of class, if
1 Year (or less)

Class A Shares (inception 12/1/70)
Return Before Taxes -5.93% 8.07% 10.44%
Return After Taxes on Distributions -7.91% 5.27% 7.73%
Return After Taxes on Distributions and Sale of -3.20% 5.63% 7.53%
Fund Shares

S&amp;P 500 Index (reflects no deduction for -11.88% 10.70% 12.93%1
fees, expenses or taxes)

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

Class B Shares (inception 8/17/93) -5.54% 8.23% 10.27%

Class C Shares (inception 11/1/95) -1.93% 8.50% 10.62%

Class N Shares (inception 3/1/01) N/A2 N/A2 N/A2

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

1 From 12/31/91.
2 Because this is a new class of shares, return data for the period specified is not available.

The Fund's average annual total returns include the applicable sales charge: for Class A, the current maximum
initial sales charge of 5.75%; for Class B, the contingent deferred sales charges of 5% (1-year) and 2%
(5-years); and for Class C, the 1% contingent deferred sales charge for the 1-year period. Because Class B shares
convert to Class A shares 72 months after purchase, Class B "life-of-class" performance does not include the
contingent deferred sales charge and uses Class A performance for the period after conversion.

The returns measure the performance of a hypothetical account and assume that all dividends and capital gains
distributions have been reinvested in additional shares. The Fund's performance of Class A shares is compared to
the S&amp;P 500 Index, an unmanaged index of equity securities. The index performance reflects the reinvestment of
dividends but does not consider the effects of capital gains or transaction costs, and the Fund also invests in
debt securities, which are not included in the index.

Fees and Expenses of the Fund

The following tables are meant to help you understand the fees and expenses you may pay if you buy and hold
shares of the Fund. The Fund pays a variety of expenses directly for management of its assets, administration,
distribution of its shares and other services. Those expenses are subtracted from the Fund's assets to calculate
the Fund's net asset values per share. All shareholders therefore pay those expenses indirectly. Shareholders pay
other expenses directly, such as sales charges and account transaction charges. The numbers below are based on
the Fund's expenses during its fiscal year ended August 31, 2002.

Shareholder Fees (charges paid directly from your investment):

Class A Class B Class C Class N
Shares Shares Shares Shares
--------------------------------------------------- -------------- --------------- --------------- ----------------
Maximum Sales Charge (Load) on purchases 5.75% None None None
(as % of offering price)
--------------------------------------------------- -------------- --------------- --------------- ----------------
Maximum Deferred Sales Charge (Load) None1 5%2 1%3
(as % of the lower of the original offering 1%4
price or redemption proceeds)
--------------------------------------------------- -------------- --------------- --------------- ----------------

1. A contingent deferred sales charge may apply to redemptions of investments of $1 million or more ($500,000 for
certain retirement plan accounts) of Class A shares. See "How Can You Buy Class A Shares" for details.
2. Applies to redemptions in first year after purchase. The contingent deferred sales charge declines to 1% in
the sixth year and is eliminated after that.

3. Applies to shares redeemed within 12 months of purchase.
4. Applies to shares redeemed within 18 months of retirement plan's first purchase of Class N shares.

Annual Fund Operating Expenses (deducted from Fund assets):
(% of average daily net assets)
Class A Class B Class C Class N
Shares Shares Shares Shares*
------------------------------------------------------ -------------- -------------- ------------- --------------

Management Fees 0.53% 0.53% 0.53% 0.53%

------------------------------------------------------
------------------------------------------------------ -------------- -------------- ------------- --------------
Distribution and/or Service (12b-1) Fees 0.23% 1.00% 1.00% 0.50%
------------------------------------------------------ -------------- -------------- ------------- --------------

Other Expenses 0.22% 0.23% 0.23% 0.22%

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

Total Annual Operating Expenses 0.98% 1.76% 1.76% 1.25%

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

Expenses may vary in future years. "Other expenses" include transfer agent fees, custodial fees, and accounting
and legal expenses that the Fund pays. The Transfer Agent has voluntarily undertaken to the Fund to limit the
transfer agent fees to 0.35% of average daily net assets per fiscal year for all classes. That undertaking was
effective October 1, 2001, was pro-rated for the remainder of the fiscal year end after that date, and may be
amended or withdrawn at any time. For the Fund's fiscal year ended August 31, 2002, the transfer agent fees did
not exceed the expense limitation described above.

EXAMPLES. The following examples are intended to help you compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The examples assume that you invest $10,000 in a class of shares of the Fund
for the time periods indicated and reinvest your dividends and distributions.

The first example assumes that you redeem all of your shares at the end of those periods. The second
example assumes that you keep your shares. Both examples also assume that your investment has a 5% return each
year and that the class's operating expenses remain the same. Your actual costs may be higher or lower because
expenses will vary over time. Based on these assumptions your expenses would be as follows:

If shares are redeemed: 1 Year 3 Years 5 Years 10 Years1
----------------------------------------- ------------------ ---------------- ----------------- -----------------

Class A Shares $669 $869 $1,086 $1,707

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

Class B Shares $679 $854 $1,154 $1,6781

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

Class C Shares $279 $554 $954 $2,073

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

Class N Shares $227 $397 $686 $1,511

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

If shares are not redeemed: 1 Year 3 Years 5 Years 10 Years1
----------------------------------------- ------------------ ---------------- ----------------- ------------------

Class A Shares $669 $869 $1,086 $1,707

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

Class B Shares $179 $554 $954 $1,6781

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

Class C Shares $179 $554 $954 $2,073

Class N Shares $127 $397 $686 $1,511

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

In the first example, expenses include the initial sales charge for Class A and the applicable Class B, Class C
or Class N contingent deferred sales charges. In the second example, the Class A expenses include the sales
charge, but Class B, Class C and Class N expenses do not include the contingent deferred sales charges.
1. Class B expenses for years 7 through 10 are based on Class A expenses, since Class B shares automatically
convert to Class A after 6 years.

About the Fund's Investments

THE FUND'S PRINCIPAL INVESTMENT POLICIES. The allocation of the Fund's portfolio among different types of
investments will vary over time based on the Manager's evaluation of economic and market trends. The Fund's
portfolio might not always include all of the different types of investments described below. The Statement of
Additional Information contains more detailed information about the Fund's investment policies and risks.

The Manager tries to reduce risks by carefully researching securities before they are purchased. The
Fund attempts to reduce its exposure to market risks by diversifying its investments, that is, by not holding a
substantial amount of stock of any one company and by not investing too great a percentage of the Fund's assets
in any one company. Also, the Fund does not concentrate 25% or more of its investments in any one industry.
However, changes in the overall market prices of securities and the income they pay can occur at any time. The
share price of the Fund will change daily based on changes in market prices of securities and market conditions
and in response to other economic events.

Equity Securities. The Fund's investments in equity securities are mainly common stocks but also include
preferred stocks and securities convertible into common stocks. The Fund currently focuses on securities
of issuers that have large capitalizations. They may pay higher dividends than small or medium
capitalization companies and their stock prices have tended to be less volatile than securities of
smaller issuers. However, the Fund can buy stocks of issuers in all capitalization ranges.

The Fund may invest in equity securities both for current income from dividends as well as secondarily
for growth opportunities. The mix of equities and debt securities in the Fund's portfolio will vary over
time depending on the Manager's judgment about market and economic conditions.

Equity securities include common stocks, as well as "equity equivalents" such as preferred stocks and
securities convertible into common stock. They can include securities issued by domestic or foreign
companies. Preferred stock has a set dividend rate and ranks after bonds and before common stocks in its
claim for dividends and on assets if the issuer is liquidated or becomes bankrupt. The Manager considers
some convertible securities to be "equity equivalents" because of the conversion feature and in that
case their rating has less impact on the investment decision than in the case of debt securities.

Convertible Securities. Convertible debt securities pay interest and convertible preferred stocks pay dividends
until they mature or are converted, exchanged or redeemed. Because of the conversion feature, the price
of a convertible security will normally vary in some proportion to changes in the price of the
underlying common stock. In general, convertible securities:

o have higher yields than common stocks but lower yields than comparable non-convertible securities,
o may be subject to less fluctuation in value than the underlying stock because of their income, and
o provide potential for capital appreciation if the market price of the underlying common stock increases
(and in those cases may be thought of as "equity substitutes").

The Fund does not invest only in securities of issuers in a particular market capitalization range, and
at times the Manager might increase the relative emphasis of securities of issuers in a particular
capitalization range if the Manager believes they offer greater opportunities for total return.

Convertible Preferred Stock. Unlike common stock, preferred stock typically has a stated dividend rate. When
prevailing interest rates rise, the value of preferred stock having a fixed dividend rate tends to fall.
The right to payment of dividends on preferred stock generally is subordinate to the rights of the
company's debt securities. Preferred stock dividends may be cumulative (they remain a liability of the
company until paid) or non-cumulative.

Some convertible preferred stock with a mandatory conversion feature has a set call price to buy the
underlying common stock. If the underlying common stock price is less than the call price, the holder
will pay more for the common stock than its market price. The issuer might also be able to redeem the
stock prior to the mandatory conversion date, which could diminish the potential for capital
appreciation on the investment.

Debt Securities. The Fund's investments in debt securities include securities issued or guaranteed by the U.S.
government or its agencies and instrumentalities, and foreign and domestic corporate bonds, notes and
debentures. These are selected primarily for their income possibilities and to help cushion fluctuations
in the Fund's net asset values.

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. Although not rated, Treasury
obligations have little credit risk but are subject to interest rate risk.

Forward Rolls. The Fund can enter into "forward roll" transactions (also referred to as "mortgage dollar rolls")
with respect to mortgage-related securities. In this type of transaction, the Fund sells a
mortgage-related security to a buyer and simultaneously agrees to repurchase a similar security at a
later date at a set price.

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, or that the counterparty might default in its obligation.

Securities of Smaller Companies. Securities of smaller, newer companies may offer greater potential for higher
returns, but their stock prices may be volatile, and for debt securities, they are also subject to
greater risks of default than larger, more established issuers. They may have unseasoned management,
they may lack established markets for their products or services and may be dependent on only a few
customers or suppliers for a greater amount of their business. Also, they may not have the financial
strength to sustain them through business downturns or adverse market conditions. These securities may
have less of a trading market than securities of larger issuers, and it might be harder for the Fund to
dispose of its holdings at an acceptable price when it wants to sell them. As a result, the Fund's
investments in securities of these issuers have greater risks. The Fund might not achieve its expected
returns from them and its share price may fluctuate more to the extent that it holds these investments.

In selecting securities for the Fund's portfolio and evaluating their yield potential and credit risk,
the Manager does not rely solely on ratings by rating organizations but evaluates business and economic
factors affecting an issuer as well. The debt securities and convertible securities the Fund buys may be
rated by nationally-recognized rating organizations such as Moody's Investors Service, Inc. or Standard
&amp; Poor's Rating Service, or they may be unrated securities assigned an equivalent rating by the Manager.
Credit ratings evaluate the expectation of scheduled payments of interest and principal, not market
risks. Rating agencies might not always change their credit ratings of an issuer in a timely manner to
reflect the events that could affect an issuer's ability to make timely payments on its obligations.

The Fund can invest in debt securities and convertible securities that are above or below investment
grade in credit quality and at times will invest substantial amounts of its assets in securities below
investment grade to seek higher income as part of its goal. "Investment-grade" rated securities are
those in the four highest rating categories of national ratings organizations. The ratings definitions
of the principal ratings organizations are included in Appendix A to the Statement of Additional
Information.

Special Credit Risks of Lower-Grade Securities. The Fund can invest up to 25% of its total assets in
"lower-grade" securities commonly known as "junk bonds." These are securities rated below "Baa" by
Moody's Investors Service, Inc. or "BBB" by Standard &amp; Poors Ratings Service or having similar ratings by
other ratings organizations, or if unrated, assigned a comparable rating by the Manager. However, the
Fund cannot invest more than 10% of its total assets in lower-grade securities that are not convertible.

While all debt securities are subject to risks of non-payment of interest and principal, debt securities
below investment grade, whether rated or unrated, have greater risks than investment grade securities.
There may be less of a market for them and therefore they may be harder to sell at an acceptable price.
There is a relatively greater possibility that the issuer's earnings may be insufficient to make the
payments of interest and principal when due.

Credit Derivatives. The Fund may enter into credit default swaps, both (i) directly and (ii) indirectly
in the form of a swap embedded within a structured note, to protect against the risk that a debt
security will default. The Fund pays a fee to enter into the trade and receives a fixed payment during
the life of the swap. If there is a credit event (for example, the security fails to timely pay interest
or principal), the Fund either delivers the defaulted bond (if the Fund has taken the short position in
the credit default swap, also known as "buying credit protection") or pays the par amount of the
defaulted bond (if the Fund has taken the long position in the credit default swap note, also know as
"selling credit protection"). Risks of credit default swaps include the cost of paying for credit
protection if there are no credit events, and adverse pricing when purchasing bonds to satisfy its
delivery obligation where the Fund took a short position in the swap and there has been a credit event.

CAN THE FUND'S INVESTMENT OBJECTIVES AND POLICIES CHANGE? The Fund's Board of Trustees can change non-fundamental
investment policies without shareholder approval, although significant changes will be described in amendments to
this Prospectus. Fundamental policies cannot be changed without the approval of a majority of the Fund's
outstanding voting shares. The Fund's investment objectives are fundamental policies. Other investment
restrictions that are fundamental policies are listed in the Statement of Additional Information. An investment
policy or technique is not fundamental unless this Prospectus or the Statement of Additional Information says
that it is.

OTHER INVESTMENT STRATEGIES. To seek its objectives, the Fund can also use the investment techniques and
strategies described below. The Fund might not always use all of them. These techniques have risks, although some
are designed to help reduce overall investment or market risks.

Zero-Coupon and "Stripped" Securities. Some of the debt securities the Fund buys are zero-coupon bonds (including
U.S. Treasury bonds) that pay no interest and are issued at a substantial discount from their face
value. Others are debt securities that have been "stripped" of their interest coupons, such as Treasury
Securities whose coupons have been stripped by a Federal Reserve Bank. They may also include securities
issued by private issuers. Zero-coupon and stripped securities are subject to greater fluctuations in
price from interest rate changes than interest-paying securities. The Fund may have to pay out the
imputed income on zero coupon securities without receiving the actual cash currently.

Foreign Securities. There is no limit on the amount of the Fund's assets that can be invested in foreign
securities. However, the Fund currently does not invest a significant portion of its assets in foreign
securities and does not intend to invest more than 35% of its total assets in foreign securities. The
Fund can buy foreign equity securities as well as debt securities issued by foreign companies or
governments and their agencies in any country, developed or undeveloped.

o Risks of Foreign Investing. While foreign securities offer special investment opportunities, they also
have special risks. The change in value of a foreign currency against the U.S. dollar will result in a
change in the U.S. dollar value of securities denominated in that foreign currency. Foreign issuers are
not subject to the same accounting and disclosure requirements to which U.S. companies are subject. The
value of foreign investments may be affected by exchange control regulations, expropriation or nationalization
of a company's assets, foreign taxes, delays in settlement of transactions, changes in governmental,
economic or monetary policy in the U.S. or abroad, or other political and economic factors. Securities
in emerging market countries may be more difficult to sell and their prices may be more volatile.

Illiquid and Restricted Securities. Investments may be illiquid because they do not have 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. The Fund will not invest more than 10%
of its net assets in illiquid or restricted securities. The Board can increase that limit to 15%.
Certain restricted securities that are eligible for resale to qualified institutional purchasers are not
subject to that limit. The Manager monitors holdings of illiquid securities on an ongoing basis to
determine whether to sell any holdings to maintain adequate liquidity.

Derivative Investments. The Fund can invest in a number of different kinds of "derivative" investments. In
general terms, a derivative investment is an investment contract whose value depends on (or is derived
from) the value of an underlying asset, interest rate or index. In the broadest sense, options, futures
contracts, and other hedging instruments the Fund might use may be considered "derivative" investments.
In addition to using derivatives for hedging, the Fund might use other derivative investments because
they offer the potential for increased value. The Fund currently does not use derivatives to a
significant degree and is not required to use them in seeking its objective.

Derivatives have risks. If the issuer of the derivative investment does not pay the amount due, the Fund
can lose money on the investment. The underlying security or investment on which a derivative is based,
and the derivative itself, may not perform the way the Manager expected it to. As a result of these
risks the Fund could realize less principal or income from the investment than expected or its hedge
might be unsuccessful. As a result, the Fund's share prices could fall. Certain derivative investments
held by the Fund might be illiquid.

o Hedging. The Fund can buy and sell futures contracts, put and call options, forward contracts, interest
rate swaps and options on futures and broadly-based securities indices. These are all referred to as
"hedging instruments." The Fund has limits on its use of hedging instruments and is not required to use
them in seeking its objectives.

Some of these strategies would hedge the Fund's portfolio against price fluctuations. Other hedging
strategies, such as buying futures and call options, would tend to increase the Fund's exposure to the
securities market.

There are also special risks in particular hedging strategies. Options trading involves the payment of
premiums and can increase portfolio turnover. If the Manager used a hedging instrument at the wrong time
or judged market conditions incorrectly, the strategy could reduce the Fund's return.

Temporary Defensive and Interim Investments. In times of unstable or adverse market or economic conditions, the
Fund can invest up to 100% of its total assets in temporary defensive investments. Generally they would
be cash equivalents (such as commercial paper), money market instruments, short-term debt securities,
U.S. government securities, or repurchase agreements. They can also include other investment-grade debt
securities. The Fund might also hold these types of securities pending the investment of proceeds from
the sale of Fund shares or portfolio securities or to meet anticipated redemptions of Fund shares. To
the extent the Fund invests in these securities, it might not achieve its investment objective of
current income.

Portfolio Turnover. The Fund may engage in short-term trading to achieve its objectives. It might have a turnover
rate in excess of 100% annually. Portfolio turnover affects brokerage costs, although the Fund does not
pay for brokerage on most of its portfolio transactions. If the Fund realizes capital gains when it
sells its portfolio investments, it must generally pay those gains out to shareholders, increasing their
taxable distributions. The Financial Highlights table at the end of this Prospectus shows the Fund's
portfolio turnover rates during prior fiscal years.

How the Fund is Managed

THE MANAGER. The Manager chooses the Fund's investments and handles its day-to-day business. The Manager carries
out its duties, subject to the policies established by the Fund's Board of Trustees, under an investment advisory
agreement that states the Manager's responsibilities. The agreement sets the fees the Fund pays to the Manager
and describes the expenses that the Fund is responsible to pay to conduct its business.

The Manager has been an investment adviser since January 1960. The Manager and its subsidiaries and
controlled affiliates managed more than $120 billion in assets as of September 30, 2002, including other
Oppenheimer funds with more than 7 million shareholder accounts. The Manager is located at 498 Seventh Avenue,
New York, NY 10018.

Portfolio Manager. The portfolio manager of the Fund is Michael Levine. He is the person principally responsible
for the day -to-day management of the Fund's portfolio. Mr. Levine became a Vice President and portfolio
manager of the Fund on June 1, 1999 and has been a Vice President of the Manager since June 1998. Mr.
Levine is portfolio manager and an officer of other Oppenheimer funds.

Advisory Fees. Under the investment advisory agreement, the Fund pays the Manager an advisory fee at an annual
rate that declines as the Fund's assets grow: 0.75% of the first $100 million of average annual net
assets of the Fund, 0.70% of the next $100 million, 0.65% of the next $100 million, 0.60% of the next
$100 million, 0.55% of the next $100 million and 0.50% of average annual net assets in excess of $500
million. The Fund's management fee for its last fiscal year ended August 31, 2002 was 0.53% of average
annual net assets for each class of shares.

ABOUT your account

How to Buy Shares

HOW DO YOU BUY SHARES? You can buy shares several ways, as described below. The Fund's Distributor,
OppenheimerFunds Distributor, Inc., may appoint servicing agents to accept purchase (and redemption) orders. The
Distributor, in its sole discretion, may reject any purchase order for the Fund's shares.

Buying Shares Through Your Dealer. You can buy shares through any dealer, broker or financial institution that
has a sales agreement with the Distributor. Your dealer will place your order with the Distributor on
your behalf.
Buying Shares Through the Distributor. Complete an OppenheimerFunds New Account Application and return it with a check payable
to "OppenheimerFunds Distributor, Inc." Mail it to P.O. Box 5270, Denver, Colorado 80217. If you don't list a dealer on the
application, the Distributor will act as your agent in buying the shares. However, we recommend that you discuss your investment
with a financial advisor before you make a purchase to be sure that the Fund is appropriate for you.

Paying by Federal Funds Wire. Shares purchased through the Distributor may be paid for by Federal Funds
wire. The minimum investment is $2,500. Before sending a wire, call the Distributor's Wire Department at
1.800.225.5677 to notify the Distributor of the wire and to receive further instructions.

Buying Shares Through OppenheimerFunds AccountLink. With AccountLink, you pay for shares by electronic funds
transfers from your bank account. Shares are purchased for your account by a transfer of money from your
bank account through the Automated Clearing House (ACH) system. You can provide those instructions
automatically, under an Asset Builder Plan, described below, or by telephone instructions using
OppenheimerFunds PhoneLink, also described below. Please refer to "AccountLink," below for more details.
Buying Shares Through Asset Builder Plans. You may purchase shares of the Fund automatically each month from
your account at a bank or other financial institution under an Asset Builder Plan with AccountLink.
Details are in the Asset Builder Application and the Statement of Additional Information.

HOW MUCH MUST YOU INVEST? You can buy Fund shares with a minimum initial investment of $1,000 and make additional
investments at any time with as little as $25 (effective November 1, 2002, the additional purchase amount is
$50). There are reduced minimum investments under special investment plans.

With Asset Builder Plans, 403(b) plans, Automatic Exchange Plans and military allotment plans, you can make
initial and subsequent investments for as little as $25. o The minimum additional investment in
any such plan accounts established on or after November 1, 2002 is $50. The minimum additional
investment to such plan accounts that were established prior to November 1, 2002 will remain $25. To
establish a new Asset Builder Plan account on or after November 1, 2002, you must first invest at least
$500.
Under retirement plans, such as IRAs, pension and profit-sharing plans and 401(k) plans, you can start your
account with as little as $250. If your IRA is started as an Asset Builder Plan, the $25 minimum
applies. Additional purchases may be for as little as o $25. To establish any type of IRA account on
or after November 1, 2002, the minimum investment is $500. The minimum additional investment to any type
of IRA account after November 1, 2002 is $50.

The minimum investment requirement does not apply to reinvesting dividends from the Fund or
other Oppenheimer funds (a list of them appears in the Statement of Additional Information, or you can
ask your dealer or call the Transfer Agent), or reinvesting distributions from unit investment trusts
that have made arrangements with the Distributor.

AT WHAT PRICE ARE SHARES SOLD? Shares are sold at their offering price which is the net asset value per share
plus any initial sales charge that applies. The offering price that applies to a purchase order is based on the
next calculation of the net asset value per share that is made after the Distributor receives the purchase order at
its offices in Colorado, or after any agent appointed by the Distributor receives the order.

Net Asset Value. The Fund calculates the net asset value of each class of shares as of the close of The New York
Stock Exchange, on each day the Exchange is open for trading (referred to in this Prospectus as a
"regular business day"). The Exchange normally closes at 4:00 P.M., Eastern time, but may close earlier
on some days. All references to time in this Prospectus mean "Eastern time."

The net asset value per share is determined 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. To determine net asset value, the
Fund's Board of Trustees has established procedures to value the Fund's securities, in general, based on
market value. The Board has adopted special procedures for valuing illiquid and restricted securities
and obligations for which market values cannot be readily obtained. Because some foreign securities
trade in markets and on exchanges that operate on weekends and U.S. holidays, the values of some of the
Fund's foreign investments may change on days when investors cannot buy or redeem Fund shares.

If, after the close of the principal market on which a security held by the Fund is traded, and before
the time the Fund's securities are priced that day, an event occurs that the Manager deems likely to
cause a material change in the value of such security, the Fund's Board of Trustees has authorized the
Manager, subject to the Board's review, to ascertain a fair value for such security. A security's
valuation may differ depending on the method used for determining value.

The Offering Price. To receive the offering price for a particular day, in most cases the Distributor or its
designated agent must receive your order by the time of day The New York Stock Exchange closes that day.
If your order is received on a day when the Exchange is closed or after it has closed, the order will
receive the next offering price that is determined after your order is received.

Buying Through a Dealer. If you buy shares through a dealer, your dealer must receive the order by the close of
The New York Stock Exchange and transmit it to the Distributor so that it is received before the
Distributor's close of business on a regular business day (normally 5:00 P.M.) to receive that day's
offering price, unless your dealer has made alternative arrangements with the Distributor. Otherwise,
the order will receive the next offering price that is determined.

-------------------------------------------------------------------------------------------------------------------
WHAT CLASSES OF SHARES DOES THE FUND OFFER? The Fund offers investors four different classes of shares. The
different classes of shares represent investments in the same portfolio of securities, but the classes are
subject to different expenses and will likely have different share prices. When you buy shares, be sure to
specify the class of shares. If you do not choose a class, your investment will be made in Class A shares.

Class A Shares. If you buy Class A shares, you pay an initial sales charge (on investments up to $1 million for
regular accounts or lesser amounts for certain retirement plans). The amount of that sales charge will
vary depending on the amount you invest. The sales charge rates are listed in "How Can You Buy Class A
Shares?" below.

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

Class B Shares. If you buy Class B shares, you pay no sales charge at the time of purchase, but you will pay an
annual asset-based sales charge. If you sell your shares within 6 years of buying them, you will
normally pay a contingent deferred sales charge. That contingent deferred sales charge varies depending
on how long you own your shares, as described in "How Can You Buy Class B Shares?" below.

Class C Shares. If you buy Class C shares, you pay no sales charge at the time of purchase, but you will pay an
annual asset-based sales charge. If you sell your shares within 12 months of buying them, you will
normally pay a contingent deferred sales charge of 1.0%, as described in "How Can You Buy Class C
Shares?" below.

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

Class N Shares. If you buy Class N shares (available only through certain retirement plans), you pay no sales
charge at the time of purchase, but you will pay an annual asset-based sales charge. If you sell your
shares within 18 months of the retirement plan's first purchase of Class N shares, you may pay a
contingent deferred sales charge of 1.0%, as described in "How Can You Buy Class N Shares?" below.

-------------------------------------------------------------------------------------------------------------------
WHICH CLASS OF SHARES SHOULD YOU CHOOSE? Once you decide that the Fund is an appropriate investment for you, the
decision as to which class of shares is best suited to your needs depends on a number of factors that you should
discuss with your financial advisor. Some factors to consider are how much you plan to invest and how long you
plan to hold your investment. If your goals and objectives change over time and you plan to purchase additional
shares, you should re-evaluate those factors to see if you should consider another class of shares. The Fund's
operating costs that apply to a class of shares and the effect of the different types of sales charges on your
investment will vary your investment results over time.

    The discussion below is not intended to be investment advice or a recommendation, because each
investor's financial considerations are different. The discussion below assumes that you will purchase only one
class of shares and not a combination of shares of different classes. Of course, these examples are based on
approximations of the effects of current sales charges and expenses projected over time, and do not detail all of
the considerations in selecting a class of shares. You should analyze your options carefully with your financial
advisor before making that choice.


How Long Do You Expect to Hold Your Investment? While future financial needs cannot be predicted with certainty,
         knowing how long you expect to hold your investment will assist you in selecting the appropriate class
         of shares. Because of the effect of class-based expenses, your choice will also depend on how much you
         plan to invest. For example, the reduced sales charges available for larger purchases of Class A shares
         may, over time, offset the effect of paying an initial sales charge on your investment, compared to the
         effect over time of higher class-based expenses on shares of Class B, Class C or Class N. For retirement
         plans that qualify to purchase Class N shares, Class N shares will generally be more advantageous than
         Class B and Class C shares.


     o   Investing for the Shorter Term. While the Fund is meant to be a long-term investment, if you have a
         relatively short-term investment horizon (that is, you plan to hold your shares for not more than six
         years), you should probably consider purchasing Class A or Class C shares rather than Class B shares.
         That is because of the effect of the Class B contingent deferred sales charge if you redeem within six
         years, as well as the effect of the Class B asset-based sales charge on the investment return for that
         class in the short-term. Class C shares might be the appropriate choice (especially for investments of
         less than $100,000), because there is no initial sales charge on Class C shares, and the contingent
         deferred sales charge does not apply to amounts you sell after holding them one year.

         However, if you plan to invest more than $100,000 for the shorter term, then as your
         investment horizon increases toward six years, Class C shares might not be as advantageous as Class A
         shares. That is because the annual asset-based sales charge on Class C shares will have a greater impact
         on your account over the longer term than the reduced front-end sales charge available for larger
         purchases of Class A shares.

         And for non-retirement plan investors who invest $1 million or more, in most cases Class A shares will
         be the most advantageous choice, no matter how long you intend to hold your shares. For that reason, the
         Distributor normally will not accept purchase orders of $500,000 or more of Class B shares or $1 million
         or more of Class C shares from a single investor.

              Investing for the Longer Term. If you are investing less than $100,000 for the  longer-term,  for
         example for  retirement,  and do not expect to need access to your money for seven years or more,  Class B
         shares may be appropriate.


Are There  Differences in Account  Features That Matter to You? Some account features may not be available to Class
         B, Class C and Class N  shareholders.  Other  features may not be advisable  (because of the effect of the
         contingent  deferred sales charge) for Class B, Class C and Class N  shareholders.  Therefore,  you should
         carefully  review how you plan to use your  investment  account  before  deciding which class of shares to
         buy.

         Additionally, the dividends payable to Class B, Class C and Class N shareholders will be reduced by the
         additional expenses borne by those classes that are not borne by Class A shares, such as the Class B,
         Class C and Class N asset-based sales charge described below and in the Statement of Additional
         Information. Share certificates are only available for Class A shares. If you are considering using your
         shares as collateral for a loan, that may be a factor to consider.


How Do Share Classes Affect Payments to Your Broker? A financial advisor may receive different compensation for
         selling one class of shares than for selling another class. It is important to remember that Class B,
         Class C and Class N contingent deferred sales charges and asset-based sales charges have the same
         purpose as the front-end sales charge on sales of Class A shares: to compensate the Distributor for
         concessions and expenses it pays to dealers and financial institutions for selling shares. The
         Distributor may pay additional compensation from its own resources to securities dealers or financial
         institutions based upon the value of shares of the Fund owned by the dealer or financial institution for
         its own account or for its customers.

SPECIAL SALES CHARGE ARRANGEMENTS AND WAIVERS. Appendix C to the Statement of Additional Information details the
conditions for the waiver of sales charges that apply in certain cases, and the special sales charge rates that
apply to purchases of shares of the Fund by certain groups, or under specified retirement plan arrangements or in
other special types of transactions. To receive a waiver or special sales charge rate, you must advise the
Distributor when purchasing shares or the Transfer Agent when redeeming shares that the special conditions apply.

HOW CAN YOU BUY CLASS A SHARES? Class A shares are sold at their offering price,
which is normally net asset value plus an initial sales charge. However, in some cases, described below,
purchases are not subject to an initial sales charge, and the offering price will be the net
asset value. In other cases, reduced sales charges may be available, as described below or in the Statement of
Additional Information. Out of the amount you invest, the Fund receives the net asset value to invest for your
account.


         The sales charge varies depending on the amount of your purchase. A portion of the sales charge may be
retained by the Distributor or allocated to your dealer as a concession. The Distributor reserves the right to
reallow the entire concession to dealers. The current sales charge rates and concessions paid to dealers and
brokers are as follows:


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

  Amount of Purchase                  Front-End Sales          Front-End Sales            Concession As
                                      Charge As a              Charge As a
                                      Percentage of            Percentage of Net          Percentage of
                                      Offering Price           Amount Invested            Offering Price

                                       ------------------------ ------------------------- -------------------------
  ------------------------------------ ------------------------ ------------------------- -------------------------
  Less than $25,000                             5.75%                    6.10%                     4.75%
  ------------------------------------ ------------------------ ------------------------- -------------------------
  ----------------------------------- --------------------------------------------------- -------------------------

  $25,000 or more but less than                5.50%                     5.82%                     4.75%
  $50,000

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

  $50,000 or more but less than                4.75%                     4.99%                     4.00%
  $100,000

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

  $100,000 or more but less than               3.75%                     3.90%                     3.00%
  $250,000

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

  $250,000 or more but less than               2.50%                     2.56%                     2.00%
  $500,000

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

  $500,000 or more but less than $1            2.00%                     2.04%                     1.60%
  million

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


Can You Reduce Class A Sales Charges? You may be eligible to buy Class A shares at reduced sales charge rates
         under the Fund's "Right of Accumulation" or a Letter of Intent, as described in "Reduced Sales Charges"
         in the Statement of Additional Information.

Class A Contingent Deferred Sales Charge. There is no initial sales charge on purchases of Class A shares of any
         one or more of the Oppenheimer funds aggregating $1 million or more, or for certain purchases by
         particular types of retirement plans that were permitted to purchase such shares prior to March 1, 2001
         ("grandfathered retirement accounts"). Retirement plans are not permitted to make initial purchases of
         Class A shares subject to a contingent deferred sales charge. The Distributor pays dealers of record
         concessions in an amount equal to 1.0% of purchases of $1 million or more other than by grandfathered
         retirement accounts. For grandfathered retirement accounts, the concession is 0.75% of the first $2.5
         million of purchases plus 0.25% of purchases in excess of $2.5 million. In either case, the concession
         will not be paid on purchases of shares by exchange or that were previously subject to a front-end sales
         charge and dealer concession.

         If you redeem any of those shares within an 18-month "holding period" measured from the beginning of the
         calendar month of their purchase, a contingent deferred sales charge (called the "Class A contingent
         deferred sales charge") may be deducted from the redemption proceeds. That sales charge will be equal to
         1.0% of the lesser of:

o        the aggregate net asset value of the redeemed shares at the time of redemption (excluding shares
         purchased by reinvestment of dividends or capital gain distributions) or
o        the original net asset value of the redeemed shares.

         The Class A contingent deferred sales charge will not exceed the aggregate amount of the concessions the
         Distributor paid to your dealer on all purchases of Class A shares of all Oppenheimer funds you made
         that were subject to the Class A contingent deferred sales charge.


Purchases by Certain Retirement Plans. There is no initial sales charge on purchases of Class A shares of any one
         or more Oppenheimer funds by retirement plans that have $10 million or more in plan assets and that have
         entered into a special agreement with the Distributor and by retirement plans which are part of a
         retirement plan product or platform offered by certain banks, broker-dealers, financial advisors,
         insurance companies or recordkeepers which have entered into a special agreement with the Distributor.
         The Distributor currently pays dealers of record concessions in an amount equal to 0.25% of the purchase
         price of Class A shares by those retirement plans from its own resources at the time of sale, subject to
         certain exceptions as described in the Statement of Additional Information. There is no contingent
         deferred sales charge upon the redemption of such shares.

HOW CAN YOU BUY CLASS B SHARES? Class B shares are sold at net asset value per share without an initial sales
charge. However, if Class B shares are redeemed within six years from the beginning of the calendar month of
their purchase, a contingent deferred sales charge will be deducted from the redemption proceeds. The Class B
contingent deferred sales charge is paid to compensate the Distributor for its expenses of providing
distribution-related services to the Fund in connection with the sale of Class B shares.


         The amount of the contingent deferred sales charge will depend on the number of years since you invested
and the dollar amount being redeemed, according to the following schedule for the Class B contingent deferred
sales charge holding period:

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

  Years Since Beginning of Month in Which Purchase       Contingent Deferred Sales Charge on Redemptions
                                                         in That Year
  Order was Accepted                                     (As % of Amount Subject to Charge)

                                                            --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
0 - 1                                                       5.0%
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
1 - 2                                                       4.0%
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
2 - 3                                                       3.0%
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
3 - 4                                                       3.0%
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
4 - 5                                                       2.0%
----------------------------------------------------------- --------------------------------------------------------
----------------------------------------------------------- --------------------------------------------------------
5 - 6                                                       1.0%
----------------------------------------------------------- --------------------------------------------------------
  ------------------------------------------------------ -----------------------------------------------------------

  After 6                                                None

  ------------------------------------------------------ -----------------------------------------------------------
         In the table,  a "year" is a 12-month  period.  In applying the  contingent  deferred  sales  charge,  all
purchases are  considered  to have been made on the first  regular  business day of the month in which the purchase
was made.

Automatic Conversion of Class B Shares. Class B shares automatically convert to Class A shares 72 months after
         you purchase them. This conversion feature relieves Class B shareholders of the asset-based sales charge
         that applies to Class B shares under the Class B Distribution and Service Plan, described below. The
         conversion is based on the relative net asset value of the two classes, and no sales load or other charge is imposed.
         When any Class B shares that you hold convert, any other Class B shares that were acquired by reinvesting dividends and
         distributions on the converted shares will also convert to Class A shares. For further information on
         the conversion feature and its tax implications, see "Class B Conversion" in the Statement of Additional
         Information.

How Can you Buy Class C Shares? Class C shares are sold at net asset value per share without an initial sales
charge. However, if Class C shares are redeemed within a holding period of 12 months from the beginning of the
calendar month of their purchase, a contingent deferred sales charge of 1.0% will be deducted from the redemption
proceeds. The Class C contingent deferred sales charge is paid to compensate the Distributor for its expenses of
providing distribution-related services to the Fund in connection with the sale of Class C shares.

HOW CAN YOU BUY CLASS N SHARES? Class N shares are offered for sale to retirement plans (including IRAs and
403(b) plans) that purchase $500,000 or more of Class N shares of one or more Oppenheimer funds or to group
retirement plans (which do not include IRAs and 403(b) plans) that have assets of $500,000 or more or 100 or more
eligible participants. See "Availability of Class N shares" in the Statement of Additional Information for other
circumstances where Class N shares are available for purchase.

         A contingent deferred sales charge of 1.0% will be imposed upon the redemption of Class N shares, if:
o        The group retirement plan is terminated or Class N shares of all Oppenheimer funds are terminated as an

         investment option of the plan and Class N shares are redeemed within 18 months after the plan's first
         purchase of Class N shares of any Oppenheimer fund, or
         o    With respect to an IRA or 403(b) plan, Class N shares are redeemed within 18 months of the plan's
         first purchase of Class N shares of any Oppenheimer fund.

         Retirement plans that offer Class N shares may impose charges on plan participant accounts. The
procedures for buying, selling, exchanging and transferring the Fund's other classes of shares (other than the
time those orders must be received by the Distributor or Transfer Agent in Colorado) and the special account
features applicable to purchasers of those other classes of shares described elsewhere in this prospectus do not
apply to Class N shares offered through a group retirement plan. Instructions for buying, selling, exchanging or
transferring Class N shares offered through a group retirement plan must be submitted by the plan, not by plan
participants for whose benefit the shares are held.


DISTRIBUTION AND SERVICE (12b-1) PLANS.


Service Plan for Class A Shares. The Fund has adopted a Service Plan for Class A shares. It reimburses the
Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares.
Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A
shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other
financial institutions quarterly for providing personal service and maintenance of accounts of their customers
that hold Class A shares. With respect to Class A shares subject to a Class A contingent deferred sales charge
purchased by grandfathered retirement accounts, the Distributor pays the 0.25% service fee to dealers in
advance for the first year after the shares are sold by the dealer. After the shares have been held for a year, the
Distributor pays the service fee to dealers on a quarterly basis.

Distribution and Service Plans for Class B, Class C and Class N Shares. The Fund has adopted Distribution and
         Service Plans for Class B, Class C and Class N shares to pay the Distributor for its services and costs
         in distributing Class B, Class C and Class N shares and servicing accounts. Under the plans, the Fund
         pays the Distributor an annual asset-based sales charge of 0.75% on Class B and Class C shares and 0.25%
         on Class N shares. The Distributor also receives a service fee of 0.25% per year under the Class B,
         Class C and Class N plans.

         The asset-based sales charge and service fees increase Class B and Class C expenses by 1.0% and increase
         Class N expenses by 0.50% of the net assets per year of the respective class. Because these fees are
         paid out of the Fund's assets on an on-going basis, over time these fees will increase the cost of your
         investment and may cost you more than other types of sales charges.

         The Distributor uses the service fees to compensate dealers for providing personal services for accounts
         that hold Class B, Class C or Class N shares. The Distributor pays the 0.25% service fees to dealers in
         advance for the first year after the shares are sold by the dealer. After the shares have been held for
         a year, the Distributor pays the service fees to dealers on a quarterly basis. The Distributor retains
         the service fees for accounts for which it renders the required personal services.

         The Distributor currently pays a sales concession of 3.75% of the purchase price of Class B shares to
         dealers from its own resources at the time of sale. Including the advance of the service fee, the total
         amount paid by the Distributor to the dealer at the time of sale of Class B shares is therefore 4.00% of
         the purchase price. The Distributor retains the Class B asset-based sales charge.  See the Statement of
         Additional Information for exceptions.

         The Distributor currently pays a sales concession of 0.75% of the purchase price of Class C shares to
         dealers from its own resources at the time of sale. Including the advance of the service fee, the total
         amount paid by the Distributor to the dealer at the time of sale of Class C shares is therefore 1.0% of
         the purchase price. The Distributor pays the asset-based sales charge as an ongoing concession to the
         dealer on Class C shares that have been outstanding for a year or more. See the Statement of Additional
         Information for exceptions.

         The Distributor currently pays a sales concession of 0.75% of the purchase price of Class N shares to
         dealers from its own resources at the time of sale. Including the advance of the service fee, the total
         amount paid by the Distributor to the dealer at the time of sale of Class N shares is therefore 1.0% of
         the purchase price. The Distributor retains the asset-based sales charge on Class N shares. See the
         Statement of Additional Information for exceptions.

Special Investor Services

ACCOUNTLINK. You can use our AccountLink feature to link your Fund account with an account at a U.S. bank or
other financial institution. It must be an Automated Clearing House (ACH) member. AccountLink lets you:
o transmit funds electronically to purchase shares by telephone (through a service representative or by
PhoneLink) or automatically under Asset Builder Plans, or
o have the Transfer Agent send redemption proceeds or transmit dividends and distributions directly to
your bank account. Please call the Transfer Agent for more information.

You may purchase shares by telephone only after your account has been established. To purchase shares in
amounts up to $250,000 through a telephone representative, call the Distributor at 1.800.225.5677. The purchase
payment will be debited from your bank account.

AccountLink privileges should be requested on your Application or your dealer's settlement instructions
if you buy your shares through a dealer. After your account is established, you can request AccountLink
privileges by sending signature-guaranteed instructions and proper documentation to the Transfer Agent.
AccountLink privileges will apply to each shareholder listed in the registration on your account as well as to
your dealer representative of record unless and until the Transfer Agent receives written instructions
terminating or changing those privileges. After you establish AccountLink for your account, any change of bank
account information must be made by signature-guaranteed instructions to the Transfer Agent signed by all
shareholders who own the account.

PHONELINK. PhoneLink is the OppenheimerFunds automated telephone system that enables shareholders to perform a
number of account transactions automatically using a touch-tone phone. PhoneLink may be used on
already-established Fund accounts after you obtain a Personal Identification Number (PIN), by calling the
PhoneLink number, 1.800.225.5677.
Purchasing Shares. You may purchase shares in amounts up to $100,000 by phone, by calling 1.800.225.5677. You
must have established AccountLink privileges to link your bank account with the Fund to pay for these
purchases.

Exchanging Shares. With the OppenheimerFunds Exchange Privilege, described below, you can exchange shares
automatically by phone from your Fund account to another OppenheimerFunds account you have already
established by calling the special PhoneLink number.
Selling Shares. You can redeem shares by telephone automatically by calling the PhoneLink number and the Fund
will send the proceeds directly to your AccountLink bank account. Please refer to "How to Sell Shares,"
below for details.

CAN YOU SUBMIT TRANSACTION REQUESTS BY FAX? You may send requests for certain types of account transactions to
the Transfer Agent by fax (telecopier). Please call 1.800.225.5677 for information about which transactions may
be handled this way. Transaction requests submitted by fax are subject to the same rules and restrictions as
written and telephone requests described in this Prospectus.
OPPENHEIMERFUNDS INTERNET WEBSITE. You can obtain information about the Fund, as well as your account balance, on
the OppenheimerFunds Internet website, at WWW.OPPENHEIMERFUNDS.COM. Additionally, shareholders listed in the
account registration (and the dealer of record) may request certain account transactions through a special
section of that website. To perform account transactions or obtain account information online, you must first
obtain a user I.D. and password on that website. If you do not want to have Internet account transaction
capability for your account, please call the Transfer Agent at 1.800.225.5677. At times, the website may be
inaccessible or its transaction features may be unavailable.

AUTOMATIC WITHDRAWAL AND EXCHANGE PLANS. The Fund has several plans that enable you to sell shares automatically
or exchange them to another OppenheimerFunds account on a regular basis. Please call the Transfer Agent or
consult the Statement of Additional Information for details.

REINVESTMENT PRIVILEGE. If you redeem some or all of your Class A or Class B shares of the Fund, you have up to
six months to reinvest all or part of the redemption proceeds in Class A shares of the Fund or other Oppenheimer
funds without paying a sales charge. This privilege applies only to Class A shares that you purchased subject to
an initial sales charge and to Class A or Class B shares on which you paid a contingent deferred sales charge
when you redeemed them. This privilege does not apply to Class C or Class N shares. You must be sure to ask the
Distributor for this privilege when you send your payment.

RETIREMENT PLANS. You may buy shares of the Fund for your retirement plan account. If you participate in a plan
sponsored by your employer, the plan trustee or administrator must buy the shares for your plan account. The
Distributor also offers a number of different retirement plans that individuals and employers can use:
Individual Retirement Accounts (IRAs). These include regular IRAs, Roth IRAs, SIMPLE IRAs and rollover IRAs.
SEP-IRAs. These are Simplified Employee Pension Plan IRAs for small business owners or self-employed individuals.
403(b)(7) Custodial Plans. These are tax-deferred plans for employees of eligible tax-exempt organizations, such

as schools, hospitals and charitable organizations.
401(k) Plans. These are special retirement plans for businesses.
Pension and Profit-Sharing Plans. These plans are designed for businesses and self-employed individuals.
Please call the Distributor for OppenheimerFunds retirement plan documents, which include applications
and important plan information.

How to Sell Shares

You can sell (redeem) some or all of your shares on any regular business day. Your shares will be sold at the
next net asset value calculated after your order is received in proper form (which means that it must comply with
the procedures described below) and is accepted by the Transfer Agent. The Fund lets you sell your shares by
writing a letter, by wire or by telephone. You can also set up Automatic Withdrawal Plans to redeem shares on a
regular basis. If you have questions about any of these procedures, and especially if you are redeeming shares in
a special situation, such as due to the death of the owner or from a retirement plan account, please call the
Transfer Agent first, at 1.800.225.5677, for assistance.

Certain Requests Require a Signature Guarantee. To protect you and the Fund from fraud, the following redemption
requests must be in writing and must include a signature guarantee (although there may be other
situations that also require a signature guarantee):
o You wish to redeem more than $100,000 and receive a check
o The redemption check is not payable to all shareholders listed on the account statement
o The redemption check is not sent to the address of record on your account statement
o Shares are being transferred to a Fund account with a different owner or name
o Shares are being redeemed by someone (such as an Executor) other than the owners.

Where Can You Have Your Signature Guaranteed? The Transfer Agent will accept a guarantee of your signature by a
number of financial institutions, including:
o a U.S. bank, trust company, credit union or savings association,
o a foreign bank that has a U.S. correspondent bank,
o a U.S. registered dealer or broker in securities, municipal securities or government securities, or
o a U.S. national securities exchange, a registered securities association or a clearing agency.
If you are signing on behalf of a corporation, partnership or other business or as a fiduciary, you must
also include your title in the signature.

Retirement Plan Accounts. There are special procedures to sell shares in an OppenheimerFunds retirement plan
account. Call the Transfer Agent for a distribution request form. Special income tax withholding
requirements apply to distributions from retirement plans. You must submit a withholding form with your
redemption request to avoid delay in getting your money and if you do not want tax withheld. If your
employer holds your retirement plan account for you in the name of the plan, you must ask the plan
trustee or administrator to request the sale of the Fund shares in your plan account.

Sending Redemption Proceeds by Wire. While the Fund normally sends your money by check, you can arrange to have
the proceeds of shares you sell sent by Federal Funds wire to a bank account you designate. It must be a
commercial bank that is a member of the Federal Reserve wire system. The minimum redemption you can have
sent by wire is $2,500. There is a $10 fee for each request. To find out how to set up this feature on
your account or to arrange a wire, call the Transfer Agent at 1.800.225.5677.

HOW DO you SELL SHARES BY MAIL? Write a letter of instruction that includes:
o Your name
o The Fund's name
o Your Fund account number (from your account statement)
o The dollar amount or number of shares to be redeemed
o Any special payment instructions
o Any share certificates for the shares you are selling
o The signatures of all registered owners exactly as the account is registered, and

o Any special documents requested by the Transfer Agent to assure proper authorization of the person
asking to sell the shares.

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

Use the following address for Send courier or express mail
Requests by mail: requests to:
OppenheimerFunds Services OppenheimerFunds Services
P.O. Box 5270 10200 E. Girard Avenue, Building D
Denver Colorado 80217 Denver, Colorado 80231

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

HOW DO you SELL SHARES BY TELEPHONE? You and your dealer representative of record may also sell your shares by
telephone. To receive the redemption price calculated on a particular regular business day, your call must be
received by the Transfer Agent by the close of

The New York Stock Exchange that day, which is normally 4:00 P.M., but may be earlier on some days. You may not
redeem shares held in an OppenheimerFunds retirement plan account or under a share certificate by telephone.

o To redeem shares through a service representative or automatically on PhoneLink, call 1.800.225.5677.
Whichever method you use, you may have a check sent to the address on the account statement, or, if you

have linked your Fund account to your bank account on AccountLink, you may have the proceeds sent to that bank
account.

Are There Limits on Amounts Redeemed by Telephone?

Telephone Redemptions Paid by Check. Up to $100,000 may be redeemed by telephone in any seven-day period. The
check must be payable to all owners of record of the shares and must be sent to the address on the
account statement. This service is not available within 30 days of changing the address on an account.

Telephone Redemptions Through AccountLink or by Wire. There are no dollar limits on telephone redemption proceeds
sent to a bank account designated when you establish AccountLink. Normally the ACH transfer to your bank
is initiated on the business day after the redemption. You do not receive dividends on the proceeds of
the shares you redeemed while they are waiting to be transferred.

If you have requested Federal Funds wire privileges for your account, the wire of the redemption
proceeds will normally be transmitted on the next bank business day after the shares are redeemed. There
is a possibility that the wire may be delayed up to seven days to enable the Fund to sell securities to
pay the redemption proceeds. No dividends are accrued or paid on the proceeds of shares that have been
redeemed and are awaiting transmittal by wire.

CAN YOU SELL SHARES THROUGH your DEALER? The Distributor has made arrangements to repurchase Fund shares from
dealers and brokers on behalf of their customers. Brokers or dealers may charge for that service. If your shares
are held in the name of your dealer, you must redeem them through your dealer.

HOW CONTINGENT DEFERRED SALES CHARGES AFFECT REDEMPTIONS. If you purchase shares subject to a Class A, Class B,
Class C or Class N contingent deferred sales charge and redeem any of those shares during the applicable holding
period for the class of shares, the contingent deferred sales charge will be deducted from the redemption
proceeds (unless you are eligible for a waiver of that sales charge based on the categories listed in Appendix C
to the Statement of Additional Information and you advise the Transfer Agent of your eligibility for the waiver
when you place your redemption request.)

A contingent deferred sales charge will be based on the lesser of the net asset value of the redeemed
shares at the time of redemption or the original net asset value. A contingent deferred sales charge is not
imposed on:
o the amount of your account value represented by an increase in net asset value over the initial purchase
price,
o shares purchased by the reinvestment of dividends or capital gains distributions, or
o shares redeemed in the special circumstances described in Appendix C to the Statement of Additional
Information. To determine whether a contingent deferred sales charge applies to a redemption, the Fund
redeems shares in the following order:
1. shares acquired by reinvestment of dividends and capital gains distributions,
2. shares held for the holding period that applies to the class, and
3. shares held the longest during the holding period.

Contingent deferred sales charges are not charged when you exchange shares of the Fund for shares of
other Oppenheimer funds. However, if you exchange them within the applicable contingent deferred sales charge
holding period, the holding period will carry over to the fund whose shares you acquire. Similarly, if you
acquire shares of this Fund by exchanging shares of another Oppenheimer fund that are still subject to a
contingent deferred sales charge holding period, that holding period will carry over to this Fund.

How to Exchange Shares

Shares of the Fund may be exchanged for shares of certain Oppenheimer funds at net asset value per share at the
time of exchange, without sales charge. Shares of the Fund can be purchased by exchange of shares of other
Oppenheimer funds on the same basis. To exchange shares, you must meet several conditions:

o Shares of the fund selected for exchange must be available for sale in your state of residence.
o The prospectuses of both funds must offer the exchange privilege.
o You must hold the shares you buy when you establish your account for at least seven days before you can
exchange them. After the account is open seven days, you can exchange shares every regular business day.
o You must meet the minimum purchase requirements for the fund whose shares you purchase by exchange.
o Before exchanging into a fund, you must obtain and read its prospectus.

Shares of a particular class of the Fund may be exchanged only for shares of the same class in the other
Oppenheimer funds. For example, you can exchange Class A shares of this Fund only for Class A shares of another
fund. In some cases, sales charges may be imposed on exchange transactions. For tax purposes, exchanges of
shares involve a sale of the shares of the fund you own and a purchase of the shares of the other fund, which may
result in a capital gain or loss. Please refer to "How to Exchange Shares" in the Statement of Additional
Information for more details.

You can find a list of Oppenheimer funds currently available for exchanges in the Statement of
Additional Information or obtain one by calling a service representative at 1.800.225.5677. That list can change
from time to time.

HOW DO you SUBMIT EXCHANGE REQUESTS? Exchanges may be requested in writing or by telephone:

Written Exchange Requests. Submit an OppenheimerFunds Exchange Request form, signed by all owners of the account.
Send it to the Transfer Agent at the address on the back cover. Exchanges of shares held under
certificates cannot be processed unless the Transfer Agent receives the certificates with the request.

Telephone Exchange Requests. Telephone exchange requests may be made either by calling a service representative
or by using PhoneLink for automated exchanges by calling
1.800.225.5677. Telephone exchanges may be made only between accounts that are registered with the same name(s)
and address. Shares held under certificates may not be exchanged by telephone.

ARE THERE LIMITATIONS ON EXCHANGES? There are certain exchange policies you should be aware of:
Shares are normally redeemed from one fund and purchased from the other fund in the exchange transaction on

the same regular business day on which the Transfer Agent receives an exchange request that conforms to
the policies described above. It must be received by the close of The New York Stock Exchange that day,
which is normally 4:00 P.M. but may be earlier on some days. However, either fund may delay the purchase
of shares of the fund you are exchanging into up to seven days if it determines it would be
disadvantaged by the same day exchange.
The interests of the Fund's long-term shareholders and its ability to manage its investments may be
adversely affected when its shares are repeatedly bought and sold in response to short-term market
fluctuations--also known as "market timing." When large dollar amounts are involved, the Fund may have
difficulty implementing long-term investment strategies, because it cannot predict how much cash it will
have to invest. Market timing also may force the Fund to sell portfolio securities at disadvantageous
times to raise the cash needed to buy a market timer's Fund shares. These factors may hurt the Fund's
performance and its shareholders. When the Manager believes frequent trading would have a disruptive
effect on the Fund's ability to manage its investments, the Manager and the Fund may reject purchase
orders and exchanges into the Fund by any person, group or account that the Manager believes to be a
market timer.
o The Fund may amend, suspend or terminate the exchange privilege at any time. The Fund will provide you
notice whenever it is required to do so by applicable law, but it may impose changes at any time for
emergency purposes.

o If the Transfer Agent cannot exchange all the shares you request because of a restriction cited above,
only the shares eligible for exchange will be exchanged.

Shareholder Account Rules and Policies

More information about the Fund's policies and procedures for buying, selling and exchanging shares is contained
in the Statement of Additional Information.

A $12 annual fee is charged on any account valued at less than $500. See the Statement of Additional Information
for circumstances when this fee will not be charged.

The offering of shares may be suspended during any period in which the determination of net asset value is
suspended, and the offering may be suspended by the Board of Trustees at any time the Board believes it
is in the Fund's best interest to do so.

Telephone transaction privileges for purchases, redemptions or exchanges may be modified, suspended or terminated
by the Fund at any time. The Fund will provide you notice whenever it is required to do so by applicable
law. If an account has more than one owner, the Fund and the Transfer Agent may rely on the instructions
of any one owner. Telephone privileges apply to each owner of the account and the dealer representative
of record for the account unless the Transfer Agent receives cancellation instructions from an owner of
the account.

The Transfer Agent will record any telephone calls to verify data concerning transactions and has adopted other
procedures to confirm that telephone instructions are genuine, by requiring callers to provide tax
identification numbers and other account data or by using PINs, and by confirming such transactions in
writing. The Transfer Agent and the Fund will not be liable for losses or expenses arising out of
telephone instructions reasonably believed to be genuine.
Redemption or transfer requests will not be honored until the Transfer Agent receives all required documents in
proper form. From time to time, the Transfer Agent in its discretion may waive certain of the
requirements for redemptions stated in this Prospectus.
Dealers that perform account transactions for their clients by participating in NETWORKING through the National
Securities Clearing Corporation are responsible for obtaining their clients' permission to perform those
transactions, and are responsible to their clients who are shareholders of the Fund if the dealer
performs any transaction erroneously or improperly.
The redemption price for shares will vary from day to day because the value of the securities in the Fund's
portfolio fluctuates. The redemption price, which is the net asset value per share, will normally differ
for each class of shares. The redemption value of your shares may be more or less than their original
cost.

Payment for redeemed shares ordinarily is made in cash. It is forwarded by check, or through AccountLink or by
Federal Funds wire (as elected by the shareholder) within seven days after the Transfer Agent receives
redemption instructions in proper form. However, under unusual circumstances determined by the
Securities and Exchange Commission, payment may be delayed or suspended. For accounts registered in the
name of a broker-dealer, payment will normally be forwarded within three business days after redemption.
The Transfer Agent may delay processing any type of redemption payment as described under "How to Sell Shares"
for recently purchased shares, but only until the purchase payment has cleared. That delay may be as
much as 10 days from the date the shares were purchased. That delay may be avoided if you purchase
shares by Federal Funds wire or certified check, or arrange with your bank to provide telephone or
written assurance to the Transfer Agent that your purchase payment has cleared.
Involuntary redemptions of small accounts may be made by the Fund if the account value has fallen below $200 for
reasons other than the fact that the market value of shares has dropped. In some cases, involuntary
redemptions may be made to repay the Distributor for losses from the cancellation of share purchase
orders.

Shares may be "redeemed in kind" under unusual circumstances (such as a lack of liquidity in the Fund's portfolio
to meet redemptions). This means that the redemption proceeds will be paid with liquid securities from
the Fund's portfolio.

"Backup withholding" of federal income tax may be applied against taxable dividends, distributions and redemption
proceeds (including exchanges) if you fail to furnish the Fund your correct, certified Social Security
or Employer Identification Number when you sign your application, or if you under-report your income to
the Internal Revenue Service.

To avoid sending duplicate copies of materials to households, the Fund will mail only one copy of each
prospectus, annual and semi-annual report and annual notice of the Fund's privacy policy to shareholders
having the same last name and address on the Fund's records. The consolidation of these mailings, called
householding, benefits the Fund through reduced mailing expense.

If you want to receive multiple copies of these materials, you may call the Transfer Agent at
1.800.225.5677. You may also notify the Transfer Agent in writing. Individual copies of prospectuses,
reports and privacy notices will be sent to you commencing within 30 days after the Transfer Agent
receives your request to stop householding.

Dividends, Capital Gains and Taxes

Dividends. The Fund intends to declare dividends separately for each class of shares from net investment income
on a quarterly basis in March, June, September and December on a date selected by the Board of Trustees.
Dividends and distributions paid to Class A shares will generally be higher than dividends for Class B, Class C
and Class N shares, which normally have higher expenses than Class A.

The Fund attempts to pay dividends on Class A shares at a constant level. There is no assurance that it
will be able to do so. The Board of Trustees may change the targeted dividend rate at any time without prior
notice to shareholders. The amount of those dividends and the dividends paid on the Fund's other classes of
shares may vary over time, depending on market conditions, the composition of the Fund's portfolio, and expenses
borne by the particular class of shares. There is no fixed dividend rate for Class B, C and N shares, and there
can be no assurance as to the payment of any dividends.

Capital Gains. The Fund may realize capital gains on the sale of portfolio securities. If it does, it may make
distributions out of any net short-term or long-term capital gains in December of each year. The Fund may make
supplemental distributions of dividends and capital gains following the end of its fiscal year. There can be no
assurance that the Fund will pay any capital gains distributions in a particular year.

WHAT CHOICES DO YOU HAVE FOR RECEIVING DISTRIBUTIONS? When you open your account, specify on your application how
you want to receive your dividends and distributions. You have four options:
Reinvest All Distributions in the Fund. You can elect to reinvest all dividends and capital gains distributions
in additional shares of the Fund.

Reinvest Dividends or Capital Gains. You can elect to reinvest some distributions (dividends, short-term capital
gains or long-term capital gains distributions) in the Fund while receiving the other types of
distributions by check or having them sent to your bank account through AccountLink.

Receive All Distributions in Cash. You can elect to receive a check for all dividends and capital gains
distributions or have them sent to your bank through AccountLink.
Reinvest Your Distributions in Another OppenheimerFunds Account. You can reinvest all distributions in the same
class of shares of another OppenheimerFunds account you have established.

TAXES. If your shares are not held in a tax-deferred retirement account, you should be aware of the following tax
implications of investing in the Fund. Distributions are subject to federal income tax and may be subject to
state or local taxes. Dividends paid from short-term capital gains and net investment income are taxable as
ordinary income. Long-term capital gains are taxable as long-term capital gains when distributed to shareholders.
It does not matter how long you have held your shares. Whether you reinvest your distributions in additional
shares or take them in cash, the tax treatment is the same. Every year the Fund will send you and the IRS a
statement showing the amount of any taxable distribution you received in the previous year. Any long-term capital
gains will be separately identified in the tax information the Fund sends you after the end of the calendar year.

Avoid "Buying a Dividend." If you buy shares on or just before the ex-dividend date, or just before the Fund
declares a capital gains distribution, you will pay the full price for the shares and then receive a
portion of the price back as a taxable dividend or capital gain.
Remember, There May be Taxes on Transactions. Because the Fund's share prices fluctuate, you may have a capital
gain or loss when you sell or exchange your shares. A capital gain or loss is the difference between the
price you paid for the shares and the price you received when you sold them. Any capital gain is subject
to capital gains tax.

Returns of Capital Can Occur. In certain cases, distributions made by the Fund may be considered a non-taxable
return of capital to shareholders. If that occurs, it will be identified in notices to shareholders.

This information is only a summary of certain federal income tax information about your investment. You
should consult with your tax advisor about the effect of an investment in the Fund on your particular tax
situation.

Financial Highlights

The Financial Highlights Table is presented to help you understand the Fund's financial performance for the past
five fiscal years. Certain information reflects financial results for a single Fund share. The total returns in
the table represent the rate that an investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been audited by Deloitte &amp; Touche LLP, the
Fund's independent auditors, whose report, along with the Fund's financial statements, is included in the
Statement of Additional Information, which is available on request.

FINANCIAL HIGHLIGHTS


CLASS A   YEAR ENDED AUGUST 31,                2002         2001         2000         1999         1998
-------------------------------------------------------------------------------------------------------

 PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------

 Net asset value, beginning of period        $12.72      $ 12.88      $ 13.63      $ 13.75      $ 14.12
-------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                          .51          .42          .49          .51          .50
 Net realized and unrealized gain (loss)      (2.66)         .41          .32         1.03          .41
                                             ----------------------------------------------------------
 Total from investment operations             (2.15)         .83          .81         1.54          .91
-------------------------------------------------------------------------------------------------------
 Dividends and/or distributions
   to shareholders:
 Dividends from net investment income          (.48)        (.48)        (.49)        (.49)        (.49)
 Distributions from net realized gain          (.33)        (.51)       (1.07)       (1.17)        (.79)
                                             ----------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                               (.81)        (.99)       (1.56)       (1.66)       (1.28)
-------------------------------------------------------------------------------------------------------
 Net asset value, end of period              $ 9.76       $12.72       $12.88       $13.63       $13.75
                                             ==========================================================
-------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE(1)         (17.75)%       6.84%        7.24%       11.03%        6.17%
-------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------
 Net assets, end of period
   (in thousands)                        $1,873,458   $2,458,272   $2,395,444   $2,926,923   $2,889,472
-------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)       $2,224,911   $2,432,151   $2,502,535   $3,156,294   $3,071,928
-------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                         4.48%        3.21%        3.78%        3.51%        3.47%
 Expenses                                      0.98%        0.91%        0.93%        0.89%        0.87%(3)
-------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                        148%          74%          37%          40%          18%


 1. Assumes an investment on the business day before the first day of the fiscal
 period, with all dividends and distributions reinvested in additional shares on
 the reinvestment date, and redemption at the net asset value calculated on the
 last business day of the fiscal period. Sales charges are not reflected in the
 total returns. Total returns are not annualized for periods of less than one
 full year.
 2. Annualized for periods of less than one full year.
 3. Expense ratio has been calculated without adjustment for the reduction to
 custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 26 | OPPENHEIMER CAPITAL INCOME FUND |


 CLASS B   YEAR ENDED AUGUST 31,               2002         2001         2000         1999         1998
-------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------

 Net asset value, beginning of period        $12.60      $ 12.76      $ 13.51      $ 13.63      $ 14.01
-------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                          .41          .32          .38          .39          .39
 Net realized and unrealized gain (loss)      (2.62)         .41          .32         1.03          .40
                                             ----------------------------------------------------------
 Total from investment operations             (2.21)         .73          .70         1.42          .79
-------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to
   shareholders:
 Dividends from net investment income          (.39)        (.38)        (.38)        (.37)        (.38)
 Distributions from net realized gain          (.33)        (.51)       (1.07)       (1.17)        (.79)
                                             ----------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                               (.72)        (.89)       (1.45)       (1.54)       (1.17)
-------------------------------------------------------------------------------------------------------
 Net asset value, end of period              $ 9.67       $12.60       $12.76       $13.51       $13.63
                                             ==========================================================

-------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE(1)         (18.31)%       6.05%        6.34%       10.22%        5.32%
-------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)  $327,368     $477,223     $472,222     $720,721     $634,775
-------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)         $410,652     $469,690     $546,390     $749,020     $574,986
-------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                         3.67%        2.44%        3.01%        2.71%        2.68%
 Expenses                                      1.76%        1.68%        1.70%        1.69%        1.67%(3)
-------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                        148%          74%          37%          40%          18%


 1. Assumes an investment on the business day before the first day of the fiscal
 period, with all dividends and distributions reinvested in additional shares on
 the reinvestment date, and redemption at the net asset value calculated on the
 last business day of the fiscal period. Sales charges are not reflected in the
 total returns. Total returns are not annualized for periods of less than one
 full year.
 2. Annualized for periods of less than one full year.
 3. Expense ratio has been calculated without adjustment for the reduction to
 custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 27 | OPPENHEIMER CAPITAL INCOME FUND | FINANCIAL HIGHLIGHTS CONTINUED


 CLASS C   YEAR ENDED AUGUST 31,               2002         2001         2000         1999         1998
-------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------

 Net asset value, beginning of period        $12.59      $ 12.76      $ 13.50      $ 13.63      $ 14.02
-------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                          .42          .32          .38          .39          .39
 Net realized and unrealized gain (loss)      (2.62)         .40          .32         1.02          .40
                                             ----------------------------------------------------------
 Total from investment operations             (2.20)         .72          .70         1.41          .79
-------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to
   shareholders:
 Dividends from net investment income          (.40)        (.38)        (.37)        (.38)        (.39)
 Distributions from net realized gain          (.33)        (.51)       (1.07)       (1.16)        (.79)
                                             ----------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                               (.73)        (.89)       (1.44)       (1.54)       (1.18)
-------------------------------------------------------------------------------------------------------
 Net asset value, end of period              $ 9.66       $12.59       $12.76       $13.50       $13.63
                                             ==========================================================

-------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE(1)         (18.30)%       6.00%        6.40%       10.15%        5.30%
-------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------
 Net assets, end of period
   (in thousands)                           $72,792      $89,547      $73,346     $119,284      $94,995
-------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)          $84,049      $80,390      $84,898     $119,594      $77,052
-------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                         3.74%        2.44%        3.01%        2.70%        2.68%
 Expenses                                      1.76%        1.68%        1.70%        1.69%        1.67%(3)
-------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                        148%          74%          37%          40%          18%


 1. Assumes an investment on the business day before the first day of the fiscal
 period, with all dividends and distributions reinvested in additional shares on
 the reinvestment date, and redemption at the net asset value calculated on the
 last business day of the fiscal period. Sales charges are not reflected in the
 total returns. Total returns are not annualized for periods of less than one
 full year.
 2. Annualized for periods of less than one full year.
 3. Expense ratio has been calculated without adjustment for the reduction to
 custodian expenses.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 28 | OPPENHEIMER CAPITAL INCOME FUND | CLASS N YEAR ENDED AUGUST 31, 2002 2001(1) ------------------------------------------------------------------- PER SHARE OPERATING DATA ------------------------------------------------------------------- Net asset value, beginning of period $12.69 $ 12.96 ------------------------------------------------------------------- Income (loss) from investment operations: Net investment income .50 .28 Net realized and unrealized loss (2.66) (.30) ---------------------- Total from investment operations (2.16) (.02) ------------------------------------------------------------------- Dividends and/or distributions to shareholders: Dividends from net investment income (.47) (.25) Distributions from net realized gain (.33) -- ---------------------- Total dividends and/or distributions to shareholders (.80) (.25) ------------------------------------------------------------------- Net asset value, end of period $ 9.73 $12.69 ====================== ------------------------------------------------------------------- TOTAL RETURN, AT NET ASSET VALUE(2) (17.89)% (0.18)% ------------------------------------------------------------------- ------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA ------------------------------------------------------------------- Net assets, end of period (in thousands) $4,071 $648 ------------------------------------------------------------------- Average net assets (in thousands) $2,839 $214 ------------------------------------------------------------------- Ratios to average net assets:(3) Net investment income 4.74% 2.94% Expenses 1.25% 1.17% ------------------------------------------------------------------- Portfolio turnover rate 148% 74% 1. For the period from March 1, 2001 (inception of offering) to August 31, 2001. 2. Assumes an investment on the business day before the first day of the fiscal period (or inception of offering), with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. 3. Annualized for periods of less than one full year.

                                           APPENDIX TO THE PROSPECTUS OF
                                          OPPENHEIMER CAPITAL INCOME FUND

         Graphic material included in the Prospectus of Oppenheimer Capital Income Fund: "Annual Total Returns
(Class A) (as of 12/31 each year)":

&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;&amp;nbsp;A
bar chart will be included in the Prospectus of Oppenheimer Capital Income Fund
(the &amp;#147;Fund&amp;#148;) depicting the annual total returns of a hypothetical
$10,000 investment in Class A shares of the Fund for each of the ten most recent
calendar years without deducting sales charges. Set forth below are the relevant
data points that will appear in the bar chart:

         --------------------------------------- -------------------------------------
                                                 Oppenheimer   Capital   Income  Fund
         Calendar Year Ended:                    Class A Shares
         --------------------------------------- -------------------------------------
         --------------------------------------- -------------------------------------
         12/31/92                                7.06%
         --------------------------------------- -------------------------------------
         --------------------------------------- -------------------------------------
         12/31/93                                14.57%
         --------------------------------------- -------------------------------------
         --------------------------------------- -------------------------------------
         12/31/94                                -2.79%
         --------------------------------------- -------------------------------------
         --------------------------------------- -------------------------------------
         12/31/95                                27.92%
         --------------------------------------- -------------------------------------
         --------------------------------------- -------------------------------------
         12/31/96                                20.06%
         --------------------------------------- -------------------------------------
         --------------------------------------- -------------------------------------
         12/31/97                                29.68%
         --------------------------------------- -------------------------------------
         --------------------------------------- -------------------------------------
         12/31/98                                10.32%
         --------------------------------------- -------------------------------------
         --------------------------------------- -------------------------------------
         12/31/99                                -6.25%
         --------------------------------------- -------------------------------------
         --------------------------------------- -------------------------------------
         12/31/00                                16.82%
         --------------------------------------- -------------------------------------
         --------------------------------------- -------------------------------------

         12/31/01                                -0.19%

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

INFORMATION
AND SERVICES


For More
Information on Oppenheimer Capital Income Fund


The following additional
information about the Fund is available without charge upon request:

STATEMENT OF ADDITIONAL
INFORMATION. This document includes additional information about the
Fund&amp;#146;s investment policies, risks, and operations. It is incorporated by
reference into this Prospectus (which means it is legally part of this
Prospectus).

ANNUAL AND SEMI-ANNUAL
REPORTS. Additional information about the Fund&amp;#146;s investments and
performance is available in the Fund&amp;#146;s Annual and Semi-Annual Reports to
shareholders. The Annual Report includes a discussion of market conditions and
investment strategies that significantly affected the Fund&amp;#146;s performance
during its last fiscal year.

How to Get
More Information

You can request the
Statement of Additional Information, the Annual and Semi-Annual Reports, the
notice explaining the Fund&amp;#146;s privacy policy and other information about the
Fund or your account:

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

By Telephone:                                          Call OppenheimerFunds Services toll-free:
                                                       1.800.CALL.OPP (225.5677)

-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
By Mail:                                               Write to:
                                                       OppenheimerFunds Services
                                                       P.O. Box 5270
                                                       Denver, Colorado 80217-5270
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------

On the Internet:                                       You can send us a request by e-mail or read or down-load
                                                       documents on the OppenheimerFunds website:
                                                       WWW.OPPENHEIMERFUNDS.COM
                                                       ------------------------

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


Information about the Fund
including the Statement of Additional Information can be reviewed and copied at
the SEC&amp;#146;s Public Reference Room in Washington, D.C. Information on the
operation of the Public Reference Room may be obtained by calling the SEC at
1.202.942.8090. Reports and other information about the Fund are available on
the EDGAR database on the SEC&amp;#146;s Internet website at www.sec.gov.
Copies may be obtained after payment of a duplicating fee by electronic request
at the SEC&amp;#146;s e-mail address: publicinfo@sec.gov or by writing to the
SEC&amp;#146;s Public Reference Section, Washington, D.C. 20549-0102.


No one has been
authorized to provide any information about the Fund or to make any
representations about the Fund other than what is contained in this Prospectus.
This Prospectus is not an offer to sell shares of the Fund, nor a solicitation
of an offer to buy shares of the Fund, to any person in any state or other
jurisdiction where it is unlawful to make such an offer.


The Fund's shares are distributed by:                 [logo] OppenheimerFunds Distributor, Inc.
The Fund's SEC File No. 811-1512
PR0300.001.1002
Printed on recycled paper

Oppenheimer Capital Income Fund
6803 South Tucson Way, Centennial, Colorado 80112
1-800-525-7048

Statement of Additional Information dated October 23, 2002

This Statement of Additional Information is not a Prospectus. This document contains additional
information about the Fund and supplements information in the Prospectus dated October 23, 2002. 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......................................................... 8
Investment Restrictions............................................................................ 23
How the Fund is Managed ................................................................................ 25
Organization and History........................................................................... 25
Trustees and Officers.............................................................................. 27
The Manager........................................................................................ 36
Brokerage Policies of the Fund.......................................................................... 38
Distribution and Service Plans.......................................................................... 40
Performance of the Fund................................................................................. 45

About Your Account
How To Buy Shares....................................................................................... 49
How To Sell Shares...................................................................................... 60
How To Exchange Shares.................................................................................. 64
Dividends, Capital Gains and Taxes...................................................................... 68
Additional Information About the Fund................................................................... 73

Financial Information About the Fund
Independent Auditors' Report............................................................................ 74
Financial Statements.................................................................................... 75

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

6
ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

The investment objectives, 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 can use to try to achieve its
objective.

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

|X| Investments in Equity Securities. In selecting equity investments for the Fund's portfolio, the
portfolio manager currently uses a value investing style. In using a value approach, the manager looks for stock
and other securities that appear to be temporarily undervalued, by various measures, such as price/earnings
ratios. This approach is subject to change and may not necessarily be used in all cases. 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:
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.

While the Fund currently focuses on securities of issuers having large capitalizations, it does not
limit its investments in equity securities to issuers having a market capitalization of a specified size or
range, and therefore can invest in securities of small-, mid- and large-capitalization issuers. At times, the
Fund can focus its equity investments in securities of one or more capitalization ranges, based upon the
Manager's 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,
and 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. Warrants are options to purchase stock at set prices. They are generally
valid for a limited period of time. Their prices do not necessarily move parallel to the prices of the underlying
securities. Rights are similar to warrants and generally have a short duration. They are distributed directly by
the issuer to its shareholders.

As a non-fundamental policy, the Fund cannot invest more than 5% of its total assets in warrants or
rights, and not more than 2% of its total assets may be invested in warrants and rights that are not listed on
The New York Stock Exchange or The American Stock Exchange. That limitation does not apply to warrants and rights
the Fund acquires attached to other securities or as part of investments in units of securities that are issued
with other securities. Rights and warrants have no voting rights, receive no dividends and have no rights with
respect to the assets of the issuer.

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

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

|_| Convertible Securities. Convertible securities are debt securities that are convertible into an
issuer's common stock. Convertible securities rank senior to common stock in a corporation's capital structure
and therefore are subject to less risk than common stock in case of the issuer's bankruptcy or liquidation.

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

While some convertible securities are a form of debt security, in many cases their conversion feature
(allowing conversion into equity securities) caused them to be regarded by the Manager more as "equity
equivalents." As a result, 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:
o 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,
o 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
o 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.

|X| Investments in Bonds and Other Debt Securities. The Fund can invest in bonds, debentures and other
debt securities to seek current income as part of its investment objective.

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 Corporation or Fitch, Inc., or that have comparable ratings by
another nationally-recognized rating organization.

In making investments in debt securities, the Manager can rely to some extent on the ratings of ratings
organizations or it can use its own research to evaluate a security's credit-worthiness. If the securities 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.

|_| Interest Rate Risk. Interest rate risk refers to the fluctuations in value of debt 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 debt securities, 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 debt securities after the Fund buys them will not affect the
interest income payable on those securities (unless the coupon rate is a floating rate pegged to an index or
other measure) . 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.

|X| U.S. Government Securities. The Fund can buy securities issued or guaranteed by the U.S. government
or its agencies and instrumentalities. Securities issued by the U.S. Treasury are backed by the full faith and
credit of the U.S. government and are subject to very little credit risk. Obligations of U.S. government agencies
or instrumentalities (including mortgage-backed securities) may or may not be guaranteed or supported by the
"full faith and credit" of the United States. Some are backed by the right of the issuer to borrow from the U.S.
Treasury; others, by discretionary authority of the U.S. government to purchase the agencies' obligations; while
others are supported only by the credit of the instrumentality. 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 and might not be able to assert a claim against the United States in the event that the agency or
instrumentality does not meet its commitment.

|_| U.S. Treasury Obligations. These include Treasury bills (having maturities of one year or less
when issued), Treasury notes (having maturities of from one to ten years), and Treasury bonds (having maturities
of more than ten years). Treasury securities are backed by the full faith and credit of the United States as to
timely payments of interest and repayments of principal. Other U.S. Treasury securities the Fund can buy 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").

|_| 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.

|_| 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
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").

|_| Special Risks of Lower-Grade Securities. The Fund can invest up to 25% of its total assets in
"lower grade" debt securities. "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 Fitch, Inc., 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 "C" or "D" or which may be in default at the time the Fund buys them. The Fund may invest no more
than 10% of its total assets in lower-grade debt securities that are not convertible

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 effect of those 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 Fitch, Inc. are investment
grade and are not regarded as junk bonds, those securities may be subject to special risks, and have some
speculative characteristics. Definitions of the debt security ratings categories of Moody's, S&P and Fitch, Inc.
are included in Appendix A to this Statement of Additional Information.

|_| Zero Coupon Securities. The Fund can buy zero-coupon and delayed interest securities, and "stripped"
securities. Stripped securities are debt securities whose interest coupons are separated from the security and
sold separately. The Fund can buy the following types of zero-coupon or stripped securities, among others: U.S.
Treasury notes or bonds that have been stripped of their interest coupons, U.S. Treasury bills issued without
interest coupons, and certificates representing interests in stripped securities.

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

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

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.

|X| Real Estate Investment Trusts (REITs). The Fund can invest in real estate investment trusts, as well
as real estate development companies and operating companies. It can also buy shares of companies engaged in
other real estate businesses. REITs are trusts that sell shares to investors and use the proceeds to invest in
real estate. A REIT may focus on a particular project, such as a shopping center or apartment complex, or may buy
many properties or properties located in a particular geographic region.

|X| 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. The
debt obligations of a foreign government and its agencies and instrumentalities may or may not be supported by
the full faith and credit of the foreign government.

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

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

|_| Risks of Foreign Investing. Investments in foreign securities may offer special opportunities
for investing but also present special additional risks and considerations not typically associated with
investments in domestic securities. Some of these additional risks are:
o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency rates or currency control
regulations (for example, currency blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in foreign countries comparable
to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, stock exchanges and brokers than in the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or loss of certificates for portfolio
securities;
o possibilities in some countries of expropriation, confiscatory taxation, political, financial or social
instability or adverse diplomatic developments; and
o unfavorable differences between the U.S. economy and foreign economies.

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

|X| Portfolio Turnover. "Portfolio turnover" describes the rate at which the Fund traded its portfolio
securities during its last fiscal year. For example, if a fund sold all of its securities during the year, its
portfolio turnover rate would have been 100%. The Fund's portfolio turnover rate will fluctuate from year to
year. Although the Fund usually does not expect to have a portfolio turnover rate of 100% or more, for the
fiscal year ended August 31, 2002, the Fund's portfolio turnover rate was over 100% due to a reduction in the
Fund's equity exposure. 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. The Financial Highlights table at the end of the Prospectus shows the Fund's portfolio
turnover rates during prior fiscal years.

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

|X| Investing in Small, Unseasoned Companies. The Fund can invest in securities of small, unseasoned
companies. These are companies that have been in operation for less than three years, including the operations of
any predecessors. Securities of these companies may be subject to volatility in their prices. They may have a
limited trading market, which may adversely affect the Fund's ability to dispose of them and can reduce the price
the Fund might be able to obtain for them. Other investors that own a security issued by a small, unseasoned
issuer for which there is limited liquidity might trade the security when the Fund is attempting to dispose of
its holdings of that security. In that case the Fund might receive a lower price for its holdings than might
otherwise be obtained.

|X| "When-Issued" and "Delayed-Delivery" Transactions. The Fund can invest in securities on a
"when-issued" basis and can purchase or sell securities on a "delayed-delivery" basis. When-issued and
delayed-delivery are terms that refer to securities whose terms and indenture have been created, but the
securities are not available for immediate delivery even though the market for them exists.

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. 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 until it receives the security at settlement.

The Fund can engage in when-issued transactions to secure what the Manager considers to be an
advantageous price and yield at the time the Fund enters 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 can 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.

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

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 Manager from time to time.

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

Repurchase agreements, considered "loans" under the Investment Company Act of 1940 (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.

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

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

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

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

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

|X| Loans of Portfolio Securities. The Fund can lend its portfolio securities to certain types of
eligible borrowers approved by the Board of Trustees. It might do so to try to provide income or to raise cash
for liquidity purposes. These loans are limited to not more than 10% 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 lend its securities in the coming year, but if it does, the value of the loaned securities is not
expected to exceed 5% of the value of the Fund's total assets.

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

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

|X| Derivatives. The Fund can invest in a variety of derivative investments for income, for capital
appreciation or for hedging purposes. Some derivative investments the Fund can use are the hedging instruments
described below in this Statement of Additional Information.

The Fund can invest in "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 can 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.

Other 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 might not be as high as the Manager expected.
|X| 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,
o buy puts on futures or on securities, or
o write covered calls on securities or futures. Covered calls can also be used to increase the Fund's
income, but the Manager does not expect to engage extensively in that practice.

The Fund might 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:
o buy futures, or
o buy calls on such futures or on securities.

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 uses futures and other instruments to maintain the desired
interest rate exposure. The particular hedging instruments the Fund can use are described below. The Fund can
employ new hedging instruments and strategies when they are developed, if those investment methods are consistent
with the Fund's investment objective and are permissible under applicable regulations governing the Fund.

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

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

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

No 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 can 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 are effected through a clearinghouse associated with the exchange on which the contracts
are traded.

|_| Commodity Futures. The Fund can invest a portion of its assets in commodity futures contracts.
They may be based upon commodities in five main commodity groups: energy, livestock, agriculture, industrial
metals and precious metals, on individual commodities within these groups, or on other commodities. For hedging
purposes, the Fund can buy and sell commodity futures contracts, options on commodity futures contracts, and
options and futures on commodity indices.

Under a commodity futures contract, the buyer agrees to take delivery of a specified amount of a
commodity at a future date at a price agreed upon when the contract is made. In the United States, commodity
contracts are traded on futures exchanges. The exchanges offer a central marketplace for transactions, a clearing
corporation to process trades, standardization of contract sizes and expiration dates, and the liquidity of a
secondary market. Futures markets also regulate the terms and conditions of delivery and the maximum permissible
price movement of a contract during a trading session. The exchanges have rules on position limits. Those rules
limit the amount of futures contracts that any one party may hold in a particular commodity at one time. Those
rules are designed to prevent any one party from controlling a significant portion of the market.

Despite the daily price limits imposed by the futures exchanges, historically the short-term price
volatility of commodity futures contracts has been greater than that for stocks and bonds. To the extent that the
Fund invests in these futures contracts, its share price may be subject to greater volatility.

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

|_| Writing Covered Call Options. The Fund can write (that is, sell) covered calls. If the Fund
sells a call option, it must be covered. That means the Fund must own the security subject to the call while the
call is outstanding, or, for certain types of calls, the call may be covered by liquid assets identifying on the
Fund's books to enable the Fund to satisfy its obligations if the call is exercised. Up to 25% of the Fund's
total assets can 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 bank, will act as the
Fund's escrow agent, through the facilities of the Options Clearing Corporation ("OCC"), as to the investments on
which the Fund has written calls traded on exchanges or as to other acceptable escrow securities. In that way, no
margin will be required for such transactions. OCC will release the securities on the expiration of the option or
when the Fund enters into a closing transaction.

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

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

The Fund 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 an equivalent dollar amount of liquid assets on the Fund's books. The Fund will identify additional
liquid assets on its books if the value of the identified assets drops below 100% of the current value of the
future. Because of this segregation requirement, in no circumstances would the Fund's receipt of an exercise
notice as to that future require the Fund to deliver a futures contract. It would simply put the Fund in a short
futures position, which is permitted by the Fund's hedging policies.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

There is a risk in using short hedging by selling futures or purchasing puts on broadly-based indices or
futures to attempt to protect against declines in the value of the Fund's portfolio securities. The risk is that
the prices of the futures or the applicable index will correlate imperfectly with the behavior of the cash prices
of the Fund's securities. For example, it is possible that while the Fund has used hedging instruments in a short
hedge, the market 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 and/or calls on such
futures, broadly-based indices or on securities. It is possible that when the Fund does so the market might
decline. If the Fund then concludes not to invest in securities because of concerns that the market may decline
further or for other reasons, the Fund will realize a loss on the hedging instruments that is not offset by a
reduction in the price of the securities purchased.

|_| Forward Contracts. Forward contracts are foreign currency exchange contracts. They are used to
buy or sell foreign currency for future delivery at a fixed price. The Fund uses them to "lock in" the U.S.
dollar price of a security denominated in a foreign currency that the Fund has bought or sold, or to protect
against possible losses from changes in the relative values of the U.S. dollar and a foreign currency. The Fund
limits its exposure in foreign currency exchange contracts in a particular foreign currency to the amount of its
assets denominated in that currency or a closely-correlated currency. The Fund can 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 can use forward contracts to protect against uncertainty in the level of future exchange rates.
The use of forward contracts does not eliminate the risk of fluctuations in the prices of the underlying
securities the Fund owns or intends to acquire, but it does fix a rate of exchange in advance. Although forward
contracts may reduce the risk of loss from a decline in the value of the hedged currency, at the same time they
limit any potential gain if the value of the hedged currency increases.
When the Fund enters into a contract for the purchase or sale of a security denominated in a foreign
currency, or when it anticipates receiving dividend payments in a foreign currency, the Fund might desire to
"lock-in" the U.S. dollar price of the security or the U.S. dollar equivalent of the dividend payments. To do so,
the Fund could enter into a forward contract for the purchase or sale of the amount of foreign currency involved
in the underlying transaction, in a fixed amount of U.S. dollars per unit of the foreign currency. This is called
a "transaction hedge." The transaction hedge will protect the Fund against a loss from an adverse change in the
currency exchange rates during the period between the date on which the security is purchased or sold or on which
the payment is declared, and the date on which the payments are made or received.

The Fund could also use forward contracts to lock in the U.S. dollar value of portfolio positions. This
is called a "position hedge." When the Fund believes that foreign currency might suffer a substantial decline
against the U.S. dollar, it could enter into a forward contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio securities denominated in that foreign currency.
When the Fund believes that the U.S. dollar may suffer a substantial decline against a foreign currency, it might
enter into a forward contract to buy that foreign currency for a fixed dollar amount. Alternatively, the Fund
might 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 can maintain a net exposure to forward
contracts in excess of the value of the Fund's portfolio securities or other assets denominated in foreign
currencies if the excess amount is "covered" by liquid securities denominated in any currency. The cover must be
at least equal at all times to the amount of that excess. As one alternative, the Fund can purchase a call option
permitting the Fund to purchase the amount of foreign currency being hedged by a forward sale contract at a price
no higher than the forward contract price. As another alternative, the Fund can purchase a put option permitting
the Fund to sell the amount of foreign currency subject to a forward purchase contract at a price as high or
higher than the forward contact price.

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

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

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

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

Although the Fund values its assets daily in terms of U.S. dollars, it does not intend to convert its
holdings of foreign currencies into U.S. dollars on a daily basis. The Fund can 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.

|_| 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 identify liquid assets on its books (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."

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

Transactions in options by the Fund are subject to limitations established by the option exchanges. The
exchanges limit the maximum number of options that may be written or held by a single investor or group of
investors acting in concert. Those limits apply regardless of whether the options were written or purchased on
the same or different exchanges or are held in one or more accounts or through one or more different exchanges or
through one or more brokers. Thus, the number of options that the Fund may write or hold may be affected by
options written or held by other entities, including other investment companies having the same advisor as the
Fund (or an advisor that is an affiliate of the Fund's advisor). 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.

|_| 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.

|X|Credit Derivatives. The Fund may enter into credit default swaps, both directly ("unfunded swaps")
and indirectly in the form of a swap embedded within a structured note ("funded swaps"), to protect against the
risk that a security will default. Unfunded and funded credit default swaps may be on a single security, or on
a basket of securities. The Fund pays a fee to enter into the swap and receives a fixed payment during the life
of the swap. The Fund may take a short position in the credit default swap (also known as "buying credit
protection"), or may take a long position in the credit default swap note (also known as "selling credit
protection").

|X| The Fund would take a short position in a credit default swap (the "unfunded swap") against a long
portfolio position to decrease exposure to specific corporate issuers. If the short credit default swap is
against a corporate issue, the Fund must own that corporate issue. However, if the short credit default swap is
against sovereign debt, the Fund may own either: (i) the reference obligation, (ii) any sovereign debt of that
foreign country, or (iii) sovereign debt of any country that the Manager determines is closely correlated as an
inexact bona fide hedge.

|X| If the Fund takes a short position in the credit default swap, if there is a credit event
(including bankruptcy, failure to timely pay interest or principal, or a restructuring), the Fund will deliver
the defaulted bonds and the swap counterparty will pay the par amount of the bonds. An associated risk is
adverse pricing when purchasing bonds to satisfy the delivery obligation. If the swap is on a basket of
securities, the notional amount of the swap is reduced by the par amount of the defaulted bond, and the fixed
payments are then made on the reduced notional amount.

Taking a long position in the credit default swap note (i.e., purchasing the "funded swap") would
increase the Fund's exposure to specific corporate issuers. The goal would be to increase liquidity in that
market sector via the swap note and its associated increase in the number of trading instruments, the number and
type of market participants, and market capitalization.

If the Fund takes a long position in the credit default swap note, if there is a credit event the Fund
will pay the par amount of the bonds and the swap counterparty will deliver the bonds. If the swap is on a
basket of securities, the notional amount of the swap is reduced by the par amount of the defaulted bond, and the
fixed payments are then made on the reduced notional amount.

The Fund will invest no more than 25 % of its total assets in "unfunded" credit default swaps.

The Fund will limit its investments in "funded" credit default swap notes to no more than 10% of its
total assets.

Other risks of credit default swaps include the cost of paying for credit protection if there are no
credit events, pricing transparency when assessing the cost of a credit default swap, counterparty risk, and the
need to fund the delivery obligation (either cash or the defaulted bonds, depending on whether the Fund is long
or short the swap, respectively).

|X| Temporary Defensive Investments. The Fund's temporary defensive investments can include debt
securities such as: (i) U.S. Treasury bills or other obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities; (ii) commercial paper rated A-3 or higher by Standard & Poor's or P-3 or higher by
Moody's; (iii) certificates of deposit or bankers' acceptances or other obligations of domestic banks with assets
of $1 billion or more; and (iv) repurchase agreements.

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

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

Investment Restrictions

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

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

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

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

o The Fund cannot invest in physical commodities or physical commodity contracts. However, the Fund
can buy and sell hedging instruments that are permitted by any of its other investment policies. The Fund can
also buy and sell options, futures and other instruments backed by physical commodities or the investment return
from which is linked to changes in the price of physical commodities.

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

o The Fund cannot borrow money in excess of 33-1/3% of the value of its total assets. The Fund may
borrow only from banks and/or affiliated investment companies. With respect to this fundamental policy, the Fund
can borrow only if it maintains a 300% ratio of assets to borrowing at all times in the manner set forth in the
Investment Company Act.

o The Fund cannot make loans except (a) through lending of securities, (b) through the purchase of
debt instruments or similar evidence of indebtedness, (c) through an interfund lending program with other
affiliated funds, and (d) through repurchase agreements.

o The Fund cannot invest in real estate or in interests in real estate. However, the Fund can
purchase securities of issuers holding real estate or interests in real estate (including securities of real
estate investment trusts).

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

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

|X| 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 with the
exception of the borrowing policy. 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 an open-end, diversified management investment company with an unlimited
number of authorized shares of beneficial interest. The Fund was organized as a corporation in 1967 but was
reorganized as a Massachusetts business trust in July 1986.

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

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

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

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

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

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

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

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

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

The Board of Trustees has an Audit Committee and a Review Committee. The members of the Audit Committee
are Edward L. Cameron (Chairman), William L. Armstrong, George C. Bowen and Robert J. Malone. The Audit
Committee held seven meetings during the fiscal year ended August 31, 2002. The Audit Committee furnishes the
Board with recommendations regarding the selection of the Fund's independent auditors. Other main functions of
the Audit Committee include, but are not limited to: (i) reviewing the scope and results of audits and the audit
fees charged; (ii) reviewing reports from the Fund's independent auditors regarding the Fund's internal
accounting procedures and controls; and (iii) establishing a separate line of communication between the Fund's
independent auditors and its independent Trustees.

The Audit Committee's functions include selecting and nominating to the full Board, Independent nominees
for election as Independent Trustees. The Audit Committee may, but need not consider the advice and
recommendation of the Manager and its affiliates in selecting nominees. The full Board elects new Trustees except
for those instances when a shareholder vote is required. To date, the Audit Committee has been able to identify
from its own resources an ample number of qualified candidates. Nonetheless, shareholders may submit names of
individuals, accompanied by complete and properly supported resumes, for the Audit Committee's consideration by
mailing such information to the Committee in care of the Fund. The Committee may consider such persons at such
time as it meets to consider possible nominees. The Committee, however, reserves sole discretion to determine
the candidates to present to the Board and/or shareholders when it meets for the purpose considering potential
nominees.

The members of the Review Committee are Jon S. Fossel (Chairman), Robert G. Avis, Sam Freedman, Beverly
Hamilton and F. William Marshall, Jr. The Review Committee held seven meetings during the fiscal year ended
August 31, 2002. Among other functions, the Review Committee reviews reports and makes recommendations to the
Board concerning the fees paid to the Fund's transfer agent and the services provided to the Fund by the transfer
agent. The Review Committee also reviews the Fund's investment performance and policies and procedures adopted
by the Fund to comply with Investment Company Act and other applicable law.

Trustees and Officers of the Fund. Except for Mr. Murphy, each of the Trustees is an independent trustee of the
Fund ("Independent Trustee"). Mr. Murphy is an "Interested Trustee," because he is affiliated with the Manager by
virtue of his positions as an officer and director of the Manager, and as a shareholder of its parent company.
Mr. Murphy was elected as a Trustee of the Fund with the understanding that in the event he ceases to be the
chief executive officer of the Manager, he will resign as a trustee of the Fund and the other Board II Funds
(defined below) for which he is a trustee or director.

The Fund's Trustees and officers and their positions held with the Fund and length of service in such
position(s) and their principal occupations and business affiliations during the past five years are listed in
the chart below. The information for the Trustees also includes the dollar range of shares of the Fund as well as
the aggregate dollar range of shares beneficially owned in any of the Oppenheimer funds overseen by the Trustees.
All of the Trustees are also trustees or directors of the following Oppenheimer funds (except for Ms. Hamilton
and Mr. Malone, who are not Trustees of Oppenheimer Senior Floating Rate Fund and Mr. Murphy is not a Trustee or
Managing General Partner of any of the Centennial trusts) (referred to as "Board II Funds"):

Oppenheimer Cash Reserves Oppenheimer Select Managers
Oppenheimer Champion Income Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Capital Income Fund Oppenheimer Strategic Income Fund
Oppenheimer High Yield Fund Oppenheimer Total Return Fund, Inc.
Oppenheimer International Bond Fund Oppenheimer Variable Account Funds
Oppenheimer Integrity Funds Panorama Series Fund, Inc.
Oppenheimer Limited-Term Government Fund Centennial America Fund, L. P.
Oppenheimer Main Street Funds, Inc. Centennial California Tax Exempt Trust
Oppenheimer Main Street Opportunity Fund Centennial Government Trust
Oppenheimer Main Street Small Cap Fund Centennial Money Market Trust
Oppenheimer Municipal Fund Centennial New York Tax Exempt Trust
Oppenheimer Real Asset Fund Centennial Tax Exempt Trust

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

Messrs. Murphy, Masterson, Molleur, Levine, Vottiero, Wixted and Zack and Mses. Bechtolt, Feld and Ives
who are officers of the Fund, respectively hold the same offices with one or more of the other Board II Funds as
with the Fund. As of September 26, 2002, the Trustees and officers of the Fund, as a group, owned of record or
beneficially less than 1% of each class of shares of the Fund. The foregoing statement does not reflect
ownership of shares held of record by an employee benefit plan for employees of the Manager, other than the
shares beneficially owned under that plan by the officers of the Fund listed above. In addition, each
Independent Trustee, and his family members, do not own securities of either the Manager or Distributor of the
Board II Funds or any person directly or indirectly controlling, controlled by or under common control with the
Manager or Distributor.

|X| Affiliated Transactions and Material Business Relationships. In 2000, Mr. Swain sold 93,000 shares of
Oppenheimer Acquisition Company ("OAC") (the Manager's parent holding company), for a cash payment of $4,278,930
and surrendered for cancellation 60,000 options to MassMutual for a cash payment of $2,569,800. In 2001, Mr.
Swain surrendered for cancellation 60,000 options to MassMutual for a cash payment of $2,700,600.

Mr. Swain has reported that he sold a residential property to Mr. Freedman on October 23, 2001 for $1.2
million. An independent appraisal of the property supported the sale price.

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

---------------------------------------------------------------------------------------------------------------------------
Independent Trustees
---------------------------------------------------------------------------------------------------------------------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
Name, Address, Age, Principal Occupation(s) During Past 5 Years / Other Dollar Range Aggregate
Dollar Range
of Shares
Beneficially
Owned in any
of Shares of the
Position(s) Held with Beneficially Oppenheimer
Fund and Length of Trusteeships/Directorships Held by Trustee / Number of Owned in the Funds Overseen
Service Portfolios in Fund Complex Currently Overseen by Trustee Fund by Trustee
-------------------------- -------------------------------------------------------------- ---------------- ----------------
-------------------------- -------------------------------------------------------------- ---------------------------------
As of December 31, 2001
-------------------------- -------------------------------------------------------------- ---------------------------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
James C. Swain, Chairman Formerly Chief Executive Officer (until August 27, 2002) of Over $100,000 Over $100,000
and Trustee, since 1970 the Funds, Vice Chairman (until January 2, 2002) of the
Age: 68 Manager and President and a director (until 1997) of
Centennial Asset Management Corporation (a wholly-owned
investment advisory subsidiary of the Manager). Oversees 41
portfolios in the OppenheimerFunds complex.
-------------------------- -------------------------------------------------------------- ---------------- ----------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
William L. Armstrong, Chairman of the following private mortgage banking
Trustee since 1999 companies: Cherry Creek Mortgage Company (since 1991),
Age: 65 Centennial State Mortgage Company (since 1994), The El Paso
Mortgage Company (since 1993), Transland Financial Services,
Inc. (since 1997); Chairman of the following private
companies: Great Frontier Insurance (insurance agency)
(since 1995) and Ambassador Media Corporation (since 1984);
a director of the following public companies: Storage
Technology Corporation (computer equipment company) (since
1991), Helmerich & Payne, Inc. (oil and gas $50,001-
drilling/production company) (since 1992), UNUMProvident $0 $100,000
(insurance company) (since 1991). Formerly Director of
International Family Entertainment (television channel)
(1992-1997) and Natec Resources, Inc. (air pollution control
equipment and services company) (1991-1995), Frontier Real
Estate, Inc. (residential real estate brokerage)
(1994-1999), and Frontier Title (title insurance agency)
(1995-June 1999); a U.S. Senator (January 1979-January
1991). Oversees 41 portfolios in the OppenheimerFunds
complex.
-------------------------- -------------------------------------------------------------- ---------------- ----------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
Robert G. Avis, Trustee Formerly Director and President of A.G. Edwards Capital,
since 1993 Inc. (General Partner of private equity funds) (until
Age: 71 February 2001); Chairman, President and Chief Executive
Officer of A.G. Edwards Capital, Inc. (until March 2000);
Vice Chairman and Director of A.G. Edwards, Inc. and Vice
Chairman of A.G. Edwards & Sons, Inc. (its brokerage company $0 Over $100,000
subsidiary) (until March 1999); Chairman of A.G. Edwards
Trust Company and A.G.E. Asset Management (investment
advisor) (until March 1999); and a Director (until March
2000) of A.G. Edwards & Sons and A.G. Edwards Trust Company.
Oversees 41 portfolios in the OppenheimerFunds complex.
-------------------------- -------------------------------------------------------------- ---------------- ----------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
George C. Bowen, Trustee Formerly (until April 1999) Senior Vice President (from
since 1998 September 1987) and Treasurer (from March 1985) of the
Age: 65 Manager; Vice President (from June 1983) and Treasurer
(since March 1985) of OppenheimerFunds Distributor, Inc. (a
subsidiary of the Manager); Senior Vice President (since
February 1992), Treasurer (since July 1991) Assistant
Secretary and a director (since December 1991) of Centennial
Asset Management Corporation; Vice President (since October
1989) and Treasurer (since April 1986) of HarbourView Asset
Management Corporation (an investment advisory subsidiary of
the Manager); President, Treasurer and a director (June
1989-January 1990) of Centennial Capital Corporation (an
investment advisory subsidiary of the Manager); Vice
President and Treasurer (since August 1978) and Secretary
(since April 1981) of Shareholder Services, Inc. (a transfer
agent subsidiary of the Manager); Vice President, Treasurer $10,001-$50,000 Over $100,000
and Secretary (since November 1989) of Shareholder Financial
Services, Inc. (a transfer agent subsidiary of the Manager);
Assistant Treasurer (since March 1998) of Oppenheimer
Acquisition Corp. (the Manager's parent corporation);
Treasurer (since November 1989) of Oppenheimer Partnership
Holdings, Inc. (a holding company subsidiary of the
Manager); Vice President and Treasurer (since July 1996) of
Oppenheimer Real Asset Management, Inc. (an investment
advisory subsidiary of the Manager); Chief Executive Officer
and director (since March 1996) of MultiSource Services,
Inc. (a broker-dealer subsidiary of the Manager); Treasurer
(since October 1997) of OppenheimerFunds International Ltd.
and Oppenheimer Millennium Funds plc (offshore fund
management subsidiaries of the Manager). Oversees 41
portfolios in the OppenheimerFunds complex.
-------------------------- -------------------------------------------------------------- ---------------- ----------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
Edward L. Cameron, A member of The Life Guard of Mount Vernon, George
Trustee since 1999 Washington's home (since June 2000). Formerly (March 2001 -
Age: 63 May 2002) Director of Genetic ID, Inc. and its subsidiaries
(a privately held biotech company); a partner with $50,001-
PricewaterhouseCoopers LLP (from 1974-1999) (an accounting $10,001-$50,000 $100,000
firm) and Chairman (from 1994-1998), Price Waterhouse LLP
Global Investment Management Industry Services Group.
Oversees 41 portfolios in the OppenheimerFunds complex.
-------------------------- -------------------------------------------------------------- ---------------- ----------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
Jon S. Fossel, Chairman and Director (since 1998) of Rocky Mountain Elk
Trustee since 1990 Foundation (a not-for-profit foundation); and a director
Age: 60 (since October 1999) of P.R. Pharmaceuticals (a privately
held company) and UNUMProvident (an insurance company)
(since June 1, 2002). Formerly Chairman and a director
(until October 1996) and President and Chief Executive
Officer (until October 1995) of the Manager, President,
Chief Executive Officer and a director of Oppenheimer
Acquisition Corp., Shareholder Services, Inc. and $0 $50,001-
Shareholder Financial Services, Inc. (until October 1995). $100,000
Formerly Chairman and a director (until October 1996) and
President and Chief Executive Officer (until October 1995)
of the Manager; President, Chief Executive Officer and a
director of Oppenheimer Acquisition Corp., Shareholder
Services, Inc. and Shareholder Financial Services Inc.
(until October 1995). Oversees 41 portfolios in the
OppenheimerFunds complex.
-------------------------- -------------------------------------------------------------- ---------------- ----------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
Sam Freedman, A trustee or director of other Oppenheimer funds. Formerly
Trustee since 1996 (until October 1994) Mr. Freedman held several positions in
Age: 61 subsidiary or affiliated companies of the Manager. Oversees Over $100,000 Over $100,000
41 portfolios in the OppenheimerFunds complex.
-------------------------- -------------------------------------------------------------- ---------------- ----------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
Beverly L. Hamilton, Trustee (since 1996) of MassMutual Institutional Funds and N/A1 N/A1
Trustee since 2002 of MML Series Investment Fund (open-end investment
Age: 56 companies); Director of MML Services (since April 1987) and
America Funds Emerging Markets Growth Fund (since October
1991) (both are investment companies), The California
Endowment (a philanthropy organization) (since April 2002),
and Community Hospital of Monterey Peninsula, (since
February 2002); a trustee (since February 2000) of Monterey
International Studies (an educational organization), and an
advisor to Unilever (Holland)'s pension fund and to Credit
Suisse First Boston's Sprout venture capital unit. Mrs.
Hamilton also is a member of the investment committees of
the Rockefeller Foundation, the University of Michigan and
Hartford Hospital. Formerly, Mrs. Hamilton held the
following position: President (February 1991-April 2000)
ARCO Investment Management Company. Oversees 40 portfolios
in the OppenheimerFunds complex.
-------------------------- -------------------------------------------------------------- ---------------- ----------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
Robert J. Malone, Director (since 2001) of Jones Knowledge, Inc. (a privately N/A1 N/A1
Trustee since 2002 held company), U.S. Exploration, Inc., (since 1997),
Age: 58 Colorado UpLIFT (a non-profit organization) (since 1986) and
a trustee of the Gallagher Family Foundation (since 2000).
Formerly, Mr. Malone held the following positions: Chairman
of U.S. Bank (a subsidiary of U.S. Bancorp and formerly
Colorado National Bank,) (July 1996-April 1, 1999) and a
director of Commercial Assets, Inc. (1993-2000). Oversees 40
portfolios in the OppenheimerFunds complex.
-------------------------- -------------------------------------------------------------- ---------------- ----------------
-------------------------- -------------------------------------------------------------- ---------------- ----------------
F. William Marshall, Trustee (since 1996) of MassMutual Institutional Funds and $0 $50,001-
Jr., Trustee since 2000 of MML Series Investment Fund (open-end investment
Age: 60 companies); Trustee and Chairman (since May 1987) of the
investment committee for the Worcester Polytech Institute;
President and Treasurer (since January 1999) of the SIS Fund
(a private not for profit charitable organization); Trustee
(since 1995) of the Springfield Library and Museum
Association; Trustee (since 1996) of the Community Music
School of Springfield; Member of the investment committee of
the Community Foundation of Western Massachusetts (since $100,000
1998). Formerly, Chairman (January 1999-July 1999) of SIS &
Family Bank, F.S.B. (formerly SIS Bank); President, Chief
Executive Officer and Director (May 1993-December 1998) of
SIS Bankcorp, Inc. and SIS Bank (formerly Springfield
Institution for Savings) and Executive Vice President
(January 1999-July 1999) of Peoples Heritage Financial
Group, Inc. Oversees 41 portfolios in the OppenheimerFunds
complex.
-------------------------- -------------------------------------------------------------- ---------------- ----------------

The address of Mr. Murphy in the chart below is 498 Seventh Avenue, New York, NY 10018. Mr. Murphy
serves for an indefinite term, until his resignation, death or removal.

---------------------------------------------------------------------------------------------------------------------------
Interested Trustee and Officer
---------------------------------------------------------------------------------------------------------------------------
--------------------------- -------------------------------------------------------------- --------------- ----------------
Name, Address, Age, Principal Occupation(s) During Past 5 Years / Other Dollar Range Aggregate
Dollar Range
of Shares
Beneficially
of Shares Owned in any
Beneficially of the
Position(s) Held with Trusteeships/Directorships Held by Trustee / Number of Owned in the Oppenheimer
Fund and Length of Service Portfolios in Fund Complex Currently Overseen by Trustee Fund Funds
--------------------------- -------------------------------------------------------------- --------------- ----------------
--------------------------- -------------------------------------------------------------- --------------------------------
As of December 31, 2001
--------------------------- -------------------------------------------------------------- --------------------------------
--------------------------- -------------------------------------------------------------- --------------- ----------------
John V. Murphy, Chairman, Chief Executive Officer and director (since June
President, Trustee and 2001) and President (since September 2000) of the Manager; $0 Over $100,000
Principal Executive President and a director or trustee of other Oppenheimer
Officer funds; President and a director (since July 2001) of
since October 2001 Oppenheimer Acquisition Corp. and of Oppenheimer Partnership
Age: 53 Holdings, Inc.; a director (since November 2001) of
OppenheimerFunds Distributor, Inc.; Chairman and a director
(since July 2001) of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc.; President and a
director (since July 2001) of OppenheimerFunds Legacy
Program (a charitable trust program established by the
Manager); a director of the following investment advisory
subsidiaries of OppenheimerFunds, Inc.: OFI Institutional
Asset Management, Inc. and Centennial Asset Management
Corporation (since November 2001), HarbourView Asset
Management Corporation and OFI Private Investments, Inc.
(since July 2001); President (since November 1, 2001) and a
director (since July 2001) of Oppenheimer Real Asset
Management, Inc.; a director (since November 2001) of
Trinity Investment Management Corp. and Tremont Advisers,
Inc. (investment advisory affiliates of the Manager);
Executive Vice President (since February 1997) of
Massachusetts Mutual Life Insurance Company (the Manager's
parent company); a director (since June 1995) of DBL
Acquisition Corporation; formerly, Chief Operating Officer
(September 2000-June 2001) of the Manager; President and
trustee (November 1999-November 2001) of MML Series
Investment Fund and MassMutual Institutional Funds (open-end
investment companies); a director (September 1999-August
2000) of C.M. Life Insurance Company; President, Chief
Executive Officer and director (September 1999-August 2000)
of MML Bay State Life Insurance Company; a director (June
1989-June 1998) of Emerald Isle Bancorp and Hibernia Savings
Bank (a wholly-owned subsidiary of Emerald Isle Bancorp).
Oversees 69 portfolios in the OppenheimerFunds complex.
--------------------------- -------------------------------------------------------------- --------------- ----------------

The address of the Officers in the chart below is as follows: Messrs. Molleur, Levine and Zack and Ms.
Feld is 498 Seventh Avenue, New York, NY 10018, Messrs. Masterson, Vottiero and Wixted and Ms. Ives is 6803 S.
Tucson Way, Centennial, CO 80112-3924. Each Officer serves for an annual term or until his or her resignation,
death or removal.

---------------------------------------------------------------------------------------------------------------------------
Officers of the Fund
---------------------------------------------------------------------------------------------------------------------------
------------------------------------------------ --------------------------------------------------------------------------
Name, Address, Age, Position(s) Held with Fund Principal Occupation(s) During Past 5 Years
and Length of Service
------------------------------------------------ --------------------------------------------------------------------------
------------------------------------------------ --------------------------------------------------------------------------
Michael S. Levine, Vice President (since June 1998) of the Manager; an officer of 4
Vice President and Portfolio Manager since portfolios in the OppenheimerFunds complex; formerly Assistant Vice
June 1999 President and Portfolio Manager of the Manager (April 1996 - June 1998);
Age: 37 prior to joining the Manager in June 1994, he was a portfolio manager
and research associate for Amas Securities, Inc. (February 1990 -
February 1994).
------------------------------------------------ --------------------------------------------------------------------------
------------------------------------------------ --------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of the Manager;
Treasurer, Principal Financial and Accounting Treasurer (since March 1999) of HarbourView Asset Management
Officer (since April 1999) Corporation, Shareholder Services, Inc., Oppenheimer Real Asset
Age: 43 Management Corporation, Shareholder Financial Services, Inc.,
Oppenheimer Partnership Holdings, Inc., OFI Private Investments, Inc.
(since March 2000), OppenheimerFunds International Ltd. and Oppenheimer
Millennium Funds plc (since May 2000) and OFI Institutional Asset
Management, Inc. (since November 2000); Treasurer and Chief Financial
Officer (since May 2000) of Oppenheimer Trust Company (a trust company
subsidiary of the Manager); Assistant Treasurer (since March 1999) of
Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy Program (since
April 2000); formerly Principal and Chief Operating Officer (March
1995-March 1999), Bankers Trust Company-Mutual Fund Services Division.
An officer of 85 portfolios in the OppenheimerFunds complex.
------------------------------------------------ --------------------------------------------------------------------------
------------------------------------------------ --------------------------------------------------------------------------
Philip Vottiero, Vice President/Fund Accounting of the Manager (since March 2002;
formerly Vice President/Corporate Accounting of the Manager (July
Assistant Treasurer (since August 27, 2002) 1999-March 2002) prior to which he was Chief Financial Officer at
Age: 39 Sovlink Corporation (April 1996-June 1999). An officer of 82 portfolios
in the OppenheimerFunds complex.
------------------------------------------------ --------------------------------------------------------------------------
------------------------------------------------ --------------------------------------------------------------------------
Connie Bechtolt, Assistant Vice President of the Manager (since September 1998); formerly
Assistant Treasurer (since October 7, 2002)
Age: 39 Manager/Fund Accounting (September 1994-September 1998) of the Manager.
An officer of 82 portfolios in the OppenheimerFunds complex.
------------------------------------------------ --------------------------------------------------------------------------
------------------------------------------------ --------------------------------------------------------------------------
Robert G. Zack, Senior Vice President (since May 1985) and General Counsel (since
Vice President & Secretary (since November 1, February 2002) of the Manager; General Counsel and a director (since
2001) November 2001) of OppenheimerFunds Distributor, Inc.; Senior Vice
Age: 54 President and General Counsel (since November 2001) of HarbourView Asset
Management Corporation; Vice President and a director (since November
2000) of Oppenheimer Partnership Holdings, Inc.; Senior Vice President,
General Counsel and a director (since November 2001) of Shareholder
Services, Inc., Shareholder Financial Services, Inc., OFI Private
Investments, Inc., Oppenheimer Trust Company and OFI Institutional Asset
Management, Inc.; General Counsel (since November 2001) of Centennial
Asset Management Corporation; a director (since November 2001) of
Oppenheimer Real Asset Management, Inc.; Assistant Secretary and a
director (since November 2001) of OppenheimerFunds International Ltd.;
Vice President (since November 2001) of OppenheimerFunds Legacy Program;
Secretary (since November 2001) of Oppenheimer Acquisition Corp.;
formerly Acting General Counsel (November 2001-February 2002) and
Associate General Counsel (May 1981-October 2001) of the Manager;
Assistant Secretary of Shareholder Services, Inc. (May 1985-November
2001), Shareholder Financial Services, Inc. (November 1989-November
2001); OppenheimerFunds International Ltd. And Oppenheimer Millennium
Funds plc (October 1997-November 2001). An officer of 85 portfolios in
the OppenheimerFunds complex.
------------------------------------------------ --------------------------------------------------------------------------
------------------------------------------------ --------------------------------------------------------------------------
Philip T. Masterson, Vice President and Assistant Counsel of the Manager (since July 1998);
Assistant Secretary formerly, an associate with Davis, Graham, & Stubbs LLP (January
(since August 27, 2002) 1997-June 1998). An officer of 82 portfolios in the OppenheimerFunds
Age: 38 complex.
------------------------------------------------ --------------------------------------------------------------------------
------------------------------------------------ --------------------------------------------------------------------------
Denis R. Molleur, Vice President and Senior Counsel of the Manager (since July 1999);
Assistant Secretary formerly a Vice President and Associate Counsel of the Manager
(since November 1, 2001) (September 1995-July 1999). An officer of 82 portfolios in the
Age: 45 OppenheimerFunds complex.
------------------------------------------------ --------------------------------------------------------------------------
------------------------------------------------ --------------------------------------------------------------------------
Katherine P. Feld, Vice President and Senior Counsel (since July 1999) of the Manager; Vice
Assistant Secretary President (since June 1990) of OppenheimerFunds Distributor, Inc.;
(since November 1, 2001) Director, Vice President and Assistant Secretary (since June 1999) of
Age: 44 Centennial Asset Management Corporation; Vice President (since 1997) of
Oppenheimer Real Asset Management, Inc.; formerly Vice President and
Associate Counsel of the Manager (June 1990-July 1999). An officer of 85
portfolios in the OppenheimerFunds complex.
------------------------------------------------ --------------------------------------------------------------------------
------------------------------------------------ --------------------------------------------------------------------------
Kathleen T. Ives, Vice President and Assistant Counsel (since June 1998) of the Manager;
Assistant Secretary Vice President (since 1999) of OppenheimerFunds Distributor, Inc.; Vice
(since November 1, 2001) President and Assistant Secretary (since 1999) of Shareholder Services,
Age: 36 Inc.; Assistant Secretary (since December 2001) of OppenheimerFunds
Legacy Program and Shareholder Financial Services, Inc.; formerly
Assistant Vice President and Assistant Counsel of the Manager (August
1997-June 1998); Assistant Counsel of the Manager (August 1994-August
1997). An officer of 85 portfolios in the OppenheimerFunds complex.
------------------------------------------------ --------------------------------------------------------------------------

|X| Remuneration of Trustees. The officers of the Fund and one Trustee of the Fund (Mr. Murphy) are
affiliated with the Manager and receive no salary or fee from the Fund. The remaining Trustees of the Fund
received the compensation shown below from the Fund with respect to the Fund's fiscal year ended August 31,
2002. Mr. Swain was affiliated with the Manager until January 2, 2002. The compensation from all of the Board
II Funds (including the Fund) represents compensation received as a director, trustee, managing general partner
or member of a committee of the Board during the calendar year 2001.

-------------------------------------------------- -------------------------------- -------------------------------
Trustee Name and Other Aggregate Compensation from Total Compensation From All
Oppenheimer Funds For Which
Individual Serves As
Trustee/Director
Fund Position(s) Fund as of For Calendar Year Ended 12/31/01
(as applicable) Fiscal Year Ended 8/31/021 (41 Funds)7
-------------------------------------------------- -------------------------------- -------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
James C. Swain $3,829 $02
Chairman of the Board of Trustees
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
William L. Armstrong $2,545 $78,865
Audit Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Robert G. Avis $2,564 $79,452
Review Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
George C. Bowen $2,450 $75,936
Audit Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Edward L. Cameron $2,446 $75,794
Audit Committee Chairman
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Jon S. Fossel $2,716 $84,177
Review Committee Chairman
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Sam Freedman $2,691 $83,402
Review Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Beverly Hamilton $ 707 None3
Review Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
C. Howard Kast4 $2,352 $87,452
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Robert M. Kirchner4 $2,137 $79,452
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Robert J. Malone $ 7075 None3
Audit Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
F. William Marshall, Jr. $2,256 $69,922
Review Committee Member
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
Ned M. Steel6 $1,452 $60,000
-------------------------------------------------- --------------------------------- ------------------------------
-------------------------------------------------- --------------------------------- ------------------------------
William A. Baker6 $ 645 $60,000
-------------------------------------------------- --------------------------------- ------------------------------
*Effective July 1, 2000, William A. Baker and Ned M. Steel resigned as Trustees of the Board II Funds and
subsequently became Trustees Emeritus. For the fiscal year ended 8/31/02, Mr. Baker received $645 and Mr. Steel
received $1,452 aggregate compensation from the Fund. For the calendar year ended December 31, 2001, Messrs.
Baker and Steel each received $60,000 total compensation from all of the Oppenheimer funds for which they served
as Trustee.
1. Aggregate compensation from the Fund includes fees and deferred compensation, if any.
2. Mr. Swain became an Independent Trustee effective January 1, 2002, prior to which he did not receive compensation
from any of the Board II Funds.
3. Ms. Hamilton and Mr. Malone were appointed as Trustees of the Board II Funds effective June 1, 2002 and
therefore did not receive compensation from any of the Board II Funds during calendar year 2001.
4. Messrs. Kast and Kirchner retired as Trustees from the Board II Funds effective July 1, 2002.
5. Aggregate compensation from the Fund includes $707 deferred under Deferred Compensation Plan described
below.
6. Effective July 1, 2000, William A. Baker and Ned M. Steel resigned as Trustees of the Board II Funds and
subsequently became Trustees Emeritus.
7. Ms. Hamilton and Mr. Malone serve as Trustee/Director for 40 Funds.

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

Deferral of Trustee's 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 Trustee or to pay any
particular level of compensation to any Trustee. Pursuant to an Order issued by the Securities and Exchange
Commission, the Fund may invest in the funds selected by the Trustee under the plan without shareholder approval
for the limited purpose of determining the value of the Trustee's deferred fee account.

|X| Major Shareholders. As of September 26, 2002, the only persons who owned of record or who were
known by the Fund to own of record 5% or more of the Fund's outstanding Class A, Class B, Class C, Class N and
Class Y shares were:

RPSS TR Mull Group 401K PSP, Attention: Diana Lontz, P.O Box 6561, Wheeling WV 26003-0627 which owned 61,983.00
Class N shares, representing 14.52% of the Class N shares then outstanding.

David Mitchell & David K JO TR, Dayton Spine and Rehab Ltd. PSP FBO David F. Mitchell MD,
524 Grants Trl, Centerville, OH 45459-3120, which owned 50,290.689 Class N shares, representing 11.78% of the
Class N shares then outstanding.

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

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

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

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

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

The Fund pays expenses not expressly assumed by the Manager under the advisory agreement or paid by the
general distributor of the shares of the Fund. The advisory agreement lists examples of expenses paid by the
Fund. The major categories relate to interest, taxes, brokerage commissions, fees to independent trustees, legal
and audit expenses, custodian bank 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 Management Fees Paid to
Ended 8/31: OppenheimerFunds, Inc.
------------------------------------- --------------------------------------------------------
------------------------------------- --------------------------------------------------------
2000 $16,447,234
------------------------------------- --------------------------------------------------------
------------------------------------- --------------------------------------------------------
2001 $15,646,888
------------------------------------- --------------------------------------------------------
------------------------------------- --------------------------------------------------------
2002 $14,372,477
------------------------------------- --------------------------------------------------------

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

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

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

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

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

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

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

In arriving at a decision, the Board did not single out any one factor or group of factors as being more
important than other factors, but considered all factors together. The Board judged the terms and conditions of
the investment advisory agreement, including the investment advisory fee, in light of all of the surrounding
circumstances.

Brokerage Policies of the Fund

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

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

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

Transactions in securities other than those for which an exchange is the primary market are generally
done with principals or market makers. In transactions on foreign exchanges, the Fund may be required to pay
fixed brokerage commissions and therefore would not have the benefit of negotiated commissions available in U.S.
markets. Brokerage commissions are paid primarily for transactions in listed securities or for certain
fixed-income agency transactions in the secondary market. Otherwise brokerage commissions are paid only if it
appears likely that a better price or execution can be obtained by doing so. In an option transaction, the Fund
ordinarily uses the same broker for the purchase or sale of the option and any transaction in the securities to
which the option relates. Other funds advised by the Manager have investment policies similar to those of the
Fund. Those other funds may purchase or sell the same securities as the Fund at the same time as the Fund, which
could affect the supply and price of the securities. If two or more funds advised by the Manager purchase the
same security on the same day from the same dealer, the transactions under those combined orders are averaged as
to price and allocated in accordance with the purchase or sale orders actually placed for each account.

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

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

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

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

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

----------------------------------- ---------------------------------------------------------------------
Fiscal Year Total Brokerage Commissions
Ended 8/31: Paid by the Fund1
----------------------------------- ---------------------------------------------------------------------
----------------------------------- ---------------------------------------------------------------------
2000 $2,894,461
----------------------------------- ---------------------------------------------------------------------
----------------------------------- ---------------------------------------------------------------------
2001 $3,134,355
----------------------------------- ---------------------------------------------------------------------
----------------------------------- ---------------------------------------------------------------------
2002 $4,226,4322
----------------------------------- ---------------------------------------------------------------------
1. Amounts do not include spreads or concessions on principal transactions on a net trade basis.
2. In the fiscal year ended 8/31/02, the amount of transactions directed to brokers for research
services was $318,864,284 and the amount of the commissions paid to broker-dealers for those services
was $521,570.

Distribution and Service Plans

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

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

---------------------------- ------------------------------ -------------------------------------
Aggregate Front-End Sales Class A Front-End Sales Charges
Fiscal Year Ended 8/31 Charges on Class A Shares Retained by Distributor
---------------------------- ------------------------------ -------------------------------------
---------------------------- ------------------------------ -------------------------------------
2000 $2,190,051 $631,452
---------------------------- ------------------------------ -------------------------------------
---------------------------- ------------------------------ -------------------------------------
2001 $2,709,328 $813,198
---------------------------- ------------------------------ -------------------------------------
---------------------------- ------------------------------ -------------------------------------
2002 $2,233,812 $667,8451
---------------------------- ------------------------------ -------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent of the distributor.

---------------------- ------------------------- ----------------------- -------------------- ----------------------
Concessions on Class A Concessions on Class Concessions on Concessions on Class
Shares Advanced by B Shares Advanced by Class C Shares N Shares Advanced by
Fiscal Year Distributor1 Distributor1 Advanced by Distributor1
Ended8/31: Distributor1
---------------------- ------------------------- ----------------------- -------------------- ----------------------
---------------------- ------------------------- ----------------------- -------------------- ----------------------
2000 $300,262 $1,621,384 $96,086 N/A
---------------------- ------------------------- ----------------------- -------------------- ----------------------
---------------------- ------------------------- ----------------------- -------------------- ----------------------
2001 $286,624 $2,326,642 $173,514 $ 6,563
---------------------- ------------------------- ----------------------- -------------------- ----------------------
---------------------- ------------------------- ----------------------- -------------------- ----------------------
2002 $203,793 $1,929,632 $154,139 $45,149
---------------------- ------------------------- ----------------------- -------------------- ----------------------
1. The Distributor advances concession payments to dealers for certain sales of Class A shares and for
sales of Class B, Class C and Class N shares from its own resources at the time of sale.

------------ -------------------------- ------------------------ ------------------------- -------------------------
Fiscal Class A Contingent Class B Contingent Class C Contingent Class N Contingent
Year Deferred Sales Deferred Sales Deferred Sales Deferred Sales
Ended Charges Retained Charges Retained Charges Retained Charges Retained
8/31: By Distributor by Distributor by Distributor By Distributor
------------ -------------------------- ------------------------ ------------------------- -------------------------
------------ -------------------------- ------------------------ ------------------------- -------------------------
2002 $9,652 $736,732 $10,425 $261
------------ -------------------------- ------------------------ ------------------------- -------------------------

For additional information about distribution of the Fund's shares, including fees and expenses, please
refer to "Distribution and Service Plans," below.

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

Each plan has been approved by a vote of the Board of Trustees, including a majority of the Independent
Trustees,2 cast in person at a meeting called for the purpose of voting on that plan.

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

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

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

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

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

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

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

|X| 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. 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 and held in the accounts of the recipients or their customers.

For the fiscal year ended August 31, 2002 payments under the Class A Plan totaled $5,199,797, all of
which was paid by the Distributor to recipients. That included $338,493 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.

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

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

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

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

When Class B, Class C or Class N shares are sold without the designation of a broker-dealer, the
Distributor is automatically designated as the broker-dealer of record. In those cases, the Distributor retains
the service fee and asset-based sales charge paid on Class B, Class C and Class N shares.

|X| The sales concession on the sale of Class N shares will not be paid on (i) purchases of Class N shares
in amounts of $500,000 or more by a retirement plan that pays for the purchase with the redemption proceeds of
Class C shares of one or more Oppenheimer funds held by the plan for more than one year (other than rollovers
from an OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to any IRA invested in the Oppenheimer
funds), (ii) purchases of Class N shares in amounts of $500,000 or more by a retirement plan that pays for the
purchase with the redemption proceeds of Class A shares of one or more Oppenheimer funds (other than rollovers
from an OppenheimerFunds-sponsored Pinnacle or Ascender 401(k) plan to any IRA invested in the Oppenheimer
funds), and (iii) purchases of Class N shares by an OppenheimerFunds - sponsored Pinnacle or Ascender 401(k) plan
made with the redemption proceeds of Class A shares of one or more Oppenheimer funds.

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

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

---------------------------------------------------------------------------------------------------------------------
Distribution Fees Paid to the Distributor for the Year Ended 8/31/02
---------------------------------------------------------------------------------------------------------------------
--------------------- ------------------ -------------------- ----------------------------- -------------------------
Class: Total Amount Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as
Payments Retained by Expenses % of Net Assets
Under Plan Distributor Under Plan of Class
--------------------- ------------------ -------------------- ----------------------------- -------------------------
--------------------- ------------------ -------------------- ----------------------------- -------------------------
Class B Plan $4,110,610 $3,224,6081 $10,921,681 3.34%
--------------------- ------------------ -------------------- ----------------------------- -------------------------
--------------------- ------------------ -------------------- ----------------------------- -------------------------
Class C Plan $ 840,947 $163,0482 $2,143,424 2.94%
--------------------- ------------------ -------------------- ----------------------------- -------------------------
--------------------- ------------------ -------------------- ----------------------------- -------------------------
Class N Plan $ 14,148 $ 14,2043 $ 117,059 2.88%
--------------------- ------------------ -------------------- ----------------------------- -------------------------
1. Includes $79,365 paid to an affiliate of the Distributor's parent company.
2. Includes $27,859 paid to an affiliate of the Distributor's parent company.
3. Includes $18 paid to an affiliate of the Distributor's parent company.

Performance of the Fund

Explanation of Performance Terminology. The Fund uses a variety of terms to illustrate its investment
performance. Those terms include "cumulative total return," "average annual total return," "average annual total
return at net asset value" and "total return at net asset value." An explanation of how total returns are
calculated is set forth below. The charts below show the Fund's performance as of the Fund's most recent fiscal
year end. You can obtain current performance information by calling the Fund's Transfer Agent at 1-800-525-7048
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:
o Total returns measure the performance of a hypothetical account in the Fund over various periods
and do not show the performance of each shareholder's account. Your account's performance will vary from the
model performance data if your dividends are received in cash, or you buy or sell shares during the period, or
you bought your shares at a different time and price than the shares used in the model.
o The Fund's performance returns do not reflect the effect of taxes on dividends and capital gains
distributions.
o An investment in the Fund is not insured by the FDIC or any other government agency.
o The principal value of the Fund's shares and total returns are not guaranteed and normally will
fluctuate on a daily basis.
o When an investor's shares are redeemed, they may be worth more or less than their original cost.

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 one-year
period. For Class N shares, the 1% contingent deferred sales charge is deducted for returns for the one-year
period, and total returns for the periods prior to March 1, 2001 (the inception date for Class N shares) is based
on the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1 fees.

|_| 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:

[OBJECT OMITTED]

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

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

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

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

------------------------------------------------------------------------------------------------------------------------------
Average Annual Total Returns for Class A Shares1 (After Sales Charge)
For the Periods Ended 8/31/02
------------------------------------------------------------------------------------------------------------------------------
-------------------------------------- ------------------------- ------------------------------ ------------------------------
1-Year 5-Year (or Life of Class) 10-Year (or Life of Class)
-------------------------------------- ------------------------- ------------------------------ ------------------------------
-------------------------------------- ------------------------- ------------------------------ ------------------------------
------------------------------------- -24.18% -1.72% 5.56%
After Taxes on Distributions
-------------------------------------- ------------------------- ------------------------------ ------------------------------
-------------------------------------- ------------------------- ------------------------------ ------------------------------
After Taxes on Distributions and -13.11% 0.09% 5.81%
Redemption of Fund Shares
-------------------------------------- ------------------------- ------------------------------ ------------------------------
1. Inception of Class A shares: 12/1/70.
-------------------------------------------------------------------------------------------------------------------

|_| 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:

-------------------------------------------------------------------------------------------------------------------
[OBJECT OMITTED]
-------------------------------------------------------------------------------------------------------------------

|_| 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
N shares. Each is based on the difference in net asset value per share at the beginning and the end of the
period for a hypothetical investment in that class of shares (without considering front-end or contingent
deferred sales charges) and takes into consideration the reinvestment of dividends and capital gains
distributions.

---------------------------------------------------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 8/31/02
---------------------------------------------------------------------------------------------------------------------------
--------------- --------------------------- -------------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Shares Returns (10 years or
Life of Class)
--------------- --------------------------- -------------------------------------------------------------------------------
--------------- --------------------------- --------------------------- ----------------------- ---------------------------
1-Year 5-Year 10-Year
(or life-of-class) (or 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 120.46%1 133.91%1 -22.48% -17.75% 0.92% 2.12% 8.23%1 8.87%1
--------------- ------------- ------------- ------------- ------------- ---------- ------------ ------------ --------------
--------------- ------------- ------------- ------------- ------------- ---------- ------------ ------------ --------------
Class B 90.03%2 90.03%2 -22.15% -18.31% 1.08% 1.35% 7.36%2 7.36%2
--------------- ------------- ------------- ------------- ------------- ---------- ------------ ------------ --------------
--------------- ------------- ------------- ------------- ------------- ---------- ------------ ------------ --------------
Class C 55.57%3 55.57%3 -19.07% -18.30% 1.34% 1.34% 6.68%3 6.68%3
--------------- ------------- ------------- ------------- ------------- ---------- ------------ ------------ --------------
--------------- ------------- ------------- ------------- ------------- ---------- ------------ ------------ --------------
Class N -18.79%4 -18.04%4 -18.66%4 -17.89%4 -12.964 -12.424 N/A N/A
--------------- ------------- ------------- ------------- ------------- ---------- ------------ ------------ --------------
1. Inception of Class A: 12/1/70
2. Inception of Class B: 8/17/93. Because Class B shares convert to Class A shares 72 months after purchase, the
"Life-of-Class" return for Class B shares uses Class A performance for the period after conversion.
3. Inception of Class C: 11/1/95
4. Inception of Class N: 3/1/01.

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

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

|_| Morningstar Rankings. From time to time the Fund may publish the star ranking of the
performance of its classes of shares by Morningstar, Inc., an independent mutual fund monitoring service.
Morningstar ranks mutual funds in their specialized market sector. The Fund is ranked in the domestic hybrid
category.

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

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

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

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

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

ABOUT your account

How to Buy Shares

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

AccountLink. When shares are purchased through AccountLink, each purchase must be at least $25. Effective
November 1, 2002, for any new Asset Builder Plan, each purchase through AccountLink must be at least $50 and
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shareholders must invest at least $500 before an Asset Builder Plan can be established on a new account. Accounts
established prior to November 1, 2001 will remain at $25 for additional purchases. Shares will be purchased on
the regular business day the Distributor is instructed to initiate the Automated Clearing House ("ACH") transfer
to buy the shares. Dividends will begin to accrue on shares purchased with the proceeds of ACH transfers on the
business day the Fund receives Federal Funds for the purchase through the ACH system before the close of The New
York Stock Exchange. The Exchange normally closes at 4:00 P.M., but may close earlier on certain days. If
Federal Funds are received on a business day after the close of the Exchange, the shares will be purchased and
dividends will begin to accrue on the next regular business day. The proceeds of ACH transfers are normally
received by the Fund three days after the transfers are initiated. If the proceeds of the ACH transfer are not
received on a timely basis, the Distributor reserves the right to cancel the purchase order. The Distributor and
the Fund are not responsible for any delays in purchasing shares resulting from delays in ACH transmissions.

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

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

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

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

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

1 - "OSM" stands for Oppenheimer Select Managers

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

Letters of Intent. Under a Letter of Intent, if you purchase Class A shares or Class A and Class B shares of the
Fund and other Oppenheimer funds during a 13-month period, you can reduce the sales charge rate that applies to
your purchases of Class A shares. The total amount of your intended purchases of both Class A and Class B shares
will determine the reduced sales charge rate for the Class A shares purchased during that period. You can
include purchases made up to 90 days before the date of the Letter. Letters of Intent do not consider Class C or
Class N shares you purchase or may have purchased.

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 concessions previously paid to the dealer of record for the account and the amount
of sales charge retained by the Distributor will be adjusted to the rates applicable to actual total purchases.
If total eligible purchases during the Letter 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 concessions allowed or paid to the dealer over the amount of concessions
that apply to the actual amount of purchases. The excess concessions returned to the Distributor will be used to
purchase additional shares for the investor's account at the net asset value per share in effect on the date of
such purchase, promptly after the Distributor's receipt thereof.

The Transfer Agent will not hold shares in escrow for purchases of shares of the Fund and other
Oppenheimer funds by OppenheimerFunds prototype 401(k) plans under a Letter 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 concessions paid to the
broker-dealer or financial institution of record for accounts held in the name of that plan.

In determining the total amount of purchases made under a Letter, shares redeemed by the investor prior
to the termination of the Letter 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.

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

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

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

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

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

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

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

Asset Builder Plans. To establish an Asset Builder Plan to buy shares directly from a bank account, you must
enclose a check (the minimum is $25) for the initial purchase with your application. Currently, the minimum
investment is $25 to establish an Asset Builder Plan, and will remain at $25 for those accounts established prior
to November 1, 2002. However, as described above under "AccountLink," for Asset Builder Plans established on or
after November 1, 2002, the minimum investment for new Asset Builder Plans will increase to $50, each purchase
must be at least $50 and shareholders must invest at least $500 before an Asset Builder Plan can be established.
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Shares purchased by Asset Builder Plan payments from bank accounts are subject to the redemption restrictions for
recent purchases described in the Prospectus. Asset Builder Plans are available only if your bank is an ACH
member. Asset Builder Plans may not be used to buy shares for OppenheimerFunds employer-sponsored qualified
retirement accounts. Asset Builder Plans also enable shareholders of Oppenheimer Cash Reserves to use their fund
account to make monthly automatic purchases of shares of up to four other Oppenheimer funds.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Account Fees. As stated in the Prospectus, effective September 27, 2002, a $12 annual fee is charged on any
account valued at less than $500. This fee will not be charged for:
o Accounts that have balances below $500 due to the automatic conversion of shares from Class B to Class A
shares;
o Accounts with an active Asset Builder Plan, payroll deduction plan or a military allotment plan;
o OppenheimerFunds-sponsored group retirement accounts that are making continuing purchases;
o Certain accounts held by broker-dealers through the National Securities Clearing Corporation; and
o Accounts that fall below the $500 threshold due solely to market fluctuations within the 12-month period
preceding the date the fee is deducted.

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

Determination of Net Asset Values Per Share. The net asset values per share of each class of shares of the Fund
are determined as of the close of business of The New York Stock Exchange ("the Exchange") on each day that the
Exchange is open. The calculation is done by dividing the value of the Fund's net assets attributable to a class
by the number of shares of that class that are outstanding. The Exchange normally closes at 4:00 P.M., Eastern
time, but may close earlier on some other days (for example, in case of weather emergencies or on days falling
before a U.S. holiday). All references to time in this Statement of Additional Information mean "Eastern time."
The Exchange's most recent annual announcement (which is subject to change) states that it will close on New
Year's Day, 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. Because the
Fund's net asset values will not be calculated on those days, the Fund's net asset values per share may be
significantly affected on such days when shareholders may not purchase or redeem shares. Additionally, trading on
European and Asian stock exchanges and over-the-counter markets normally is completed before the close of The 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, or an internal
valuation committee established by the Manager, as applicable, may establish a valuation, under procedures
established by the Board and subject to the approval, ratification and confirmation by the Board at its next
ensuing meeting.

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

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

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

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

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

How to Sell Shares

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

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

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

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

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

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

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

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

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

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

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

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

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

Special Arrangements for Repurchase of Shares from Dealers and Brokers. The Distributor is the Fund's agent to
repurchase its shares from authorized dealers or brokers on behalf of their customers. Shareholders should
contact their broker or dealer to arrange this type of redemption. The repurchase price per share will be the net
asset value next computed after the Distributor receives an order placed by the dealer or broker. However, if the
Distributor receives a repurchase order from a dealer or broker after the close of The 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, Class C and Class N shareholders should not
establish automatic withdrawal plans, because of the potential imposition of the contingent deferred sales charge
on such withdrawals (except where the Class B, Class C or Class N contingent deferred sales charge is waived as
described in Appendix 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. Effective November 1, 2002, the minimum amount
that may be exchanged to each other fund account is $50. Instructions should be provided on the OppenheimerFunds
Application or signature-guaranteed instructions. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange Shares" in the Prospectus and below in this
Statement of Additional Information.

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

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

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

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

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

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

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

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

How to Exchange Shares

As stated in the Prospectus, shares of a particular class of Oppenheimer funds having more than one class of
shares may be exchanged only for shares of the same class of other Oppenheimer funds. Shares of Oppenheimer funds
that have a single class without a class designation are deemed "Class A" shares for this purpose. You can obtain
a current list showing which funds offer which classes of shares by calling the Distributor.

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

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

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

The following funds do not offer Class Y shares:
Oppenheimer California Municipal Fund Oppenheimer Limited Term Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Cash Reserves Oppenheimer New York Municipal Fund
Oppenheimer Champion Income Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Convertible Securities Fund Oppenheimer Rochester National Municipals
Oppenheimer Disciplined Allocation Fund Oppenheimer Senior Floating Rate Fund
Oppenheimer Gold & Special Minerals Fund Oppenheimer Small Cap Value Fund
Oppenheimer International Small Company Fund Limited Term New York Municipal Fund

o Class Y shares of Oppenheimer Real Asset Fund may not be exchanged for shares of any other fund.
o Class B, Class C and Class N shares of Oppenheimer Cash Reserves are generally available only by
exchange from the same class of shares of other Oppenheimer funds or through OppenheimerFunds-sponsored
401(k) plans.
o Class M shares of Oppenheimer Convertible Securities Fund may be exchanged only for Class A shares of
other Oppenheimer funds. They may not be acquired by exchange of shares of any class of any other
Oppenheimer funds except Class A shares of Oppenheimer Money Market Fund or Oppenheimer Cash Reserves
acquired by exchange of Class M shares.
o Class X shares of Limited Term New York Municipal Fund may be exchanged only for Class B shares of other
Oppenheimer funds and no exchanges may be made to Class X shares.
o Shares of Oppenheimer Capital Preservation Fund may not be exchanged for shares of Oppenheimer Money
Market Fund, Inc., Oppenheimer Cash Reserves or Oppenheimer Limited-Term Government Fund. Only
participants in certain retirement plans may purchase shares of Oppenheimer Capital Preservation Fund,
and only those participants may exchange shares of other Oppenheimer funds for shares of Oppenheimer
Capital Preservation Fund.
o Class A shares of Oppenheimer Senior Floating Rate Fund are not available by exchange of shares of
Oppenheimer Money Market Fund or Class A shares of Oppenheimer Cash Reserves.
o Shares of Oppenheimer Select Managers Mercury Advisors S&P Index Fund and Oppenheimer Select Managers QM
Active Balanced Fund are only available to retirement plans and are available only by exchange from the
same class of shares of other Oppenheimer funds held by retirement plans.
o Class A shares of Oppenheimer funds may be exchanged at net asset value for shares of any money market
fund offered by the Distributor. Shares of any money market fund purchased without a sales charge may be
exchanged for shares of Oppenheimer funds offered with a sales charge upon payment of the sales charge.
They may also be used to purchase shares of Oppenheimer funds subject to an early withdrawal charge or
contingent deferred sales charge.
o Shares of Oppenheimer Money Market Fund, Inc. purchased with the redemption proceeds of shares of other
mutual funds (other than funds managed by the Manager or its subsidiaries) redeemed within the 30 days
prior to that purchase may subsequently be exchanged for shares of other Oppenheimer funds without being
subject to an initial sales charge or contingent deferred sales charge. To qualify for that privilege,
the investor or the investor's dealer must notify the Distributor of eligibility for this privilege at
the time the shares of Oppenheimer Money Market Fund, Inc. are purchased. If requested, they must supply
proof of entitlement to this privilege.
o Shares of the Fund acquired by reinvestment of dividends or distributions from any of the other
Oppenheimer funds or from any unit investment trust for which reinvestment arrangements have been made
with the Distributor may be exchanged at net asset value for shares of any of the Oppenheimer funds.

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

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

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

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

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

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

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

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

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

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

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

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

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

|X| Processing Exchange Requests. Shares to be exchanged are redeemed on the regular business day the
Transfer Agent receives an exchange request in proper form (the "Redemption Date"). Normally, shares of the fund
to be acquired are purchased on the Redemption Date, but such purchases may be delayed by either fund up to five
business days if it determines that it would be disadvantaged by an immediate transfer of the redemption
proceeds. The Fund reserves the right, in its discretion, to refuse any exchange request that may disadvantage
it. For example, if the receipt of multiple exchange requests from a dealer might require the disposition of
portfolio securities at a time or at a price that might be disadvantageous to the Fund, the Fund may refuse the
request.
|X|
When you exchange some or all of your shares from one fund to another, any special account feature such
as an Asset Builder Plan or Automatic Withdrawal Plan, will be switched to the new fund account unless you tell
the Transfer Agent not to do so. However, special redemption and exchange features such as Automatic Exchange
Plans and Automatic Withdrawal Plans cannot be switched to an account in Oppenheimer Senior Floating Rate Fund.

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

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

Dividends, Capital Gains and Taxes

Dividends and Distributions. Dividends will be payable on shares held of record at the time of the previous
determination of net asset value, or as otherwise described in "How to Buy Shares." Normally, purchase checks
received from investors are converted to Federal Funds on the next business day. Shares purchased through
dealers or brokers normally are paid for by the third business day following the placement of the purchase order.

Shares redeemed through the regular redemption procedure will be paid dividends through and including
the day on which the redemption request is received by the Transfer Agent in proper form. Dividends will be
declared on shares repurchased by a dealer or broker for three business days following the trade date (that is,
up to and including the day prior to settlement of the repurchase). If all shares in an account are redeemed, all
dividends accrued on shares of the same class in the account will be paid together with the redemption proceeds.

The Fund's practice of attempting to pay dividends on Class A shares at a constant level requires the
Manager to monitor the Fund's portfolio and, if necessary, to select higher-yielding securities when it is deemed
appropriate to seek income at the level needed to meet the target. Those securities must be within the Fund's
investment parameters, however. The Fund expects to pay dividends at a targeted level from its net investment
income and other distributable income without any impact on the net asset values per share.

The Fund has no fixed dividend rate for Class B, Class C and Class N shares, and the rate can change for
Class A shares. There can be no assurance as to the payment of any dividends or the realization of any capital
gains. The dividends and distributions paid by a class of shares will vary from time to time depending on market
conditions, the composition of the Fund's portfolio, and expenses borne by the Fund or borne separately by a
class. Dividends are calculated in the same manner, at the same time, and on the same day for each class of
shares. However, dividends on Class B, Class C and Class N shares are expected to be lower than dividends on
Class A and Class Y shares. That is because of the effect of the asset-based sales charge on Class B, Class C and
Class N shares. Those dividends will also differ in amount as a consequence of any difference in the net asset
values of the different classes of shares.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Fund will be required in certain cases to withhold 30% (29% for payments after December 31, 2003) of
ordinary income dividends, capital gains distributions and the proceeds of the redemption of shares, paid to any
shareholder (1) who has failed to provide a correct taxpayer identification number or to properly certify that
-------
number when required, (2) who is subject to backup withholding for failure to report the receipt of interest or
dividend income properly, or (3) who has failed to certify to the Fund that the shareholder is not subject to
backup withholding or is an "exempt recipient" (such as a corporation). All income and any tax withheld by the
Fund is remitted by the Fund to the U.S. Treasury and is identified in reports mailed to shareholders in January
of each year.

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

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

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

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

If the ordinary income dividends from the Fund are effectively connected with the conduct of a U.S.
---
trade or business, then the foreign person may claim an exemption from the U.S. tax described above provided the
Fund obtains a properly completed and signed Certificate of Foreign Status.

If the foreign person fails to provide a certification of his/her foreign status, the Fund will be
required to withhold U.S. tax at a rate of 30% (29% for payments after December 31, 2003) on ordinary income
dividends, capital gains distributions and the proceeds of the redemption of shares, paid to any foreign person.
All income and any tax withheld (in this situation) by the Fund is remitted by the Fund to the U.S. Treasury and
is identified in reports mailed to shareholders in January of each year.

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

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

Additional Information About the Fund

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

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

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

Independent Auditors. Deloitte & Touche 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 the Manager and for
certain other funds advised by the Manager and its affiliates.

INDEPENDENT AUDITORS' REPORT


--------------------------------------------------------------------------------
 TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
 OPPENHEIMER CAPITAL INCOME FUND:

 We have audited the accompanying statement of assets and liabilities of
 Oppenheimer Capital Income Fund, including the statement of investments, as of
 August 31, 2002, and the related statement of operations for the year then
 ended, the statements of changes in net assets for each of the two years in the
 period then ended, and the financial highlights for the periods indicated.
 These financial statements and financial highlights are the responsibility of
 the Fund's management. Our responsibility is to express an opinion on these
 financial statements and financial highlights based on our audits.
    We conducted our audits in accordance with auditing standards generally
 accepted in the United States of America. Those standards require that we plan
 and perform the audit to obtain reasonable assurance about whether the
 financial statements and financial highlights are free of material
 misstatement. An audit includes examining, on a test basis, evidence supporting
 the amounts and disclosures in the financial statements. Our procedures
 included confirmation of securities owned as of August 31, 2002, by
 correspondence with the custodian and brokers; where replies were not received
 from brokers, we performed other auditing procedures. An audit also includes
 assessing the accounting principles used and significant estimates made by
 management, as well as evaluating the overall financial statement presentation.
 We believe that our audits provide a reasonable basis for our opinion.
    In our opinion, the financial statements and financial highlights referred
 to above present fairly, in all material respects, the financial position of
 Oppenheimer Capital Income Fund as of August 31, 2002, the results of its
 operations for the year then ended, the changes in its net assets for each of
 the two years in the period then ended, and the financial highlights for the
 periods indicated, in conformity with accounting principles generally accepted
 in the United States of America.


 /s/ DELOITTE & TOUCHE LLP
--------------------------
 DELOITTE & TOUCHE LLP

 Denver, Colorado
 September 23, 2002




STATEMENT OF INVESTMENTS  AUGUST 31, 2002




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

COMMON STOCKS--42.3%
--------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--3.5%
--------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--3.5%
CSK Auto Corp.(1,2)                                                          1,862,614        $   23,562,067
--------------------------------------------------------------------------------------------------------------
CSK Auto Corp.(1,2,3)                                                        4,524,886            57,239,808
                                                                                              ----------------
                                                                                                  80,801,875
--------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--5.8%
--------------------------------------------------------------------------------------------------------------
TOBACCO--5.8%
Loews Corp./Carolina Group                                                     775,000            20,072,500
--------------------------------------------------------------------------------------------------------------
Philip Morris Cos., Inc.(4)                                                  2,250,000           112,500,000
                                                                                              ----------------
                                                                                                 132,572,500
--------------------------------------------------------------------------------------------------------------
ENERGY--3.3%
--------------------------------------------------------------------------------------------------------------
OIL & GAS--3.3%
ChevronTexaco Corp.                                                            200,000            15,326,000
--------------------------------------------------------------------------------------------------------------
Conoco, Inc.                                                                   250,000             6,137,500
--------------------------------------------------------------------------------------------------------------
Marathon Oil Corp.                                                           1,025,000            25,368,750
--------------------------------------------------------------------------------------------------------------
Phillips Petroleum Co.                                                         450,000            23,661,000
--------------------------------------------------------------------------------------------------------------
Unocal Corp.(4)                                                                150,000             4,960,500
                                                                                              ----------------
                                                                                                  75,453,750
--------------------------------------------------------------------------------------------------------------
FINANCIALS--19.5%
--------------------------------------------------------------------------------------------------------------
BANKS--8.1%
Charter One Financial, Inc.                                                    750,000            25,275,000
--------------------------------------------------------------------------------------------------------------
FleetBoston Financial Corp.                                                  1,750,000            42,227,500
--------------------------------------------------------------------------------------------------------------
Mellon Financial Corp.                                                         500,000            13,825,000
--------------------------------------------------------------------------------------------------------------
PNC Financial Services Group                                                   400,000            18,436,000
--------------------------------------------------------------------------------------------------------------
U.S. Bancorp                                                                 1,275,000            27,399,750
--------------------------------------------------------------------------------------------------------------
Washington Mutual, Inc.(4)                                                   1,500,000            56,715,000
                                                                                              ----------------
                                                                                                 183,878,250
--------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS--6.5%
CIT Group, Inc.(1)                                                             775,000            16,856,250
--------------------------------------------------------------------------------------------------------------
Citigroup, Inc.                                                              2,050,000            67,137,500
--------------------------------------------------------------------------------------------------------------
Household International, Inc.                                                  500,000            18,055,000
--------------------------------------------------------------------------------------------------------------
J.P. Morgan Chase & Co.                                                      1,750,000            46,200,000
                                                                                              ----------------
                                                                                                 148,248,750


                     11 | OPPENHEIMER CAPITAL INCOME FUND
                        |



STATEMENT OF INVESTMENTS  CONTINUED


                                                                                                MARKET VALUE
                                                                                SHARES            SEE NOTE 1
--------------------------------------------------------------------------------------------------------------
INSURANCE--3.9%
ACE Ltd.                                                                       222,100        $    7,065,001
--------------------------------------------------------------------------------------------------------------
Everest Re Group Ltd.                                                          815,000            44,173,000
--------------------------------------------------------------------------------------------------------------
Radian Group, Inc.                                                             475,000            20,643,500
--------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., Cl. B(1)                                    181,969             2,964,275
--------------------------------------------------------------------------------------------------------------
XL Capital Ltd., Cl. A                                                         200,000            14,722,000
                                                                                              ----------------
                                                                                                  89,567,776
--------------------------------------------------------------------------------------------------------------
REAL ESTATE--1.0%
Anthracite Capital, Inc.                                                       925,000            11,423,750
--------------------------------------------------------------------------------------------------------------
Archstone-Smith Trust                                                          380,000            10,013,000
                                                                                              ----------------
                                                                                                  21,436,750
--------------------------------------------------------------------------------------------------------------
HEALTH CARE--1.0%
--------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS--1.0%
Bristol-Myers Squibb Co.                                                       525,000            13,098,750
--------------------------------------------------------------------------------------------------------------
Pharmacia Corp.                                                                200,000             8,740,000
                                                                                              ----------------
                                                                                                  21,838,750
--------------------------------------------------------------------------------------------------------------
INDUSTRIALS--1.2%
--------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.2%
Tyco International Ltd.                                                      1,750,000            27,457,500
--------------------------------------------------------------------------------------------------------------
MATERIALS--0.6%
--------------------------------------------------------------------------------------------------------------
CHEMICALS--0.0%
Lyondell Chemical Co.                                                           34,000               487,220
--------------------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS--0.6%
Sappi Ltd., Sponsored ADR                                                    1,072,500            13,245,375
--------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--1.6%
--------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--1.1%
BellSouth Corp.                                                                225,000             5,247,000
--------------------------------------------------------------------------------------------------------------
SBC Communications, Inc.                                                       400,000             9,896,000
--------------------------------------------------------------------------------------------------------------
Verizon Communications, Inc.                                                   300,000             9,300,000
                                                                                              ----------------
                                                                                                  24,443,000


--------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--0.5%
AT&T Corp.                                                                   1,000,000            12,220,000
--------------------------------------------------------------------------------------------------------------
UTILITIES--5.8%
--------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.2%
Exelon Corp.                                                                   100,000             4,682,000
--------------------------------------------------------------------------------------------------------------
GAS UTILITIES--5.6%
El Paso Corp.                                                                  599,330            10,134,670
--------------------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners LP                                               108,500             3,532,760


                     12 | OPPENHEIMER CAPITAL INCOME FUND
                        |


                                                                                                MARKET VALUE
                                                                                SHARES            SEE NOTE 1
--------------------------------------------------------------------------------------------------------------
GAS UTILITIES Continued
Kinder Morgan Management LLC                                                 2,155,969        $   69,012,568
--------------------------------------------------------------------------------------------------------------
Kinder Morgan, Inc.                                                          1,070,000            44,073,300
                                                                                              ----------------
                                                                                                 126,753,298
--------------------------------------------------------------------------------------------------------------
MULTI-UTILITIES--0.0%
Dynegy, Inc.                                                                   175,000               364,000
                                                                                              ----------------
Total Common Stocks (Cost $774,220,217)                                                          963,450,794

--------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS--10.3%
--------------------------------------------------------------------------------------------------------------
ACE Ltd., 8.25% Cv. Preferred Redeemable Increased Dividend
Equity Securities, Non-Vtg.                                                    325,000            21,693,750
--------------------------------------------------------------------------------------------------------------
Broadwing Communications, Inc., 12.50% Jr. Exchangeable Cum.,
Series B, Non-Vtg.(3)                                                            3,500               350,000
--------------------------------------------------------------------------------------------------------------
California Federal Preferred Capital Corp., 9.125% Non-Cum.
Exchangeable, Series A, Non-Vtg.                                               100,000             2,655,000
--------------------------------------------------------------------------------------------------------------
Duke Energy Corp., 8% Cv. Equity Units, Series B (each equity unit
consists of units referred to as corporate units with a stated value
of $25 per corporate unit; each corporate unit consists of a purchase
contract to purchase Duke Energy Corp. common stock and $25 principal
amount of Duke Capital Corp., 4.32% sr. nts., 2006), Non-Vtg.(5)               108,100             2,248,480
--------------------------------------------------------------------------------------------------------------
El Paso Corp., 9% Cv. Equity Security Units (each unit has a stated
value of $50 and consists of a purchase contract to purchase El
Paso Corp. common stock and $50 principal amount of El Paso
Corp., 6.14% sr. nts., 8/16/07)(5)                                             375,000            16,537,500
--------------------------------------------------------------------------------------------------------------
Emmis Communications Corp., 6.25% Cum. Cv., Series A, Non-Vtg.                 400,000            11,700,000
--------------------------------------------------------------------------------------------------------------
Equity Securities Trust I, 6.50% Cv., Series CVC                               875,000            12,118,750
--------------------------------------------------------------------------------------------------------------
Ford Motor Co. Capital Trust II, 6.50% Cum. Cv. Trust Preferred
Securities, Non-Vtg.                                                           225,000            10,338,750
--------------------------------------------------------------------------------------------------------------
Lucent Technologies, Inc., 8% Redeemable Cv., Non-Vtg.                          30,000            13,777,500
--------------------------------------------------------------------------------------------------------------
NRG Energy, Inc., Equity Units (each unit consists of units referred
to as corporate units which consist of $25 principal amount of
NRG Energy, Inc., 6.50% sr. debs., 5/16/01 and a purchase contract
to purchase NRG Energy, Inc. common stock), Non-Vtg.(5)                        456,100             1,377,422
--------------------------------------------------------------------------------------------------------------
National Australia Bank Ltd., ExCaps (each ExCap consists of $25
principal amount of 7.875% Perpetual Capital Security and a
purchase contract entitling the holder to exchange ExCaps for
ordinary shares of the Bank)(5)                                                500,000            16,825,000
--------------------------------------------------------------------------------------------------------------
Prudential Financial, Inc., 6.75% Cv. Equity Security Units (each
unit consists of a contract to purchase Prudential Financial, Inc.
common stock and a redeemable capital security of Prudential
Financial Capital Trust I)(5)                                                  242,500            12,677,900
--------------------------------------------------------------------------------------------------------------
Qwest Trends Trust, 5.75% Cv., Non-Vtg.(6)                                     400,000             3,926,400
--------------------------------------------------------------------------------------------------------------
Reliant Energy, Inc., 2% Cv. Zero-Premium Exchangeable Sub. Nts.
(exchangeable for cash based on value of Time Warner, Inc. common stock)     1,175,000            22,301,500


                     13 | OPPENHEIMER CAPITAL INCOME FUND
                        |



STATEMENT OF INVESTMENTS  CONTINUED


                                                                                                MARKET VALUE
                                                                                SHARES            SEE NOTE 1
--------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS Continued
--------------------------------------------------------------------------------------------------------------
Sempra Energy, 8.50% Cv. Equity Units (each equity unit consists
of income equity units, each with a stated value of $25 and
consists of a purchase contract to purchase Sempra Energy
common stock and $25 principal amount of Sempra Energy,
5.60% sr. nts., 5/17/07)(5)                                                    675,000        $   16,341,750
--------------------------------------------------------------------------------------------------------------
Six Flags, Inc., 7.25% Cum. Cv  Preferred Income Equity Redeemable Stock       700,000            10,164,000
--------------------------------------------------------------------------------------------------------------
Sovereign Capital Trust II, 7.50% Cv. Preferred Income Equity
Redeemable Stock Units (each unit consists of one preferred plus
one warrant to purchase 5.3355 shares of Sovereign Bancorp
common stock)(5)                                                               225,000            18,900,000
--------------------------------------------------------------------------------------------------------------
Toys R Us, Inc., 6.25% Cv. Equity Security Units (each equity security
unit has a stated amount of $50 and consists of a contract to purchase
Toys R Us, Inc. common stock and $50 principal amount of Toys R Us, Inc.,
6.25% sr. nts., 8/16/07)(5)                                                     40,000             1,674,400
--------------------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 4.50% Cv. Jr. Unsec. Sub. Nts.              512,500            11,403,125
--------------------------------------------------------------------------------------------------------------
Union Pacific Capital Trust, 6 25% Cum. Cv. Term Income Deferrable
Equity Securities, Non-Vtg.                                                    140,000             7,227,500
--------------------------------------------------------------------------------------------------------------
United Rental Trust I, 6.50% Cv  Quarterly Income Preferred Securities,
Non-Vtg.                                                                       375,000            10,218,750
--------------------------------------------------------------------------------------------------------------
Valero Energy Corp., 7.75% Cv  Premium Equity Participating Security           250,000             6,507,500
--------------------------------------------------------------------------------------------------------------
Williams Cos., Inc. (The), 9% Cv. Flexible Equity-Linked Security PACS
Units [each unit is referred to as Income PACS, each has a stated
amount of $25 and consists of a purchase contract to purchase
Williams Cos., Inc. (The) common stock and $25 principal amount
of Williams Cos., Inc., (The), 6.50% sr. nts., 2/16/07], Non-Vtg.(5)           500,000             3,915,000
                                                                                              ----------------
Total Preferred Stocks (Cost $311,341,613)                                                       234,879,977

                                                                             PRINCIPAL
                                                                                AMOUNT
--------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED OBLIGATIONS--8 1%
--------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., Gtd. Mtg. Pass-Through
Participation Certificates, 9%, 8/1/22-5/1/25                             $    846,261               937,249
--------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn.:
6%, 9/25/32(7)                                                             126,000,000           128,441,250
6.50%, 9/1/32(7)                                                            30,000,000            30,975,000
7%, 9/25/32(7)                                                              15,000,000            15,623,430
--------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, Inc., Commercial Mtg. Pass-Through
Certificates, Series 1996-WF1, Cl. A2, 7.319%, 11/15/28(6,8)                 4,031,143             4,124,048
--------------------------------------------------------------------------------------------------------------
Washington Mutual Mortgage Securities Corp., Collateralized Mtg.
Pass-Through Certificates, Series 2002-AR10, Cl. A1, 2.359%, 10/25/32(3,8)   4,070,000             4,072,544
                                                                                                --------------
Total Mortgage-Backed Obligations (Cost $183,027,411)                                            184,173,521

--------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--0.9%
--------------------------------------------------------------------------------------------------------------
Daimler Chrysler Auto Trust, Automobile Loan Pass-Through
Certificates, Series 2002-B, Cl  A2, 2.20%, 4/6/05                           2,810,000             2,810,000
--------------------------------------------------------------------------------------------------------------
Ford Credit Auto Owner Trust, Automobile Loan Certificates,
Series 2002-D, Cl. A2A, 2.13%, 3/15/05(3)                                    5,140,000             5,139,560


                     14 | OPPENHEIMER CAPITAL INCOME FUND
                        |


                                                                             PRINCIPAL          MARKET VALUE
                                                                                AMOUNT            SEE NOTE 1
--------------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES Continued
--------------------------------------------------------------------------------------------------------------
Harley-Davidson Motorcycle Trust, Motorcycle Receivable Nts.,
Series 2002-2, Cl. A1, 1.91%, 4/15/07(3)                                  $  3,080,000        $    3,072,300
--------------------------------------------------------------------------------------------------------------
Honda Auto Receivables Owner Trust, Automobile Mtg. Obligations,
Series 2002-3, Cl. A2, 2.26%, 12/18/04                                       3,560,000             3,570,819
--------------------------------------------------------------------------------------------------------------
Household Automotive Trust, Automobile Loan Certificates,
Series 2002-2, Cl. A2, 2.15%, 12/19/05(3)                                    2,570,000             2,566,659
--------------------------------------------------------------------------------------------------------------
Nissan Auto Receivables Owner Trust, Auto Receivable Nts.,
Series 2002-C, Cl. A2, 1.94%, 9/15/04                                        3,730,000             3,729,869
                                                                                              ----------------
Total Asset-Backed Securities (Cost $20,888,706)                                                  20,889,207

--------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--7 4%
--------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. Unsec. Nts., 6.25%, 7/15/32                 4,000,000             4,390,240
--------------------------------------------------------------------------------------------------------------
Federal National Mortgage Assn  Unsec. Nts., 6.375%, 6/15/09                 9,500,000            10,731,418
--------------------------------------------------------------------------------------------------------------
U.S. Treasury Bonds:
4.375%, 8/15/12                                                             22,060,000            22,486,552
5.375%, 2/15/31                                                             32,635,000            34,816,193
--------------------------------------------------------------------------------------------------------------
U.S. Treasury Nts.:
3.25%, 8/15/07                                                              18,085,000            18,124,570
5%, 2/15/11                                                                 30,000,000            32,146,890
6.50%, 2/15/10                                                              39,600,000            46,297,984
                                                                                              ----------------
Total U.S. Government Obligations (Cost $161,841,334)                                            168,993,847

--------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT OBLIGATIONS--0.0%
--------------------------------------------------------------------------------------------------------------
United Mexican States Nts., 7.50%, 1/14/12 (Cost $950,438)                     940,000               964,675

--------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES--8.9%
--------------------------------------------------------------------------------------------------------------
AT&T Corp., 8% Sr. Nts., 11/15/31                                            3,810,000             3,382,327
--------------------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 7 50% Sr. Unsec. Nts., 5/1/07                  6,000,000             5,285,970
--------------------------------------------------------------------------------------------------------------
AXA Group, 8.60% Unsec. Sub. Nts., 12/15/30                                  1,650,000             1,828,603
--------------------------------------------------------------------------------------------------------------
Albertson's, Inc., 7.45% Unsec  Debs., 8/1/29                                1,845,000             2,027,365
--------------------------------------------------------------------------------------------------------------
Allied Waste North America, Inc.
7.875% Sr. Unsec. Nts., Series B, 1/1/09                                     4,000,000             3,920,000
8.50% Sr. Sub. Nts., 12/1/08                                                 2,500,000             2,500,000
--------------------------------------------------------------------------------------------------------------
American International Group, Inc./SunAmerica Global Financing VI,
6.30% Sr. Sec. Nts., 5/10/11(6)                                              1,365,000             1,469,799
--------------------------------------------------------------------------------------------------------------
Amtran, Inc., 9.625% Nts., 12/15/05                                          3,000,000             1,425,000
--------------------------------------------------------------------------------------------------------------
Anthem, Inc., 6.80% Bonds, 8/1/12                                            1,430,000             1,482,848
--------------------------------------------------------------------------------------------------------------
Auburn Hills Trust, 12% Gtd. Exchangeable Certificates, 5/1/20(8)            5,000,000             7,568,545
--------------------------------------------------------------------------------------------------------------
Bank Plus Corp., 12% Sr. Nts., 7/18/07(3)                                    2,500,000             2,687,500
--------------------------------------------------------------------------------------------------------------
Beazer Homes USA, Inc., 8.375% Sr. Nts., 4/15/12(6)                            800,000               808,000
--------------------------------------------------------------------------------------------------------------
BellSouth Corp., 5% Nts., 10/15/06                                           1,885,000             1,905,961
--------------------------------------------------------------------------------------------------------------
Boeing Capital Corp., 5.65% Sr  Unsec. Nts., 5/15/06                         1,750,000             1,801,100
--------------------------------------------------------------------------------------------------------------
Boyd Gaming Corp., 8.75% Sr. Sub. Nts., 4/15/12                                300,000               312,000
--------------------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co., 5.75% Nts., 10/1/11                                1,780,000             1,842,855


                     15 | OPPENHEIMER CAPITAL INCOME FUND
                        |


STATEMENT OF INVESTMENTS  CONTINUED

                                                                             PRINCIPAL          MARKET VALUE
                                                                                AMOUNT            SEE NOTE 1
--------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
--------------------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp., 5.90% Sr. Nts., 7/1/12                $  1,355,000        $    1,419,118
--------------------------------------------------------------------------------------------------------------
CSC Holdings, Inc., 7.625% Sr  Unsec. Debs., 7/15/18                         3,000,000             2,280,000
--------------------------------------------------------------------------------------------------------------
CSK Auto, Inc., 12% Sr. Unsec  Nts., 6/15/06(2)                             10,000,000            10,612,500
--------------------------------------------------------------------------------------------------------------
Cardinal Health, Inc., 4.45% Nts., 6/30/05                                   1,360,000             1,405,805
--------------------------------------------------------------------------------------------------------------
Carolina Power & Light Co., 6.50% Nts., 7/15/12                                270,000               288,134
--------------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 8.125% Sr. Unsec. Nts., 4/1/11                      5,000,000             4,925,000
--------------------------------------------------------------------------------------------------------------
Citigroup, Inc., 7.25% Sub. Nts.  10/1/10                                    2,760,000             3,096,916
--------------------------------------------------------------------------------------------------------------
Coast Hotels & Casinos, Inc., 9 50% Sr. Unsec. Sub. Nts., 4/1/09               300,000               312,750
--------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston (USA), Inc., 5.75% Nts., 4/15/07                  1,750,000             1,839,901
--------------------------------------------------------------------------------------------------------------
DaimlerChrysler NA Holdings Corp., 8.50% Nts., 1/18/31                          15,000                17,537
--------------------------------------------------------------------------------------------------------------
Delphi Corp., 6.55% Nts., 6/15/06                                            1,125,000             1,187,205
--------------------------------------------------------------------------------------------------------------
Deutsche Telekom International BV, 8.25% Unsec. Unsub. Nts., 6/15/05(8)      1,800,000             1,905,345
--------------------------------------------------------------------------------------------------------------
Dole Food Co., Inc., 7.25% Sr  Nts., 5/1/09                                    500,000               515,973
--------------------------------------------------------------------------------------------------------------
EOP Operating LP, 7.34% Unsec  Nts., 11/15/07                                  110,000               122,651
--------------------------------------------------------------------------------------------------------------
EchoStar DBS Corp., 9.375% Sr  Unsec. Nts., 2/1/09                           7,500,000             7,500,000
--------------------------------------------------------------------------------------------------------------
Emmis Communications Corp., 8.125% Sr. Unsec. Sub. Nts., Series B, 3/15/09   9,000,000             9,000,000
--------------------------------------------------------------------------------------------------------------
Entravision Communications Corp.  8.125% Sr. Sub. Nts., 3/15/09                400,000               411,000
--------------------------------------------------------------------------------------------------------------
Fairchild Corp., 10.75% Sr. Unsec. Sub. Nts., 4/15/09                        1,500,000             1,402,500
--------------------------------------------------------------------------------------------------------------
Fairchild Semiconductor Corp., 10.375% Sr. Unsec. Nts., 10/1/07              2,500,000             2,625,000
--------------------------------------------------------------------------------------------------------------
Federated Department Stores, Inc., 6.30% Sr. Nts., 4/1/09                    1,850,000             1,938,794
--------------------------------------------------------------------------------------------------------------
Ferrellgas Partners LP, 9.375% Sr. Sec. Nts., Series B, 6/15/06(3)           5,000,000             5,175,000
--------------------------------------------------------------------------------------------------------------
Fleming Cos., Inc., 9.25% Sr. Nts., 6/15/10                                  5,000,000             4,850,000
--------------------------------------------------------------------------------------------------------------
Ford Motor Co., 7.45% Bonds, 7/16/31                                         5,370,000             4,686,318
--------------------------------------------------------------------------------------------------------------
France Telecom SA, 7.70% Sr. Unsec. Nts., 3/1/06(8)                            760,000               789,230
--------------------------------------------------------------------------------------------------------------
General Electric Capital Corp.:
6% Nts., 6/15/12                                                               550,000               579,680
6.75% Nts., Series A, 3/15/32                                                1,100,000             1,176,004
--------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp.  6.875% Unsec. Unsub. Nts., 8/28/12(3)       3,480,000             3,440,484
--------------------------------------------------------------------------------------------------------------
HMH Properties, Inc., 8.45% Sr  Nts., Series C, 12/1/08                     10,000,000             9,737,500
--------------------------------------------------------------------------------------------------------------
Hollinger International Publishing, Inc., 9.25% Sr. Unsec. Sub. Nts.,
  2/1/06                                                                     4,200,000             4,284,000
--------------------------------------------------------------------------------------------------------------
Huntsman International LLC, 9.875% Sr. Nts., 3/1/09(6)                         400,000               412,000
--------------------------------------------------------------------------------------------------------------
Imax Corp., 7.875% Sr. Nts., 12/1/05                                         5,000,000             3,725,000
--------------------------------------------------------------------------------------------------------------
Intrawest Corp., 9.75% Sr. Nts. 8/15/08                                      2,000,000             2,050,000
--------------------------------------------------------------------------------------------------------------
Isle of Capri Casinos, Inc., 9% Sr. Sub. Nts., 3/15/12                       1,000,000             1,017,500
--------------------------------------------------------------------------------------------------------------
J.P. Morgan Chase & Co., 6.625% Sub. Nts., 3/15/12                           1,000,000             1,058,874
--------------------------------------------------------------------------------------------------------------
John Hancock Global Funding II, 5% Nts., 7/27/07(6)                          2,770,000             2,855,319
--------------------------------------------------------------------------------------------------------------
K. Hovnanian Enterprises, Inc., 8.875% Sr. Sub. Nts., 4/1/12(6)              1,600,000             1,448,000
--------------------------------------------------------------------------------------------------------------
Kindercare Learning Centers, Inc., 9.50% Sr. Sub. Nts., 2/15/09              6,000,000             5,730,000
--------------------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 6.50% Bonds, 11/1/31                                      1,350,000             1,451,086
--------------------------------------------------------------------------------------------------------------
Kroger Co. (The), 6.75% Nts., 4/15/12                                        1,710,000             1,847,216
--------------------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 6.625% Nts., 1/18/12                           675,000               723,073

                     16 | OPPENHEIMER CAPITAL INCOME FUND
                        |




                                                                             PRINCIPAL          MARKET VALUE
                                                                                AMOUNT            SEE NOTE 1
--------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE CORPORATE BONDS AND NOTES Continued
--------------------------------------------------------------------------------------------------------------
Lockheed Martin Corp., 8.20% Nts., 12/1/09                                $  1,060,000        $    1,262,575
--------------------------------------------------------------------------------------------------------------
MBNA America Bank NA, 6.625% Sub. Nts., 6/15/12                              1,520,000             1,459,743
--------------------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc., 5.90% Nts., 7/1/12                        825,000               838,289
--------------------------------------------------------------------------------------------------------------
NiSource Finance Corp., 7.875% Sr. Unsec. Nts., 11/15/10                     1,230,000             1,209,436
--------------------------------------------------------------------------------------------------------------
Nortek, Inc., 9.125% Sr. Unsec  Nts., Series B, 9/1/07                       7,500,000             7,631,250
--------------------------------------------------------------------------------------------------------------
OM Group, Inc., 9.25% Sr. Sub. Nts., 12/15/11                                1,000,000             1,005,000
--------------------------------------------------------------------------------------------------------------
Oncor Electric Delivery Co., 7% Nts., 9/1/22(3)                              1,320,000             1,333,200
--------------------------------------------------------------------------------------------------------------
P&L Coal Holdings Corp., 9.625% Sr. Sub. Nts., Series B, 5/15/08             3,224,000             3,401,320
--------------------------------------------------------------------------------------------------------------
Petroleos Mexicanos, 9.50% Sr  Sub. Nts., 9/15/27                              620,000               651,000
--------------------------------------------------------------------------------------------------------------
Pharmacia Corp., 6.60% Sr. Unsec. Nts., 12/1/28(9)                             620,000               672,677
--------------------------------------------------------------------------------------------------------------
Prudential Insurance Co. of America, 8.30% Nts., 7/1/25(6)                   2,080,000             2,294,993
--------------------------------------------------------------------------------------------------------------
Pulte Corp., 8.125% Sr. Unsec  Nts., 3/1/11                                  1,350,000             1,486,308
--------------------------------------------------------------------------------------------------------------
RCN Corp., 10.125% Sr. Unsec. Nts., 1/15/10                                 14,284,000             2,928,220
--------------------------------------------------------------------------------------------------------------
Raytheon Co., 5.70% Sr. Unsec  Nts., 11/1/03                                 2,280,000             2,327,891
--------------------------------------------------------------------------------------------------------------
Reed Elsevier Capital, Inc., 6 75% Bonds, 8/1/11                               970,000             1,045,671
--------------------------------------------------------------------------------------------------------------
Rite Aid Corp., 6.875% Sr. Unsec. Debs., 8/15/13                             5,000,000             2,925,000
--------------------------------------------------------------------------------------------------------------
Riverwood International Corp.:
10.625% Sr. Unsec. Nts., 8/1/07                                              1,000,000             1,040,000
10.875% Sr. Sub. Nts., 4/1/08                                                1,000,000             1,020,000
--------------------------------------------------------------------------------------------------------------
SBC Communications, Inc.:
5.75% Sr. Nts., 5/2/06                                                         590,000               618,067
5.875% Nts., 8/15/12                                                         1,080,000             1,099,074
--------------------------------------------------------------------------------------------------------------
Safeway, Inc., 4.80% Sr. Unsec  Nts., 7/16/07                                1,430,000             1,452,770
--------------------------------------------------------------------------------------------------------------
Simon DeBartolo Group LP, 6.875% Unsec. Nts., 11/15/06                       1,305,000             1,404,017
--------------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., 8% Sr. Sub. Nts., 3/15/12                    1,000,000               995,000
--------------------------------------------------------------------------------------------------------------
Sprint Capital Corp., 8.75% Nts.  3/15/32                                      870,000               675,072
--------------------------------------------------------------------------------------------------------------
Standard Pacific Corp., 9.25% Sr. Sub. Nts., 4/15/12                           300,000               289,500
--------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp., 6.375% Sr. Nts., 12/1/11                             1,410,000             1,476,957
--------------------------------------------------------------------------------------------------------------
Terex Corp., 9.25% Sr. Unsec. Sub. Nts., 7/15/11                             1,000,000               987,500
--------------------------------------------------------------------------------------------------------------
United Auto Group, Inc., 9.625% Sr. Sub. Nts., 3/15/12(6)                      400,000               406,000
--------------------------------------------------------------------------------------------------------------
Viacom, Inc., 7.70% Sr. Unsec  Nts., 7/30/10                                   700,000               801,224
--------------------------------------------------------------------------------------------------------------
VoiceStream Wireless Corp., 10 375% Sr. Unsec. Nts., 11/15/09                   64,000                64,320
--------------------------------------------------------------------------------------------------------------
Vornado Realty LP, 5.625% Sr. Unsec. Unsub. Nts., 6/15/07                    1,180,000             1,192,288
--------------------------------------------------------------------------------------------------------------
Walt Disney Co. (The), 7.30% Nts., 2/8/05                                    1,160,000             1,244,701
--------------------------------------------------------------------------------------------------------------
Waste Management, Inc., 7.75% Bonds, 5/15/32(6)                              1,170,000             1,149,179
--------------------------------------------------------------------------------------------------------------
WellPoint Health Networks, Inc.  6.375% Nts., 1/15/12                          960,000             1,013,193
--------------------------------------------------------------------------------------------------------------
World Color Press, Inc., 7.75% Sr. Unsec. Sub. Nts., 2/15/09                 1,000,000             1,004,751
--------------------------------------------------------------------------------------------------------------
Wyeth, 5.875% Nts., 3/15/04                                                  1,400,000             1,438,842
                                                                                              ----------------
Total Non-Convertible Corporate Bonds and Notes (Cost $206,055,306)                              201,935,314


                     17 | OPPENHEIMER CAPITAL INCOME FUND
                        |



STATEMENT OF INVESTMENTS  CONTINUED


                                                                             PRINCIPAL          MARKET VALUE
                                                                                AMOUNT            SEE NOTE 1
--------------------------------------------------------------------------------------------------------------
CONVERTIBLE CORPORATE BONDS AND NOTES--23.1%
--------------------------------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--9.8%
--------------------------------------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--0.5%
Royal Carribean Cruises Ltd., Zero Coupon Cv. Sr. Unsec. Unsub.
Liquid Yield Option Nts., 5.25%, 2/2/21(10)                               $ 37,500,000        $   12,750,000
--------------------------------------------------------------------------------------------------------------
MEDIA--8.7%
America Online, Inc., Zero Coupon Cv. Nts., 3.81%, 12/6/19(10)              54,000,000            27,472,500
--------------------------------------------------------------------------------------------------------------
Charter Communications, Inc.:
4.75% Cv. Sr. Unsec. Nts., 6/1/06                                           45,000,000            20,700,000
5.75% Cv. Sr. Unsec. Nts., 10/15/05                                         80,000,000            41,200,000
--------------------------------------------------------------------------------------------------------------
Clear Channel Communications, Inc., 1.50% Cv. Nts., 12/1/02                 10,000,000             9,950,000
--------------------------------------------------------------------------------------------------------------
Liberty Media Corp.:
3.25% Sr. Exchangeable Debs., 3/15/31 (exchangeable for Viacom, Inc.,
Cl. B common stock)(6)                                                      15,000,000            13,612,500
3.25% Sr. Exchangeable Unsec. Debs., 3/15/31 (exchangeable for
Viacom, Inc., Cl. B common stock or cash based on the value thereof)        57,000,000            51,727,500
3.50% Sr. Exchangeable Debs., 1/15/31 (exchangeable for Motorola, Inc.
common stock or cash based on the value of that stock)                      12,500,000             8,140,625
3.75% Sr. Exchangeable Debs., 2/15/30 (exchangeable for Sprint Corp.
PCS common stock, series 1 or cash based on the value of that stock)        19,750,000             9,010,938
4% Sr. Exchangeable Debs., 11/15/29 (exchangeable for Sprint Corp.
PCS common stock, series 1 or cash based on the value of that stock)        32,750,000            16,047,500
                                                                                              ----------------
                                                                                                 197,861,563
--------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL--0.6%
Gap, Inc. (The), 5.75% Cv. Sr  Nts., 3/15/09(6)                             13,000,000            13,308,750
--------------------------------------------------------------------------------------------------------------
CONSUMER STAPLES--3.9%
--------------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILING--3.9%
Rite Aid Corp.:
4.75% Cv. Nts., 12/1/06(6)                                                  45,000,000            29,925,000
5.25% Cv. Sub. Nts., 9/15/02(3)                                             43,000,000            42,570,000
--------------------------------------------------------------------------------------------------------------
Supervalu, Inc., Zero Coupon Cv. Sr. Liquid Yield Option Nts.,
4.47%, 11/2/31(6,10)                                                        60,455,000            17,456,381
                                                                                              ----------------
                                                                                                  89,951,381
--------------------------------------------------------------------------------------------------------------
ENERGY--0.6%
--------------------------------------------------------------------------------------------------------------
OIL & GAS--0.6%
Kerr-McGee Corp., 5.25% Cv. Unsec. Sub. Nts., 2/15/10                       12,000,000            12,960,000
--------------------------------------------------------------------------------------------------------------
FINANCIALS--0.7%
--------------------------------------------------------------------------------------------------------------
DIVERSIFIED FINANCIALS--0.6%
Providian Financial Corp.:
3.25% Cv. Sr. Unsec. Nts., 8/15/05                                          10,000,000             6,025,000
Zero Coupon Cv. Sr. Unsec. Unsub. Nts., 6.49%, 2/15/21(3,10)                27,500,000             7,287,500
                                                                                              ----------------
                                                                                                  13,312,500
--------------------------------------------------------------------------------------------------------------
INSURANCE--0.1%
Mutual Risk Management Ltd., Zero Coupon Exchangeable Sub. Debs.,
5.25%, 10/30/15(3,10)                                                       19,500,000             1,657,500


                     18 | OPPENHEIMER CAPITAL INCOME FUND
                        |


                                                                             PRINCIPAL          MARKET VALUE
                                                                                AMOUNT            SEE NOTE 1
--------------------------------------------------------------------------------------------------------------
INDUSTRIALS--1.5%
--------------------------------------------------------------------------------------------------------------
CONSTRUCTION & ENGINEERING--0.1%
Shaw Group, Inc. (The), Zero Coupon Cv. Sr. Unsec. Liquid Yield
Option Nts., 3.24%, 5/1/21(10)                                            $  3,000,000        $    1,556,250
--------------------------------------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.4%
Tyco International Ltd., Zero Coupon Cv. Sr. Unsec. Unsub. Liquid
Yield Option Nts., 2.56%, 11/17/20(10)                                      49,500,000            31,803,750
--------------------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--3.8%
--------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT--0.6%
Commscope, Inc., 4% Cv. Unsec  Sub. Nts., 12/15/06                          10,500,000             7,796,250
--------------------------------------------------------------------------------------------------------------
Juniper Networks, Inc., 4.75% Cv. Unsec. Sub. Nts., 3/15/07                 10,000,000             7,150,000
                                                                                              ----------------
                                                                                                  14,946,250
--------------------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--0.9%
Solectron Corp.:
Zero Coupon Cv. Sr. Unsec. Unsub. Liquid Yield Option Nts.,
  3.34%, 5/8/20(10)                                                         20,000,000            11,700,000
Zero Coupon Sr. Unsec. Unsub. Liquid Yield Option Nts., 4.27% 10/20/20(10)  20,000,000             8,800,000
                                                                                              ----------------
                                                                                                  20,500,000
--------------------------------------------------------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT & PRODUCTS--2.3%
Amkor Technology, Inc.:
5% Cv. Sub. Nts., 3/15/07(6)                                                20,655,000             6,170,681
5% Cv. Unsec. Sub. Nts., 3/15/07                                             5,000,000             1,493,750
5.75% Unsec. Sub. Nts., 6/1/06                                               6,845,000             2,258,850

--------------------------------------------------------------------------------------------------------------
LSI Logic Corp., 4% Cv. Unsec  Sub. Nts., 11/1/06                           37,500,000            27,609,375
--------------------------------------------------------------------------------------------------------------
Vitesse Semiconductor Corp., 4% Cv. Sub. Nts., 3/15/05                      20,000,000            14,000,000
                                                                                              ----------------
                                                                                                  51,532,656
--------------------------------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES--2.1%
--------------------------------------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES--0.8%
Level 3 Communications, Inc., 6% Cv. Nts., 9/15/09                          54,000,000            18,630,000
--------------------------------------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES--1.3%
Nextel Communications, Inc.:
4.75% Cv. Nts., 7/1/07                                                      22,500,000            15,890,625
5.25% Cv. Sr. Nts., 1/15/10                                                 22,500,000            14,512,500
                                                                                              ----------------
                                                                                                  30,403,125
--------------------------------------------------------------------------------------------------------------
UTILITIES--0.7%
--------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES--0.7%
Calpine Corp., 4% Cv. Sr. Unsec  Nts., 12/26/06(6)                          27,500,000            15,675,000
                                                                                              ----------------
Total Convertible Corporate Bonds and Notes (Cost $626,365,968)                                  526,848,725


                     19 | OPPENHEIMER CAPITAL INCOME FUND
                        |


STATEMENT OF INVESTMENTS  CONTINUED


                                                                             PRINCIPAL          MARKET VALUE
                                                                                AMOUNT            SEE NOTE 1
--------------------------------------------------------------------------------------------------------------
STRUCTURED NOTES--4.4%
--------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), Abbott Laboratories Cv. Medium
Term Linked Nts., Series B, 7%, 7/27/03                                   $    684,300        $   24,185,215
--------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), GlobalSantaFe Corp. Cv. Linked Nts.,
9%, 8/1/03                                                                     700,000            14,060,200
--------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), Schering-Plough Corp. Cv. Medium
Term Linked Nts., Series B, 9%, 7/27/03                                      1,005,000            21,352,230
--------------------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. (The), Wyeth Cv. Medium Term Linked Nts.,
Series B, 11.50%, 7/27/03                                                      836,100            27,903,165
--------------------------------------------------------------------------------------------------------------
JPMorgan Chase Bank, High Yield Index Linked Nts., 8.75%, 5/15/07           12,250,000            11,469,063
                                                                                              ----------------
Total Structured Notes (Cost $97,155,399)                                                         98,969,873

--------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS, AT VALUE (COST $2,381,846,392)                                105.4%        2,401,105,933
--------------------------------------------------------------------------------------------------------------
LIABILITIES IN EXCESS OF OTHER ASSETS                                             (5.4)         (123,417,231)
                                                                          ------------------------------------
NET ASSETS                                                                       100.0%       $2,277,688,702
                                                                          ====================================



FOOTNOTES TO STATEMENT OF INVESTMENTS
1.  Non-income producing security.
2. Affiliated company. Represents ownership of at least 5% of the voting
securities of the issuer, and is or was an affiliate, as defined in the
Investment Company Act of 1940, at or during the period ended August 31, 2002.
The aggregate fair value of securities of affiliated companies held by the Fund
as of August 31, 2002 amounts to $91,414,375. Transactions during the period in
which the issuer was an affiliate are as follows:



                                 SHARES/                                      SHARES/
                               PRINCIPAL                                    PRINCIPAL       UNREALIZED    DIVIDEND/
                              AUGUST 31,          GROSS         GROSS       AUGUST 31,     APPRECIATION     INTEREST      REALIZED
                                    2001      ADDITIONS     REDUCTIONS             2002   (DEPRECIATION)       INCOME          LOSS
------------------------------------------------------------------------------------------------------------------------------------

STOCKS
CSK Auto Corp.                 1,839,300         25,000          1,686        1,862,614     $(11,149,875)     $     --      $26,947
CSK Auto Corp.,
Restricted                            --      4,524,886*            --        4,524,886       27,239,808            --           --
BONDS AND NOTES
CSK Auto Corp.,
7% Cv. Sub. Nts., 8/1/06     $30,000,000    $        --    $30,000,000*     $        --               --            --           --
CSK Auto, Inc.,
12% Unsec. Nts., 6/15/06              --     10,000,000             --       10,000,000          753,757       580,000           --
                                                                                                               ---------------------
                                                                                                              $580,000      $26,947
                                                                                                              ======================

* Result of conversion from convertible bond to restricted common stock.
3. Identifies issues considered to be illiquid or restricted--See Note 8 of
Notes to Financial Statements.


                     20 | OPPENHEIMER CAPITAL INCOME FUND
                        |



4. A sufficient amount of liquid assets has been designated to cover outstanding
written options, as follows:



                                          CONTRACTS          EXPIRATION          EXERCISE               PREMIUM        MARKET VALUE
                                    SUBJECT TO CALL                DATE             PRICE              RECEIVED          SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------

Philip Morris Cos., Inc.                        500            10/21/02            $55.00           $    19,500          $   20,000
Unocal Corp.                                    500            10/21/02             37.50               172,872               5,000
Unocal Corp.                                    500            10/21/02             40.00               105,998                  --
Washington Mutual, Inc.                         500            10/21/02             40.00                39,500              45,000
                                                                                                    -------------------------------
                                                                                                        337,870              70,000
                                                                                                    -------------------------------

                                          CONTRACTS          EXPIRATION          EXERCISE               PREMIUM        MARKET VALUE
                                     SUBJECT TO PUT                DATE             PRICE              RECEIVED          SEE NOTE 1
-----------------------------------------------------------------------------------------------------------------------------------
Abbott Laboratories                             449            11/18/02             42.50               227,109             175,110
ACE Ltd.                                        500             9/23/02             30.00               171,497              40,000
American International Group, Inc.            1,000             9/23/02             65.00               491,493             340,000
Bristol-Myers Squibb Co.                        250            10/21/02             25.00                36,999              47,500
Bristol-Myers Squibb Co.                        250            10/21/02             27.50                84,249              85,000
Bristol-Myers Squibb Co.                        299            12/23/02             30.00               214,380             170,430
Cisco Systems, Inc.                             500            10/21/02             15.00               163,498              92,500
Citigroup, Inc.                                 500            12/23/02             30.00               213,497              77,500
Citigroup, Inc.                                 500            12/23/02             35.00               160,998             160,000
Clear Channel Communications, Inc.            2,000             1/20/03             25.00               783,988             280,000
Clear Channel Communications, Inc.              750             1/20/03             30.00               437,743             187,500
Clear Channel Communications, Inc.              500            10/21/02             35.00               468,493             135,000
Clear Channel Communications, Inc.            3,000            10/21/02             40.00             2,623,761           1,830,000
Comcast Corp., Cl. A                            544            10/21/02             35.00               335,053             598,400
ENSCO International, Inc.                       250             9/23/02             30.00               122,648              87,500
ENSCO International, Inc.                       250            12/23/02             30.00               130,498             122,500
General Mills, Inc.                             500            10/21/02             45.00               170,997             175,000
Kinder Morgan, Inc.                             250            10/21/02             45.00               114,248             115,000
Kinder Morgan, Inc.                           1,250            11/18/02             45.00               743,739             637,500
Mattel, Inc.                                    500            10/21/02             17.50                63,499              15,000
Merck & Co., Inc.                               500            10/21/02             50.00                98,499             100,000
Microsoft Corp.                                 500             9/23/02             50.00               218,497             115,000
Microsoft Corp.                                 500            10/21/02             50.00               170,997             170,000
Micron Technology, Inc.                       1,500            10/21/02             22.50               880,487             855,000
Morgan Stanley                                  275            10/21/02             40.00               133,673              55,000
Morgan Stanley                                  550            10/21/02             45.00               343,345             214,500
Morgan Stanley                                  255            10/21/02             50.00               208,332             193,800
Pfizer, Inc.                                    500             9/23/02             32.50                53,499              40,000
Pfizer, Inc.                                    500             9/23/02             30.00                83,498              15,000
Pfizer, Inc.                                  1,950             9/23/02             35.00               413,393             419,250
                                                                                                    -------------------------------
                                                                                                     10,362,607           7,548,990
                                                                                                    -------------------------------
                                                                                                    $10,700,477          $7,618,990
                                                                                                    ===============================


5. Units may be comprised of several components, such as debt and equity and/or
warrants to purchase equity at some point in the future. For units, which
represent debt securities, principal amount disclosed represents total
underlying principal.
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
Trustees. These securities amount to $115,042,050 or 5.05% of the Fund's net
assets as of August 31, 2002.
7. When-issued security to be delivered and settled after August 31, 2002.
8. Represents the current interest rate for a variable or increasing rate
security.
9. Securities with an aggregate market value of $216,993 are held in
collateralized accounts to cover initial margin requirements on open futures
sales contracts. See Note 6 of Notes to Financial Statements.
10. Zero coupon bond reflects effective yield on the date of purchase.


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     21 | OPPENHEIMER CAPITAL INCOME FUND
                        |



STATEMENT OF ASSETS AND LIABILITIES  AUGUST 31, 2002



-----------------------------------------------------------------------------------------------------------------
 ASSETS
-----------------------------------------------------------------------------------------------------------------

 Investments, at value--see accompanying statement:
 Unaffiliated companies (cost $2,307,275,707)                                                      $2,309,691,558
 Affiliated companies (cost $74,570,685)                                                               91,414,375
                                                                                                   --------------
                                                                                                    2,401,105,933
-----------------------------------------------------------------------------------------------------------------
 Cash                                                                                                      18,970
-----------------------------------------------------------------------------------------------------------------
 Cash used for collateral on written puts                                                              26,598,169
-----------------------------------------------------------------------------------------------------------------
 Receivables and other assets:
 Investments sold                                                                                      65,726,831
 Interest, dividends and principal paydowns                                                            18,056,207
 Shares of beneficial interest sold                                                                     1,247,436
 Other                                                                                                    105,663
                                                                                                   --------------
 Total assets                                                                                       2,512,859,209

-----------------------------------------------------------------------------------------------------------------
 LIABILITIES
-----------------------------------------------------------------------------------------------------------------
 Options written, at value (premiums received $10,700,477)--see accompanying statement                  7,618,990
-----------------------------------------------------------------------------------------------------------------
 Payables and other liabilities:
 Investments purchased (including 174,306,875 purchased on a when-issued basis)                       222,657,984
 Shares of beneficial interest redeemed                                                                 2,632,690
 Distribution and service plan fees                                                                       912,905
 Transfer and shareholder servicing agent fees                                                            630,439
 Shareholder reports                                                                                      534,799
 Daily variation on futures contracts                                                                      46,317
 Trustees' compensation                                                                                     2,415
 Other                                                                                                    133,968
                                                                                                   --------------
 Total liabilities                                                                                    235,170,507
-----------------------------------------------------------------------------------------------------------------
 NET ASSETS                                                                                        $2,277,688,702
                                                                                                   ==============

-----------------------------------------------------------------------------------------------------------------
 COMPOSITION OF NET ASSETS
-----------------------------------------------------------------------------------------------------------------
 Par value of shares of beneficial interest                                                        $      233,698
-----------------------------------------------------------------------------------------------------------------
 Additional paid-in capital                                                                         2,329,074,706
-----------------------------------------------------------------------------------------------------------------
 Undistributed net investment income                                                                   18,133,482
-----------------------------------------------------------------------------------------------------------------
 Accumulated net realized loss on investments and foreign currency transactions                    (91,996,532)
-----------------------------------------------------------------------------------------------------------------
 Net unrealized appreciation on investments and translation of
 assets and liabilities denominated in foreign currencies                                              22,243,348
                                                                                                   --------------
 NET ASSETS                                                                                        $2,277,688,702
                                                                                                   ==============



                     22 | OPPENHEIMER CAPITAL INCOME FUND
                        |




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

 Class A Shares:
 Net asset value and redemption price per share (based on net assets of
 $1,873,457,904 and 191,878,831 shares of beneficial interest outstanding)       $ 9.76
 Maximum offering price per share (net asset value plus sales charge of
 5.75% of offering price)                                                        $10.36
---------------------------------------------------------------------------------------
 Class B Shares:
 Net asset value, redemption price (excludes applicable contingent
 deferred sales charge) and offering price per share (based on net assets
 of $327,367,943 and 33,862,697 shares of beneficial interest outstanding)       $ 9.67
---------------------------------------------------------------------------------------
 Class C Shares:
 Net asset value, redemption price (excludes applicable contingent
 deferred sales charge) and offering price per share (based on net assets
 of $72,791,504 and 7,537,406 shares of beneficial interest outstanding)         $ 9.66
---------------------------------------------------------------------------------------
 Class N Shares:
 Net asset value, redemption price (excludes applicable contingent
 deferred sales charge) and offering price per share (based on net assets
 of $4,071,351 and 418,605 shares of beneficial interest outstanding)            $ 9.73


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     23 | OPPENHEIMER CAPITAL INCOME FUND
                        |


STATEMENT OF OPERATIONS  FOR THE YEAR ENDED AUGUST 31, 2002



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

 INVESTMENT INCOME
----------------------------------------------------------------------------------
 Dividends                                                            $ 77,101,105
----------------------------------------------------------------------------------
 Interest:
  Unaffiliated companies                                                70,915,443
  Affiliated companies                                                     580,000
                                                                     -------------
 Total investment income                                               148,596,548

----------------------------------------------------------------------------------
 EXPENSES
----------------------------------------------------------------------------------
 Management fees                                                        14,372,477
----------------------------------------------------------------------------------
 Distribution and service plan fees:
 Class A                                                                 5,199,797
 Class B                                                                 4,110,610
 Class C                                                                   840,947
 Class N                                                                    14,148
----------------------------------------------------------------------------------
 Transfer and shareholder servicing agent fees:
 Class A                                                                 3,835,934
 Class B                                                                   730,035
 Class C                                                                   147,369
 Class N                                                                     4,913
----------------------------------------------------------------------------------
 Shareholder reports                                                       901,359
----------------------------------------------------------------------------------
 Custodian fees and expenses                                               213,848
----------------------------------------------------------------------------------
 Trustees' compensation                                                     29,499
----------------------------------------------------------------------------------
 Other                                                                     148,394
                                                                     -------------
 Total expenses                                                         30,549,330
 Less reduction to custodian expenses                                       (9,382)
                                                                     -------------
 Net expenses                                                           30,539,948

----------------------------------------------------------------------------------
 NET INVESTMENT INCOME                                                 118,056,600
----------------------------------------------------------------------------------
 REALIZED AND UNREALIZED GAIN (LOSS)
----------------------------------------------------------------------------------
 Net realized gain (loss) on:
 Investments:
  Unaffiliated companies (including premiums on options exercised)    (109,030,441)
  Affiliated companies                                                     (26,947)
 Closing of futures contracts                                               45,335
 Closing and expiration of option contracts written                     20,228,225
 Foreign currency transactions                                          (1,344,871)
 Net increase from payments by affiliates                                   13,550
                                                                     -------------
 Net realized loss                                                     (90,115,149)
----------------------------------------------------------------------------------
 Net change in unrealized appreciation (depreciation) on:
 Investments                                                          (554,600,481)
 Translation of assets and liabilities denominated in foreign
   currencies                                                            1,303,683
                                                                     -------------
 Net change                                                           (553,296,798)
                                                                     -------------
 Net realized and unrealized loss                                     (643,411,947)

----------------------------------------------------------------------------------
 NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS                $(525,355,347)
                                                                     =============


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     24 | OPPENHEIMER CAPITAL INCOME FUND
                        |



STATEMENTS OF CHANGES IN NET ASSETS




 YEAR ENDED AUGUST 31,                                                                 2002                 2001
----------------------------------------------------------------------------------------------------------------
 OPERATIONS
----------------------------------------------------------------------------------------------------------------

 Net investment income                                                       $  118,056,600       $   91,431,736
----------------------------------------------------------------------------------------------------------------
 Net realized gain (loss)                                                       (90,115,149)          98,563,934
----------------------------------------------------------------------------------------------------------------
 Net change in unrealized depreciation                                         (553,296,798)          (1,459,013)
                                                                             -----------------------------------
 Net increase (decrease) in net assets resulting
   from operations                                                             (525,355,347)         188,536,657
----------------------------------------------------------------------------------------------------------------
 DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
----------------------------------------------------------------------------------------------------------------
 Dividends from net investment income:
 Class A                                                                        (93,931,397)         (89,710,614)
 Class B                                                                        (14,424,307)         (13,856,744)
 Class C                                                                         (2,953,586)          (2,367,695)
 Class N                                                                           (106,899)              (1,361)
----------------------------------------------------------------------------------------------------------------
 Distributions from net realized gain:
 Class A                                                                        (64,030,274)         (92,805,879)
 Class B                                                                        (12,137,001)         (17,996,313)
 Class C                                                                         (2,393,666)          (2,930,775)
 Class N                                                                            (61,281)                  --
----------------------------------------------------------------------------------------------------------------
 BENEFICIAL INTEREST TRANSACTIONS
----------------------------------------------------------------------------------------------------------------
 Net increase (decrease) in net assets resulting from beneficial interest
 transactions:
 Class A                                                                           (904,695)          88,120,939
 Class B                                                                        (41,599,972)           9,692,620
 Class C                                                                          5,678,706           17,337,172
 Class N                                                                          4,218,615              659,783

----------------------------------------------------------------------------------------------------------------
 NET ASSETS
----------------------------------------------------------------------------------------------------------------
 Total increase (decrease)                                                     (748,001,104)          84,677,790
----------------------------------------------------------------------------------------------------------------
 Beginning of period                                                          3,025,689,806        2,941,012,016
                                                                             -----------------------------------
 End of period [including undistributed net investment income of
 $18,133,482 and $9,104,384, respectively]                                   $2,277,688,702       $3,025,689,806
                                                                             ===================================


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     25 | OPPENHEIMER CAPITAL INCOME FUND
                        |



FINANCIAL HIGHLIGHTS




CLASS A   YEAR ENDED AUGUST 31,                2002         2001         2000         1999         1998
-------------------------------------------------------------------------------------------------------

 PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------

 Net asset value, beginning of period        $12.72      $ 12.88      $ 13.63      $ 13.75      $ 14.12
-------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                          .51          .42          .49          .51          .50
 Net realized and unrealized gain (loss)      (2.66)         .41          .32         1.03          .41
                                             ----------------------------------------------------------
 Total from investment operations             (2.15)         .83          .81         1.54          .91
-------------------------------------------------------------------------------------------------------
 Dividends and/or distributions
   to shareholders:
 Dividends from net investment income          (.48)        (.48)        (.49)        (.49)        (.49)
 Distributions from net realized gain          (.33)        (.51)       (1.07)       (1.17)        (.79)
                                             ----------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                               (.81)        (.99)       (1.56)       (1.66)       (1.28)
-------------------------------------------------------------------------------------------------------
 Net asset value, end of period              $ 9.76       $12.72       $12.88       $13.63       $13.75
                                             ==========================================================
-------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE(1)         (17.75)%       6.84%        7.24%       11.03%        6.17%
-------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------
 Net assets, end of period
   (in thousands)                        $1,873,458   $2,458,272   $2,395,444   $2,926,923   $2,889,472
-------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)       $2,224,911   $2,432,151   $2,502,535   $3,156,294   $3,071,928
-------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                         4.48%        3.21%        3.78%        3.51%        3.47%
 Expenses                                      0.98%        0.91%        0.93%        0.89%        0.87%(3)
-------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                        148%          74%          37%          40%          18%


 1. Assumes an investment on the business day before the first day of the fiscal
 period, with all dividends and distributions reinvested in additional shares on
 the reinvestment date, and redemption at the net asset value calculated on the
 last business day of the fiscal period. Sales charges are not reflected in the
 total returns. Total returns are not annualized for periods of less than one
 full year.
 2. Annualized for periods of less than one full year.
 3. Expense ratio has been calculated without adjustment for the reduction to
 custodian expenses.

 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     26 | OPPENHEIMER CAPITAL INCOME FUND
                        |




 CLASS B   YEAR ENDED AUGUST 31,               2002         2001         2000         1999         1998
-------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------

 Net asset value, beginning of period        $12.60      $ 12.76      $ 13.51      $ 13.63      $ 14.01
-------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                          .41          .32          .38          .39          .39
 Net realized and unrealized gain (loss)      (2.62)         .41          .32         1.03          .40
                                             ----------------------------------------------------------
 Total from investment operations             (2.21)         .73          .70         1.42          .79
-------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to
   shareholders:
 Dividends from net investment income          (.39)        (.38)        (.38)        (.37)        (.38)
 Distributions from net realized gain          (.33)        (.51)       (1.07)       (1.17)        (.79)
                                             ----------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                               (.72)        (.89)       (1.45)       (1.54)       (1.17)
-------------------------------------------------------------------------------------------------------
 Net asset value, end of period              $ 9.67       $12.60       $12.76       $13.51       $13.63
                                             ==========================================================

-------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE(1)         (18.31)%       6.05%        6.34%       10.22%        5.32%
-------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------
 Net assets, end of period (in thousands)  $327,368     $477,223     $472,222     $720,721     $634,775
-------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)         $410,652     $469,690     $546,390     $749,020     $574,986
-------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                         3.67%        2.44%        3.01%        2.71%        2.68%
 Expenses                                      1.76%        1.68%        1.70%        1.69%        1.67%(3)
-------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                        148%          74%          37%          40%          18%


 1. Assumes an investment on the business day before the first day of the fiscal
 period, with all dividends and distributions reinvested in additional shares on
 the reinvestment date, and redemption at the net asset value calculated on the
 last business day of the fiscal period. Sales charges are not reflected in the
 total returns. Total returns are not annualized for periods of less than one
 full year.
 2. Annualized for periods of less than one full year.
 3. Expense ratio has been calculated without adjustment for the reduction to
 custodian expenses.

 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     27 | OPPENHEIMER CAPITAL INCOME FUND
                        |



FINANCIAL HIGHLIGHTS  CONTINUED


 CLASS C   YEAR ENDED AUGUST 31,               2002         2001         2000         1999         1998
-------------------------------------------------------------------------------------------------------
 PER SHARE OPERATING DATA
-------------------------------------------------------------------------------------------------------

 Net asset value, beginning of period        $12.59      $ 12.76      $ 13.50      $ 13.63      $ 14.02
-------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                          .42          .32          .38          .39          .39
 Net realized and unrealized gain (loss)      (2.62)         .40          .32         1.02          .40
                                             ----------------------------------------------------------
 Total from investment operations             (2.20)         .72          .70         1.41          .79
-------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to
   shareholders:
 Dividends from net investment income          (.40)        (.38)        (.37)        (.38)        (.39)
 Distributions from net realized gain          (.33)        (.51)       (1.07)       (1.16)        (.79)
                                             ----------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                               (.73)        (.89)       (1.44)       (1.54)       (1.18)
-------------------------------------------------------------------------------------------------------
 Net asset value, end of period              $ 9.66       $12.59       $12.76       $13.50       $13.63
                                             ==========================================================

-------------------------------------------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE(1)         (18.30)%       6.00%        6.40%       10.15%        5.30%
-------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------
 RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------
 Net assets, end of period
   (in thousands)                           $72,792      $89,547      $73,346     $119,284      $94,995
-------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)          $84,049      $80,390      $84,898     $119,594      $77,052
-------------------------------------------------------------------------------------------------------
 Ratios to average net assets:(2)
 Net investment income                         3.74%        2.44%        3.01%        2.70%        2.68%
 Expenses                                      1.76%        1.68%        1.70%        1.69%        1.67%(3)
-------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                        148%          74%          37%          40%          18%


 1. Assumes an investment on the business day before the first day of the fiscal
 period, with all dividends and distributions reinvested in additional shares on
 the reinvestment date, and redemption at the net asset value calculated on the
 last business day of the fiscal period. Sales charges are not reflected in the
 total returns. Total returns are not annualized for periods of less than one
 full year.
 2. Annualized for periods of less than one full year.
 3. Expense ratio has been calculated without adjustment for the reduction to
 custodian expenses.

 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     28 | OPPENHEIMER CAPITAL INCOME FUND
                        |


 CLASS N   YEAR ENDED AUGUST 31,               2002         2001(1)
-------------------------------------------------------------------
 PER SHARE OPERATING DATA
-------------------------------------------------------------------

 Net asset value, beginning of period        $12.69      $ 12.96
-------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income                          .50          .28
 Net realized and unrealized loss             (2.66)        (.30)
                                             ----------------------
 Total from investment operations             (2.16)        (.02)
-------------------------------------------------------------------
 Dividends and/or distributions to
   shareholders:
 Dividends from net investment income          (.47)        (.25)
 Distributions from net realized gain          (.33)          --
                                             ----------------------
 Total dividends and/or distributions to
   shareholders                                (.80)        (.25)
-------------------------------------------------------------------
 Net asset value, end of period              $ 9.73       $12.69
                                             ======================

-------------------------------------------------------------------
 TOTAL RETURN, AT NET ASSET VALUE(2)         (17.89)%      (0.18)%
-------------------------------------------------------------------

-------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------
 Net assets, end of period (in thousands)    $4,071         $648
-------------------------------------------------------------------
 Average net assets (in thousands)           $2,839         $214
-------------------------------------------------------------------
 Ratios to average net assets:(3)
 Net investment income                         4.74%        2.94%
 Expenses                                      1.25%        1.17%
-------------------------------------------------------------------
 Portfolio turnover rate                        148%          74%

1. For the period from March 1, 2001 (inception of offering) to August 31, 2001.
2. Assumes an investment on the business day before the first day of the fiscal
period (or inception of offering), with all dividends and distributions
reinvested in additional shares on the reinvestment date, and redemption at the
net asset value calculated on the last business day of the fiscal period. Sales
charges are not reflected in the total returns. Total returns are not annualized
for periods of less than one full year.
3. Annualized for periods of less than one full year.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


                     29 | OPPENHEIMER CAPITAL INCOME FUND
                        |


NOTES TO FINANCIAL STATEMENTS


--------------------------------------------------------------------------------
 1. SIGNIFICANT ACCOUNTING POLICIES
 Oppenheimer Capital Income Fund (the Fund) is registered under the Investment
 Company Act of 1940, as amended, as an open-end management investment company.
 The Fund's investment objective is to seek as much current income as is
 compatible with prudent investment. The Fund's investment advisor is
 OppenheimerFunds, Inc. (the Manager).
    The Fund offers Class A, Class B, Class C and Class N shares. Class A shares
 are sold at their offering price, which is normally net asset value plus a
 front-end sales charge. Class B, Class C and Class N shares are sold without a
 front-end sales charge but may be subject to a contingent deferred sales charge
 (CDSC). Class N shares are sold only through retirement plans. Retirement plans
 that offer Class N shares may impose charges on those accounts. All classes of
 shares have identical rights and voting privileges. Earnings, net assets and
 net asset value per share may differ by minor amounts due to each class having
 its own expenses directly attributable to that class. Classes A, B, C and N
 have separate distribution and/or service plans. Class B shares will
 automatically convert to Class A shares six years after the date of purchase.
    The following is a summary of significant accounting policies consistently
 followed by the Fund.

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

--------------------------------------------------------------------------------
 STRUCTURED NOTES. The Fund invests in structured notes whose market values and
 redemption prices are linked to the market value of specific securities. The
 structured notes are leveraged, which increases the Fund's exposure to changes
 in prices of the underlying securities and increases the volatility of each
 note's market value relative to the change in the underlying security prices.
 The Fund also invests in "index-linked" notes whose principal and/or interest
 payments depend on the performance of an underlying index. Fluctuations in
 value of these securities are recorded as unrealized gains and losses in the
 accompanying financial statements. The Fund records a realized gain or loss
 when a structured note is sold or matures. As of August 31, 2002, the market
 value of these securities comprised 4.4% of the Fund's net assets, and resulted
 in unrealized gains in the current period of $1,814,474.


                     30 | OPPENHEIMER CAPITAL INCOME FUND
                        |



--------------------------------------------------------------------------------
 SECURITIES PURCHASED ON A WHEN-ISSUED BASIS. Delivery and payment for
 securities that have been purchased by the Fund on a when-issued basis can take
 place a month or more after the trade date. Normally the settlement date occurs
 within six months after the trade date; however, the Fund may, from time to
 time, purchase securities whose settlement date extends beyond six months or
 more beyond trade date. During this period, such securities do not earn
 interest, are subject to market fluctuation and may increase or decrease in
 value prior to their delivery. The Fund maintains segregated assets with a
 market value equal to or greater than the amount of its purchase commitments.
 The purchase of securities on a when-issued basis may increase the volatility
 of the Fund's net asset value to the extent the Fund makes such purchases while
 remaining substantially fully invested. As of August 31, 2002, the Fund had
 entered into when-issued purchase commitments of $174,306,875.
    In connection with its ability to purchase securities on a when-issued
 basis, the Fund may enter into forward roll transactions with respect to
 mortgage-related securities. Forward roll transactions require the sale of
 securities for delivery in the current month, and a simultaneous agreement with
 the same counterparty to repurchase similar (same type, coupon and maturity)
 but not identical securities on a specified future date. The forward roll may
 not extend for a period of greater than one year. The Fund generally records
 the incremental difference between the forward purchase and sell of each
 forward roll as interest income.
    Risks to the Fund of entering into forward roll transactions include the
 potential inability of the counterparty to meet the terms of the agreement; the
 potential of the Fund to receive inferior securities to what was sold to the
 counterparty at redelivery; counterparty credit risk; and the potential pay
 down speed variance between the mortgage-related pools.

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


                     31 | OPPENHEIMER CAPITAL INCOME FUND
                        |


NOTES TO FINANCIAL STATEMENTS  CONTINUED

--------------------------------------------------------------------------------
 1. SIGNIFICANT ACCOUNTING POLICIES Continued
 JOINT REPURCHASE AGREEMENTS. The Fund, along with other affiliated funds of the
 Manager, may transfer uninvested cash balances into one or more joint
 repurchase agreement accounts. These balances are invested in one or more
 repurchase agreements, secured by U.S. government securities. Securities
 pledged as collateral for repurchase agreements are held by a custodian bank
 until the agreements mature. Each agreement requires that the market value of
 the collateral be sufficient to cover payments of interest and principal;
 however, in the event of default by the other party to the agreement, retention
 of the collateral may be subject to legal proceedings.

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

--------------------------------------------------------------------------------
 FEDERAL TAXES. The Fund intends to continue to comply with provisions of the
 Internal Revenue Code applicable to regulated investment companies and to
 distribute all of its taxable income, including any net realized gain on
 investments not offset by capital loss carryforwards, if any, to shareholders.
 Therefore, no federal income or excise tax provision is required.
    As of August 31, 2002, the Fund had approximately $71,301,000 of
 post-October losses available to offset future capital gains, if any. Such
 losses, if unutilized, will expire in 2011. Additionally, the Fund had
 approximately $184,000 of post-October foreign currency losses which were
 deferred.

--------------------------------------------------------------------------------
 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
 shareholders, which are determined in accordance with income tax regulations,
 are recorded on the ex-dividend date.

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


                     32 | OPPENHEIMER CAPITAL INCOME FUND
                        |



    The Fund adjusts the classification of distributions to shareholders to
 reflect the differences between financial statement amounts and distributions
 determined in accordance with income tax regulations. Accordingly, during the
 year ended August 31, 2002, amounts have been reclassified to reflect an
 increase in undistributed net investment income of $2,388,687. Accumulated net
 realized loss on investments was increased by the same amount. Net assets of
 the Fund were unaffected by the reclassifications.

 The tax character of distributions paid during the years ended August 31, 2002
 and August 31, 2001 was as follows:


                                                    YEAR ENDED        YEAR ENDED
                                               AUGUST 31, 2002   AUGUST 31, 2001
                 ---------------------------------------------------------------
                 Distributions paid from:
                 Ordinary income                $118,904,111        $105,936,414
                 Long-term capital gain           71,134,300         113,732,967
                 Return of capital                        --                  --
                                                --------------------------------
                 Total                          $190,038,411        $219,669,381
                                                ================================

 As of August 31, 2002, the components of distributable earnings on a tax basis
 were as follows:

                 Undistributed net investment income     $ 18,133,482
                 Accumulated net realized loss            (91,996,532)
                 Net unrealized appreciation               22,243,348
                                                         ------------
                 Total                                   $(51,619,702)
                                                         ============

--------------------------------------------------------------------------------
 INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date or upon
 ex-dividend notification in the case of certain foreign dividends where the
 ex-dividend date may have passed. Non-cash dividends included in dividend
 income, if any, are recorded at the fair market value of the securities
 received. Interest income, which includes accretion of discount and
 amortization of premium, is accrued as earned.

--------------------------------------------------------------------------------
 SECURITY TRANSACTIONS. Security transactions are recorded on the trade date.
 Realized gains and losses on securities sold are determined on the basis of
 identified cost.

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


                     33 | OPPENHEIMER CAPITAL INCOME FUND
                        |



NOTES TO FINANCIAL STATEMENTS  CONTINUED

--------------------------------------------------------------------------------
 2. SHARES OF BENEFICIAL INTEREST
 The Fund has authorized an unlimited number of $0.001 par value shares of
 beneficial interest of each class. Transactions in shares of beneficial
 interest were as follows:



                                       YEAR ENDED AUGUST 31, 2002             YEAR ENDED AUGUST 31, 2001(1)
                                      SHARES               AMOUNT               SHARES               AMOUNT
-----------------------------------------------------------------------------------------------------------
 CLASS A

 Sold                             18,148,756         $206,380,355           19,693,851         $253,926,557
 Dividends and/or
 distributions reinvested         12,606,412          145,364,495           13,680,385          168,977,357
 Redeemed                        (32,149,618)        (352,649,545)         (26,145,434)        (334,782,975)
                                 --------------------------------------------------------------------------
 Net increase (decrease)          (1,394,450)        $   (904,695)           7,228,802         $ 88,120,939
                                 ==========================================================================

-----------------------------------------------------------------------------------------------------------
 CLASS B
 Sold                              6,320,365         $ 70,958,107            7,837,432         $ 99,951,476
 Dividends and/or
 distributions reinvested          2,201,008           25,204,122            2,479,247           30,352,277
 Redeemed                        (12,525,612)        (137,762,201)          (9,451,946)        (120,611,133)
                                 --------------------------------------------------------------------------
 Net increase (decrease)          (4,004,239)        $(41,599,972)             864,733         $  9,692,620
                                 ==========================================================================

-----------------------------------------------------------------------------------------------------------
 CLASS C
 Sold                              1,886,328         $ 21,124,579            3,211,146         $ 41,111,852
 Dividends and/or
 distributions reinvested            432,179            4,940,085              401,329            4,914,815
 Redeemed                         (1,891,475)         (20,385,958)          (2,251,323)         (28,689,495)
                                 --------------------------------------------------------------------------
 Net increase                        427,032         $  5,678,706            1,361,152         $ 17,337,172
                                 ==========================================================================

-----------------------------------------------------------------------------------------------------------
 CLASS N
 Sold                                472,713         $  5,351,965               50,932         $    658,442
 Dividends and/or
 distributions reinvested             14,683              167,638                  103                1,341
 Redeemed                           (119,826)          (1,300,988)                  --                   --
                                 --------------------------------------------------------------------------
 Net increase                        367,570         $  4,218,615               51,035         $    659,783
                                 ==========================================================================

 1. For the year ended August 31, 2001, for Class A, B and C shares and for the
 period from March 1, 2001 (inception of offering) to August 31, 2001, for Class
 N shares.

                     34 | OPPENHEIMER CAPITAL INCOME FUND
                        |



--------------------------------------------------------------------------------
 3. PURCHASES AND SALES OF SECURITIES
 The aggregate cost of purchases and proceeds from sales of securities, other
 than short-term obligations, for the year ended August 31, 2002, were
 $4,120,889,642 and $4,258,719,476, respectively.

 As of August 31, 2002, unrealized appreciation (depreciation) based on cost of
 securities for federal income tax purposes of $2,402,455,714 was composed of:

            Gross unrealized appreciation        $ 294,934,776
            Gross unrealized depreciation         (296,284,557)
                                                 -------------
            Net unrealized depreciation          $  (1,349,781)
                                                 =============

 The difference between book-basis and tax-basis unrealized appreciation and
 depreciation, if applicable, is attributable primarily to the tax deferral of
 losses on wash sales, or return of capital dividends, and the realization for
 tax purposes of unrealized gain (loss) on certain futures contracts,
 investments in passive foreign investment companies, and forward foreign
 currency exchange contracts.

--------------------------------------------------------------------------------
 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
 MANAGEMENT FEES. Management fees paid to the Manager were in accordance with
 the investment advisory agreement with the Fund which provides for a fee of
 0.75% of the first $100 million of average annual net assets, 0.70% of the next
 $100 million, 0.65% of the next $100 million, 0.60% of the next $100 million,
 0.55% of the next $100 million and 0.50% of average annual net assets in excess
 of $500 million.
    The Manager will reimburse the fund for certain losses (realized or
 unrealized) on a portfolio investment, often caused by a situation outside the
 Fund's, or its Manager's, direct control, such as an issuer default or a
 decline in fair value. For the year ended August 31, 2002, the Manager made
 reimbursements in the amount of $13,550 related to losses incurred by changes
 in security valuation.

--------------------------------------------------------------------------------
 TRANSFER AGENT FEES. OppenheimerFunds Services (OFS), a division of the
 Manager, acts as the transfer and shareholder servicing agent for the Fund. The
 Fund pays OFS a $19.75 per account fee.
    OFS has voluntarily agreed to limit transfer and shareholder servicing agent
 fees for all classes, up to an annual rate of 0.35% of average net assets per
 class. This undertaking may be amended or withdrawn at any time.

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


                     35 | OPPENHEIMER CAPITAL INCOME FUND
                        |



NOTES TO FINANCIAL STATEMENTS  CONTINUED


--------------------------------------------------------------------------------
 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued
 The compensation paid to (or retained by) the Distributor from the sale of
 shares or on the redemption of shares is shown in the table below for the
 period indicated.



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

 August 31, 2002        $2,233,812       $667,845         $203,793         $1,929,632         $154,139          $45,149

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

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

 August 31, 2002                $9,652         $736,732           $10,425              $261



--------------------------------------------------------------------------------
 SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class
 A Shares. It reimburses the Distributor for a portion of its costs incurred for
 services provided to accounts that hold Class A shares. Reimbursement is made
 quarterly at an annual rate of up to 0.25% of the average annual net assets of
 Class A shares of the Fund. For the year ended August 31, 2002 , payments under
 the Class A Plan totaled $5,199,797, all of which were paid by the Distributor
 to recipients, and included $338,493 paid to an affiliate of the Manager. Any
 unreimbursed expenses the Distributor incurs with respect to Class A shares in
 any fiscal year cannot be recovered in subsequent years.

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

 Distribution fees paid to the Distributor for the year ended August 31, 2002,
 were as follows:



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

 Class B Plan               $4,110,610        $3,224,608        $10,921,681              3.34%
 Class C Plan                  840,947           163,048          2,143,424              2.94
 Class N Plan                   14,148            14,204            117,059              2.88




                     36 | OPPENHEIMER CAPITAL INCOME FUND
                        |



--------------------------------------------------------------------------------
 5. FOREIGN CURRENCY CONTRACTS
 A foreign currency contract is a commitment to purchase or sell a foreign
 currency at a future date, at a negotiated rate. The Fund may enter into
 foreign currency contracts for operational purposes and to seek to protect
 against adverse exchange rate fluctuations. Risks to the Fund include the
 potential inability of the counterparty to meet the terms of the contract.
    The net U.S. dollar value of foreign currency underlying all contractual
 commitments held by the Fund and the resulting unrealized appreciation or
 depreciation are determined using foreign currency exchange rates as provided
 by a reliable bank, dealer or pricing service. Unrealized appreciation and
 depreciation on foreign currency contracts are reported in the Statement of
 Assets and Liabilities as a receivable or payable and in the Statement of
 Operations with the change in unrealized appreciation or depreciation.
    The Fund may realize a gain or loss upon the closing or settlement of the
 foreign currency transactions. Such realized gains and losses are reported with
 all other foreign currency gains and losses in the Statement of Operations.

--------------------------------------------------------------------------------
 6. FUTURES CONTRACTS
 A futures contract is a commitment to buy or sell a specific amount of a
 commodity or financial instrument at a particular price on a stipulated future
 date at a negotiated price. Futures contracts are traded on a commodity
 exchange. The Fund may buy and sell futures contracts that relate to broadly
 based securities indices "financial futures" or debt securities "interest rate
 futures" in order to gain exposure to or to seek to protect against changes in
 market value of stock and bonds or 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 decreases in market value of portfolio securities. The Fund
 may also purchase futures contracts to gain exposure to market changes 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. Realized
 gains and losses are reported in the Statement of Operations as closing and
 expiration of futures contracts.


                     37 | OPPENHEIMER CAPITAL INCOME FUND
                        |



NOTES TO FINANCIAL STATEMENTS  CONTINUED


--------------------------------------------------------------------------------
 6. FUTURES CONTRACTS Continued
    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.

 As of August 31, 2002, the Fund had outstanding futures contracts as follows:



                                                                              UNREALIZED
                            EXPIRATION    NUMBER OF    VALUATION AS OF      APPRECIATION
 CONTRACT DESCRIPTION            DATES    CONTRACTS    AUGUST 31, 2002    (DEPRECIATION)
----------------------------------------------------------------------------------------
 CONTRACTS TO PURCHASE

 U.S. Treasury Nts., 5 yr.    12/19/02          156        $17,342,813        $ (11,656)
 U.S. Treasury Nts., 10 yr.   12/19/02          439         49,071,969           40,539
                                                                              ---------
                                                                                 28,883
                                                                              ---------
 CONTRACTS TO SELL
 U.S. Long Bonds              12/19/02          456         50,017,500          (71,250)
 U.S. Treasury Nts., 2 yr.    12/27/02          177         37,648,453          (55,313)
                                                                              ---------
                                                                               (126,563)
                                                                              ---------
                                                                              $ (97,680)
                                                                              =========


--------------------------------------------------------------------------------
 7. OPTION ACTIVITY
 The Fund may buy and sell put and call options, or write put and covered call
 options on portfolio securities in order to produce incremental earnings or
 protect against changes in the value of portfolio securities.
    The Fund generally purchases put options or writes covered call options to
 hedge against adverse movements in the value of portfolio holdings. When an
 option is written, the Fund receives a premium and becomes obligated to sell or
 purchase the underlying security at a fixed price, upon exercise of the option.
    Options are valued daily based upon the last sale price on the principal
 exchange on which the option is traded and unrealized appreciation or
 depreciation is recorded. The Fund will realize a gain or loss upon the
 expiration or closing of the option transaction. When an option is exercised,
 the proceeds on sales for a written call option, the purchase cost for a
 written put option, or the cost of the security for a purchased put or call
 option is adjusted by the amount of premium received or paid.
    Securities designated to cover outstanding call options are noted in the
 Statement of Investments where applicable. Shares subject to call, expiration
 date, exercise price, premium received and market value are detailed in a note
 to the Statement of Investments. Options written are reported as a liability in
 the Statement of Assets and Liabilities. Realized gains and losses are reported
 in the Statement of Operations.
    The risk in writing a call option is that the Fund gives up the opportunity
 for profit if the market price of the security increases and the option is
 exercised. The risk in writing a put option is that the Fund may incur a loss
 if the market price of the security decreases and the option is exercised. The
 risk in buying an option is that the Fund pays a premium whether or not the
 option is exercised. The Fund also has the additional risk of not being able to
 enter into a closing transaction if a liquid secondary market does not exist.


                     38 | OPPENHEIMER CAPITAL INCOME FUND
                        |



 Written option activity for the year ended August 31, 2002 was as follows:



                                                  CALL OPTIONS                           PUT OPTIONS
                                ------------------------------        ------------------------------
                                NUMBER OF            AMOUNT OF        NUMBER OF            AMOUNT OF
                                CONTRACTS             PREMIUMS        CONTRACTS             PREMIUMS
----------------------------------------------------------------------------------------------------

 Options outstanding as of
 August 31, 2001                   26,025         $  3,768,483            6,846         $  1,966,123
 Options written                  264,140           27,665,915          103,205           31,404,540
 Options closed or expired       (253,246)         (27,586,434)         (68,816)         (15,583,904)
 Options exercised                (34,919)          (3,510,094)         (20,163)          (7,424,152)
                                --------------------------------------------------------------------
 Options outstanding as of
 August 31, 2002                    2,000         $    337,870           21,072         $ 10,362,607
                                ====================================================================


--------------------------------------------------------------------------------
 8. ILLIQUID OR RESTRICTED SECURITIES
 As of August 31, 2002, 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 Trustees as reflecting fair value. A security may also
 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 limitation. The aggregate value of illiquid
 or restricted securities subject to this limitation as of August 31, 2002 was
 $136,592,055, which represents 6% of the Fund's net assets, of which
 $57,239,808 is considered restricted. Information concerning restricted
 securities is as follows:



                           ACQUISITION                        VALUATION AS OF            UNREALIZED
 SECURITY                         DATE                COST    AUGUST 31, 2002          APPRECIATION
---------------------------------------------------------------------------------------------------

 STOCKS AND/OR WARRANTS
 CSK Auto Corp.                8/14/02         $30,000,000        $57,239,808           $27,239,808


--------------------------------------------------------------------------------
 9. BANK BORROWINGS
 The Fund may borrow from a bank for temporary or emergency purposes including,
 without limitation, funding of shareholder redemptions provided asset coverage
 for borrowings exceeds 300%. The Fund has entered into an agreement which
 enables it to participate with other Oppenheimer funds in an unsecured line of
 credit with a bank, which permits borrowings up to $400 million, collectively.
 Interest is charged to each fund, based on its borrowings, at a rate equal to
 the Federal Funds Rate plus 0.45%. Borrowings are payable within 30 days after
 such loan is executed. The Fund also pays a commitment fee equal to its pro
 rata share of the average unutilized amount of the credit facility at a rate of
 0.08% per annum.
    The Fund had no borrowings outstanding during the year ended or at August
 31, 2002.


                     39 | OPPENHEIMER CAPITAL INCOME FUND
                        |

                                                    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, 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. Securities rates in this category are not investment grade.

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. The ratings of obligations in this category are based on their prospects for achieving
partial or full recovery in a reorganization or liquidation of the obligor. While expected recovery values are
highly speculative and cannot be estimated with any precision, the following serve as general guidelines. `DDD'
obligations have the highest potential for recovery, around 90%-100% of outstanding amounts and accrued interest.
`DD' indicates potential recoveries in the range of 50%-90%, and `D' the lowest recovery potential, i.e., below
50%.

Entities rated in this category have defaulted on some or all of their obligations. Entities rated `DDD' have the
highest prospect for resumption of performance or continued operation with or without a formal reorganization
process. Entities rated `DD' and `D' are generally undergoing a formal reorganization or liquidation process;
those rated `DD' are likely to satisfy a higher portion of their outstanding obligations, while entities rated
`D' have a poor prospect for repaying all obligations.

Plus (+) and minus (-) signs may be appended to a rating symbol to denote relative status within the major rating
categories. Plus and minus signs are not added to the "AAA" category or to categories below "CCC," nor to
short-term ratings other than "F1" (see below).

International Short-Term Credit Ratings

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

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

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

B:  Speculative. Minimal capacity for timely payment of financial commitments, 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.



                                                    Appendix B

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

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





                                                    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.2
That is because of the economies of sales efforts realized by OppenheimerFunds Distributor, Inc., (referred to in
this document as the "Distributor"), or by dealers or other financial institutions that offer those shares to
certain classes of investors.

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

For the purposes of some of the waivers described below and in the Prospectus and Statement of Additional
Information of the applicable Oppenheimer funds, the term "Retirement Plan" refers to the following types of
plans:
              1)  plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code,
              2)  non-qualified deferred compensation plans,
              3)  employee benefit plans3
              4)  Group Retirement Plans4
              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.




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

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

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




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

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

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



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

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

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

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

The Class A contingent deferred sales charge is also waived if shares that would otherwise be subject to the
contingent deferred sales charge are redeemed in the following cases:
|_|      To make Automatic Withdrawal Plan payments that are limited annually to no more than 12% of the account
              value adjusted annually.
|_|      Involuntary redemptions of shares by operation of law or involuntary redemptions of small accounts
              (please refer to "Shareholder Account Rules and Policies," in the applicable fund Prospectus).
|_|      For distributions from Retirement Plans, deferred compensation plans or other employee benefit plans for
              any of the following purposes:
              1)  Following the death or disability (as defined in the Internal Revenue Code) of the participant
                  or beneficiary. The death or disability must occur after the participant's account was
                  established.
              2)  To return excess contributions.
              3)  To return contributions made due to a mistake of fact.
              4)  Hardship withdrawals, as defined in the plan.6
              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.7
              10) Participant-directed redemptions to purchase shares of a mutual fund (other than a fund managed
                  by the Manager or a subsidiary of the Manager) if the plan has made special arrangements with
                  the Distributor.
              11) Plan termination or "in-service distributions," if the redemption proceeds are rolled over
                  directly to an OppenheimerFunds-sponsored IRA.
|_|      For distributions from 401(k) plans sponsored by broker-dealers that have entered into a special
              agreement with the Distributor allowing this waiver.
|_|      For distributions from retirement plans that have $10 million or more in plan assets and that have
              entered into a special agreement with the Distributor.
|_|      For distributions from retirement plans which are part of a retirement plan product or platform offered
              by certain banks, broker-dealers, financial advisors, insurance companies or record keepers which
              have entered into a special agreement with the Distributor.

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

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

A.   Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be waived for redemptions of shares in
the following cases:
|_|      Shares redeemed involuntarily, as described in "Shareholder Account Rules and Policies," in the
              applicable Prospectus.
|_|      Redemptions from accounts other than Retirement Plans following the death or disability of the last
              surviving shareholder. The death or disability must have occurred after the account was
              established, and for disability you must provide evidence of a determination of disability by the
              Social Security Administration.
|_|      The contingent deferred sales charges are generally not waived following the death or disability of a
              grantor or trustee for a trust account. The contingent deferred sales charges will only be waived
              in the limited case of the death of the trustee of a grantor trust or revocable living trust for
              which the trustee is also the sole beneficiary. The death or disability must have occurred after
              the account was established, and for disability you must provide evidence of a determination of
              disability by the Social Security Administration.
|_|      Distributions from accounts for which the broker-dealer of record has entered into a special agreement
              with the Distributor allowing this waiver.
|_|      Redemptions of Class B shares held by Retirement Plans whose records are maintained on a daily valuation
              basis by Merrill Lynch or an independent record keeper under a contract with Merrill Lynch.
|_|      Redemptions of Class C shares of Oppenheimer U.S. Government Trust from accounts of clients of financial
              institutions that have entered into a special arrangement with the Distributor for this purpose.
|_|      Redemptions requested in writing by a Retirement Plan sponsor of Class C shares of an Oppenheimer fund
              in amounts of $500,000 or more and made more than 12 months after the Retirement Plan's first
              purchase of Class C shares, if the redemption proceeds are invested in Class N shares of one or
              more Oppenheimer funds.
|_|      Distributions8 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.9
              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.10
              9)  On account of the participant's separation from service.11
              10) Participant-directed redemptions to purchase shares of a mutual fund (other than a fund managed
                  by the Manager or a subsidiary of the Manager) offered as an investment option in a Retirement
                  Plan if the plan has made special arrangements with the Distributor.
              11) Distributions made on account of a plan termination or "in-service" distributions, if the
                  redemption proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.
              12) For distributions from a participant's account under an Automatic Withdrawal Plan after the
                  participant reaches age 59 1/2, as long as the aggregate value of the distributions does not
                  exceed 10% of the account's value, adjusted annually.
              13) Redemptions of Class B shares under an Automatic Withdrawal Plan for an account other than a
                  Retirement Plan, if the aggregate value of the redeemed shares does not exceed 10% of the
                  account's value, adjusted annually.
              14) For distributions from 401(k) plans sponsored by broker-dealers that have entered into a
                  special arrangement with the Distributor allowing this waiver.
|_|      Redemptions of Class B shares or Class C shares under an Automatic Withdrawal Plan from an account other
              than a Retirement Plan if the aggregate value of the redeemed shares does not exceed 10% of the
              account's value annually.

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

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

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

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

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

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

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

A.   Reductions or Waivers of Class A Sales Charges.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



Oppenheimer Capital Income Fund

Internet Web Site:
         WWW.OPPENHEIMERFUNDS.COM
         ------------------------

Investment Adviser
         OppenheimerFunds, Inc.
         498 Seventh Avenue
         New York, New York 10018

Distributor
         OppenheimerFunds Distributor, Inc.
         498 Seventh Avenue
         New York, New York 10018

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

Custodian Bank
         Citibank, N.A.
         111 Wall Street
         New York, New York 10005

Independent Auditors
         Deloitte & Touche LLP
         555 Seventeenth Street, Suite 3600
         Denver, Colorado 80202-3942

Counsel to the Fund
         Myer, Swanson, Adams & Wolf, P.C.
         1600 Broadway
         Denver, Colorado 80202

Counsel to the Independent Trustees
         Mayer, Brown, Rowe & Maw
         1675 Broadway
         New York, New York 10019-5820
1234

PX0300SAI.1002

--------
1 Mrs. Hamilton and Mr. Malone were appointed as Trustees to the Board II Funds effective June 1, 2002.
2 In accordance with Rule 12b-1 of the Investment  Company Act, the term  "Independent  Trustees" in this Statement
of Additional  Information  refers to those  Trustees who are not  "interested  persons" of the Fund and who do not
have any direct or indirect  financial  interest in the operation of the  distribution  plan or any agreement under
the plan.
1 Certain waivers also apply to Class M shares of Oppenheimer Convertible Securities Fund.
2 In the case of Oppenheimer Senior Floating Rate Fund, a continuously-offered closed-end fund, references to
contingent deferred sales charges mean the Fund's Early Withdrawal Charges and references to "redemptions" mean
"repurchases" of shares.
3 An "employee benefit plan" means any plan or arrangement, whether or not it is "qualified" under the Internal
Revenue Code, under which Class N shares of an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single employer or of affiliated employers.
These may include, for example, medical savings accounts, payroll deduction plans or similar plans. The fund
accounts must be registered in the name of the fiduciary or administrator purchasing the shares for the benefit
of participants in the plan.
4 The term "Group Retirement Plan" means any qualified or non-qualified retirement plan for employees of a
corporation or sole proprietorship, members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the group has made special arrangements with
the Distributor and all members of the group participating in (or who are eligible to participate in) the plan
purchase shares of an Oppenheimer fund or funds through a single investment dealer, broker or other financial
institution designated by the group. Such plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and 403(b)
plans other than plans for public school employees. The term "Group Retirement Plan" also includes qualified
retirement plans and non-qualified deferred compensation plans and IRAs that purchase shares of an Oppenheimer
fund or funds through a single investment dealer, broker or other financial institution that has made special
arrangements with the Distributor.
5 However, that concession will not be paid on purchases of shares in amounts of $1 million or more (including
any right of accumulation) by a Retirement Plan that pays for the purchase with the redemption proceeds of Class
C shares of one or more Oppenheimer funds held by the Plan for more than one year.
6 This provision does not apply to IRAs.
7 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.
8 The distribution must be requested prior to Plan termination or the elimination of the Oppenheimer funds as an
investment option under the Plan.
9 This provision does not apply to IRAs.
10 This provision does not apply to loans from 403(b)(7) custodial plans and loans from the
OppenheimerFunds-sponsored Single K retirement plan.
11 This provision does not apply to 403(b)(7) custodial plans if the participant is less than age 55, nor to IRAs.

OPPENHEIMER CAPITAL INCOME FUND

FORM N-1A

PART C

OTHER INFORMATION

Item 23. Exhibits

Amended and Restated Declaration of Trust dated June 7, 2002: Filed herewith.

(b) By-Laws as amended through October 24, 2000: Previously filed with Registrant's Post-Effective Amendment
No. 55, 10/22/01, and incorporated herein by reference.

(c) (i) Specimen Class A Share Certificate: Previously filed with Registrant's Post-Effective Amendment No.
56, 12/21/01, and incorporated herein by reference.

(ii) Specimen Class B Share Certificate: Previously filed with Registrant's Post-Effective Amendment No.
56, 12/21/01, and incorporated herein by reference.

(iii) Specimen Class C Share Certificate: Previously filed with Registrant's Post-Effective Amendment
No. 56, 12/21/01, and incorporated herein by reference.

(iv) Specimen Class N Share Certificate: Previously filed with Registrant's Post-Effective Amendment No.
56, 12/21/01, and incorporated herein by reference.

(d) Investment Advisory Agreement, dated April 16, 1998. Previously filed with Registrant's Post-Effective
amendment No. 50, 10/23/98, and incorporated herein by reference.

(e) (i) General Distributor's Agreement dated October 13, 1992: Previously filed with Registrant's
Post-Effective Amendment No. 42, 10/28/94, and incorporated herein by reference.

(ii) Form of Dealer Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective
Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and
incorporated herein by reference.

(iii) Form of Broker Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective
Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and
incorporated herein by reference.

(iv) Form of Agency Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with Post-Effective
Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/26/01, and
incorporated herein by reference.

(v) Form of Trust Company Fund/SERV Purchase Agreement of OppenheimerFunds Distributor, Inc.: Previously filed
with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No.
2-62076), 10/26/01, and incorporated herein by reference.

(vi) Form of Trust Company Agency Agreement of OppenheimerFunds Distributor, Inc.: Previously filed with
Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076),
10/26/01, and incorporated herein by reference.

Form of Deferred Compensation Plan for Disinterested Trustees/Directors: Previously Filed with Post-Effective
Amendment No. 40 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076), 10/27/98, and
incorporated herein by reference.

(i) Custody Agreement dated October 6, 1992: Filed with Post-Effective Amendment No. 37, to Registrant's
Registration Statement dated 10/28/92, and refiled with Post-Effective Amendment No. 42, 10/28/94, pursuant to
Item 102 of Regulation S-T, and incorporated herein by reference.

(ii) Amended and Restated Foreign Custody Manager Agreement dated 4/3/01: Previously filed with Post-Effective
Amendment No. 34 to the Registration Statement of Oppenheimer Gold & Special Minerals Fund (Reg. 2-82590),
10/25/01, and incorporated herein by reference.

(iii) Amendment dated 4/3/01 to Custody Agreement dated 11/12/92: Previously filed with Post-Effective Amendment
No. 34 to the Registration Statement of Oppenheimer Gold & Special Minerals Fund (Reg. No. 2-82590), 10/25/01,
and incorporated herein by reference.

(h) Not applicable.

(i) Opinion and Consent of Counsel dated September 30, 1970: Previously filed with Registrant's Initial
Registration Statement and refiled with Post Effective amendment No. 42, 10/28/94, pursuant to Item 102 of
Regulation S-T.

Independent Auditors Consent: Filed herewith.

Not applicable.

(m) (i) Amended and Restated Service Plan and Agreement for Class A shares under Rule 12b-1 of the
Investment Company Act dated April 23, 2002: Filed herewith.

(ii) Amended and Restated Distribution and Service Plan and Agreement for Class B shares under Rule
12b-1 of the Investment Company Act dated July 16, 1997: Previously filed with Registrant's Post-Effective
Amendment No. 49, 12/16/97, and incorporated herein by reference.

(iii) Amended and Restated Distribution and Service Plan and Agreement for Class C shares under Rule
12b-1 of the Investment Company Act dated July 16, 1997: Previously filed with Registrant's Post-Effective
Amendment No. 49, 12/16/97, and incorporated herein by reference.

(iv) Distribution and Service Plan and Agreement for Class N shares under Rule 12b-1 of the Investment
Company Act dated October 24, 2000: Filed herewith.

(n) Oppenheimer Funds Multiple Class Plan under Rule 18f-3 March 18, 1996 and updated through 8/21/01:
Previously filed with Post-Effective Amendment No. 20 to the Registration Statement of Oppenheimer Cash Reserves
(Reg. No. 33-23223), 9/27/01, and incorporated herein by reference.

(o) Powers of Attorney for all Trustees/Directors and Officers except for Beverly L. Hamilton, Robert J.
Malone, Edward Cameron, F. William Marshall, Jr., and John Murphy (including Certified Board Resolutions):
Previously filed with Pre-Effective Amendment No. 2 to the Registration Statement of Oppenheimer Select Managers
(Reg. No. 333-49774), 2/8/01, and incorporated herein by reference.

(i) Powers of Attorney for Edward Cameron, F. William Marshall Jr. and John Murphy: Previously filed
with Post-Effective Amendment No. 45 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No.
2-62076), 10/26/01, and incorporated herein by reference.

(ii) Powers of Attorney for Beverly L. Hamilton and Robert J. Malone: Previously filed with
Post-Effective Amendment No. 46 to the Registration Statement of Oppenheimer High Yield Fund (Reg. No. 2-62076),
8/23/02, and incorporated herein by reference.

(p) Amended and Restated Code of Ethics of the Oppenheimer Funds dated March 1, 2000 under Rule 17j-1 of the
Investment Company Act of 1940: Previously filed with the Initial Registration Statement of Oppenheimer Emerging
Growth Fund (Reg. No. 333-44176), 8/21/00, and incorporated herein by reference.

Item 24. - Persons Controlled by or Under Common Control with the Fund
----------------------------------------------------------------------

None.

Item 25. - Indemnification
--------------------------

Reference is made to the provisions of Article Seven of Registrant's Amended and Restated Declaration of Trust
filed as Exhibit 23(a) to this Registration Statement, and incorporated herein by reference.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees,
officers and controlling persons of Registrant pursuant to the foregoing provisions or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a
trustee, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding)
is asserted by such trustee, officer or controlling person, Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.

Item 26. - Business and Other Connections of the Investment Adviser

(a) OppenheimerFunds, Inc. is the investment adviser of the Registrant; it and certain subsidiaries and
affiliates act in the same capacity to other investment companies, including without limitation those described
in Parts A and B hereof and listed in Item 26(b) below.

(b) There is set forth below information as to any other business, profession, vocation or employment of a
substantial nature in which each officer and director of OppenheimerFunds, Inc. is, or at any time during the
past two fiscal years has been, engaged for his/her own account or in the capacity of director, officer,
employee, partner or trustee.

Name and Current Position with OppenheimerFunds, Inc.
Other Business and Connections During the Past Two Years
Timothy L. Abbuhl,
Assistant Vice President None
Amy B. Adamshick,
Vice President None
Charles E. Albers,
Senior Vice President None
Edward J. Amberger,
Assistant Vice President None
Erik Anderson,
Assistant Vice President None
Janette Aprilante,
Vice President & Secretary As of January 2002: Secretary of OppenheimerFunds, Distributor, Inc.,
Centennial Asset Management Corporation, Oppenheimer Partnership Holdings, Inc., Oppenheimer Real Asset
Management, Inc., Shareholder Financial Services, Inc., Shareholder Services, Inc.; Assistant Secretary of
HarbourView Asset Management Corporation, OFI Private Investments, Inc., Oppenheimer Trust Company and OFI
Institutional Asset Management, Inc.
Hany S. Ayad,
Assistant Vice President None
Victor W. Babin,
Senior Vice President None
Bruce L. Bartlett,
Senior Vice President None
John Michael Banta,
Assistant Vice President None
Lerae A. Barela,
Assistant Vice President None
George Batejan,
Executive Vice President/
Chief Information Officer None
Kevin Baum,
Vice President None
Connie Bechtolt,
Assistant Vice President None
Robert Behal
Assistant Vice President Assistant Vice President of HarbourView Asset Management Corporation.
Formerly, Associate Director at MetLife (Jan 2000-May 2000).
Kathleen Beichert,
Vice President Vice President of OppenheimerFunds Distributor, Inc.
Erik S. Berg,
Assistant Vice President None
Rajeev Bhaman,
Vice President None
Mark Binning,
Assistant Vice President None
Robert J. Bishop,
Vice President None
John R. Blomfield,
Vice President None
Chad Boll,
Assistant Vice President None
Lowell Scott Brooks,
Vice President Vice President of OppenheimerFunds Distributor, Inc.
Richard Buckmaster,
Vice President None
Mark Burns,
Assistant Vice President Formerly a Marketing Manager with Alliance Capital Management (October
1999-April 2001).
Bruce Burroughs
Vice President None
Claudia Calich,
Assistant Vice President None
Michael A. Carbuto,
Vice President None
Ronald G. Chibnik,
Assistant Vice President Director of technology for Sapient Corporation (July, 2000-August
2001); software architect for Sapient Corporation (March 1997-July 2000).
H.C. Digby Clements,
Vice President: Rochester Division None
Peter V. Cocuzza,
Vice President None
Julie C. Cusker,
Assistant Vice President:
Rochester Division None
John Damian,
Vice President Formerly senior analyst/director for Citigroup Asset Management
(November 1999-September 2001).
O. Leonard Darling,
Vice Chairman, Executive Vice
President, Chief Investment
Officer & Director Chairman of the Board and a director (since June 1999) and Senior
Managing Director (since December 1998) of HarbourView Asset Management Corporation; a director (since July 2001)
of Oppenheimer Acquisition Corp.; a director (since March 2000) of OFI Private Investments, Inc.; Chairman of the
Board, Senior Managing Director and director (since February 2001) of OFI Institutional Asset Management, Inc.;
Trustee (since 1993) of Awhtolia College - Greece.
John M. Davis,
Assistant Vice President Assistant Vice President of OppenheimerFunds Distributor, Inc.
Robert A. Densen,
Senior Vice President None
Ruggero de'Rossi,
Vice President None
Craig P. Dinsell,
Executive Vice President None
Randall C. Dishmon,
Assistant Vice President Formerly an Associate with Booz Allen & Hamilton (1998-June 2001).
Rebecca K. Dolan
Vice President None
Steven D. Dombrower,
Vice President Vice President of OppenheimerFunds Distributor, Inc.
Bruce C. Dunbar,
Vice President None
Richard Edmiston,
Assistant Vice President None
Daniel R. Engstrom,
Assistant Vice President None
Armand B. Erpf,
Assistant Vice President None
James Robert Erven
Assistant Vice President Formerly an Assistant Vice President/Senior Trader with Morgan Stanley
Investment Management (1999-April 2002).
George R. Evans,
Vice President None
Edward N. Everett,
Vice President None
George Fahey,
Vice President Vice President of OppenheimerFunds Distributor, Inc.
Scott T. Farrar,
Vice President None
Katherine P. Feld,
Vice President, Senior Counsel Vice President of OppenheimerFunds, Distributor, Inc.; Vice President,
Assistant Secretary and Director of Centennial Asset Management Corporation; Vice President of Oppenheimer Real
Asset Management, Inc.
Ronald H. Fielding,
Senior Vice President;
Chairman: Rochester Division Vice President of OppenheimerFunds Distributor, Inc.; Director of ICI
Mutual Insurance Company; Governor of St. John's College; Chairman of the Board of Directors of International
Museum of Photography at George Eastman House.
P. Lyman Foster,
Senior Vice President Senior Vice President of OppenheimerFunds Distributor, Inc.
David Foxhoven,
Assistant Vice President Assistant Vice President of OppenheimerFunds Legacy Program.
Colleen M. Franca,
Assistant Vice President None
Crystal French,
Vice President None
Dan P. Gangemi,
Vice President None
Dan Gagliardo,
Assistant Vice President Formerly an Assistant Vice President with Mitchell Hutchins (January
2000-October 2000).
Subrata Ghose,
Assistant Vice President None
Charles W. Gilbert,
Assistant Vice President None
Alan C. Gilston,
Vice President None
Sharon M. Giordano,
Assistant Vice President None
Jill E. Glazerman,
Vice President None
Paul M. Goldenberg,
Vice President None
Mike Goldverg,
Assistant Vice President None
Bejamin J. Gord,
Vice President Vice President of HarbourView Asset Management Corporation. Formerly
Executive Director with Miller Anderson Sherrerd, a division of Morgan Stanley Investment Management. (April
1992-March 2002).
Laura Granger,
Vice President Formerly a portfolio manager at Fortis Advisors (July 1998-October
2000).
Robert Grill,
Senior Vice President None
Robert Guy,
Senior Vice President None
David Hager,
Vice President None
Robert Haley,
Assistant Vice President None
Marilyn Hall,
Vice President None
Kelly Haney,
Assistant Vice President None
Thomas B. Hayes,
Vice President None
Dorothy F. Hirshman,
Vice President None
Merryl I. Hoffman,
Vice President & Senior Counsel As of December 2001: Secretary of HarbourView Asset Management
Corporation, OFI Private Investments, Inc. and OFI Institutional Asset Management, Inc.; Assistant Secretary of
OppenheimerFunds Legacy Program.
Scott T. Huebl,
Vice President Assistant Vice President of OppenheimerFunds Legacy Program.
Margaret Hui,
Assistant Vice President None
John Huttlin,
Vice President None
James G. Hyland,
Assistant Vice President None
Steve P. Ilnitzki,
Senior Vice President Formerly Vice President of Product Management at Ameritrade (until
March 2000).
Kathleen T. Ives,
Vice President & Assistant Counsel Vice President of OppenheimerFunds Distributor, Inc.; Vice President
and Assistant Secretary of Shareholder Services, Inc.; Assistant Secretary of OppenheimerFunds Legacy Program and
Shareholder Financial Services, Inc.
William Jaume,
Vice President Senior Vice President and Chief Compliance Officer (since April 2000)
of HarbourView Asset Management Corporation; and of OFI Institutional Asset Management, Inc. (since February
2001).
Frank V. Jennings,
Vice President None
John Jennings,
Vice President None
John Michael Johnson,
Assistant Vice President Formerly Vice President, Senior Analyst/Portfolio Manager at Aladdin
Capital Holdings Inc. (February 2001-May 2002) prior to which he was Vice President and Senior Analyst at Merrill
Lynch Investment Managers (October 1996-February 2001).
Lewis A. Kamman,
Vice President None
Jennifer E. Kane,
Assistant Vice President None.
Lynn O. Keeshan,
Senior Vice President None
Thomas W. Keffer,
Senior Vice President None
Cristina J. Keller,
Vice President Vice President of OppenheimerFunds Distributor, Inc.
Michael Keogh,
Vice President None
Garrett K. Kolb,
Assistant Vice President None
Walter G. Konops,
Assistant Vice President None
Avram D. Kornberg,
Senior Vice President None
James Kourkoulakos,
Vice President None
Guy E. Leaf,
Vice President Vice President of Merrill Lynch (January 2000-September 2001.
Christopher M. Leavy,
Senior Vice President Formerly Vice President and portfolio manager at Morgan Stanley
Investment Management (1997-September 2000).
Dina C. Lee,
Assistant Vice President & Assistant Counsel
Formerly an attorney with Van Eck Global (until December 2000).
Laura Leitzinger,
Vice President Vice President of Shareholder Financial Services, Inc.
Michael S. Levine,
Vice President None
Gang Li,
Assistant Vice President None
Shanquan Li,
Vice President None
Mitchell J. Lindauer,
Vice President & Assistant General Counsel None
Bill Linden,
Assistant Vice President None
Malissa B. Lischin,
Assistant Vice President Assistant Vice President of OppenheimerFunds Distributor, Inc.
Reed Litcher,
Vice President None
David P. Lolli,
Assistant Vice President None
Daniel G. Loughran
Vice President: Rochester Division None
Patricia Lovett,
Vice President Vice President of Shareholder Financial Services, Inc. and Senior Vice
President of Shareholder Services, Inc.
Steve Macchia,
Vice President None
Angelo G. Manioudakis
Senior Vice President Senior Vice President of HarbourView Asset Management Corporation.
Formerly Executive Director and portfolio manager for Miller, Anderson & Sherrerd, a division of Morgan Stanley
Investment Management (August 1993-April 2002).
Marianne Manzolillo,
Assistant Vice President None
Philip T. Masterson,
Vice President & Assistant Counsel None
Charles L. McKenzie,
Senior Vice President Senior Vice President of HarbourView Asset Management Corporation and
OFI Institutional Asset Management Corporation.
Lisa Migan,
Assistant Vice President None
Andrew J. Mika,
Senior Vice President None
Joy Milan,
Vice President None
Denis R. Molleur,
Vice President & Senior Counsel None
Nikolaos D. Monoyios,
Vice President None
Charles Moon,
Vice President Vice President of HarbourView Asset Management Corporation. Formerly
an Executive Director and Portfolio Manager with Miller Anderson & Sherrerd, a division of Morgan Stanley
Investment Management (June 1999-March 2002).
John Murphy,
Chairman, President, Chief Executive Officer & Director
Director of OppenheimerFunds Distributor, Inc., Centennial Asset Management Corporation, HarbourView Asset
Management Corporation, OFI Private Investments, Inc., OFI Institutional Asset Management, Inc. and Tremont
Advisers, Inc.; Director (Class A) of Trinity Investments Management Corporation; President and Director of
Oppenheimer Acquisition Corp., Oppenheimer Partnership Holdings, Inc., Oppenheimer Real Asset Management, Inc.;
Chairman and Director of Shareholder Financial Services, Inc. and Shareholder Services, Inc.; Executive Vice
President of MassMutual Life Insurance Company; director of DLB Acquisition Corp.
Thomas J. Murray,
Vice President None
Kenneth Nadler,
Vice President None
David Negri,
Senior Vice President Senior Vice President of HarbourView Asset Management Corporation.
Richard Nichols,
Vice President None
Barbara Niederbrach,
Assistant Vice President None
Raymond C. Olson,
Assistant Vice President Assistant Vice President and Treasurer of OppenheimerFunds
Distributor, Inc.; Treasurer of Centennial Asset Management Corporation.
Frank J. Pavlak,
Vice President None
David P. Pellegrino,
Vice President None
Allison C. Pells,
Assistant Vice President None
James F. Phillips,
Vice President None
Raghaw Prasad,
Assistant Vice President Formerly Associate Vice President with Prudential Securities New York
(January 2001-November 2001) prior to which he was a Director/Analytics with Prudential Investments New Jersey
(April 1997-November 2001).
Jane C. Putnam,
Vice President None
Michael E. Quinn,
Vice President None
Julie S. Radtke,
Vice President None
Norma J. Rapini,
Assistant Vice President:
Rochester Division None
Thomas P. Reedy,
Vice President Vice President (since April 1999) of HarbourView Asset Management
Corporation.
Brian N. Reid,
Assistant Vice President Formerly an Assistant Vice President with Eaton Vance Management
(January 2000-January 2002).
Kristina Richardson,
Assistant Vice President None
David Robertson,
Senior Vice President Senior Vice President of OppenheimerFunds Distributor, Inc.
Rob Robis,
Assistant Vice President None
Antoinette Rodriguez,
Assistant Vice President None
Jeffrey S. Rosen,
Vice President None
Richard H. Rubinstein,
Senior Vice President None
James H. Ruff,
Executive Vice President President and director of OppenheimerFunds Distributor, Inc. and
Centennial Asset Management Corporation; Executive Vice President of OFI Private Investments, Inc.
Andrew Ruotolo
Executive Vice President and Director President and director of Shareholder Services, Inc. and Shareholder
Financial Services, Inc., Director (Class A) of Trinity Investment Management Corporation
Rohit Sah,
Assistant Vice President None
Valerie Sanders,
Vice President None
Tricia Scarlata,
Assistant Vice President Formerly, Marketing Manager of OppenheimerFunds, Inc. (April
2001-August 2002); Client Service Support Manager for Sanford C. Bernstein (December 1999-April 2001)
Jeffrey R. Schneider,
Vice President None
Ellen P. Schoenfeld,
Vice President None
David Schultz,
Senior Vice President Chief Executive Officer, President & Senior Managing Director &
Director of OFI Institutional Asset Management, Inc. and HarbourView Asset Management Corporation; Director
(Class A) and Chairman of Trinity Investment Management Corporation; Director of Oppenheimer Trust Company.
Scott A. Schwegel,
Assistant Vice President None
Allan P. Sedmak
Assistant Vice President None
Jennifer L. Sexton,
Vice President Vice President of OFI Private Investments, Inc.
Martha A. Shapiro,
Vice President None
Navin Sharma,
Vice President Formerly, Manager at BNP Paribas Cooper Neff Advisors (May 2001-April
2002) prior to which he was Development Manager at Reality Online/Reuters America Inc. (June 2000-May 2001).
Steven J. Sheerin,
Vice President Formerly consultant with Pricewaterhouse Coopers (November 2000-May
2001) prior to which he was a Vice President of Merrill Lynch Pierce Fenner & Smith, Inc. (July 1998-October
2000).
Bonnie Sherman,
Assistant Vice President None
David C. Sitgreaves,
Assistant Vice President None
Edward James Sivigny
Assistant Vice President Formerly a Director for ABN Amro Securities (July 2001-July 2002)
prior to which he was Associate Director for Barclays Capital (1998-July 2001).
Enrique H. Smith,
Assistant Vice President Formerly a business analyst with Goldman Sachs (August 1999-August
2001).
Richard A. Soper,
Vice President None
Louis Sortino,
Assistant Vice President:
Rochester Division None
Keith J. Spencer,
Vice President None
Marco Antonio Spinar,
Assistant Vice President Formerly, Director of Business Operations at AOL Time Warner, AOL Time
Warner Book Group (June 2000-December 2001).
Richard A. Stein,
Vice President: Rochester Division None
Arthur P. Steinmetz,
Senior Vice President Senior Vice President of HarbourView Asset Management Corporation.
Jayne M. Stevlingson,
Vice President None
Gregory J. Stitt,
Vice President None
John P. Stoma,
Senior Vice President Senior Vice President of OppenheimerFunds Distributor, Inc.
Wayne Strauss,
Assistant Vice President:
Rochester Division None
Michael Stricker,
Vice President None
Deborah A. Sullivan,
Assistant Vice President,
Assistant Counsel Since December 2001, Secretary of Oppenheimer Trust Company.
Mary Sullivan,
Assistant Vice President None
Kevin L. Surrett,
Assistant Vice President None
Susan B. Switzer,
Vice President None
Anthony A. Tanner,
Vice President: Rochester Division None
Paul Temple,
Vice President Formerly a Vice President of Merrill Lynch (October 2001-January 2002)
prior to which he was a Vice President with OppenheimerFunds, Inc. (May 2000-October 5, 2001).
Eamon Tubridy,
Assistant Vice President None
James F. Turner,
Vice President Formerly portfolio manager for Technology Crossover Ventures (May
2000-March 2001).
Cameron Ullyat,
Assistant Vice President None
Mark S. Vandehey,
Vice President Vice President of OppenheimerFunds Distributor, Inc., Centennial Asset
Management Corporation and Shareholder Services, Inc.
Maureen Van Norstrand,
Assistant Vice President None
Vincent Vermette,
Assistant Vice President Assistant Vice President of OppenheimerFunds Distributor, Inc.
Phillip F. Vottiero,
Vice President None
Samuel Sloan Walker,
Vice President Vice President of HarbourView Asset Management Corporation.
Teresa M. Ward,
Vice President Vice President of OppenheimerFunds Distributor, Inc.
Jerry A. Webman,
Senior Vice President Senior Vice President of HarbourView Asset Management Corporation.
Christopher D. Weiler,
Assistant Vice President:
Rochester Division None
Barry D. Weiss,
Vice President None
Melissa Lynn Weiss,
Vice President Formerly an Associate at Hoguet Newman & Regal, LLP (January 1998-May
2002).
Christine Wells,
Vice President None
Joseph J. Welsh,
Vice President None
Diederick Wermolder,
Vice President Director of OppenheimerFunds International Ltd.; Senior Vice President
(Managing Director of the International Division) of OFI Institutional Asset Management, Inc.
Catherine M. White,
Assistant Vice President Assistant Vice President of OppenheimerFunds Distributor, Inc.
Formerly, Assistant Vice President with Gruntal & Co. LLC (September 1998 - October 2000); member of the American
Society of Pension Actuaries (ASPA) since 1995.
William L. Wilby,
Senior Vice President Formerly Senior Vice President of HarbourView Asset Management
Corporation (May 1999-July 2002).
Donna M. Winn,
Senior Vice President President, Chief Executive Officer and Director of OFI Private
Investments, Inc.; Director and President of OppenheimerFunds Legacy Program; Senior Vice President of
OppenheimerFunds Distributor, Inc.
Kenneth Winston,
Senior Vice President Principal at Richards & Tierney, Inc. (until June 2001).
Brian W. Wixted,
Senior Vice President and
Treasurer Treasurer of HarbourView Asset Management Corporation;
OppenheimerFunds International Ltd., Oppenheimer Partnership Holdings, Inc., Oppenheimer Real Asset Management
Corporation, Shareholder Services, Inc., Shareholder Financial Services, Inc., OFI Private Investments, Inc. and
OFI Institutional Asset Management, Inc.; Treasurer and Chief Financial Officer of Oppenheimer Trust Company;
Assistant Treasurer of Oppenheimer Acquisition Corp. and OppenheimerFunds Legacy Program.
Carol Wolf,
Senior Vice President Serves on the Board of the Colorado Ballet.
Kurt Wolfgruber,
Senior Vice President Director of Tremont Advisers, Inc. (as of January 2002).
Caleb C. Wong,
Vice President None
Edward C. Yoensky,
Assistant Vice President None
Robert G. Zack
Senior Vice President and
General Counsel General Counsel and Director of OppenheimerFunds Distributor, Inc.;
General Counsel of Centennial Asset Management Corporation; Senior Vice President and General Counsel of
HarbourView Asset Management Corporation and OFI Institutional Asset Management, Inc.; Senior Vice President,
General Counsel and Director of Shareholder Financial Services, Inc., Shareholder Services, Inc., OFI Private
Investments, Inc. and Oppenheimer Trust Company; Vice President and Director of Oppenheimer Partnership Holdings,
Inc.; Secretary of OAC Acquisition Corp.; Director and Assistant Secretary of OppenheimerFunds International
Ltd.; Director of Oppenheimer Real Asset Management, Inc.; Vice President of OppenheimerFunds Legacy Program.
Jill Zachman,
Vice President: Rochester Division None
Neal A. Zamore,
Vice President None
Mark D. Zavanelli,
Vice President None
Alex Zhou,
Assistant Vice President None
Arthur J. Zimmer,
Senior Vice President Senior Vice President (since April 1999) of HarbourView Asset
Management Corporation.

The Oppenheimer Funds include the following:

Centennial America Fund, L.P.
Centennial California Tax Exempt Trust
Centennial Government Trust
Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial Tax Exempt Trust
Limited Term New York Municipal Fund (Rochester Portfolio Series)
Oppenheimer Bond Fund (a series of Oppenheimer Integrity Funds)
Oppenheimer California Municipal Fund
Oppenheimer Capital Appreciation Fund
Oppenheimer Capital Income Fund
Oppenheimer Capital Preservation Fund
Oppenheimer Cash Reserves
Oppenheimer Champion Income Fund
Oppenheimer Concentrated Growth Fund
Oppenheimer Convertible Securities Fund (Bond Fund Series)
Oppenheimer Developing Markets Fund
Oppenheimer Discovery Fund
Oppenheimer Emerging Growth Fund
Oppenheimer Emerging Technologies Fund
Oppenheimer Enterprise Fund
Oppenheimer Europe Fund
Oppenheimer Global Fund
Oppenheimer Global Growth & Income Fund
Oppenheimer Gold & Special Minerals Fund
Oppenheimer Growth Fund
Oppenheimer High Yield Fund
Oppenheimer International Bond Fund
Oppenheimer International Growth Fund
Oppenheimer International Small Company Fund
Oppenheimer Limited-Term Government Fund
Oppenheimer Limited Term Municipal Fund (a series of Oppenheimer Municipal Fund)
Oppenheimer Main Street Growth & Income Fund (a series of Oppenheimer Main
Street Funds, Inc.
Oppenheimer Main Street Opportunity Fund
Oppenheimer Main Street Small Cap Fund
Oppenheimer MidCap Fund
Oppenheimer Money Market Fund, Inc.
Oppenheimer Multiple Strategies Fund
Oppenheimer Multi-Sector Income Trust
Oppenheimer Multi-State Municipal Trust (3 series):
Oppenheimer New Jersey Municipal Fund
Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Rochester National Municipals
Oppenheimer Municipal Bond Fund
Oppenheimer New York Municipal Fund
Oppenheimer Quest Capital Value Fund, Inc.
Oppenheimer Quest For Value Funds (3 series)
Oppenheimer Quest Balanced Value Fund
Oppenheimer Quest Opportunity Value Fund
Oppenheimer Small Cap Value Fund
Oppenheimer Quest Global Value Fund, Inc.
Oppenheimer Quest Value Fund, Inc.
Oppenheimer Real Asset Fund
Oppenheimer Real Estate Fund
Oppenheimer Select Managers (6 series):
Gartmore Millennium Growth Fund II
Jennison Growth Fund
Mercury Advisors Focus Growth Fund
Mercury Advisors S&P 500 Index Fund
QM Active Balanced Fund
Salomon Brothers Capital Fund
Oppenheimer Senior Floating Rate Fund
Oppenheimer Series Fund, Inc. (2 series):
Oppenheimer Disciplined Allocation Fund
Oppenheimer Value Fund
Oppenheimer Special Value Fund
Oppenheimer Strategic Income Fund
Oppenheimer Total Return Fund, Inc.
Oppenheimer Tremont Market Neutral Fund LLC
Oppenheimer Tremont Opportunity Fund LLC
Oppenheimer Trinity Core Fund
Oppenheimer Trinity Large Cap Growth Fund
Oppenheimer Trinity Value Fund
Oppenheimer U.S. Government Trust
Oppenheimer Variable Account Funds (10 series):
Oppenheimer Aggressive Growth Fund/VA
Oppenheimer Bond Fund/VA
Oppenheimer Capital Appreciation Fund/VA
Oppenheimer Global Securities Fund/VA
Oppenheimer High Income Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
Oppenheimer Main Street Small Cap Fund/VA
Oppenheimer Money Fund/VA
Oppenheimer Multiple Strategies Fund/VA
Oppenheimer Strategic Bond Fund/VA
Panorama Series Fund, Inc. (4 series):
Growth Portfolio
Government Securities Portfolio
Oppenheimer International Growth Fund/VA
Total Return Portfolio
Rochester Fund Municipals

The address of the Oppenheimer funds listed above, Shareholder Financial Services, Inc., Shareholder Services,
Inc., OppenheimerFunds Services, Centennial Asset Management Corporation, Centennial Capital Corp., Oppenheimer
Real Asset Management, Inc. and OppenheimerFunds Legacy Program is 6803 South Tucson Way, Centennial, Colorado
80112-3924.

The address of OppenheimerFunds, Inc., OppenheimerFunds Distributor, Inc., HarbourView Asset Management
Corporation, Oppenheimer Partnership Holdings, Inc., Oppenheimer Acquisition Corp., OFI Private Investments,
Inc., OFI Institutional Asset Management, Inc. and Oppenheimer Trust Company is 498 Seventh Avenue, New York, New
York 10018.

The address of Tremont Advisers, Inc. is 555 Theodore Fremd Avenue, Suite 206-C, Rye, New York 10580.

The address of OppenheimerFunds International Ltd. is Bloc C, Irish Life Center, Lower Abbey Street, Dublin 1,
Ireland.

The address of Trinity Investment Management Corporation is 301 North Spring Street, Bellefonte, Pennsylvania
16823.

Item 27. Principal Underwriter

(a) OppenheimerFunds Distributor, Inc. is the Distributor of the Registrant's shares. It is also the
Distributor of each of the other registered open-end investment companies for which OppenheimerFunds, Inc. is the
investment adviser, as described in Part A and B of this Registration Statement and listed in Item 26(b) above
(except Oppenheimer Multi-Sector Income Trust and Panorama Series Fund, Inc.) and for MassMutual Institutional
Funds.

(b) The directors and officers of the Registrant's principal underwriter are:

Name & Principal
Business Address Position & Office
with Underwriter Position and Office
with Registrant
Robert Agan(1) Vice President None
Janette Aprilante(1) Secretary None
Jason R. Bach
3264 Winthrop Cricle
Marietta, GA 30067 Vice President None
Kathleen Beichert(1) Vice President None
Gabriella Bercze(2) Vice President None
Douglas S. Blankenship
17011 Woodbark
Spring, TX 77379 Vice President None
Tracey Blinzler(1) Assistant Vice President None
Kevin Bonner(1) Vice President None
L. Scott Brooks(2) Vice President None
Kevin E. Brosmith
170 Phillip Court
Lake Bluff, IL 60044 Senior Vice President None
Jeffrey W. Bryan(2) Vice President None
Susan Burton
412 Towne Green Circle
Addison, TX 75001 Vice President None
Kathleen Mary Byron
6 Dahlia Drive
Irvine, CA 92618 Vice President None
Robert A. Coli
12 White Tail Lane
Bedminster, NJ 07921 Vice President None
Jill E. Crockett(2) Assistant Vice President None
Jeffrey D. Damia(2) Vice President None
John Davis(2) Assistant Vice President None
Stephen J. Demetrovits(2) Vice President None
Joseph A. DiMauro
244 McKinley Avenue
Grosse Pointe Farms, MI 48236 Vice President None
Steven Dombrower(w) Vice President None
George P. Dougherty
4090 Redbud Circle
Doylestown, PA 18901 Vice President None
Cliff H. Dunteman
1196 Fieldstone Dr.
Crystal Lake, IL 60014-1642 Vice President None
John Eiler(2) Vice President None
Kent M. Elwell
35 Crown Terrace
Yardley, PA 19067 Vice President None
Gregg A. Everett
7124 Trysail Circle
Tampa, FL 33607 Vice President None
George R. Fahey
9 Townview Court
Flemington, NJ 08822 Vice President None
Eric C. Fallon
10 Worth Circle
Newton, MA 02458 Vice President None
Katherine P. Feld(2) Vice President Assistant Secretary
Mark J. Ferro(2) Vice President None
Ronald H. Fielding(3) Vice President None
Patrick W. Flynn (1) Senior Vice President None
John E. Forrest(2) Senior Vice President None
John ("J) Fortuna(2) Vice President None
P. Lyman Foster(2) Senior Vice President None
Luiggino J. Galleto
10302 Riesling Court
Charlotte, NC 28277 Vice President None
Michelle M. Gans
2700 Polk Street, Apt. #9
San Francisco, CA 94109 Vice President None
Lucio Giliberti
6 Cyndi Court
Flemington, NJ 08822 Vice President None
Raquel Granahan(2) Vice President None
Ralph Grant(2) Senior Vice President None
Michael D. Guman
3913 Pleasant Avenue
Allentown, PA 18103 Vice President None
Tonya N. Hammet
2612 W. Grand Reserve Circle #227
Clearwater, FL 33759 Assistant Vice President None
Clifford W. Heidinger
90 Gates Street
Portsmouth, NH 03801 Vice President None
Phillipe D. Hemery
184 Park Avenue
Rochester, NY 14607 Vice President None
Elyse R. Jurman Herman
1194 Hillsboro Mile, Villa 51
Hillsboro Beach, FL 33062 Vice President None
Wendy G. Hetson
4 Craig Street
Jericho, NY 11753 Vice President None
Kristen L. Heyburn
2315 Mimosa Drive #2
Houston, TX 77019 Vice President None
William E. Hortz(2) Vice President None
Edward Hrybenko(2) Vice President None
Brian F. Husch(2) Vice President None
Richard L. Hymes(2) Assistant Vice President None
Kathleen T. Ives(1) Vice President Assistant Secretary
Eric K. Johnson
28 Oxford Avenue
Mill Valley, CA 94941 Vice President None
Mark D. Johnson
15792 Scenic Green Court
Chesterfield, MO 63017 Vice President None
John S. Kavanaugh
2 Cervantes, Apt. #301
San Francisco, CA 94123 Vice President None
Christina J. Keller(2) Vice President None
Brian G. Kelly
60 Larkspur Road
Fairfield, CT 06430 Vice President None
Michael Keogh(2) Vice President None
Lisa Klassen(1) Assistant Vice President None
Richard Klein
4820 Fremont Avenue So.
Minneapolis, MN 55409 Senior Vice President None
Richard Knott(2) Vice President None
Dean Kopperud(2) Senior Vice President None
Brent A. Krantz
P. O. Box 1313
Seahurst, WA 98062 Senior Vice President None
David T. Kuzia
9697 S. Golden Eagle Dr.
Highlands, CO 80126 Vice President None
Tracey Lange(2) Vice President None
Paul R. LeMire Vice President None
Dawn Lind
21 Meadow Lane
Rockville Centre, NY 11570 Vice President None
Malissa Lischin(2) Assistant Vice President None
James V. Loehle
30 Wesley Hill Lane
Warwick, NY 10990 Vice President None
John J. Lynch
5341 Ellsworth
Dallas, TX 75206 Vice President None
Mark Macken
462 Lincoln Avenue
Sayville, NY 11782 Vice President None
Michael Magee(2) Vice President None
Steven C. Manns
1941 W. Wolfram
Chicago, IL 60657 Vice President None
Todd A. Marion
3 St. Marks Place
Cold Spring Harbor, NY 11724 Vice President None
David M. Martin
10155 S. Woodrose Lane
Highlands Ranch, CO 80126 Vice President None
LuAnn Mascia(2) Assistant Vice President None
Theresa-Marie Maynier
2421 Charlotte Drive
Charlotte, NC 28203 Vice President None
Anthony P. Mazzariello
704 Beaver Road
Leetsdale, PA 15056 Vice President None
John C. McDonough
3812 Leland Street
Chevy Chase, MD 20815 Vice President None
Kent C. McGowan
18424 12th Avenue West
Lynnwood, WA 98037 Vice President None
John V. Murphy(2) Director President, Principal Executive
Officer and Trustee/Director
Wendy Jean Murray
32 Carolin Road
Upper Montclair, NJ 07043 Vice President None
Christina Nasta(2) Assistant Vice President None
Kevin P. Neznek(2) Vice President None
Chad V. Noel
2408 Eagleridge Drive
Henderson, NV 89014 Vice President None
Raymond C. Olson(1) Assistant Vice President & Treasurer None
Brian C. Perkes
8734 Shady Shore Drive
Frisco, TX 75034 Vice President None
Charles K. Pettit
22 Fall Meadow Drive
Pittsford, NY 14534 Vice President None
William L. Presutti
238 Kemp Avenue
Fair Haven, NJ 07704 Vice President None
Elaine Puleo-Carter(2) Senior Vice President None
Christopher L. Quinson
19 Cayuga Street
Rye, NY 10580 Vice President None
Minnie Ra
100 Dolores Street, #203
Carmel, CA 93923 Vice President None
Heather Rabinowitz(2) Assistant Vice President None
Gary D. Rakan
25031 Woodridge Triangle
Farmington, MI 48335 Vice President None
Michael A. Raso
16 N. Chatsworth Ave., Apt. 301
Larchmont, NY 10538 Vice President None
Douglas Rentschler
677 Middlesex Road
Grosse Pointe Park, MI 48230 Vice President None
Louis H. Reynolds Vice President None
Michelle Simone Richter(2) Vice President None
Ruxandra Risko(2) Vice President None
David R. Robertson(2) Senior Vice President None
Kenneth A. Rosenson
24753 Bantage Point Terr.
Malibu, CA 90265 Vice President None
James H. Ruff(2) President & Director None
William R. Rylander
85 Evergreen Road
Vernon, CT 06066 Vice President None
Thomas Sabow(2) Vice President None
Alfredo Scalzo
9616 Lake Chase Island Way
Tampa, FL 33626 Vice President None
Michael Sciortino
785 Beau Chene Drive
Mandeville, LA 70471 Vice President None
Eric Sharp
862 McNeill Circle
Woodland, CA 95695 Vice President None
Debbie Simon(2) Vice President None
Douglas Bruce Smith
808 South 194th Street
Seattle,WA 98148 Vice President None
William A. Spetrino
7631 Yennicook Way
Hudson, OH 44236 Vice President None
Bryan Stein(2) Vice President None
John Stoma(2) Senior Vice President None
Brian C. Summe
239 N. Colony Drive
Edgewood, KY 41017 Vice President None
Michael Sussman(2) Assistant Vice President None
George T. Sweeney
5 Smoke House Lane
Hummelstown, PA 17036 Senior Vice President None
Scott McGregor Tatum
704 Inwood
Southlake, TX 76092 Vice President None
James Taylor(2) Assistant Vice President None
Martin Telles(2) Senior Vice President None
David G. Thomas
1328 N. Cleveland Street
Arlington, VA 22201 Vice President None
Bryan K.Toma
14575 S. Gallery
Olathe, KS 66062 Vice President None
Floyd A. Tucker
1930 W. Barry Ave., #2
Chicago, IL 60657 Vice President None
Tanya Valency(2) Vice President None
Mark Vandehey(1) Vice President None
Vincent Vermete Assistant Vice President None
Teresa Ward(1) Vice President None
Michael J. Weigner
4905 W. San Nicholas Street
Tampa, FL 33629 Vice President None
Donn Weise
3249 Earlmar Drive
Los Angeles, CA 90064 Vice President None
Catherine White(2) Assistant Vice President None
Thomas Wilson(2) Vice President None
Donna Winn(2) Senior Vice President None
Philip Witkower(2) Senior Vice President None
Cary Patrick Wozniak
18808 Bravata Court
San Diego, CA 92128 Vice President None
Gregor D. Yuska
16035 Canterbury Estates Dr.
Ellisville, MO 63021 Vice President None
Robert G. Zack(2) General Counsel & Director Vice President and Secretary

(1)6803 South Tucson Way, Centennial, CO 80112-3924
(2)498 Seventh Avenue, New York, NY 10018
(3)350 Linden Oaks, Rochester, NY 14623

Item 28. Location of Accounts and Records

The accounts, books and other documents required to be maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated thereunder are in the possession of OppenheimerFunds, Inc.
at its offices at 6803 South Tucson Way, Englewood, Colorado 80112.

Item 29. Management Services

Not applicable

Item 30. Undertakings

Not applicable.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and/or the Investment Company Act of 1940, the
Registrant certifies that it meets all requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York and State of New York on the 22nd
day of October 2002.

OPPENHEIMER CAPITAL INCOME FUND

By: /s/ John V. Murphy*
-----------------------------------
John V. Murphy, President, Principal Executive
Officer and Trustee

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by
the following persons in the capacities on the dates indicated:

Signatures Title Date
---------- ----- ----

/s/ James C. Swain* Chairman and Trustee October 22, 2002
------------------
James C. Swain

/s/ John V. Murphy* President, Principal October 22, 2002
------------------- Executive Officer
John V. Murphy and Trustee

/s/ Brian W. Wixted* Treasurer, Principal October 22, 2002
------------------------- Financial and
Brian W. Wixted Accounting Officer

/s/ William L. Armstrong* Trustee October 22, 2002
-------------------------
William L. Armstrong

/s/ Robert G. Avis* Trustee October 22, 2002
----------------------
Robert G. Avis

/s/ George Bowen* Trustee October 22, 2002
----------------------
George Bowen

/s/ Edward Cameron* Trustee October 22, 2002
------------------------
Edward Cameron

/s/ Jon S. Fossel* Trustee October 22, 2002
--------------------
Jon S. Fossel

/s/ Sam Freedman* Trustee October 22, 2002
----------------------
Sam Freedman

/s/ Beverly L. Hamilton* Trustee October 22, 2002
------------------------
Beverly L. Hamilton

/s/ Robert J. Malone* Trustee October 22, 2002
----------------------------
Robert J. Malone

/s/ F. William Marshall, Jr.* Trustee October 22, 2002
--------------------------------
F. William Marshall, Jr.

*By: /s/ Robert G. Zack
--------------------------------
Robert G. Zack, Attorney-in-Fact

OPPENHEIMER CAPITAL INCOME FUND

Registration Statement No. 2-33043

Post-Effective Amendment No. 57

EXHIBIT INDEX
-------------

Exhibit No. Description
----------- -----------

23(a) Amended and Restated Declaration of Trust

23(j) Independent Auditors' Consent

23 (m) (i) Amended and Restated Service Plan Agreement for Class A shares
(iv) Distribution and Service Plan Agreement for Class N shares.

n1a\300\2002\300ptc Oct 2002(b)