Oppenheimer

Quest Capital Value Fund, Inc. SM

Prospectus dated December 23, 2003



                                        Oppenheimer Quest Capital Value
                                        Fund, Inc. is a mutual fund that
                                        seeks capital appreciation as its
                                        goal. It invests mainly in common
                                        stocks, and other equity securities
                                        believed to be undervalued in the
                                        marketplace.
                                             This Prospectus contains important
                                        information about the Fund's objective,
                                        and its investment policies, strategies
                                        and risks. It also contains important
                                        information about how to buy and sell
                                        shares of the Fund and other account
As with all mutual funds, the           features. Please read this Prospectus
Securities and Exchange Commission has  carefully before you invest and keep it
not approved or disapproved the Fund's  for future reference about your account.
securities nor has it determined that
this Prospectus is accurate or
complete. It is a criminal offense to
represent otherwise.




                                                       [logo] OppenheimerFunds
                                                       The Right Way to Invest








                                      2
CONTENTS

               ABOUT THE FUND


               The Fund's Investment Objective and Principal Investment
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


ABOUT  THE  FUND


The Fund's Investment Objective and Principal Investment Strategies


WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks capital appreciation.

WHAT DOES THE FUND MAINLY INVEST IN?  The Fund invests mainly in common
stocks of U.S. issuers that the portfolio manager believes are undervalued in
the marketplace. The Fund may invest in other equity securities, such as
preferred stocks, warrants and debt securities convertible into common
stocks. These investments are more fully explained in "About the Fund's
Investments," below.

HOW DOES THE PORTFOLIO MANAGER DECIDE WHAT SECURITIES TO BUY OR SELL? In
selecting securities for the Fund, the Fund's portfolio manager, who is
employed by the Sub-Advisor, OpCap Advisors, uses a "value" approach to
investing. The portfolio manager searches for securities of companies
believed to be undervalued in the marketplace, in relation to factors such as
a company's assets, earnings, growth potential and cash flows. This process
and the inter-relationship of the factors used may change over time and its
implementation may vary in particular cases. Currently, the selection process
includes the following techniques:
o     A "bottom up" analytical approach using fundamental research to
         evaluate particular issuers before considering industry trends,
         evaluating each issuer's characteristics, financial results and
         management.
o     A search for securities of companies believed to be undervalued and
         having a high return on capital, strong management committed to
         shareholder value, and positive cash flows.
o     Ongoing monitoring of issuers for fundamental changes in the company
         that might alter the portfolio manager's initial expectations about
         the security and might result in a decision to sell the security.

WHO IS THE FUND DESIGNED FOR? The Fund is designed for investors seeking
capital appreciation over the long term. Those investors should be willing to
assume the risks of short-term share price fluctuations that are typical for
a fund emphasizing investments in equity securities. Since the Fund does not
seek income and its income from investments will likely be small, it is not
designed for investors needing current income or preservation of capital.
Because of its focus on long-term growth, the Fund may be appropriate for a
portion of a retirement plan investment. 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 in stocks
and bonds 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
Sub-Advisor will cause the Fund to underperform other funds having a similar
objective. As an example, the portfolio manager's "value" approach to
investing could result in fewer Fund investments in stocks that become highly
valued by the marketplace during times of rapid market advances. This could
cause the Fund to underperform other funds that seek capital appreciation but
that employ a growth or non-value approach to investing.


RISKS OF INVESTING IN STOCKS. Stocks fluctuate in price, and their short-term
volatility at times may be great. Because the Fund currently focuses on
investments in equity securities, the value of the Fund's portfolio will be
affected by changes in the stock markets.  The Fund's net asset values per
share 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.

      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 does not limit its investments to issuers in a
particular market capitalization range or ranges, although it currently
invests mainly in securities of companies with medium-size capitalizations
and larger. It also can invest in small companies, which may have more
volatile stock prices than large companies.  The stock prices of large-cap
issuers tend to be less volatile than the prices of mid-cap and small-cap
companies in the short term, but these companies may not afford the same
growth opportunities as mid-cap and small-cap companies.


RISKS OF FOREIGN INVESTING. The Fund can buy securities of companies in
developed and underdeveloped countries. While the Fund has no limits on the
amounts it can invest in foreign securities, currently it does not intend to
invest more than 25% of its net assets in securities of issuers in any single
foreign country or more than 5% of its net assets in companies or government
issuers in emerging market countries.

      While foreign securities may offer special investment opportunities,
there are also 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 that U.S.
companies are subject to.


      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. These risks could cause the prices of foreign stocks to fall and
could therefore depress the Fund's share price.

HOW RISKY IS THE FUND OVERALL? The risks described above collectively form
the overall risk profile of the Fund, and can affect the value of the Fund's
investments, its investment performance and its prices per share. Particular
investments and investment strategies have risks. The Fund is also subject to
the risk that the stocks the Sub-Advisor selects will underperform the stock
market, the relevant indices or other funds with similar investment
objectives and strategies.  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 objective.


      In the short term, the stock markets can be volatile, and the price of
the Fund's shares can go up and down substantially. The Fund generally does
not use income-oriented investments to help cushion the Fund's total return
from changes in stock prices. In the OppenheimerFunds spectrum, the Fund is
generally more conservative than aggressive growth stock funds, but has
greater risks than funds that invest in both stocks and bonds or in
investment-grade debt securities.

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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 10 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
for the other classes of shares will vary.

      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. 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 the 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
would be less than those shown.
Returns including periods prior to 3/3/97 have been adjusted to reflect
expenses in effect as of that date, because the Fund's Class A shares were
previously "capital" shares of the Fund that bore no expenses while the Fund
was a closed-end investment company. For the period 1/1/03 through 9/30/03,
the cumulative return (not annualized) before taxes for Class A shares was
13.60%. During the period shown in the bar chart, the highest return (not
annualized) before taxes for a calendar quarter was 19.34% (4th Qtr '98) and
the lowest return (not annualized) before taxes for a calendar quarter was
- -14.38% (3rd Qtr '01).








                                                     5 Years      10 Years

Average Annual Total Returns                       (or life of   (or life of
For the periods ended December 31,      1 Year      class, if     class, if
2002                                                  less)         less)

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Class A Shares (inception 2/13/87)

     Return Before Taxes               -19.62%        3.03%         8.20%
     Return After Taxes on
Distributions                          -19.62%        0.27%         5.10%
     Returns After Taxes on

Distributions

     and Sale of Shares                -11.95%        2.05%         5.98%

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S&P 500 Index 1 (reflects no           -22.09%       -0.58%         9.34%
deductions
for fees, expenses or taxes)

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Class B Shares( inception 3/3/97)      -19.60%        3.39%         5.55%

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Class C Shares (inception 3/3/97)      -16.20%        3.61%         5.61%

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Class N Shares (inception 3/1/01)      -15.80%       -8.37%          N/A
1. From 12/31/91


The Fund commenced operations on 2/13/87 as a closed-end investment company
with two classes of shares, income shares and capital shares. Capital shares
were entitled to all gains and losses but bore no expenses. Income shares
bore all of the Fund's operating expenses. The Fund redeemed its income
shares and converted to an open-end fund on 3/3/97. The capital shares were
designated as Class A shares, which bear their allocable share of Fund
expenses.

The Fund's average annual total returns in the table include the applicable
sales charges: 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-year); and for Class C and Class N, 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 any contingent deferred sales charge and uses Class A performance for
the period after conversion. Returns for Class A reflect the historical
performance of the Fund's previous capital shares as adjusted for the fees
and expenses of Class A in effect on 3/3/97 (without giving effect to any fee
waivers). Returns for periods after 3/3/97 through 2/28/99 are net of the
Manager's waiver of certain fees and the Distributor's waiver of certain
distribution fees.
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 performance of the Fund's Class A shares is compared
to the S&P 500 Index, an unmanaged index of equity securities. The index
performance includes the reinvestment of income but does not reflect
transaction costs, fees, expenses or taxes. The Fund's investments vary from
those in the index.


Fees and Expenses of the Fund

The following tables are provided 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 transaction expenses directly, such as sales charges. The numbers below
are based on the Fund's expenses during its fiscal year ended October 31,
2003.

Shareholder Fees (charges paid directly from your investment):

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

Management Fees                       0.90%      0.90%     0.90%       0.90%

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Distribution and/or Service           0.25%      1.00%     1.00%       0.50%
(12b-1) Fees

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Other Expenses                        0.34%      0.47%     0.47%       0.51%

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Total Annual Operating Expenses       1.49%      2.37%     2.37%       1.91%

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Effective January 1, 2004 the management fee schedule is revised as described
below in  "How the Fund is Managed-The Manager-The Manager's Fee." Management
Fees in the table above assumes that the revised management fee schedule,
effective January 1, 2004, was in effect for the Fund's fiscal year ended
October 31, 2003. For the Fund's fiscal year ended October 31, 2003, the
actual management fees were 0.96% for each class of shares.

Effective January 1, 2003, the Board set the Class A asset-based sales charge
to zero resulting in a 12b-1 fee of 0.25%. The Board of Directors can set the
rate of the asset-based sales charge on Class A shares up to 0.25% of average
annual net assets. For the Fund's fiscal year ended October 31, 2003, the
actual 12b-1 fee was 0.26% for Class A shares, With consideration given to
the actual management fees for each class of shares, and the actual 12b-1
fees for Class A shares, above, the "Total Annual Operating Expenses" were
1.56% for Class A shares, 2.43% for Class B shares, 2.43% for Class C shares,
and 1.97% for Class N shares.

Expenses may vary in future years. "Other Expenses" include transfer agent
fees, custodial fees, and accounting and legal expenses 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 may be amended or withdrawn at any time. After the
waiver, the actual "Other Expenses" and "Total Annual Operating Expenses" as
percentages of average daily net assets were  0.40% and 2.36% for Class B
shares, 0.40% and 2.36% for Class C shares and 0.41% and 1.87% for Class N
shares. For the Fund's fiscal year ended October 31, 2003, the transfer agent
fees did not exceed the expense limitation described above for Class A shares.

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 to Buy Shares" for details.
2.    Applies to  redemptions  in first year after  purchase.  The  contingent
      deferred  sales  charge  gradually  declines  from 5% to 1% in years one
      through six and is eliminated after that.
3.    Applies to shares redeemed within 12 months of purchase.
4.    Applies to shares redeemed within 18 months of a retirement plan's
      first purchase of Class N shares.

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 as in the table above. 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 Years
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Class A Shares           $718           $1,019        $1,341        $2,252

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Class B Shares           $740           $1,039        $1,465        $2,2861

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Class C Shares           $340           $739          $1,265        $2,706

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Class N Shares           $294           $600          $1,032        $2,233


If shares are not        1 Year         3 Years       5 Years       10 Years
redeemed:
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Class A Shares           $718           $1,019        $1,341        $2,252

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Class B Shares           $240           $739          $1,265        $2,2861

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Class C Shares           $240           $739          $1,265        $2,706

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

Class N Shares           $194           $600          $1,032        $2,233


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 shares 72 months after
purchase.

About the Fund's Investments


THE FUND'S PRINCIPAL INVESTMENT POLICIES AND RISKS. The allocation of the
Fund's portfolio among the different types of investments will vary over time
based upon the 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 Fund's investment Manager, OppenheimerFunds, Inc., has engaged the
Sub-Advisor, OpCap Advisors, to select securities for the Fund's portfolio.
The Sub-Advisor 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 assets in 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.

Stock Investments. The Fund invests mainly in common stocks and other equity
      securities to seek capital appreciation. They can be securities issued
      by domestic or foreign companies. While the Fund can invest in
      securities of issuers of small, medium or large market capitalization,
      the Sub-Advisor currently focuses investments on mid-size companies and
      larger.

      At times, the Fund may increase the relative emphasis of its
      investments in the securities of issuers in a particular industry, or
      of a particular capitalization or a range of capitalizations, depending
      on the Sub-Advisor's judgment about market and economic conditions.
      Stocks of issuers in a particular industry may be affected by changes
      in economic conditions, government regulations, availability of basic
      resources or other events that affect that industry more than others.
      To the extent that the Fund increases the relative emphasis of its
      investments in a particular industry, its share prices will fluctuate
      in response to events affecting that industry.

Foreign Investing. The Fund can buy foreign securities that are listed on a
      domestic or foreign stock exchange, traded in domestic or foreign
      over-the-counter markets, or represented by American Depository
      Receipts or other similar receipts. The Fund may invest to a limited
      degree in emerging markets, which have greater risks than developed
      countries, such as less developed trading markets and possibly less
      liquidity, unstable governments and economies, and greater risks of
      nationalization and restrictions on foreign ownership, making these
      investments more volatile than other foreign investments. The risks
      could cause the prices of foreign stocks to fall and could therefore
      depress the Fund's share prices. The Fund will hold foreign currency
      only in connection with buying and selling foreign securities.

CAN THE FUND'S INVESTMENT OBJECTIVE AND POLICIES CHANGE?  The Fund's Board of
Directors 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
objective is a fundamental policy. Other investment restrictions that are
fundamental policies are listed in the Statement of Additional Information.
An investment policy is not fundamental unless this Prospectus or the
Statement of Additional Information says that it is.

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


Debt Securities. The Fund can also invest in debt securities, such as U.S.
      government securities and domestic and foreign corporate and government
      bonds and debentures. Short-term debt securities can be selected for
      liquidity pending the purchase of other investments or to have cash to
      pay for redemptions of Fund shares.

      The debt securities the Fund buys may be rated by nationally recognized
      rating organizations or they may be unrated securities assigned an
      equivalent credit rating by the Sub-Advisor. The Fund's investments in
      debt securities, including convertible debt securities, can be above or
      below investment grade in credit quality. The Fund is not required to
      sell a security if its rating falls after the Fund buys it. However,
      the Sub-Advisor will monitor those investments to determine whether the
      Fund should continue to hold them. Rating definitions of national
      rating agencies are described in Appendix A to the Statement of
      Additional Information.

    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 bond and of the
      Fund's shares might be reduced. A downgrade in an issuer's credit
      rating or other adverse news about an issuer can reduce the market
      value of that issuer's securities.

    Interest Rate Risk. The values of debt securities are subject to change
      when prevailing interest rates change. When prevailing interest rates
      fall, the values of already-issued debt securities generally rise. When
      prevailing interest rates rise, the values of already-issued debt
      securities generally fall. The magnitude of these fluctuations will
      often be greater for longer-term debt securities than for shorter-term
      debt securities. 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.


o     Special Credit Risks of Lower-Grade Securities. All debt securities are
      subject to some degree of credit risk. Credit risk relates to the
      ability of the issuer to meet interest or principal payments on a
      security as they become due. The Fund can invest up to 25% of its
      assets in "lower-grade" securities commonly known as "junk bonds."
      These are debt securities rated lower than "Baa" by Moody's Investors
      Service, Inc. or "BBB" by Standard & Poor's Ratings Service or that
      have comparable ratings from another rating organization or that are
      unrated securities assigned a comparable rating by the Sub-Advisor.

      Higher yielding lower-grade bonds, whether rated or unrated, have
      greater risks than investment grade securities. They may be subject to
      greater market fluctuations and risk of loss of income and principal
      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 due
      on the bonds. These risks mean that the Fund's net asset value per
      share may be affected by declines in value of these securities.


Other Equity Securities. While the Fund emphasizes investments in common
     stocks, it can also buy preferred stocks and securities convertible into
     common stock. Convertible securities can be considered to be "equity
     equivalents" because of the conversion feature and in that case their
     credit rating has less impact on the Sub-Advisor's investment decision
     than in the case of other debt securities.

Money Market Instruments. For liquidity purposes, the Fund can also invest in
      "money market instruments." These include U.S. government securities
      and high-quality corporate debt securities having a remaining maturity
      of one year or less. They also include commercial paper, other
      short-term corporate debt obligations, certificates of deposit,
      bankers' acceptances and repurchase agreements.


Investing in Small, Unseasoned Companies. The Fund can invest without limit
      in securities of small, unseasoned companies. These are companies that
      have been in continuous operation for less than three years, counting
      the operations of any predecessors. These securities may have limited
      liquidity, which means that the Fund could have difficulty selling them
      at an acceptable price when it wants to. The prices of these securities
      may be very volatile, especially in the short term.


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. Restricted
      securities may have terms that limit their resale to other investors or
      may require registration under federal securities laws before they can
      be sold publicly.  The Fund cannot invest more than 15% of its net
      assets in illiquid or restricted securities. Certain restricted
      securities that are eligible for resale to qualified institutional
      purchasers may not be subject to that limit. The Manager and
      Sub-Advisor monitor holdings of illiquid securities on an ongoing basis
      to determine whether to sell any holdings to maintain adequate
      liquidity.

Hedging. The Fund can buy and sell certain kinds of futures contracts,
      forward contracts, and put and call options. These are all referred to
      as "hedging instruments." In the broadest sense, hedging instruments
      the Fund might use may be considered "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. The Fund does not currently use hedging
      extensively or for speculative purposes. It has limits on its use of
      hedging instruments and is not required to use them in seeking its
      investment objective.


      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.


      Hedging involves risk. If the portfolio manager used a hedging
      instrument at the wrong time or judged market conditions incorrectly,
      the hedge might be unsuccessful and the strategy could reduce the
      Fund's returns. The Fund may also experience losses if the prices of
      its hedging instruments were not correlated with its other investments
      or if it could not close out a position because of an illiquid market.

Portfolio  Turnover.  A change in the securities  held by the Fund is known as
      "portfolio  turnover."  The Fund does not expect to engage in active and
      frequent  trading to try to achieve its  objective.  Portfolio  turnover
      increases  brokerage costs the Fund pays.  Increased  portfolio turnover
      creates  higher  brokerage and  transaction  costs for the Fund (and may
      reduce  performance).  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.

Temporary Defensive and Interim Investments. In times of adverse or unstable
      market, economic or political conditions, the Fund can invest up to
      100% of its assets in temporary defensive investments that are
      inconsistent with the Fund's principal investment strategies.
      Generally, they would be high-quality, short-term money market
      instruments, such as U.S. government securities, highly rated
      commercial paper, short-term corporate debt obligations, bank deposits
      or repurchase agreements. The Fund could 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 defensively in these
      securities, it might not achieve its investment objective of capital
      appreciation.


How the Fund Is Managed

THE MANAGER. The Manager supervises the Fund's investment program and handles
its day-to-day business. The Manager carries out its duties, subject to the
policies established by the Fund's Board of Directors, under an investment
advisory agreement that states the Manager's responsibilities. The agreement
sets the fees paid by the Fund to the Manager and describes the expenses that
the Fund pays to conduct its business. The Manager became the Fund's
investment advisor on February 28, 1997.


      The Manager has been an investment advisor since January 1960. The
Manager and its subsidiaries and controlled affiliates managed more than $135
billion of assets as of September 30, 2003, including other Oppenheimer funds
with more than seven million shareholder accounts. The Manager is located at
Two World Financial Center, 225 Liberty Street-11th Floor, New York, New York
10281-1008.

The Manager's Fees.  Under the investment advisory agreement, effective
      January 1, 2004, the Fund pays the Manager an advisory fee at an annual
      rate that declines on additional assets as the Fund grows: 0.90% of the
      first $400 million of average annual net assets of the Fund, 0.85% of
      the next $400 million, 0.80% of the next $400 million, 0.70% of the
      next $400 million, 0.65% of the next $400 million and 0.60% of average
      annual net assets in excess of $2 billion. From June 15, 2003 until
      December 31, 2003, the annual advisory fee rate was: 0.90% of the first
      $400 million of average annual net assets of the Fund, 0.85% of the
      next $600 million, 0.80% of the next $2 billion, 0.70% of the next $1
      billion, 0.65% of the next $1 billion and 0.60% of average annual net
      assets in excess of $5 billion. Prior to June 15, 2003, the annual
      advisory fee rate was: 1.00% of the first $400 million of average
      annual net assets of the Fund, 0.90% of the next $400 million and 0.85%
      of average annual net assets in excess of $800 million. The Fund's
      management fee for its last fiscal year ended October 31, 2003 was
      0.96% of average annual net assets for each class of shares.

The Sub-Advisor. The Sub-Advisor is a Delaware limited liability company and
      is a wholly-owned subsidiary of Oppenheimer Capital LLC, a registered
      investment advisor.  From the Fund's inception on April 30, 1980 until
      February 26, 1997, the Sub-Advisor (which was then named Quest for
      Value Advisors) served as the Fund's investment advisor.  On February
      28, 1997, the Manager retained the Sub-Advisor to continue providing
      day-to-day portfolio management for the Fund. The Sub-Advisor has
      operated as an investment advisor to investment companies and other
      investors since its organization in 1980.  As of September 30, 2003,
      the Sub-Advisor, including Oppenheimer Capital LLC, advised accounts
      having assets in excess of $20 billion. The Sub-Advisor is located at
      1345 Avenue of the Americas, 49th Floor, New York, New York 10105-4800.

      The Manager, not the Fund, pays the Sub-Advisor an annual fee under the
      Sub-Advisory Agreement between the Manager and the Sub-Advisor. The fee
      is calculated as a percentage of the fee the Fund pays the Manager. The
      rate is 40% of the advisory fee collected by the Manager based on the
      net assets of the Fund as of February 28, 1997, and remaining 120 days
      later, plus 30% of the fee collected by the Manager on assets in excess
      of that amount. In each case the fee is calculated after any waivers of
      the Manager's fee from the Fund.

      The Sub-Advisor is wholly-owned by Oppenheimer Capital LLC, which is
      wholly-owned by Allianz Dresdner Asset Management U.S. Equities LLC, a
      subsidiary of Allianz Dresdner Asset Management of America L.P.  The
      general partner of Allianz Dresdner Asset Management of America L.P. is
      Allianz-PacLife Partners LLP.  Allianz AG has majority ownership of,
      and controls, Allianz Dresdner Asset Management of America L.P. and its
      subsidiaries, including Oppenheimer Capital LLC and the Sub-Advisor.

Portfolio Manager. The portfolio manager of the Fund is Louis P. Goldstein,
      who is employed by the Sub-Advisor.  He is the person primarily
      responsible for the day-to-day management of the Fund's portfolio.  Mr.
      Goldstein is a Managing Director of Oppenheimer Capital, the immediate
      parent company of the Sub-Advisor.  He has been the Fund's portfolio
      manager since February 1999, prior to which he was a MidCap portfolio
      manager at Oppenheimer Capital.



ABOUT YOUR ACCOUNT

How to 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.

o     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.
o     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.
o     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.

WHAT IS THE MINIMUM AMOUNT YOU MUST INVEST? In most cases, you can buy Fund
shares with a minimum initial investment of $1,000 and make additional
investments at any time with as little as $50. There are reduced minimums
available under the following special investment plans:
o     If you establish one of the many types of retirement plan accounts that
      OppenheimerFunds offers, more fully described below under "Special
      Investor Services," you can start your account with as little as $500.
o     By using an Asset Builder Plan or Automatic Exchange Plan (details are
      in the Statement of Additional Information), or government allotment
      plan, you can make subsequent investments (after making the initial
      investment of $500) for as little as $50. For any type of account
      established under one of these plans prior to November 1, 2002, the
      minimum additional investment will remain $25.
o     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 ("the 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 Directors 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
      Directors 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, the
      Distributor or its designated agent must receive your order by the time
      the 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 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 most likely invest in 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 $250,000 or
      more of Class B shares or $1 million or more of Class C shares from a
      single investor.


o     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 a special condition applies.

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:

 ------------------------------------------------------------------------------
                          Front-End Sales   Front-End Sales
                            Charge As a       Charge As a      Concession As
                           Percentage of   Percentage of Net   Percentage of
 Amount of Purchase        Offering Price   Amount Invested   Offering Price
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Less than $25,000             5.75%             6.10%             4.75%
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $25,000 or more but           5.50%             5.82%             4.75%
 less than $50,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $50,000 or more but           4.75%             4.99%             4.00%
 less than $100,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $100,000 or more but          3.75%             3.90%             3.00%
 less than $250,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $250,000 or more but          2.50%             2.56%             2.00%
 less than $500,000
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 $500,000 or more but          2.00%             2.04%             1.60%
 less than $1 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 on purchases of Class A shares of
      any one or more of the Oppenheimer funds by certain retirement plans
      that satisfied certain requirements prior to March 1, 2001
      ("grandfathered retirement accounts"). However, those Class A shares
      may be subject to a Class A contingent deferred sales charge, as
      described below. Qualified retirement plans (other than grandfathered
      retirement accounts, single 401(k) plans, SEP IRAs and SIMPLE IRAs) are
      not permitted to purchase Class A shares subject to a Class 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:

- -------------------------------------------------------------------------------
                                        Contingent Deferred Sales Charge on
Years Since Beginning of Month in       Redemptions in That Year
Which Purchase 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%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
More than 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.


      Class N shares are sold at net asset value without an initial sales
charge. 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.


Distribution and Service Plan for Class A Shares. The Fund has adopted a
      Distribution and Service Plan for Class A shares. The Fund pays a
      service fee to the Distributor of 0.25% of the average annual net
      assets of Class A shares. The Distributor currently uses all of the
      service fee 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. The plan also
      provides for the Fund to pay an asset-based sales charge to the
      Distributor at an annual rate of up to 0.25% of average annual net
      assets of Class A shares of the Fund (the Board of Directors has set
      that rate at zero). Prior to January 1, 2003, the Fund paid the
      Distributor an annual asset-based sales charge equal to 0.15% of
      average annual net assets representing Class A shares purchased before
      September 1, 1993, and 0.10% of average annual net assets representing
      Class A shares purchased on or after that date. The Distributor paid
      the entire asset-based sales charge to brokers.


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 normally 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 normally 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.
      The Distributor normally retains the asset-based sales charge on Class
      C shares during the first year after the purchase of Class C shares.
      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.


      Under certain circumstances, the Distributor will pay the full Class B,
      Class C or Class N asset-based sales charge and service fee to the
      dealer beginning in the first year after purchase of such shares in
      lieu of paying the dealer the sales concession and the advance of the
      first year's service fee at the time of purchase.


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 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 sponsored qualified 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 a 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:
o     Shares are 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
      Exchange that day, which is normally 4:00 P.M. but may be earlier on
      some days.
o     The interests of the Fund's 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. All accounts under common ownership or control within the
      Oppenheimer funds complex may be counted together for purposes of
      determining market timing with respect to any exchange involving this
      Fund.
   o  The Fund may amend, suspend or terminate the exchange privilege at any
      time. The Fund may refuse any exchange order and is currently not
      obligated to provide notice before rejecting an exchange order.

   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 assessed on any account valued at less than $500. The fee

      is automatically deducted from accounts annually on or about the second
      to last business day of September. See the Statement of Additional
      Information, or existing shareholders may visit the OppenheimerFunds
      website, to learn how you can avoid this fee and for circumstances when
      this fee will not be assessed.

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 Directors 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 $500 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. If the Fund redeems your shares in kind, you may
      bear transaction costs and will bear market risks until such time as
      such securities are converted into cash.
Federal regulations may require the Fund to obtain your name, your date of
      birth (for a natural person), your residential street address or
      principal place of business and your Social Security Number, Employer
      Identification Number or other government issued identification when
      you open an account. Additional information may be required in certain
      circumstances or to open corporate accounts.  The Fund or the Transfer
      Agent may use this information to attempt to verify your identity.  The
      Fund may not be able to establish an account if the necessary
      information is not received.  The Fund may also place limits on account
      transactions while it is in the process of attempting to verify your
      identity.  Additionally, if the Fund is unable to verify your identity
      after your account is established, the Fund may be required to redeem
      your shares and close your account.

"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 an  annual  basis  and to pay them to
shareholders  in  December  on a date  selected  by the  Board  of  Directors.
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 shares.  The Fund has no fixed dividend rate and
cannot guarantee that it will pay any dividends or distributions.

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 Distribution." 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). The information for fiscal years 2003, 2002, 2001 and 2000
has been audited by KPMG 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. Another accounting
firm audited the information for the fiscal years prior to 2000.

FINANCIAL HIGHLIGHTS Class A Year Ended October 31, 2003 2002 2001 2000 1999 - --------------------------------------------------------------------------------------------------------------- Per Share Operating Data Net asset value, beginning of period $19.07 $20.91 $33.65 $33.66 $32.11 - ---------------------------------------------------------------------------------------------------------------

        Income (loss) from investment operations:

Net investment loss (.09) (.13) (.11) (.25) (.06) Net realized and unrealized gain (loss) 4.73 (1.25) (2.59) 6.08 2.70 ------------------------------------------------------- Total from investment operations 4.64 (1.38) (2.70) 5.83 2.64 - ---------------------------------------------------------------------------------------------------------------

        Dividends and/or distributions to shareholders:

 Dividends from net investment income                       --         --          --          --        (.04)
 Dividends in excess of net investment income               --         --          --          --          -- 1
 Distributions from net realized gain                       --       (.46)     (10.04)      (5.84)      (1.05)
                                                       --------------------------------------------------------
 Total dividends and/or
 distributions to shareholders                              --       (.46)     (10.04)      (5.84)      (1.09)
- ---------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                         $23.71     $19.07      $20.91      $33.65      $33.66
                                                       ========================================================

- ---------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                      24.33%     (6.90)%     (9.91)%     20.63%       8.47%

- ---------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data
 Net assets, end of period (in thousands)             $193,955   $150,161    $154,346    $177,876    $224,995
- ---------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                    $165,906   $164,479    $161,187    $181,216    $256,450
- ---------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment loss                                     (0.43)%    (0.61)%     (0.44)%     (0.73)%     (0.17)%
 Total expenses                                           1.56%      1.71%       1.67%       1.73%       1.71%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                        N/A 4,5    N/A 4,5     N/A 4       N/A 4      1.58%
- ---------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                    74%        75%         80%         77%         79%

1. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 17 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. FINANCIAL HIGHLIGHTS Continued

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

 Per Share Operating Data
 Net asset value, beginning of period                   $18.09      $19.99     $ 32.77      $33.07       $31.71
- -----------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                             (.22)       (.19)        .05        (.34)        (.19)
 Net realized and unrealized gain (loss)                  4.44       (1.25)      (2.79)       5.88         2.60
                                                        ---------------------------------------------------------
 Total from investment operations                         4.22       (1.44)      (2.74)       5.54         2.41
- -----------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                       --          --          --          --           --
 Dividends in excess of net investment income               --          --          --          --           -- 1
 Distributions from net realized gain                       --        (.46)     (10.04)      (5.84)       (1.05)
                                                        ---------------------------------------------------------
 Total dividends and/or
 distributions to shareholders                              --        (.46)     (10.04)      (5.84)       (1.05)
- -----------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                         $22.31      $18.09     $ 19.99      $32.77       $33.07
                                                        =========================================================

- -----------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                      23.33%      (7.53)%    (10.48)%     20.02%        7.83%

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

 Net assets, end of period (in thousands)              $55,449     $42,010     $34,278     $17,429      $15,634
- -----------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                     $46,785     $42,900     $27,144     $15,719      $14,112
- -----------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment loss                                     (1.23)%     (1.30)%     (1.13)%     (1.26)%      (0.80)%
 Total expenses                                           2.43%       2.41%       2.26%       2.27%        2.27%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                       2.36%        N/A 4,5     N/A 4       N/A 4       2.19%
- -----------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                    74%         75%         80%         77%          79%

1. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 18 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.

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

 Per Share Operating Data
 Net asset value, beginning of period                   $18.11      $20.01     $ 32.80      $33.09       $31.73
- -----------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                             (.14)       (.13)        .11        (.38)        (.17)
 Net realized and unrealized gain (loss)                  4.37       (1.31)      (2.86)       5.93         2.58
 Total from investment operations                         4.23       (1.44)      (2.75)       5.55         2.41
- -----------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions
 to shareholders:
 Dividends from net investment income                       --          --          --          --           --
 Dividends in excess of
 net investment income                                      --          --          --          --           -- 1
 Distributions from net realized gain                       --        (.46)     (10.04)      (5.84)       (1.05)
                                                        ---------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                            --        (.46)     (10.04)      (5.84)       (1.05)
- -----------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                         $22.34      $18.11     $ 20.01      $32.80       $33.09
                                                        =========================================================

- -----------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                      23.36%      (7.52)%    (10.50)%     20.05%        7.82%

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

 Net assets, end of period (in thousands)              $30,510     $16,979     $10,272      $5,053       $4,632
- -----------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                     $20,901     $15,323     $ 7,898      $4,969       $4,117
- -----------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment loss                                     (1.24)%     (1.30)%     (1.13)%     (1.25)%      (0.80)%
 Total expenses                                           2.43%       2.41%       2.26%       2.27%        2.26%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                       2.36%        N/A 4,5     N/A 4       N/A 4       2.18%
- -----------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                    74%         75%         80%         77%          79%

1. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 19 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. FINANCIAL HIGHLIGHTS Continued

 Class N            Year Ended October 31,                                        2003        2002         2001 1
- -----------------------------------------------------------------------------------------------------------------
 Per Share Operating Data


 Net asset value, beginning of period                                           $19.00      $20.88       $23.25
- -----------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment loss                                                              (.15)       (.17)        (.03)
 Net realized and unrealized gain (loss)                                          4.71       (1.25)       (2.34)
                                                                               ----------------------------------
 Total from investment operations                                                 4.56       (1.42)       (2.37)
- -----------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions
 to shareholders:
 Dividends from net investment income                                               --          --           --
 Dividends in excess of net investment income                                       --          --           --
 Distributions from net realized gain                                               --        (.46)          --
                                                                               ----------------------------------
 Total dividends and/or distributions
 to shareholders                                                                    --        (.46)          --
- -----------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                                 $23.56      $19.00       $20.88
                                                                                =================================

- -----------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                                              24.00%      (7.10)%     (10.19)%

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

 Net assets, end of period (in thousands)                                       $6,408      $2,983         $187
- -----------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                                              $4,218      $1,475         $ 38
- -----------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment loss                                                             (0.75)%     (0.88)%      (0.96)%
 Total expenses                                                                   1.97%       1.87%        1.75%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                                               1.87%        N/A 4,5      N/A 4
- -----------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                                            74%         75%          80%

1. For the period from March 1, 2001 (inception of offering) to October 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%.

INFORMATION AND SERVICES


For More Information on Oppenheimer Quest Capital Value Fund, Inc. SM


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'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's
investments and performance is available in the Fund'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'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'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
                              download 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'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's Internet
website at www.sec.gov. Copies may be obtained after payment of a duplicating
fee by electronic request at the SEC's e-mail address: publicinfo@sec.gov or
by writing to the SEC'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 SEC File No.: 811-04797   The Fund's shares are distributed by:
PR0835.001.1203                      [logo] OppenheimerFunds Distributor, Inc.
Printed on recycled paper








                          Appendix to Prospectus of
                        Oppenheimer Quest Capital Value Fund, Inc.

Graphic Material included in the Prospectus of Oppenheimer Quest Capital
Value Fund, Inc., (the "Fund") under the heading: "Annual Total Returns
(Class A) (as of 12/31 each year)":


A bar chart will be included in the Prospectus of the Fund depicting the
annual total returns of a hypothetical investment in Class A shares of the
Fund for the past 10 calendar years, without deducting sales charges or
taxes. Set forth below are the relevant data points that will appear on the
bar chart.


Calendar      Annual
Year          Total
Ended         Return
- -----         ------


12/31/93       7.31%
12/31/94      -3.10%
12/31/95      34.20%
12/31/96      18.25%
12/31/97      14.84%
12/31/98      20.15%
12/31/99       5.83%
12/31/00      14.97%
12/31/01      -1.20%
12/31/02     -14.71%

Oppenheimer
Quest Capital Value Fund, Inc.

(A series of Oppenheimer Quest for Value Funds)


6803 South Tucson Way, Centennial, Colorado 80112

1.800.225.5677

Statement of Additional Information dated December 23, 2003

This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated December 23, 2003.  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 website at
www.oppenheimerfunds.com.


Contents

About the Fund                                                           Page


Additional Information About the Fund's Investment Policies and Risks..... 2
    The Fund's Investment Policies........................................ 2
    Other Investment Techniques and Strategies............................ 9
    Other Investment Restrictions......................................... 24
How the Fund is Managed .................................................. 26
    Organization and History.............................................. 26
    Board of Directors and Oversight Committees........................... 27
    Directors and Officers of the Fund.................................... 27
    The Manager........................................................... 33
    The Sub-Advisor....................................................... 36
Brokerage Policies of the Fund............................................ 38
Distribution and Service Plans............................................ 40
Performance of the Fund................................................... 44


About Your Account

How To Buy Shares......................................................... 49
How To Sell Shares........................................................ 59
How To Exchange Shares.................................................... 64
Dividends, Capital Gains and Taxes........................................ 68
Additional Information About the Fund..................................... 72


Financial Information About the Fund

Independent Auditors' Report.............................................. 74
Financial Statements...................................................... 75


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







                                     116

ABOUT The FUnd


Additional Information About the Fund's Investment Policies and Risks

      The investment objective, the principal investment policies and the
main risks of the Fund are described in the Prospectus. This Statement of
Additional Information contains supplemental information about those policies
and risks and the types of securities that the Fund's Sub-Advisor, OpCap
Advisors (the "Sub-Advisor"), can select for the Fund. Additional information
is also provided about the strategies that the Fund might 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 Sub-Advisor, may use in
selecting portfolio securities will vary over time. The Fund is not required
to use all of the investment techniques and strategies described below in
seeking its goal. It may use some of the special techniques and strategies at
some times or not at all.

      In selecting securities for the Fund's portfolio, the Sub-Advisor
evaluates the merits of particular securities primarily through the exercise
of its own investment analysis. In the case of corporate issuers, that
process may include, among other things, evaluation of the issuer's
historical operations, prospects for the industry of which the issuer is
part, the issuer's financial condition, its pending product developments and
business (and those of competitors), the effect of general market and
economic conditions on the issuer's business, and legislative proposals that
might affect the issuer. In the case of foreign securities, when evaluating
the securities of issuers in a particular country, the Sub-Advisor may also
consider the conditions of a particular country's economy in relation to the
U.S. economy or other foreign economies, general political conditions in a
country or region, the effect of taxes, the efficiencies and costs of
particular markets and other factors.

      Investments in Equity Securities. While the Fund currently emphasizes
investments in equity securities of mid-size and larger companies, the Fund
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 might focus its equity investments in securities of one or more
capitalization ranges, based upon the Sub-Advisor's judgment of where the
best market opportunities are to seek the Fund's objective. At times, in the
Sub-Advisor's view, the market may favor or disfavor securities of issuers of
a particular capitalization range, and securities of mid-and
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 mid-and/or smaller-capitalization companies at
times of market volatility, the Fund's share price could fluctuate more than
that of funds focusing on larger-capitalization issuers.


o     Value Investing. In selecting equity investments for the Fund's
portfolio, the portfolio manager currently uses a value investing style. In
using a value approach, the portfolio manager seeks stock and other equity
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 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, which measures the company's stock
         price in relation to its asset value.
o     Dividend Yield 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.

      o     Preferred Stocks. 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 on the issuer's
common stock. Preferred stock may be "participating" stock, which means that
it 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 calls or redemptions prior to maturity, which also have a negative
impact on prices when interest rates decline. Preferred stock also 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.

      o     Rights and Warrants. Warrants basically are options to purchase
equity securities at specific prices valid for a specific period of time.
Their prices do not necessarily move parallel to the prices of the underlying
securities. Rights are similar to warrants, but normally have a short
duration and are distributed directly by the issuer to its shareholders.
Rights and warrants have no voting rights, receive no dividends and have no
rights with respect to the assets of the issuer. The Fund will not invest
more than 5% of its net assets in warrants. That limit does not apply to
warrants that have been acquired in units or attached to other 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 rates rise. If the conversion value exceeds the investment value, the
security will behave more like an equity security: 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)
may cause them to be regarded by the Sub-Advisor more as "equity
equivalents."  As a result, the credit rating assigned to the security has
less impact on the Sub-Advisor's investment decision with respect to
convertible securities than in the case of non-convertible fixed income
securities. Convertible securities are subject to the credit risks and
interest rate risks described below. To determine whether convertible
securities should be regarded as "equity equivalents," the Sub-Advisor may
consider the following factors:

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

      Investments in Debt Securities.   The Fund can invest in a variety of
domestic and foreign debt securities including bonds, notes, debentures and
other debt securities, including U.S. government securities. It can also
invest in short-term debt securities primarily for liquidity or defensive
purposes. Because the Fund currently emphasizes investments in equity
securities, such as stocks, it is not anticipated that more than 25% of the
Fund's total assets will be invested in debt securities under normal market
conditions.


      Foreign debt securities are subject to the risks of foreign investing
described below. In general, domestic and foreign debt securities are also
subject to credit risk and interest rate risk.


      Credit Risk. Credit risk relates to the ability of the issuer of a debt
security to meet interest and principal payment obligations as they become
due. In making investments in debt securities, the Sub-Advisor may rely to
some extent on the ratings of ratings organizations or it may use its own
research to evaluate a security's creditworthiness. The Fund's debt
investments can include investment grade and below investment-grade bonds
(commonly referred to as "junk bonds"). Investment-grade bonds are bonds
rated at least "Baa" by Moody's Investors Service, Inc. ("Moody's"), at least
"BBB" by Standard & Poor's Rating Service ("Standard & Poor's") or Fitch,
Inc. ("Fitch"), or that have comparable ratings by another nationally
recognized statistical rating organization. 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 Sub-Advisor to be of comparable quality
to bonds rated as investment grade by a rating organization. The debt
security ratings definitions of the principal ratings organizations are
included in Appendix A to this Statement of Additional Information.


      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 fixed-income investments, and a
decline in general interest rates will tend to increase their value. In
addition, debt securities with longer maturities, which tend to have higher
yields, are subject to potentially greater fluctuations in value from changes
in interest rates than obligations with shorter maturities.







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


      U.S. Government Securities. These are securities issued or guaranteed
by the U.S. Treasury or other government agencies or federally-chartered
corporate entities referred to as "instrumentalities." 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. "Full faith and credit" means generally that
the taxing power of the U.S. government is pledged to the payment of interest
and repayment of principal on a security. Some are obligations 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.

      All U.S. Treasury obligations are backed by the full faith and credit
of the United States. If the securities are not backed by the full faith and
credit of the United States, the owner of the securities 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. The Fund will invest
in securities of U.S. government agencies and instrumentalities only when the
Sub-Advisor is satisfied that the credit risk with respect to such agency or
instrumentality is minimal.

      Special Risks of Lower-Grade Securities. While it is not currently
anticipated that the Fund will invest more than 25% of its total assets in
lower-grade debt securities, the Fund can invest a portion of its assets in
these securities. Because lower-grade securities tend to offer higher yields
than investment-grade securities, the Fund could invest in lower-grade
securities if the Sub-Advisor is trying to achieve greater income. In some
cases, the appreciation possibilities of lower-grade securities might be a
reason they are selected for the Fund's portfolio.

      "Lower-grade" debt securities are those rated below "investment grade,"
which means they have a rating lower than "Baa" by Moody's or lower than
"BBB" by Standard & Poor's or Fitch, or similar ratings by other nationally
recognized rating organizations. If they are unrated, and are determined by
the Sub-Advisor to be of comparable quality to debt securities rated below
investment grade, they are included in determining 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."


      Some of the special credit risks of lower-grade securities are
discussed in the Prospectus. There is a greater risk that the issuer may
default on its obligation to pay interest or to repay principal than in the
case of investment grade securities. The issuer's low creditworthiness may
increase the potential for its insolvency. An overall decline in values in
the high yield bond market is also more likely during a period of a general
economic downturn. An economic downturn or an increase in interest rates
could severely disrupt the market for high yield bonds, adversely affecting
the values of outstanding bonds as well as the ability of issuers to pay
interest or repay principal. In the case of foreign high yield bonds, these
risks are in addition to the special risks of foreign investing discussed in
the Prospectus and in this Statement of Additional Information.







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


      While securities rated "Baa" by Moody's or "BBB" by Standard & Poor's
or Fitch are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics.

      Money Market Instruments. The following is a brief description of the
types of money market securities the Fund can invest in. Those money market
securities are high-quality, short-term debt instruments that are issued by
the U.S. government, corporations, banks or other entities. They may have
fixed, variable or floating interest rates.


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

      Bank Obligations. The Fund can buy time deposits, certificates of
deposit and bankers' acceptances. Time deposits, other than overnight
deposits, may be subject to withdrawal penalties and, if so, they are deemed
"illiquid" investments.

      The Fund can purchase bank obligations that are fully insured by the
Federal Deposit Insurance Corporation. The FDIC insures the deposits of
member banks up to $100,000 per account. Insured bank obligations may have a
limited market and a particular investment of this type may be deemed
"illiquid" unless the Board of Directors of the Fund determines that a
readily-available market exists for that particular obligation, or unless the
obligation is payable at principal amount plus accrued interest on demand or
within seven days after demand.


      Commercial Paper. The Fund can invest in commercial paper if it is
rated within the top two rating categories of Standard & Poor's and Moody's.
If the paper is not rated, it may be purchased if issued by a company having
a credit rating of at least "AA" by Standard & Poor's or "Aa" by Moody's.


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

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







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

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

      Foreign Securities. The Fund can purchase equity and debt securities
issued 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 and their agencies and instrumentalities.
Those securities may be traded on foreign securities exchanges or in the
foreign over-the-counter markets.

      Securities of foreign issuers that are represented by American
Depository Receipts, European Depository Receipts or Global Depository
Receipts, or that are listed on a U.S. securities exchange or traded in the
U.S. over-the-counter markets, are considered "foreign securities" for the
purpose of the Fund's investment allocations. That is because they are
subject to many of the special considerations and risks, discussed below,
that apply to foreign securities traded and held abroad.

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

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







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

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

      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.

      Special Risks of Emerging Markets. Emerging and developing markets
abroad may also offer special opportunities for growth investing but have
greater risks than more developed foreign markets, such as those in Europe,
Canada, Australia, New Zealand and Japan. There may be even less liquidity in
their securities markets, and settlements of purchases and sales of
securities may be subject to additional delays. They are subject to greater
risks of limitations on






the repatriation of income and profits because of currency restrictions
imposed by local governments. Those countries may also be subject to the risk
of greater political and economic instability, which can greatly affect the
volatility of prices of securities in those countries. The Sub-Advisor will
consider these factors when evaluating securities in these markets.


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

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

      Subject to the limits under the Investment Company Act of 1940 (the
"Investment Company Act") and under its own non-fundamental policies, the
Fund may also invest in foreign mutual funds which are also deemed PFICs
(since nearly all of the income of a mutual fund is generally passive
income). Investing in these types of PFICs may allow exposure to varying
countries because some foreign countries limit, or prohibit, all direct
foreign investment in the securities of companies domiciled therein.

      In addition to bearing their proportionate share of a fund's expenses
(management fees and operating expenses), shareholders will also indirectly
bear similar expenses of such entities. Additional risks of investing in
other investment companies are described below under "Investment in Other
Investment Companies.


      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% annually. The Fund's portfolio turnover
rate will fluctuate from year to year, but the Fund does not expect to have a
portfolio turnover rate of 100% or more. Increased portfolio turnover creates
higher brokerage and transaction costs for the Fund, which may reduce its
overall performance. Additionally, the realization of capital gains from
selling portfolio securities may result in distributions of taxable long-term
capital gains to shareholders, since the Fund will normally distribute all of
its capital gains realized each year to avoid excise taxes under the Internal
Revenue Code.

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








      Investing in Small, Unseasoned Companies. The Fund may 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. These are more of the
speculative securities and can increase the Fund's overall portfolio risks.


|X|   Investment in Other Investment Companies. The Fund can also invest in
the securities of other investment companies, which can include open-end
funds, closed-end funds and unit investment trusts, subject to the limits set
forth in the Investment Company Act of 1940 (the "Investment Company Act")
that apply to those types of investments.  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 Fund's 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
Sub-Advisor believes that the potential benefits of the investment justify
the payment of any premiums or sales charges. At the same time, the Fund
would bear its own management fees and other expenses. As a shareholder in 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.


      "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" or "forward commitment" basis. When-issued and
delayed-delivery are terms that refer to securities whose terms and indenture
are available and for which a market exists, but which are not available for
immediate delivery. The Fund limits its when-issued commitments to not more
than 15% of its net assets.

      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 Sub-Advisor before settlement will affect the value of such
securities and may cause a loss to the Fund. During the period between
purchase and settlement, the Fund makes no payment to the issuer and no
interest accrues to the Fund from the investment until it receives the
security as settlement. There is a risk of loss to the Fund if the value of
the security changes prior to the settlement date, and there is the risk that
the other party may not perform.


      The Fund will engage in when-issued transactions to secure what the
Sub-Advisor considers to be an advantageous price and yield at the time of
entering into the obligation. When the Fund enters into a when-issued or
delayed-delivery transaction, it relies on the other party to
complete the transaction. Its failure to do so may cause the Fund to lose the
opportunity to obtain the security at a price and yield the Sub-Advisor
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 for its portfolio or for delivery
pursuant to options contracts it has entered into, and not for the purpose of
investment leverage. Although the Fund will enter into delayed-delivery or
when-issued purchase transactions to acquire securities, it may dispose of a
commitment prior to settlement. If the Fund chooses to dispose of the right
to acquire a when-issued security prior to its acquisition or to dispose of
its right to delivery or receive against a forward commitment, it may incur a
gain or loss.

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

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

      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 investment Manager,
OppenheimerFunds, Inc. (the "Manager") from time to time.


      The majority of these transactions run from day to day, and delivery
pursuant to the resale typically occurs within one to five days of the
purchase. Repurchase agreements having a maturity beyond seven days are
subject to the Fund's limits on holding illiquid investments. There is no
limit on the amount of the Fund's net assets that may be subject to
repurchase agreements having maturities of seven days or less.








      Repurchase agreements, considered "loans" under the Investment Company
Act, are collateralized by the underlying security. The Fund's repurchase
agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price
to fully collateralize the repayment obligation. However, if the vendor fails
to pay the resale price on the delivery date, the Fund may incur costs in
disposing of the collateral and may experience losses if there is any delay
in its ability to do so. The Sub-Advisor 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 ("SEC"), 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.

o     Reverse Repurchase Agreements. The Fund can use reverse repurchase
agreements and would normally do so as a cash management tool. These
agreements create leverage, a speculative investment technique. The Fund does
not currently use reverse repurchase agreements, but may do so in the future.
When the Fund enters into a reverse repurchase agreement, it segregates on
its books an amount of cash or U.S. government securities equal in value to
the purchase price of the securities it has committed to buy, plus accrued
interest, until the payment is made to the seller. Before the Fund enters
into a reverse repurchase agreement, the Manager evaluates the
creditworthiness of the seller, typically a bank or broker-dealer. Reverse
repurchase agreements are considered to be a form of borrowing by the Fund
and are subject to the Fund's limitations on borrowing.


      These agreements are subject to certain risks. The market value of the
securities retained in lieu of sale by the Fund may decline more or
appreciate more than the securities the Fund has sold but is obligated to
repurchase. If the buyer of the securities under the agreement files for
bankruptcy or becomes insolvent, there may be delays in the Fund's use of the
proceeds.

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

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








      The Fund has limitations that apply to purchases of restricted
securities, as stated 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
and the Sub-Advisor 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.

|X|   Loans of Portfolio Securities. The Fund may lend its portfolio
securities pursuant to the Securities Lending Agreement (the "Securities
Lending Agreement") with JP Morgan Chase, subject to the restrictions stated
in the Prospectus.  The Fund will lend such portfolio securities to attempt
to increase the Fund's income.  Under the Securities Lending Agreement and
applicable regulatory requirements (which are subject to change), the loan
collateral must, on each business day, be at least equal to the value of the
loaned securities and must consist of cash, bank letters of credit or
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 to JP
Morgan Chase, as agent, amounts demanded by the Fund if the demand meets the
terms of the letter.  Such terms of the letter of credit and the issuing bank
must be satisfactory to JP Morgan Chase and the Fund.  The Fund will receive,
pursuant to the Securities Lending Agreement, 80% of all annual net income
(i.e., net of rebates to the Borrower) from securities lending transactions.
JP Morgan Chase has agreed, in general, to guarantee the obligations of
borrowers to return loaned securities and to be responsible for expenses
relating to securities lending.  The Fund will be responsible, however, for
risks associated with the investment of cash collateral, including the risk
that the issuer of the security in which the cash collateral has been
invested defaults.  The Securities Lending Agreement may be terminated by
either JP Morgan Chase or the Fund on 30 days' written notice.  The terms of
the Fund's loans must also meet applicable tests under the Internal Revenue
Code and permit the Fund to reacquire loaned securities on five business
days' notice or in time to vote on any important matter.

|X|   Borrowing. As a fundamental policy, the Fund cannot borrow money except
as a temporary measure for extraordinary or emergency purposes, and loans may
not exceed one third of the lower of the market value or cost of its total
assets. Additionally, as part of that fundamental policy, the Fund will not
purchase securities at times when loans exceed 5% of its total assets.

      The Fund may borrow only from banks. Currently, under the Investment
Company Act, a mutual fund may borrow only from banks and the maximum amount
it may borrow is up to one-third of its total assets (including the amount
borrowed) less all liabilities and indebtedness other than borrowing. If the
value of the Fund's assets fails to meet this 300% asset coverage
requirement, the Fund will reduce its bank debt within three days to meet the
requirement. To do so, the Fund might have to sell a portion of its
investments at a disadvantageous time.


      The Fund will pay interest on these loans, and that interest expense
will raise the overall expenses of the Fund and reduce its returns. If it
does borrow, its expenses will be greater than comparable funds that do not
borrow. Additionally, the Fund's net asset value per share might fluctuate
more than that of funds that do not borrow.

      Hedging. Although the Fund can use hedging instruments, it is not
obligated to use them in seeking its objective. It does not currently
contemplate using them to any significant degree. The Fund may 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:
            sell futures contracts,
            buy puts on such futures or on securities, or
            write covered calls on securities or futures.

      The Fund can use hedging to establish a position in the securities
market as a temporary substitute for purchasing particular securities. In
that case the Fund would normally seek to purchase the securities and then
terminate that hedging position. The Fund might also use this type of hedge
to attempt to protect against the possibility that its portfolio securities
would not be fully included in a rise in value of the market. To do so, the
Fund could:
            buy futures, or
            buy calls on such futures or on securities.


      The Fund's strategy of hedging with futures and options on futures will
be incidental to the Fund's activities in the underlying cash market. The
particular hedging instruments the Fund can use are described below. The Fund
may employ new hedging instruments and strategies when they are developed, if
those investment methods are consistent with the Fund's investment objective
and are permissible under applicable regulations governing the Fund.

      Futures. The Fund can buy and sell futures contracts that relate to (1)
broadly-based stock indices (these are referred to as "stock index futures"),
(2) foreign currencies (these are referred to as "forward contracts"), (3) an
individual stock ("single stock futures") and (4) commodities (these are
referred to as "commodity futures").


      A broadly-based stock index is used as the basis for trading stock
index futures. These indices 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. These contracts obligate
the seller to deliver, and the purchaser to take, cash to settle the futures
transactions. 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.


      A single stock future obligates the seller to deliver (and the
purchaser to take) cash or a specified equity security to settle the futures
transaction. Either party could also enter into an offsetting contract to
close out the position.  Single stock futures trade on a very limited number
of exchanges, with contracts typically not fungible among the exchanges.


      The Fund can invest a portion of its assets in commodity futures
contracts. Commodity futures may be based upon commodities within five main
commodity groups: (1) energy, which includes crude oil, natural gas, gasoline
and heating oil; (2) livestock, which includes cattle and hogs; (3)
agriculture, which includes wheat, corn, soybeans, cotton, coffee, sugar and
cocoa; (4) industrial metals, which includes aluminum, copper, lead, nickel,
tin and zinc; and (5) precious metals, which includes gold, platinum and
silver. The Fund may purchase and sell commodity futures contracts, options
on futures contracts and options and futures on commodity indices with
respect to these five main commodity groups and the individual commodities
within each group, as well as other types of commodities.


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


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

      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 options
on broadly-based stock indices, securities, foreign currencies and stock
index futures.


         Writing Covered Call Options. The Fund can write (that is, sell)
covered calls. If the Fund sells a call option, it must be covered. For
options on securities, that means the Fund must own the security subject to
the call while the call is outstanding. For stock index options, that means
the call must be covered by identifying liquid assets to enable the Fund to
satisfy its obligations if the call is exercised. Up to 25% of the Fund's
total assets may be subject to calls the Fund writes.


      When the Fund writes a call on a security, it receives cash (a
premium). For calls on securities, 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 a call on a stock index 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.







      Settlement of puts and calls on broadly-based stock indices is in cash.
Gain or loss on options on stock indices depends on changes in the index in
question (and thus on price movements in the stock market generally).



      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. The OCC will release the securities on the expiration of the
option or when the Fund enters into a closing transaction.

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

      To terminate its obligation on a call it has written, the Fund may
purchase a corresponding call in a "closing purchase transaction."  The Fund
will then realize a profit or loss, depending upon whether the net of the
amount of the option transaction costs and the premium received on the call
the Fund wrote is more or less than the price of the call the Fund purchases
to close out the transaction. The Fund may realize a profit if the call
expires unexercised, because the Fund will retain the 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 escrowed assets in escrow until the call expires or is
exercised.

      The Fund may also write calls on a futures contract without owning the
futures contract or securities deliverable under the contract. To do so, at
the time the call is written, the Fund must cover the call by identifying an
equivalent dollar amount of liquid assets on the Fund's books. The Fund will
identify additional liquid assets if the value of the identified assets drops
below 100% of the current value of the future. Because of the requirement to
identify liquid assets, 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 on stock indices,
foreign currencies or stock index futures. If the Fund writes a put, the put
must be covered by identified liquid assets on the Fund's books. The Fund
will not write puts if, as a result, more than 25% of the Fund's net assets
would have to be identified to cover such put options.


      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 settle the transaction in cash with the buyer of
the put at the exercise price, even if the value of the underlying 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 settle in cash at the exercise price. That price will
usually exceed the market value of the investment at that time.

      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 settle the transaction in cash at
the exercise price. The Fund has no control over when it may be required to
settle the transaction, since it may be assigned an exercise notice at any
time prior to the termination of its obligation as the writer of the put.
That obligation terminates upon expiration of the put. It may also terminate
if, before it receives an exercise notice, the Fund effects a closing
purchase transaction by purchasing a put of the same series as it sold. Once
the Fund has been assigned an exercise notice, it cannot effect a closing
purchase transaction.

      The Fund may decide to effect a closing purchase transaction to realize
a profit on an outstanding put option it has written. 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 buy calls on securities it
intends to purchase and puts on securities that it owns. The Fund may
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. Buying a call on a security or future gives
the Fund 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.


      In the case of a purchase of a call on a stock index, if the Fund
exercises the call during the call period, a seller of a corresponding call
on the same index will pay the Fund an amount of cash to settle the call if
the closing level of the stock index upon which the call is based is greater
than the exercise price of the call. That cash payment is equal to the
difference between the closing price of the call and the exercise price of
the call times a specified multiple (the "multiplier") which determines the
total dollar value for each point of difference.

      When the Fund buys a put, it pays a premium. It has the right during
the put period to require a seller of a corresponding put, upon the Fund's
exercise of its put, to buy the underlying security (in the case of puts on
securities or futures) or in the case of puts on stock indices, to deliver
cash to the Fund to settle the put if the closing level of the stock index
upon which the put is based is less than the exercise price of the put. That
cash payment is determined by the multiplier, in the same manner as described
above as to calls.


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

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

      When the Fund purchases a put on a stock index, the put protects the
Fund to the extent that the index moves in a similar pattern to the
securities the Fund holds. The Fund can resell the put. The resale price of
the put will vary inversely with 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
the expiration date. In the event of a decline in price of the underlying
investment, the Fund could exercise or sell the put at a profit to attempt to
offset some or all of its loss on its portfolio securities.

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

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


      If the Sub-Advisor 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 Sub-Advisor 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 an
identified account) upon conversion or exchange of other foreign currency
held in its portfolio.

      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 Sub-Advisor 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 may affect its costs.


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


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


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

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


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

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


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

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

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

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

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

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


      The Fund could also use forward contracts to lock in the U.S. dollar
value of portfolio positions. This is called a "position hedge."  When the
Fund believes that foreign currency may 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 could enter into
a forward contract to sell a different foreign currency for a fixed U.S.
dollar amount if the Fund believes that the U.S. dollar value of the foreign
currency to be sold pursuant to its forward contract will fall whenever there
is a decline in the U.S. dollar value of the currency in which portfolio
securities of the Fund are denominated. That is referred to as a "cross
hedge."


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

      As one alternative, the Fund may purchase a call option permitting the
Fund to purchase the amount of foreign currency being hedged by a forward
sale contract at a price no higher than the forward contract price. As
another alternative, the Fund may purchase a put option permitting the Fund
to sell the amount of foreign currency subject to a forward purchase contract
at a price as high or higher than the forward contact price.

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

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

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

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

      Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Fund may convert foreign currency from time to
time, and will incur costs in doing so. Foreign exchange dealers do not
charge a fee for conversion, but they do seek to realize a profit based on
the difference between the prices at which they buy and sell various
currencies. Thus, a dealer might offer to sell a foreign currency to the Fund
at one rate, while offering a lesser rate of exchange if the Fund desires to
resell that currency to the dealer.


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


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


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

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

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


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

      Temporary Defensive and Interim Investments. When market, economic or
political conditions are unstable, or the Sub-Advisor believes it is
otherwise appropriate to reduce holdings in stocks, the Fund can invest in a
variety of debt securities for defensive purposes. The Fund can also purchase
these securities for liquidity purposes to meet cash needs due to the
redemption of Fund shares, or to hold while waiting to reinvest cash received
from the sale of other portfolio securities. The Fund's temporary defensive
investments can include the following short-term (maturing in one year or
less) dollar-denominated debt obligations:

o     obligations issued or guaranteed by the U. S. government or its
            instrumentalities or agencies,

o     commercial paper (short-term, unsecured promissory notes) rated within
            the top two rating categories rating category by an established
            rating organization,

o     debt obligations of domestic or foreign corporate issuers rated "Baa"
            or higher by Moody's or "BBB" or higher by Standard & Poor's,
o     certificates of deposit and bankers' acceptances and other bank
            obligations, and
o     repurchase agreements.

      Short-term debt securities would normally be selected for defensive or
cash management purposes because they can normally be disposed of quickly,
are not generally subject to significant fluctuations in principal value and
their value will be less subject to interest rate risk than longer-term debt
securities.


Other Investment Restrictions

      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 objective is a fundamental policy. Other policies
described in the Prospectus or this Statement of Additional Information are
"fundamental" only if they are identified as such. The Fund's Board of
Directors can change non-fundamental policies without shareholder approval.
However, significant changes to investment policies will be described in
supplements or updates to the Prospectus or this Statement of Additional
Information, as appropriate. The Fund's 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 own more than 10% of that issuer's voting securities.
This limitation applies to 75% of the Fund's total assets. The limit does not
apply to securities issued by the U.S. government or any of its agencies or
instrumentalities.

      The Fund cannot lend money or property to any person. However, the Fund
can purchase fixed income securities consistent with the Fund's investment
objective and policies. The Fund may also make loans of portfolio securities,
in an amount that does not exceed one-third of the Fund's total assets.
Additionally, the Fund can enter into repurchase agreements. For the purpose
of this restriction, collateral arrangements with respect to stock options,
options on securities and stock indices, stock index futures and options on
such futures are not deemed to be loans of assets.


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

o     The Fund cannot purchase real estate or interests in real estate.
However, the Fund can purchase or sell securities of companies that deal in
real estate or interests in real estate.

o     The Fund cannot invest for the purpose of exercising control over
management of any company.

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 invest or hold securities of any issuer if officers and
directors of the Fund or its Manager or Sub-Advisor individually beneficially
own more than 1/2 of 1% of the securities of that issuer and together own
more than 5% of the securities of that issuer.

o     The Fund cannot invest in physical commodities or physical commodity
contracts. However, the Fund may buy and sell hedging instruments to the
extent specified in its Prospectus and Statement of Additional Information
from time to time. The Fund can also buy and sell options futures and
securities or other instruments backed by physical commodities or whose
investment return is linked to changes in the price of physical commodities.

         The Fund cannot pledge, mortgage or hypothecate any of its assets.
However, the Fund can pledge assets to secure permitted borrowings and in
connection with collateral arrangements with respect to options and futures.


o     The Fund cannot issue senior securities, as defined in the Investment
Company Act of 1940. However, the Fund can enter into repurchase agreements,
lend its portfolio securities and borrow money from banks for temporary or
emergency purposes.

      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.


      Does the Fund Have Any Restrictions That Are Not Fundamental? The Fund
has other investment restrictions that are not fundamental policies, which
means that they can be changed by the Board of Directors without shareholder
approval.

o     The Fund cannot purchase oil, gas or other mineral leases, rights,
royalty contracts or exploration or development programs. However, the Fund
can invest in securities of companies that invest in or sponsor such programs.

         The Fund cannot purchase securities on margin (except for short-term
loans that are necessary for the clearance of transactions) or make short
sales of securities.







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

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management
investment company organized as a Maryland corporation in 1986. The Fund
commenced its operations on February 13, 1987 as a closed-end investment
company with a "dual-purpose" structure. The Fund originally had two
objectives: (1) long-term capital appreciation and preservation of capital,
and (2) current income and long-term growth of income. The Fund originally
had common stock, denominated as "capital shares," and preferred stock,
denominated as "income shares."

      Under the Fund's original dual-purpose structure, the capital shares
were entitled to all of the Fund's gains and losses on its assets, and no
Fund expenses were allocated to those shares. The income shares were entitled
to all of the Fund's income and bore all of the Fund's operating expenses.
The income shares were redeemed on January 31, 1997, and the Fund's
dual-purpose structure was terminated.

      On March 3, 1997, the Fund was converted to an open-end management
investment company with a single investment objective of capital
appreciation. The outstanding capital shares of the Fund were re-denominated
as Class A shares of common stock, which bear their allocable share of Fund
expenses.

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


      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.


      Meetings of Shareholders. Although the Fund is not required by Maryland
law to hold annual meetings, it may hold shareholder meetings from time to
time on important matters or when required to do so by the Investment Company
Act or other applicable law. The shareholders of the Fund have the right to
call a meeting to remove a Director or to take certain other action described
in the Articles of Incorporation or under Maryland law.

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

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

      The Board of Directors has an Audit Committee which is comprised solely
of Independent Directors.  The Audit Committee provides the Board with
recommendations regarding the selection of the Fund's independent auditor.
The Audit Committee also reviews the scope and results of audits and the
audit fees charged, reviews reports from the Fund's independent auditors
concerning the Fund's internal accounting procedures and controls, and
reviews reports of the Manager's internal auditor among other duties as set
forth in the Committee's charter.  The members of the Audit Committee are
Paul Clinton (Chairman), Thomas Courtney, Robert Galli, Lacy Herrmann and
Brian Wruble.  The Audit Committee met six times during the Fund's fiscal
year ended October 31, 2003.

Directors and Officers of the Fund. Each of the Directors is an "Independent
Director" under the Investment Company Act. The Fund's Directors 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
Directors 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 Directors. All of the Directors are also directors or
trustees of the following Oppenheimer funds (referred to as "Board III
Funds"):

Oppenheimer Quest For Value Funds, a
  series fund having the following three
  series:
  Oppenheimer Small Cap Value Fund,        Oppenheimer Quest  International Value
                                           Fund, Inc.
  Oppenheimer Quest Balanced Value Fund    Oppenheimer  Quest Capital Value Fund,
  and                                      Inc.
  Oppenheimer Quest Opportunity Value Fund Oppenheimer Quest Value Fund, Inc.
Rochester Portfolio Series, a series fund  Bond Fund Series, a series fund
  having one series: Limited-Term New        having one series: Oppenheimer
  York Municipal Fund                        Convertible Securities Fund
Rochester Fund Municipals                  Oppenheimer MidCap Fund








                                                                                 ----

     In  addition  to being a trustee or  director  of the Board III Funds,  Mr.
Galli  is  also  a  director   or  trustee  of  25  other   portfolios   in  the
OppenheimerFunds  complex. Present or former officers,  directors,  trustees and
employees (and their immediate  family members) of the Fund, the Manager and its
affiliates,  and retirement  plans  established by them for their  employees are
permitted to purchase Class A shares of the Fund and the other Oppenheimer funds
at net asset value without sales charge. The sales charges on Class A shares are
waived for that group because of the economies of sales efforts  realized by the
Distributor.

     Messrs.  Murphy,  Molleur,  Vottiero,  Wixted and Zack, and Mses. Bechtolt,
Feld and Ives who are officers of the Fund,  respectively  hold the same offices
of one or more of the other Board III Funds as with the Fund. As of November 24,
2003,  the Directors  and officers of the Fund,  as a group,  owned of record or
beneficially  less than 1% of each  class of shares of the Fund.  The  foregoing
statement does not reflect  ownership of shares of the Fund held of record by an
employee  benefit  plan for  employees  of the  Manager,  other  than the shares
beneficially  owned under the plan by the officers of the Fund listed above.  In
addition,  each Independent Director,  and his or her family members, do not own
securities of either the Manager,  Distributor  or  Sub-Advisor of the Board III
Funds or any person directly or indirectly  controlling,  controlled by or under
common control with the Manager, Distributor or Sub-Advisor.


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

          Independent Directors
                                                                                 ----
- -------------------------------------------------------------------------------------
Name,              Principal Occupation(s) During Past 5      Dollar     Aggregate
                                                                         Dollar
                                                                         Range Of
                                                                         Shares
                                                                         Beneficially
                                                                         Owned in

                   Years;                                     Range of   Any of the
Position(s) Held   Other Directorships/Trusteeships Held by   Shares     Oppenheimer
with Fund,         Director;                                  BeneficiallFunds
Length of Service, Number of Portfolios in Fund Complex       Owned in   Overseen
Age                Currently Overseen by Director             the Fund   by Director

- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
                                                                As of December 31,

                                                                       2002

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

Thomas W.          Principal  of  Courtney  Associates,  Inc. None       $10,001-$50,000
Courtney,          (venture  capital  firm);  former  General
Chairman of the    Partner of Trivest  Venture Fund  (private
Board of           venture  capital fund);  former  President
Directors,         of   Investment    Counseling    Federated
Director since     Investors,  Inc.; Trustee of the following
1996               open-end   investment   companies:    Cash
Age: 70            Assets  Trust,  Pimco  Advisors  VIT,  Tax
                   Free Trust of Arizona  and 4 funds for the
                   Hawaiian  Tax  Free  Trust.   Oversees  10
                   portfolios    in   the    OppenheimerFunds
                   complex.

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

Paul Y. Clinton,   Principal     of    Clinton     Management None       Over
Director, since    Associates,   a   financial   and  venture            $100,000
1996               capital  consulting  firm;  Trustee of the
Age: 72            following open-end  investment  companies:
                   Trustee of Capital Cash Management  Trust,
                   Prime Cash Fund,  Pimco  Advisors  VIT and
                   Narragansett   Insured   Tax-Free   Income
                   Fund.   Oversees  10   portfolios  in  the
                   OppenheimerFunds complex.

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

Robert G. Galli,   A   trustee   or    director    of   other None       Over
Director since     Oppenheimer funds.  Oversees 35 portfolios            $100,000
1998               in the OppenheimerFunds complex.
Age: 70

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

Lacy B. Herrmann,  Chairman  and Chief  Executive  Officer of None       $10,001-$50,000
Director since     Aquila   Management    Corporation,    the
1996               sponsoring   organization   and   manager,
Age: 74            administrator  and/or  sub-adviser  to the
                   following open-end  investment  companies,
                   and  Chairman of the Board of Trustees and
                   President   of   each:    Churchill   Cash
                   Reserves  Trust,   Aquila-Cascadia  Equity
                   Fund, Cash Assets Trust,  Prime Cash Fund,
                   Narragansett   Insured   Tax-Free   Income
                   Fund,  Tax-Free  Fund For Utah,  Churchill
                   Tax-Free  Fund of Kentucky,  Tax-Free Fund
                   of  Colorado,  Tax-Free  Trust of  Oregon,
                   Tax-Free   Trust  of   Arizona,   Hawaiian
                   Tax-Free Trust,  and Aquila Rocky Mountain
                   Equity Fund and Pimco  Advisors  VIT; Vice
                   President,    Director,   Secretary,   and
                   formerly      Treasurer      of     Aquila
                   Distributors,  Inc.,  distributor  of  the
                   above  funds;  President  and  Chairman of
                   the  Board of  Trustees  of  Capital  Cash
                   Management Trust ("CCMT"),  and an Officer
                   and  Trustee/Director of its predecessors;
                   President and Director of STCM  Management
                   Company,  Inc.,  sponsor  and  adviser  to
                   CCMT;  Chairman,  President and a Director
                   of InCap Management Corporation,  formerly
                   sub-adviser  and  administrator  of  Prime
                   Cash Fund and Short Term  Asset  Reserves;
                   Trustee  Emeritus  of  Brown   University.
                   Oversees    10     portfolios    in    the
                   OppenheimerFunds complex.

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

Brian Wruble,      Special  Limited  Partner  (since  January $1-$10,000 Over

Director since     1999) of Odyssey Investment Partners,  LLC            $100,000
2001               (private   equity   investment);   General

Age: 60            Partner (since  September 1996) of Odyssey
                   Partners,     L.P.    (hedge    fund    in
                   distribution   since  1/1/97);   Board  of
                   Governing  Trustees (since August 1990) of
                   The   Jackson   Laboratory   (non-profit);
                   Trustee  (since May 1992) of Institute for
                   Advanced  Study  (educational  institute);
                   formerly  Trustee  (May  2000 -  2002)  of
                   Research  Foundation  of AIMR  (investment
                   research,  non-profit);  Governor,  Jerome
                   Levy  Economics  Institute of Bard College
                   (economics        research)        (August
                   1990-September  2001);  Director  of Ray &
                   Berendtson,  Inc.  (executive search firm)
                   (May   2000-April   2002).   Oversees   10
                   portfolios    in   the    OppenheimerFunds
                   complex.

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


      The address of the Officers in the chart below is as follows: for
Messrs. Molleur, Murphy and Zack and Ms. Feld, Two World Financial Center,
225 Liberty Street, 11th Floor, New York, New York 10281-1008, for Messrs.
Vottiero and Wixted and Mses. Bechtolt and Ives, 6803 S. Tucson Way,
Centennial, CO 80112-3924. Each Officer serves for an annual term or until
his or her earlier resignation, retirement, death or removal.








- -------------------------------------------------------------------------------------
                                Officers of the Fund
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Name,                   Principal Occupation(s) During Past 5 Years
Position(s) Held with
Fund,
Length of Service,
Age
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------

John V. Murphy,         Chairman,  Chief Executive  Officer and director (since June
President since 2001    2001) and President  (since  September 2000) of the Manager;
Age: 54                 President  and a director  or  trustee of other  Oppenheimer
                        funds;  President  and  a  director  (since  July  2001)  of
                        Oppenheimer  Acquisition Corp. (the Manager's parent holding
                        company) and of Oppenheimer  Partnership  Holdings,  Inc. (a
                        holding  company  subsidiary  of the  Manager);  a  director
                        (since November 2001) of OppenheimerFunds  Distributor, Inc.
                        (a  subsidiary  of the  Manager);  Chairman  and a  director
                        (since  July  2001) of  Shareholder  Services,  Inc.  and of
                        Shareholder   Financial   Services,   Inc.  (transfer  agent
                        subsidiaries  of  the  Manager);  President  and a  director
                        (since  July  2001) of  OppenheimerFunds  Legacy  Program (a
                        charitable  trust program  established  by the  Manager);  a
                        director  of the  investment  advisory  subsidiaries  of the
                        Manager:  OFI  Institutional  Asset  Management,   Inc.  and
                        Centennial  Asset  Management  Corporation  (since  November
                        2001),  HarbourView  Asset  Management  Corporation  and OFI
                        Private  Investments,  Inc.  (since  July  2001);  President
                        (since  November  1, 2001) and a director  (since July 2001)
                        of  Oppenheimer  Real  Asset  Management,  Inc.;  a director
                        (since  November  2001)  of  Trinity  Investment  Management
                        Corp.  and  Tremont  Advisers,   Inc.  (investment  advisory
                        affiliates of the Manager);  Executive Vice President (since
                        February  1997)  of  Massachusetts   Mutual  Life  Insurance
                        Company (the Manager's  parent  company);  a director (since
                        June  1995)  of  DLB  Acquisition   Corporation  (a  holding
                        company  that owns the shares of David L.  Babson & Company,
                        Inc.);   formerly,   Chief  Operating   Officer   (September
                        2000-June  2001)  of  the  Manager;  President  and  trustee
                        (November  1999-November 2001) of MML Series Investment Fund
                        and  MassMutual  Institutional  Funds  (open-end  investment
                        companies);  a director (September 1999-August 2000) of C.M.
                        Life Insurance Company;  President,  Chief Executive Officer
                        and director  (September  1999-August 2000) of MML Bay State
                        Life Insurance  Company; a director (June 1989-June 1998) of
                        Emerald   Isle   Bancorp  and   Hibernia   Savings  Bank  (a
                        wholly-owned  subsidiary of Emerald Isle Bancorp).  Oversees
                        72  portfolios  as  Trustee/Officer  and  10  portfolios  as
                        Officer in the OppenheimerFunds complex.

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

Brian W. Wixted,        Senior Vice  President and  Treasurer  (since March 1999) of
Treasurer since 1999    the Manager;  Treasurer  (since  March 1999) of  HarbourView
Age: 44                 Asset Management  Corporation,  Shareholder Services,  Inc.,
                        Oppenheimer Real Asset Management  Corporation,  Shareholder
                        Financial Services,  Inc., Oppenheimer Partnership Holdings,
                        Inc.,  OFI Private  Investments,  Inc.  (since  March 2000),
                        OppenheimerFunds  International  Ltd.  and  OppenheimerFunds
                        plc   (since   May   2000)  and  OFI   Institutional   Asset
                        Management,   Inc.  (since  November  2000)  (offshore  fund
                        management  subsidiaries  of  the  Manager);  Treasurer  and
                        Chief  Financial  Officer  (since  May 2000) of  Oppenheimer
                        Trust Company (a trust  company  subsidiary of the Manager);
                        Assistant   Treasurer  (since  March  1999)  of  Oppenheimer
                        Acquisition  Corp.  and   OppenheimerFunds   Legacy  Program
                        (since April 2000);  formerly  Principal and Chief Operating
                        Officer    (March    1995-March    1999),    Bankers   Trust
                        Company-Mutual  Fund Services Division.  An officer of 82 in
                        the OppenheimerFunds complex.

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

Connie Bechtolt,        Assistant Vice President of the Manager (since September
Assistant Treasurer     1998); formerly Manager/Fund Accounting (September
since 2002              1994-September 1998) of the Manager. An officer of 82 in
Age: 40                 the OppenheimerFunds complex.

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

Philip Vottiero,        Vice  President/Fund  Accounting of the Manager (since March
Assistant Treasurer     2002); formerly Vice  President/Corporate  Accounting of the
since 2002              Manager (July  1999-March  2002) prior to which he was Chief
Age: 40                 Financial  Officer at Sovlink  Corporation  (April 1996-June
                        1999). An officer of 82 in the OppenheimerFunds complex.

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

Robert G. Zack,         Senior Vice President  (since May 1985) and General  Counsel
Secretary since 2001    (since February 2002) of the Manager;  General Counsel and a
Age: 55                 director   (since   November   2001)   of   OppenheimerFunds
                        Distributor,   Inc.;   Senior  Vice  President  and  General
                        Counsel  (since   November   2001)  of   HarbourView   Asset
                        Management  Corporation;   Vice  President  and  a  director
                        (since November 2000) of Oppenheimer  Partnership  Holdings,
                        Inc.; Senior Vice President,  General Counsel and a director
                        (since  November  2001)  of  Shareholder   Services,   Inc.,
                        Shareholder   Financial   Services,    Inc.,   OFI   Private
                        Investments,   Inc.,   Oppenheimer  Trust  Company  and  OFI
                        Institutional   Asset  Management,   Inc.;  General  Counsel
                        (since  November  2001)  of  Centennial   Asset   Management
                        Corporation;   a   director   (since   November   2001)   of
                        Oppenheimer   Real   Asset   Management,   Inc.;   Assistant
                        Secretary   and  a  director   (since   November   2001)  of
                        OppenheimerFunds  International  Ltd.; Vice President (since
                        November   2001)   of   OppenheimerFunds   Legacy   Program;
                        Secretary  (since November 2001) of Oppenheimer  Acquisition
                        Corp.;    formerly   Acting   General   Counsel    (November
                        2001-February  2002)  and  Associate  General  Counsel  (May
                        1981-October  2001) of the Manager;  Assistant  Secretary of
                        Shareholder   Services,   Inc.  (May  1985-November   2001),
                        Shareholder     Financial    Services,     Inc.    (November
                        1989-November  2001);  OppenheimerFunds  International  Ltd.
                        and  OppenheimerFunds  plc (October  1997-November 2001). An
                        officer of 82 in the OppenheimerFunds complex.

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

Katherine P. Feld,      Vice  President and Senior  Counsel (since July 1999) of the
Assistant Secretary     Manager;    Vice    President    (since    June   1990)   of
since 2001              OppenheimerFunds    Distributor,    Inc.;   Director,   Vice
Age: 45                 President  and  Assistant  Secretary  (since  June  1999) of
                        Centennial  Asset  Management  Corporation;  Vice  President
                        (since 1997) of  Oppenheimer  Real Asset  Management,  Inc.;
                        formerly  Vice  President  and  Associate   Counsel  of  the
                        Manager  (June  1990-July  1999).  An  officer  of 82 in the
                        OppenheimerFunds complex.

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

Kathleen T. Ives,       Vice  President  (since June 1998) and Senior Counsel (since
Assistant Secretary     October 2003) of the Manager;  Vice  President  (since 1999)
since 2001              of  OppenheimerFunds  Distributor,  Inc.; Vice President and
Age: 38                 Assistant  Secretary  (since 1999) of Shareholder  Services,
                        Inc.;   Assistant   Secretary   (since   December  2001)  of
                        OppenheimerFunds  Legacy Program and  Shareholder  Financial
                        Services,   Inc.;  formerly  an  Assistant  Counsel  (August
                        1994-October  2003)  and  Assistant  Vice  President  of the
                        Manager   (August   1997-June   1998).   An  officer  of  82
                        portfolios in the OppenheimerFunds complex.

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

Denis R. Molleur,       Vice  President  and Senior  Counsel of the  Manager  (since
Assistant Secretary     July 1999);  formerly a Vice President and Associate Counsel
since 2001              of the Manager (September  1995-July 1999). An officer of 73
Age: 46                 portfolios in the OppenheimerFunds complex.

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

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


|X|   Remuneration of Directors. The officers of the Fund who are affiliated
with the Manager receive no salary or fee from the Fund. The Directors of the
Fund received the compensation shown below from the Fund with respect to the
Fund's fiscal year ended October 31, 2003. The compensation from all 10 of
the Board III Funds (including the Fund) represents compensation received for
serving as a director or trustee and member of a committee (if applicable) of
the boards of those funds during the calendar year ended December 31, 2002.










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

Director Name and       Aggregate    Retirement   Estimated        Total
                                                                Compensation
                                                               From Fund and
                                                    Annual      Fund Complex
                                      Benefits    Retirement     Including
                                     Accrued as  Benefits to      Accrued
Other Fund                            Part of      be Paid       Retirement
Position(s)           Compensation      Fund         Upon      Benefits Paid
(as applicable)        From Fund1     Expenses   Retirement2   to Directors*

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

Thomas W. Courtney       $4,547         $493       $63,738      $262,3213, 8
Chairman and Audit
Committee Member

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

Paul Y. Clinton          $4,337         $467       $63,738      $271,6444, 8
Audit Committee
Chairman

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

Robert G. Galli
Audit Committee          $4,128         $486       $55,6785      $198,3866
Member

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

Lacy B. Herrmann
Audit Committee          $4,128         $266       $63,702      $268,5317, 8
Member

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

Brian Wruble
Audit Committee          $4,128         $75         $7,606        $95,626
Member

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

1.    Aggregate   Compensation   from   Fund   includes   fees  and   deferred
   compensation, if any, for a Director.
2.    Estimated  Annual  Retirement  Benefits  to be Paid Upon  Retirement  is
   based on a straight life payment plan election with the  assumption  that a
   Director  will  retire at the age of 75 and is  eligible  (after 7 years of
   service)  to receive  retirement  plan  benefits as  described  below under
   "Retirement Plan for Directors."
3.    Includes $158,362 ($62,188  compensation and $96,174 accrued  retirement
   benefits) paid to Mr.  Courtney for serving as a trustee or director by two
   open-end investment  companies (OCC Cash Reserves,  Inc. and PIMCO Advisors
   VIT (formerly  OCC  Accumulation  Trust)) for which the Fund's  Sub-Advisor
   acts as the investment advisor.
4.    Includes $171,851 ($62,188  compensation and $109,663 accrued retirement
   benefits)  paid to Mr.  Clinton for serving as a trustee or director by two
   open-end investment  companies (OCC Cash Reserves,  Inc. and PIMCO Advisors
   VIT) for which the Fund's Sub-Advisor acts as the investment advisor.
5.    Includes  $30,689  estimated  to be paid to Mr.  Galli for  serving as a
   trustee or director of 31 other  Oppenheimer  funds (at  December 31, 2002)
   that are not Board III Funds.
6.    Includes  $105,760  paid to Mr. Galli for serving as trustee or director
   of 31 other  Oppenheimer  funds (at  December  31, 2002) that are not Board
   III Funds.
7.    Includes $175,905 ($62,188  compensation and $113,717 accrued retirement
   benefits) paid to Mr.  Herrmann for serving as a trustee or director by two
   open-end investment  companies (OCC Cash Reserves,  Inc. and PIMCO Advisors
   VIT) for which the Fund's Sub-Advisor acts as the investment advisor.
8.    Effective  12/31/02 the OCC Cash  Reserves  Fund,  Inc. was  liquidated.
   Messrs. Clinton,  Courtney and Herrmann ceased to be directors of that fund
   upon  its  liquidation  and  received  the  one-time   retirement  benefits
   referenced above.
* For purposes of this section only, "Fund Complex" includes the Oppenheimer
funds, PIMCO Advisors VIT (formerly OCC Accumulation Trust) and OCC Cash
Reserves, Inc. in accordance with the instructions for Form N-1A.  The
Manager does not consider PIMCO Advisors VIT and OCC Cash Reserves, Inc. to
be part of the OppenheimerFunds "Fund Complex" as that term may be otherwise
interpreted

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

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

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

     Major  Shareholders.  As of November 24, 2003 the only persons who owned of
record or were known by the Fund to own  beneficially 5% or more of any class of
the Fund's  outstanding  shares and their  holdings of those  classes as of that
date were:

MAC &  Co.  Acct.  #SBKF97C4072,  Mutual  Fund  Operations,  P.O.  Box 3198,
Pittsburgh,  PA  15230-3198,   which  owned  for  the  benefit  of  its  clients
520,602.385  Class A  shares  (representing  6.32% of the  Class A  shares  then
outstanding);

Citigroup Global Markets,  Inc.,  Attention Cindy Tempesta,  7th Floor, 333 West
34th Street,  New York, New York 10001-2483,  which owned for the benefit of its
clients  941,866.561 Class A shares  (representing  11.43% of the Class A shares
then outstanding);

Bill Krebsbach  &  James Bachma TR Minnesota  Conway,  401K PSP, 314 W. 86th
Street, #107,  Bloomington,  MN 55420-1706,  who owned 16,099.025 Class N shares
(representing 5.72% 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,  a
global,  diversified insurance and financial services organization.  The Manager
became the Fund's investment advisor on February 28, 1997.

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

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









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

     o    The Fund votes with the  recommendation of the issuer's  management on
          routine  matters,   including  election  of  directors   nominated  by
          management and ratification of auditors, unless circumstances indicate
          otherwise.

     o    In general,  the Fund  opposes  anti-takeover  proposals  and supports
          elimination of anti-takeover proposals, absent unusual circumstances.

     o    The Fund  supports  shareholder  proposals to reduce a  super-majority
          vote  requirement,   and  opposes   management   proposals  to  add  a
          super-majority vote requirement.

     o    The Fund opposes proposals to classify the board of directors.

     o    The Fund supports proposals to eliminate cumulative voting.

     o    The Fund opposes re-pricing of stock options.

     o    The Fund generally considers executive  compensation questions such as
          stock option plans and bonus plans to be ordinary  business  activity.
          The Fund analyzes stock option plans,  paying particular  attention to
          their dilutive effect.  While the Fund generally  supports  management
          proposals, the Fund opposes plans it considers to be excessive.

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

     The Investment Advisory Agreement. The Manager provides investment advisory
and  management  services  to the Fund under an  investment  advisory  agreement
between  the  Manager  and Fund.  The  Manager  handles  the  Fund's  day-to-day
business,  and the  agreement  permits  the  Manager to enter into  sub-advisory
agreements  with other  registered  investment  advisors  to obtain  specialized
services  for  the  Fund,  as  long  as the  Fund  is not  obligated  to pay any
additional  fees for those  services.  The Manager has retained the  Sub-Advisor
pursuant to a separate Sub-Advisory Agreement,  described below, under which the
Sub-Advisor  buys and sells  portfolio  securities  for the Fund.  The portfolio
manager  of the Fund is  employed  by the  Sub-Advisor  and is the person who is
principally  responsible for the day-to-day  management of the Fund's portfolio,
as described below.


     The investment advisory agreement between the Fund and the Manager 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  Management required
to provide effective administration for the Fund. Those responsibilities include
the compilation  and maintenance of records with respect to its operations,  the
preparation and filing of specified reports,  and composition of proxy materials
and registration statements for continuous public sale of shares of the Fund.


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

                         OppenheimerFunds,

Fiscal Year ended 10/31:    Inc.1

- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
            2001                                $1,961,752
- -------------------------------------------------------------------------------
         ---------------------------------------------------------------
            2002                                $2,241,431
         ---------------------------------------------------------------
         ---------------------------------------------------------------

                   2003                         $2,276,055

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

1.    The Manager, not the Fund, pays the Sub-Advisor an annual sub-advisory
            fee. For fiscal years ended 2001, 2002 and 2003 this sub-advisory
            fee was $782,152, $892,561 and $858,498, respectively.


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

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


      |X|   Annual Approval of Investment Advisory and Sub-Advisory
Agreement. Each year, the Board of Directors, including a majority of the
Independent Directors, is required to approve the renewal of the investment
advisory agreement and sub-advisory agreement. The Investment Company Act
requires that the Board request and evaluate the Manager and Sub-Advisor and
provide such information as may be reasonably necessary to evaluate the terms
of the investment advisory and sub-advisory agreements.  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 and sub-advisory agreements.  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 and the Sub-Advisor;
o     The investment performance of the Fund in comparison to regular market
            indices and in comparison to other funds with similar investment
            objectives and policies;
o     Economies of scale that may be available to the Fund from the Manager;
o     The fee paid by the Manager to the Sub-Advisor;
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 Sub-Advisor, and
o     The direct and indirect benefits the Manager and Sub-Advisor receives
            from their relationships 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 and Sub-Advisor 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 and Sub-Advisor is important so that the
Manager and Sub-Advisor 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 and
Sub-Advisor. The Board is aware that there are alternatives to the use of the
Manager and Sub-Advisor.

      These matters were also considered by the Independent Directors,
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 and Sub-Advisor within the meaning and intent of
the SEC Rules regarding the independence of counsel.

      After careful deliberation the Board concluded that it was in the best
interest of shareholders to continue the investment advisory and sub-advisory
agreements for another year. In arriving at a decision, the Board did not
single out any one factor or group of factors as being more important than
other factors, but considered all factors together.  The Board judged the
terms and conditions of the investment advisory agreements, including the
investment advisory fees, in light of all of the surrounding circumstances.
After deliberating the Board approved the following fee schedule: effective
January 1, 2004, the Fund pays the Manager an advisory fee at an annual rate
that declines on additional assets as the Fund grows: 0.90% of the first $400
million of average annual net assets of the Fund, 0.85% of the next $400
million, 0.80% of the next $400 million, 0.70% of the next $400 million,
0.65% of the next $400 million and 0.60% of average annual net assets in
excess of $2 billion.

The Sub-Advisor. The Sub-Advisor is a Delaware limited liability company and
is a wholly-owned subsidiary of Oppenheimer Capital LLC, a registered
investment advisor.  From the Fund's inception on April 30, 1980 until
February 28, 1997, the Sub-Advisor (which was then named Quest for Value
Advisors) served as the Fund's investment advisor.  On February 28, 1997, the
Manager retained the Sub-Advisor to continue providing day-to-day portfolio
management for the Fund. The Sub-Advisor has operated as an investment
advisor to investment companies and other investors since its organization in
1980.  As of September 30, 2003, the Sub-Advisor including Oppenheimer
Capital LLC, advised accounts having assets in excess of $20 billion. The
Sub-Advisor is located at 1345 Avenue of the Americas, 49th Floor, New York,
New York 10105-4800.

      Oppenheimer Capital LLC is a Delaware limited liability company with
one member, Allianz Dresdner Asset Management U.S. Equities LLC. Allianz
Dresdner Asset Management U.S. Equities LLC is a wholly-owned subsidiary of
Allianz Dresdner Asset Management of America L.P. ("ADAM LP"). ADAM LP is a
Delaware limited partnership whose sole general partner is Allianz-PacLife
Partners LLC.  Allianz-PacLife Partners LLC is a Delaware limited liability
company with three members, ADAM U.S. Holding LLC, a Delaware limited
liability company, Pacific Asset Management LLC, a Delaware limited liability
company and Pacific Life Insurance Company, a California stock life insurance
company.  The sole member of ADAM U.S. Holding LLC is Allianz Dresdner Asset
Management of America LLC. Allianz Dresdner Asset Management of America LLC
has two members, Allianz of America, Inc., a Delaware corporation which owns
99.9% non-managing interest and Allianz Dresdner Asset Management of America
Holding Inc., a Delaware corporation which owns a 0.01% managing interest.
Allianz Dresdner Asset Management of America Holding Inc. is a wholly-owned
subsidiary of ADAM GmbH, which is wholly owned by Allianz Aktiengesellschaft
("Allianz AG"). Allianz of America, Inc. is wholly-owned by Allianz AG.
Pacific Asset Management LLC is a wholly-owned subsidiary of Pacific Life
Insurance Company, a wholly-owned subsidiary of Pacific Mutual Holding
Company. Allianz AG indirectly holds a controlling interest in ADAM LP.
Allianz AG is a European-based, multinational insurance and financial
services holding company. Pacific Life Insurance Company owns an indirect
minority equity interest in ADAM LP and is a California-based insurance
company.

      The Sub-Advisor's Code of Ethics. Each employee of the Sub-Advisor is
subject to a Code of Ethics which has been adopted by the Sub-Advisor to
comply with the provisions of Rule 17j-1 under the Investment Company Act.
The Codes of Ethics are designed to detect and prevent improper personal
trading. The Codes of Ethics permit personnel subject to the Codes to invest
in securities, including securities that may be purchased, sold or held by
the Fund, subject to a number of restrictions and controls including
prohibitions against purchases of securities in an Initial Public Offering
and a preclearance requirement with respect to certain personal securities
transactions.

|X|   The Sub-Advisory Agreement. Under the Sub-Advisory Agreement between
the Manager and the Sub-Advisor, the Sub-Advisor shall regularly provide
investment advice with respect to the Fund and invest and reinvest cash,
securities and the property comprising the assets of the Fund.  Under the
Sub-Advisory Agreement, the Sub-Advisor agrees not to change the portfolio
manager of the Fund without the written approval of the Manager. The
Sub-Advisor also agrees to provide assistance in the distribution and
marketing of the Fund.


      Under the Sub-Advisory Agreement, the Manager pays the Sub-Advisor an
annual fee in monthly installments, based on the average daily net assets of
the Fund. The fee paid to the Sub-Advisor under the Sub-Advisory agreement is
paid by the Manager, not by the Fund. The fee is equal to 40% of the
investment advisory fee collected by the Manager from the Fund based on the
total net assets of the Fund as of February 28, 1997 (the "Base Amount") that
remained in the Fund 120 days later, plus 30% of the investment advisory fee
collected by the Manager based on the total net assets of the Fund that
exceed the Base Amount. In each case the fee is calculated after any waivers
by the Manager of its fee.

      The Sub-Advisory Agreement states that in the absence of willful
misfeasance, bad faith, negligence or reckless disregard of its duties or
obligations, the Sub-Advisor shall not be liable to the Manager for any act
or omission in the course of or connected with rendering services under the
Sub-Advisory Agreement or for any losses that may be sustained in the
purchase, holding or sale of any security.

Brokerage Policies of the Fund

Brokerage Provisions of the Investment Advisory Agreement and the
Sub-Advisory Agreement. One of the duties of the Sub-Advisor under the
Sub-Advisory Agreement is to arrange the portfolio transactions for the Fund.
The Fund's investment advisory agreement with the Manager and the
Sub-Advisory Agreement contain provisions relating to the employment of
broker-dealers to effect the Fund's portfolio transactions. The Manager and
the Sub-Advisor are authorized to employ broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment Company Act.
They may employ broker-dealers that they think, in their 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 and the Sub-Advisor need not seek competitive commission
bidding. However, they are expected to be aware of the current rates of
eligible brokers and to minimize the commissions paid to the extent
consistent with the interests and policies of the Fund as established by its
Board of Directors.

      The Manager and the Sub-Advisor 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, the Sub-Advisor or their
respective affiliates have investment discretion. The commissions paid to
such brokers may be higher than another qualified broker would charge, if the
Manager or Sub-Advisor, as applicable, 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 and the Sub-Advisor may also
consider sales of shares of the Fund and other investment companies for which
the Manager or an affiliate serves as investment advisor.


      The Sub-Advisory Agreement permits the Sub-Advisor to enter into
"soft-dollar" arrangements through the agency of third parties to obtain
services for the Fund. Pursuant to these arrangements, the Sub-Advisor will
undertake to place brokerage business with broker-dealers who pay third
parties that provide services. Any such "soft-dollar" arrangements will be
made in accordance with policies adopted by the Board of Directors and in
compliance with applicable law.


Brokerage Practices. Brokerage for the Fund is allocated subject to the
provisions of the investment advisory agreement and the Sub-Advisory
Agreement and the procedures and rules described above. Generally, the
Sub-Advisor's portfolio traders allocate brokerage based upon recommendations
from the Fund's portfolio manager. In certain instances, portfolio managers
may directly place trades and allocate brokerage. In either case, the
Sub-Advisor'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.

      The Sub-Advisor serves as investment manager to a number of clients,
including other investment companies, and may in the future act as investment
manager or advisor to others. It is the practice of the Sub-Advisor to
allocate purchase or sale transactions among the Fund and other clients whose
assets it manages in a manner it deems equitable. In making those
allocations, the Sub-Advisor considers several main factors, including the
respective investment objectives, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment,
the size of investment commitments generally held and the opinions of the
persons responsible for managing the portfolios of the Fund and each other
client's accounts.

      When orders to purchase or sell the same security on identical terms
are placed by more than one of the funds and/or other advisory accounts
managed by the Sub-Advisor or its affiliates, the transactions are generally
executed as received, although a fund or advisory account that does not
direct trades to a specific broker (these are called "free trades") usually
will have its order executed first. Orders placed by accounts that direct
trades to a specific broker will generally be executed after the free trades.
All orders placed on behalf of the Fund are considered free trades. However,
having an order placed first in the market does not necessarily guarantee the
most favorable price. Purchases are combined where possible for the purpose
of negotiating brokerage commissions. In some cases that practice might have
a detrimental effect on the price or volume of the security in a particular
transaction for the Fund.

      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 Sub-Advisor 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 and the Sub-Advisory Agreement permit
the Manager and the Sub-Advisor 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 Sub-Advisor 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 Sub-Advisor's other
accounts. Investment research may be supplied to the Sub-Advisor 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 Sub-Advisor in a non-research capacity (such as
bookkeeping or other administrative functions), then only the percentage or
component that provides assistance to the Sub-Advisor in the investment
decision-making process may be paid in commission dollars.

    The research services provided by brokers broaden the scope and
supplement the research activities of the Sub-Advisor. That research provides
additional views and comparisons for consideration, and helps the Sub-Advisor
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
Sub-Advisor provides information to the Manager and the Board about the
commissions paid to brokers furnishing such services, together with the
Sub-Advisor's representation that the amount of such commissions was
- -------------------------------------------------------------------------------

                                Total Brokerage Commissions Paid by the Fund 1

    Fiscal Year Ended 10/31:

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

             2001                                  $400,985

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

             2002                                 $471,8472

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

             2003                                  $465,008

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

1  Amounts do not include spreads or commissions on principal transactions on
a net trade basis.
2. In the fiscal year ended 10/31/02, the amount of transactions directed to
   brokers for research services was $2,581,201 and the amount of the
   commissions paid to broker-dealers for those services was $3,700.


Distribution and Service Plans

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


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


- -------------------------------------------
Fiscal    Aggregate        Class A
                           Front-End

Year      Front-End Sales  Sales Charges
Ended     Charges on       Retained by
10/31:    Class A Shares   Distributor1

- -------------------------------------------
- -------------------------------------------------------
    2001           $437,916             $110,633
- -------------------------------------------------------
- -------------------------------------------
    2002           $557,052             $163,592
- -------------------------------------------
- -------------------------------------------------------------------------------

    2003         $380,381        $111,449

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

1.    Includes amounts  retained by a broker-dealer  that is an affiliate or a
    parent of the Distributor.


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

Fiscal    Concessions on   Concessions on  Concessions on   Concessions on
Year      Class A Shares   Class B Shares  Class C Shares   Class N Shares
Ended     Advanced by      Advanced by     Advanced by      Advanced by
10/31:    Distributor1     Distributor1    Distributor1     Distributor1

- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2001        $58,690         $546,699         $53,657          $1,9282
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2002        $34,981         $566,717         $98,063          $27,328
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------

  2003         $7,733         $310,827         $65,110          $27,337

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

1.    The  Distributor  advances  concession  payments  to dealers for certain
   sales  of  Class A shares  and for  sales  of Class B and  Class C shares
   from its own resources at the time of sale.
2.    The inception date of Class N shares was March 1, 2001.


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

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

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

  2001        $11,111          $44,754          $1,916              $0

- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
  2002         $5,460         $113,843          $5,740             $885
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------

  2003         $1,203         $119,717          $7,691            $9,966

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


Distribution and Service Plans. The Fund has adopted a Service Plan for Class
A shares and Distribution and Service Plans for Class B, Class C and Class N
shares under Rule 12b-1 of the Investment Company Act. Under those plans the
Fund pays the Distributor for all or a portion of its costs incurred in
connection with the distribution and/or servicing of the shares of the
particular class. Each plan has been approved by a vote of the Board of
Directors, including a majority of the Independent Directors1, 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 Directors and its
Independent Directors specifically vote annually to approve its continuance.
Approval must be by a vote cast in person at a meeting called for the purpose
of voting on continuing the plan. A plan may be terminated at any time by the
vote of a majority of the Independent Directors or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the outstanding
shares of that class.


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


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

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


      Under the 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 Directors. The Board of Directors has set no minimum amount
of assets to qualify for payments under the plans.

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

      Under the Class A distribution plan, the plan provides for the Fund to
pay an asset-based sales charge to the Distributor at an annual rate of 0.25%
of average annual net assets of Class A shares of the Fund. Effective January
1, 2003, the Board set that rate to zero. Prior to that date, the Fund paid
the Distributor an annual asset-based sales charge equal to 0.10% of average
annual net assets representing Class A shares. The Distributor paid the
entire asset-based sales charge to brokers, dealers and financial
institutions.

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

      For the fiscal year ended October 31, 2003 payments under the Class A
distribution and service plan totaled $431,506, of which $3,763 was service
fee payments retained by the Distributor in connection with the grandfathered
retirement accounts, described above, and included $13,443 paid to an
affiliate of the Distributor's parent company. In addition, no fees were
retained for the asset-based sales charge, as allowed under the plan prior to
January 1, 2003. Any unreimbursed expenses the Distributor incurs with
respect to Class A shares in any fiscal year cannot be recovered in
subsequent years. The Distributor may not use payments received under the
Class A plan to pay any of its interest expenses, carrying charges, or other
financial costs, or allocation of overhead.

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

      The 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 shares are redeemed during the first year after their purchase,
the recipient of the service fees on those shares will be obligated to repay
the Distributor a pro rata portion of the advance payment of the service fee
made on those shares. In cases where the Distributor is the broker of record
for Class B, Class C and Class N shares, i.e. shareholders without the
services of a broker directly invest in the Fund, the Distributor will retain
the asset-based sales charge and service fee for Class B, Class C and Class N
shares.

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

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

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







      may experience increased difficulty selling the Fund's shares if
         payments under the plan are discontinued because most competitor
         funds have plans that pay dealers for rendering distribution
         services as much or more than the amounts currently being paid by
         the Fund, and
o     may not be able to continue providing, at the same or at a lesser cost,
         the same quality distribution sales efforts and services, or to
         obtain such services from brokers and dealers, if the plan payments
         were to be discontinued.

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


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

  Distribution Fees Paid to the Distributor in the Fiscal Year Ended 10/31/03

 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Class:            Total     Amount Retained   Distributor's    Distributor's
                                                 Aggregate      Unreimbursed
                                                Unreimbursed    Expenses as %
                 Payments                      Expenses Under   of Net Assets
                Under Plan1   by Distributor        Plan          of Class
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------

 Class B Plan    $467,475        $351,691        $1,247,483         2.25%

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

 Class C Plan    $208,636        $73,934          $325,053          1.07%

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

 Class N Plan     $21,044        $17,801          $115,421          1.80%

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

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

Includes amounts paid to an affiliate of the Distributor's parent company:
   $6,723 (Class B); $4,600 (Class C); and $781 (Class N).


    All payments under the plans are subject to the limitations imposed by
the Conduct Rules of the NASD Inc. on payments of asset-based sales charges
and service fees.

Performance of the Fund


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

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









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

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

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


      In calculating total returns for Class A shares, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted
from the initial investment ("P") (unless the return is shown without sales
charge, as described below). For Class B shares, payment of the applicable
contingent deferred sales charge is applied, depending on the period for
which the return is shown: 5.0% in the first year, 4.0% in the second year,
3.0% in the third and fourth years, 2.0% in the fifth year, 1.0% in the sixth
year and none thereafter.  For Class C shares, the 1% contingent deferred
sales charge is deducted for returns for the 1-year period.  For Class N
shares, the 1% contingent deferred sales charge is deducted for returns for
the one year period.  Class N total returns may also be calculated for the
periods prior to 3/1/01 (the inception date for Class N shares), based on the
Fund's Class A returns, adjusted to reflect the higher Class N 12b-1 fees.

      The historical performance of Class A shares is restated to reflect the
fees and expenses of Class A that were in effect as of March 3, 1997, without
giving effect to any fee waivers, to reflect the re-denomination of the
Fund's prior capital shares (which bore no expenses) as Class A shares after
the Fund converted to an open-end investment company.
      Average Annual Total Return. The "average annual total return" of each
class is an average annual compounded rate of return for each year in a
specified number of years. It is the rate of return based on the change in
value of a hypothetical initial investment of $1,000 ("P" in the formula
below) held for a number of years ("n" in the formula) to achieve an Ending
Redeemable Value ("ERV" in the formula) of that investment, according to the
following formula:


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


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


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


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

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

o







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

 ERV - P   = Total Return

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

    P

o     Total Returns at Net Asset Value. From time to time the Fund may also
quote a cumulative or an average annual total return "at net asset value"
(without deducting sales charges) for Class A, Class B, Class C or Class N
shares. Each is based on the difference in net asset value per share at the
beginning and the end of the period for a hypothetical investment in that
class of shares (without considering front-end or contingent deferred sales
charges) and takes into consideration the reinvestment of dividends and
capital gains distributions.


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

            The Fund's Total Returns for the Periods Ended 10/31/03

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

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

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

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

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

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

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

Class A1  144.66%  159.58%   17.18%   24.33%   5.16%    6.41%    9.36%   10.01%

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

Class B2   67.29%   67.29%   18.33%   23.33%   5.50%    5.73%    8.03%   8.03%

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

Class C3   66.24%   66.24%   22.36%   23.36%   5.73%    5.73%    7.93%   7.93%

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

Class N4   3.45%    3.45%    23.00%   24.00%   1.28%    1.28%     N/A     N/A

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

1. Inception of Class A: 2/13/87.
2. Inception of Class B: 3/3/97.
3. Inception of Class C: 3/3/97.
4. Inception of Class N: 3/1/01


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

  Average
  Annual
   Total
  Returns
 for Class
 A Shares
  (After
   Sales
  Charge)
- -----------
  For the
  Periods
   Ended
 10/31/03

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

                                 1-Year          5-Year          10-Year

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

After Taxes on Distributions     17.18%          2.34%           6.22%1

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

After Taxes on                   11.17%          3.19%           6.58%1
Distributions and
Redemption of Fund Shares

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

1.    Inception of Class A: 2/13/87.


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 based on stated fund
classifications. Lipper currently ranks the Fund's performance against all
other multi-cap value 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 the performance of the
funds in particular categories.


      Morningstar Ratings. From time to time the Fund may publish the star
rating of the performance of its classes of shares by Morningstar, Inc., an
independent mutual fund monitoring service.  Morningstar rates mutual funds
in their specialized market sector.  The Fund is rated among mid-cap blend
funds.

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

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


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

      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,
o     Current purchases of Class A and Class B shares of the Fund and other
            Oppenheimer funds to reduce the sales charge rate that applies to
            current purchases of Class A shares, and
o     Class A and Class B shares of Oppenheimer funds you previously
            purchased subject to an initial or contingent deferred sales
            charge to reduce the sales charge rate for current purchases of
            Class A shares, provided that you still hold your investment in
            one of the Oppenheimer funds.

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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     5. The shares  eligible  for  purchase  under the Letter (or the holding of
which may be counted toward completion of a Letter) include:

     (a)  Class A shares  sold with a  front-end  sales  charge or  subject to a
          Class A contingent deferred sales charge,

     (b)  Class B shares  of  other  Oppenheimer  funds  acquired  subject  to a
          contingent deferred sales charge, and

     (c)  Class A or Class B shares  acquired  by exchange of either (1) Class A
          shares  of one of the  other  Oppenheimer  funds  that  were  acquired
          subject to a Class A initial or  contingent  deferred  sales charge or
          (2)  Class B shares of one of the other  Oppenheimer  funds  that were
          acquired subject to a contingent deferred sales charge.

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

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

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

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

Retirement  Plans.  Certain types of  retirement  plans are entitled to purchase
shares of the Fund without  sales 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 72 months after purchase is not treated as a taxable event for
the shareholder.  If those laws or the IRS  interpretation  of those laws should
change,  the automatic  conversion  feature may be suspended.  In that event, no
further conversions of Class B shares would occur while that suspension remained
in effect. Although Class B shares could then be exchanged for Class A shares on
the basis of relative net asset value of the two classes, without the imposition
of a sales charge or fee, such exchange could constitute a taxable event for the
shareholder,  and absent  such  exchange,  Class B shares  might  continue to be
subject to the asset-based sales charge for longer than six years.


     |X|  Availability of Class N Shares.  In addition to the description of the
types of  retirement  plans which may purchase  Class N shares  contained in the
prospectus, Class N shares also are offered to the following:

o    to all rollover IRAs (including SEP IRAs and SIMPLE IRAs),

o    to  all  rollover   contributions   made  to   Individual   401(k)   plans,
     Profit-Sharing Plans and Money Purchase Pension Plans,

o    to  all  direct  rollovers  from  OppenheimerFunds-sponsored  Pinnacle  and
     Ascender retirement plans,

o    to all trustee-to-trustee IRA transfers,

o    to all 90-24 type 403(b) transfers,

o    to Group  Retirement  Plans (as defined in Appendix 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, and







o    to certain  customers of  broker-dealers  and  financial  advisors that are
     identified in a special  agreement  between the  broker-dealer or financial
     advisor and the Distributor for that purpose.

     The sales  concession  and the advance of the service  fee, as described in
the Prospectus, will not be paid to dealers of record on sales of Class N shares
on:

o    purchases  of Class N shares in amounts of $500,000 or more by a retirement
     plan that pays for the  purchase  with the  redemption  proceeds of Class A
     shares of one or more  Oppenheimer  funds  (other  than  rollovers  from an
     OppenheimerFunds-sponsored  Pinnacle  or  Ascender  401(k)  plan to any IRA
     invested in the Oppenheimer funds),

o    purchases  of Class N shares in amounts of $500,000 or more by a retirement
     plan that pays for the  purchase  with the  redemption  proceeds of Class C
     shares of one or more Oppenheimer  funds held by the plan for more than one
     year (other than rollovers from an  OppenheimerFunds-sponsored  Pinnacle or
     Ascender 401(k) plan to any IRA invested in the Oppenheimer funds), and

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

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

     |X|  Allocation of Expenses.  The Fund pays  expenses  related to its daily
operations, such as custodian fees, Directors' fees, transfer agency fees, legal
fees and auditing  costs.  Those  expenses are paid out of the Fund's assets and
are not paid directly by  shareholders.  However,  those expenses reduce the net
asset 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
Directors,  custodian expenses, share issuance costs,  organization and start-up
costs, interest,  taxes and brokerage commissions,  and non-recurring  expenses,
such as litigation costs.

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

Account Fees. As stated in the  Prospectus,  a $12 annual fee is assessed on any
account valued at less than $500. This fee will not be assessed on the following
accounts:

o    Accounts that have balances  below $500 due to the automatic  conversion of
     shares from Class B to Class A shares;

o    Accounts  with an active Asset Builder Plan,  payroll  deduction  plan or a
     military allotment plan;

o    OppenheimerFunds-sponsored   group  retirement  accounts  that  are  making
     continuing purchases;

o    Certain  accounts held by  broker-dealers  through the National  Securities
     Clearing Corporation; and

o    Accounts  that  fall  below  the  $500   threshold  due  solely  to  market
     fluctuations  within  the  12-month  period  preceding  the date the fee is
     deducted.

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


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


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

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







     Securities  Valuation.  The  Fund's  Board  of  Directors  has  established
procedures  for  the  valuation  of the  Fund's  securities.  In  general  those
procedures  are as  follows:  o Equity  securities  traded on a U.S.  securities
exchange or on Nasdaq(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 Directors, or

(2)  at the last sale  price  obtained  by the  Manager  from the  report of the
     principal  exchange  on which the  security  is traded at its last  trading
     session on or immediately before the valuation date, or

(3)  at the  mean  between  the  "bid"  and  "asked"  prices  obtained  from the
     principal  exchange  on which the  security  is traded  or, on the basis of
     reasonable  inquiry,  from two market makers in the  security.  o Long-term
     debt securities having a remaining maturity in excess of 60 days are valued
     based on the mean  between the "bid" and  "asked"  prices  determined  by a
     portfolio  pricing  service  approved by the Fund's  Board of  Directors or
     obtained by the Manager  from two active  market  makers in the security on
     the basis of reasonable inquiry.

o    The  following  securities  are  valued at the mean  between  the "bid" and
     "asked" prices determined by a pricing service approved by the Fund's Board
     of Directors or obtained by the Manager  from two active  market  makers in
     the security on the basis of reasonable inquiry:

(1)  debt instruments that have a maturity of more than 397 days when issued,

(2)  debt  instruments  that had a maturity  of 397 days or less when issued and
     have a remaining maturity of more than 60 days, and

(3)  non-money  market debt  instruments that had a maturity of 397 days or less
     when issued and which have a remaining maturity of 60 days or less.

o    The following  securities are valued at cost,  adjusted for amortization of
     premiums and accretion of discounts:

(1)  money  market debt  securities  held by a non-money  market fund that had a
     maturity of less than 397 days when  issued that have a remaining  maturity
     of 60 days or less, and

(2)  debt instruments held by a money market fund that have a remaining maturity
     of 397 days or less.

o    Securities (including restricted  securities) not having  readily-available
     market  quotations  are valued at fair value  determined  under the Board's
     procedures. If the Manager is unable to locate two market makers willing to
     give  quotes,  a security  may be priced at the mean  between the "bid" and
     "asked"  prices  provided by a single active market maker (which in certain
     cases may be the "bid" price if no "asked" price is available).








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


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

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

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


How to Sell Shares

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 Directors of the Fund may determine that it would be detrimental to the
best  interests of the remaining  shareholders  of the Fund to make payment of a
redemption  order wholly or partly in cash.  In that case,  the Fund may pay the
redemption  proceeds in whole or in part by a  distribution  "in kind" of liquid
securities from the portfolio of the Fund, in lieu of cash.

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

Involuntary  Redemptions.  The Fund's Board of Directors  has the right to cause
the  involuntary  redemption  of the shares held in any account if the aggregate
net asset value of those  shares is less than $500 or such lesser  amount as the
Board may fix. The Board will not cause the involuntary  redemption of shares in
an account if the  aggregate net asset value of such shares has fallen below the
stated minimum solely as a result of market fluctuations. If the Board exercises
this right, it may also fix the  requirements  for any notice to be given to the
shareholders  in question (not less than 30 days).  The Board may  alternatively
set  requirements  for the shareholder to increase the investment,  or set other
terms and conditions so that the shares would not be involuntarily redeemed.

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

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


Distributions   From  Retirement   Plans.   Requests  for   distributions   from
OppenheimerFunds-sponsored  IRAs,  SEP-IRAs,  SIMPLE IRAs,  403(b)(7)  custodial
plans,  401(k) plans or pension or  profit-sharing  plans should be addressed to
"Trustee,  OppenheimerFunds  Retirement  Plans," c/o the  Transfer  Agent at its
address listed in "How To Sell Shares" in the Prospectus or on the back cover of
this Statement of Additional Information. The request must:

(1)  state the reason for the distribution;


(2)  state  the  owner's  awareness  of tax  penalties  if the  distribution  is
     premature; and

(3)  conform to the  requirements  of the plan and the Fund's  other  redemption
     requirements.

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

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







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

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

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

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

     The Fund cannot guarantee  receipt of a payment on the date requested.  The
Fund reserves the right to amend, suspend or discontinue offering these plans at
any time without prior notice.  Because of the sales charge  assessed on Class A
share purchases,  shareholders  should not make regular additional Class A share
purchases while participating in an Automatic  Withdrawal Plan. Class B, Class C
and Class N  shareholders  should  not  establish  automatic  withdrawal  plans,
because of the potential  imposition of the contingent  deferred sales charge on
such  withdrawals  (except  where  the  Class B,  Class C or Class N  contingent
deferred  sales charge is waived as described in Appendix 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 $50.  Instructions should be
provided   on   the   OppenheimerFunds   Application   or   signature-guaranteed
instructions.  Exchanges made under these plans are subject to the  restrictions
that  apply  to  exchanges  as set  forth  in "How to  Exchange  Shares"  in the
Prospectus and below in this Statement of Additional Information.

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


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


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

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


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









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

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

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


How to Exchange Shares

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

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

   The following funds only offer Class
   A shares:
Centennial America Fund, L.P.             Centennial New York Tax Exempt Trust
Centennial California Tax Exempt 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 AMT-Free Municipals           Oppenheimer Pennsylvania Municipal
                                             Fund
   Oppenheimer AMT-Free New York             Oppenheimer Rochester National
   Municipals                                Municipals
   Oppenheimer California Municipal Fund     Limited Term New York Municipal Fund
   Oppenheimer Limited Term Municipal        Oppenheimer Senior Floating Rate Fund
   Fund
   Oppenheimer New Jersey Municipal Fund     Rochester Fund Municipals


   The following funds do not offer Class Y shares:

   Oppenheimer AMT-Free Municipals          Oppenheimer Limited Term Municipal Fund
   Oppenheimer AMT-Free New York Municipals Oppenheimer Multiple Strategies Fund
   Oppenheimer California Municipal Fund    Oppenheimer New Jersey Municipal Fund
   Oppenheimer Capital Income Fund          Oppenheimer Pennsylvania Municipal Fund
   Oppenheimer Cash Reserves                Oppenheimer Principal Protected Main
                                            Street Fund
   Oppenheimer Champion Income Fund         Oppenheimer Principal Protected Main
                                            Street Fund II
   Oppenheimer Convertible Securities Fund  Oppenheimer Quest Capital Value Fund,
                                            Inc.
   Oppenheimer Disciplined Allocation Fund  Oppenheimer Quest International Value
                                            Fund, Inc.
   Oppenheimer Developing Markets Fund      Oppenheimer Rochester National Municipals
   Oppenheimer Gold & Special Minerals Fund Oppenheimer Senior Floating Rate Fund
   Oppenheimer International Bond Fund      Oppenheimer Small Cap Value Fund
   Oppenheimer International Growth Fund    Oppenheimer Total Return Bond Fund
   Oppenheimer International Small Company  Limited Term New York Municipal Fund
   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 funds may be exchanged at net asset value
      for shares of any money market fund offered by the Distributor. Shares
      of any money market fund purchased without a sales charge may be
      exchanged for shares of Oppenheimer funds offered with a sales charge
      upon payment of the sales charge. They may also be used to purchase
      shares of Oppenheimer funds subject to an early withdrawal charge or
      contingent deferred sales charge.
o     Shares of Oppenheimer Money Market Fund, Inc. purchased with the
      redemption proceeds of shares of other mutual funds (other than funds
      managed by the Manager or its subsidiaries) redeemed within the 30 days
      prior to that purchase may subsequently be exchanged for shares of
      other Oppenheimer funds without being subject to an initial sales
      charge or contingent deferred sales charge. To qualify for that
      privilege, the investor or the investor's dealer must notify the
      Distributor of eligibility for this privilege at the time the shares of
      Oppenheimer Money Market Fund, Inc. are purchased. If requested, they
      must supply proof of entitlement to this privilege.
o     Shares of the Fund acquired by reinvestment of dividends or
      distributions from any of the other Oppenheimer funds or from any unit
      investment trust for which reinvestment arrangements have been made
      with the Distributor may be exchanged at net asset value for shares of
      any of the Oppenheimer funds.

o     Shares of Oppenheimer Principal Protected Main Street Fund may be
      exchanged at net asset value for shares of any of the Oppenheimer
      funds. However, shareholders are not permitted to exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Principal Protected
      Main Street Fund until after the expiration of the warranty period
      (8/5/2010).
o     Shares of Oppenheimer Principal Protected Main Street Fund II may be
      exchanged at net asset value for shares of any of the Oppenheimer
      funds. However, shareholders are not permitted to exchange shares of
      other Oppenheimer funds for shares of Oppenheimer Principal Protected
      Main Street Fund II until after the expiration of the warranty period
      (2/4/2011).


      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.

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

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

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

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

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


Dividends, Capital Gains and Taxes

Dividends and Distributions. The Fund has no fixed dividend rate and there
can be no assurance as to the payment of any dividends or the realization of
any capital gains. The dividends and distributions paid by a class of shares
will vary from time to time depending on market conditions, the composition
of the Fund's portfolio, and expenses borne by the Fund or borne separately
by a class. Dividends are calculated in the same manner, at the same time,
and on the same day for each class of shares. However, dividends on Class B,
Class C and Class N shares are expected to be lower than dividends on Class A
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.

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.








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 Directors and the Manager might determine in a
particular year that it would be in the best interests of shareholders for
the Fund not to make such distributions at the required levels and to pay the
excise tax on the undistributed amounts. That would reduce the amount of
income or capital gains available for distribution to shareholders.

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

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


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


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

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

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

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


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


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.

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

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


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


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

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

Additional Information About the Fund

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

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

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

INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- The Board of Directors and Shareholders of Oppenheimer Quest Capital Value Fund, Inc.:

  We have audited the accompanying statement of assets and liabilities of Oppenheimer Quest Capital Value Fund, Inc., including the statement of investments, as of October 31, 2003, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the year ended October 31, 1999, were audited by other auditors whose report dated November 19, 1999, expressed an unqualified opinion on this information.

  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 October 31, 2003, by correspondence with the custodian. 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 Quest Capital Value Fund, Inc. as of October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

KPMG LLP Denver, Colorado November 21, 2003 STATEMENT OF INVESTMENTS October 31, 2003 Market Value Shares See Note 1 - ------------------------------------------------------------- Common Stocks--92.5% - ------------------------------------------------------------- Consumer Discretionary--16.5% - ------------------------------------------------------------- Automobiles--1.7% Winnebago Industries, Inc. 84,900 $ 4,949,670 - ------------------------------------------------------------- Hotels, Restaurants & Leisure--1.5% Yum! Brands, Inc. 1 129,500 4,421,130 - ------------------------------------------------------------- Media--7.8% Lamar Advertising Co., Cl. A 1 327,900 9,935,370 - ------------------------------------------------------------- Liberty Media Corp., Cl. A 1 217,000 2,189,530 - ------------------------------------------------------------- Omnicom Group, Inc. 86,121 6,872,456 - ------------------------------------------------------------- WPP Group plc, Sponsored ADR 70,300 3,372,994 --------------- 22,370,350 - ------------------------------------------------------------- Multiline Retail--2.5% Dollar General Corp. 193,600 4,350,192 - ------------------------------------------------------------- Target Corp. 68,300 2,714,242 --------------- 7,064,434 - ------------------------------------------------------------- Specialty Retail--3.0% Office Depot, Inc. 1 173,000 2,582,890 - ------------------------------------------------------------- Ross Stores, Inc. 119,200 5,961,192 --------------- 8,544,082 - ------------------------------------------------------------- Consumer Staples--2.5% - ------------------------------------------------------------- Household Products--2.5% Dial Corp. (The) 295,100 7,082,400 - ------------------------------------------------------------- Energy--6.3% - ------------------------------------------------------------- Energy Equipment & Services--3.2% GlobalSantaFe Corp. 149,300 3,360,743 - ------------------------------------------------------------- Nabors Industries Ltd. 1 36,400 1,375,920 - ------------------------------------------------------------- National-Oilwell, Inc. 1 232,700 4,437,589 --------------- 9,174,252 - ------------------------------------------------------------- Oil & Gas--3.1% Anadarko Petroleum Corp. 141,100 6,154,782 - ------------------------------------------------------------- BP plc, ADR 62,000 2,627,560 --------------- 8,782,342 Market Value Shares See Note 1 - ------------------------------------------------------------- Financials--17.3% - ------------------------------------------------------------- Commercial Banks--5.7% Bank One Corp. 68,500 $ 2,907,825 - ------------------------------------------------------------- M&T Bank Corp. 45,300 4,253,670 - ------------------------------------------------------------- SouthTrust Corp. 183,100 5,831,735 - ------------------------------------------------------------- Trustmark Corp. 119,800 3,410,706 --------------- 16,403,936 - ------------------------------------------------------------- Diversified Financial Services--2.2% Citigroup, Inc. 129,800 6,152,520 - ------------------------------------------------------------- Insurance--6.7% American International Group, Inc. 62,000 3,771,460 - ------------------------------------------------------------- Nationwide Financial Services, Inc., Cl. A 198,500 6,743,045 - ------------------------------------------------------------- Partnerre Holdings Ltd. 57,000 3,093,390 - ------------------------------------------------------------- Platinum Underwriters Holdings Ltd. 89,000 2,557,860 - ------------------------------------------------------------- XL Capital Ltd., Cl. A 42,200 2,932,900 --------------- 19,098,655 - ------------------------------------------------------------- Thrifts & Mortgage Finance--2.7% Freddie Mac 139,800 7,846,974 - ------------------------------------------------------------- Health Care--9.2% - ------------------------------------------------------------- Biotechnology--1.8% Charles River Laboratories International, Inc. 1 163,000 5,255,120 - ------------------------------------------------------------- Health Care Equipment & Supplies--3.1% Millipore Corp. 1 202,032 8,859,103 - ------------------------------------------------------------- Health Care Providers & Services--4.3% LifePoint Hospitals, Inc. 1 69,100 1,776,561 - ------------------------------------------------------------- Omnicare, Inc. 82,600 3,166,884 - ------------------------------------------------------------- Pharmaceutical Product Development, Inc. 1 167,714 5,043,160 - ------------------------------------------------------------- Triad Hospitals, Inc. 1 77,600 2,384,648 --------------- 12,371,253 - ------------------------------------------------------------- Industrials--28.5% - ------------------------------------------------------------- Aerospace & Defense--4.7% Alliant Techsystems, Inc. 1 131,126 6,787,082 11 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. STATEMENT OF INVESTMENTS Continued Market Value Shares See Note 1 - ------------------------------------------------------------- Aerospace & Defense Continued General Dynamics Corp. 26,500 $ 2,218,050 - ------------------------------------------------------------- Rockwell Collins, Inc. 157,400 4,320,630 --------------- 13,325,762 - ------------------------------------------------------------- Commercial Services & Supplies--4.0% Aramark Corp., Cl. B 1 433,200 11,575,104 - ------------------------------------------------------------- Electrical Equipment--3.0% AMETEK, Inc. 66,700 3,138,235 - ------------------------------------------------------------- Roper Industries, Inc. 112,000 5,535,040 --------------- 8,673,275 - ------------------------------------------------------------- Industrial Conglomerates--1.9% General Electric Co. 185,100 5,369,751 - ------------------------------------------------------------- Machinery--9.2% Actuant Corp., Cl. A 1 97,600 3,146,624 - ------------------------------------------------------------- Eaton Corp. 75,300 7,548,072 - ------------------------------------------------------------- Navistar International Corp. 1 80,800 3,266,744 - ------------------------------------------------------------- Oshkosh Truck Corp. 159,400 7,305,302 - ------------------------------------------------------------- Paccar, Inc. 65,800 5,195,568 --------------- 26,462,310 - ------------------------------------------------------------- Road & Rail--5.7% Canadian National Railway Co. 172,700 10,396,540 - ------------------------------------------------------------- Pacer International, Inc. 1 280,300 5,779,786 --------------- 16,176,326 - ------------------------------------------------------------- Information Technology--9.2% - ------------------------------------------------------------- Electronic Equipment & Instruments--8.0% Arrow Electronics, Inc. 1 100,000 2,135,000 - ------------------------------------------------------------- Diebold, Inc. 135,800 7,748,748 - ------------------------------------------------------------- Jabil Circuit, Inc. 1 60,200 1,676,570 - ------------------------------------------------------------- Mettler-Toledo International, Inc. 1 177,500 6,805,350 - ------------------------------------------------------------- Waters Corp. 1 143,538 4,511,399 --------------- 22,877,067 Market Value Shares See Note 1 - ------------------------------------------------------------- IT Services--1.2% Certegy, Inc. 104,000 $3,500,640 - ------------------------------------------------------------- Utilities--3.0% - ------------------------------------------------------------- Electric Utilities--3.0% Cinergy Corp. 151,000 5,482,810 - ------------------------------------------------------------- Exelon Corp. 49,200 3,121,740 --------------- 8,604,550 --------------- Total Common Stocks (Cost $220,355,234) 264,941,006 - ------------------------------------------------------------- Preferred Stocks--0.5% EIX Trust II, 8.60% Cum. Quarterly Income Preferred Securities, Series B, Non-Vtg. 1 (Cost $1,415,409) 47,000 1,459,350 Principal Amount - ------------------------------------------------------------- Short-Term Notes--7.0% American Express Credit Corp., 1.02%, 11/12/03 $ 4,000,000 3,998,753 - ------------------------------------------------------------- Federal Home Loan Bank: 0.97%, 12/2/03 4,000,000 3,996,659 1.09%, 11/7/03 4,000,000 3,999,347 - ------------------------------------------------------------- Student Loan Marketing Assn., 0.94%, 11/3/03 8,041,000 8,040,580 --------------- Total Short-Term Notes (Cost $20,035,339) 20,035,339 - ------------------------------------------------------------- Total Investments, at Value (Cost $241,805,982) 100.0% 286,435,695 - ------------------------------------------------------------- Liabilities in Excess of Other Assets (0.0) (114,835) --------------------------- Net Assets 100.0% $ 286,320,860 =========================== Footnote to Statement of Investments 1. Non-income producing security. See accompanying Notes to Financial Statements. 12 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 - -------------------------------------------------------------------------- Assets Investments, at value (cost $241,805,982)-- see accompanying statement $ 286,435,695 - -------------------------------------------------------------------------- Cash 60,818 - -------------------------------------------------------------------------- Receivables and other assets: Shares of capital stock sold 341,993 Interest and dividends 178,097 Other 9,719 -------------- Total assets 287,026,322 - -------------------------------------------------------------------------- Liabilities Payables and other liabilities: Shares of capital stock redeemed 475,869 Transfer and shareholder servicing agent fees 61,150 Distribution and service plan fees 58,746 Shareholder reports 51,094 Directors' compensation 24,556 Other 34,047 -------------- Total liabilities 705,462 - -------------------------------------------------------------------------- Net Assets $286,320,860 ============== - -------------------------------------------------------------------------- Composition of Net Assets Par value of shares of capital stock $ 1,230 - -------------------------------------------------------------------------- Additional paid-in capital 239,661,840 - -------------------------------------------------------------------------- Accumulated net investment loss (23,341) - -------------------------------------------------------------------------- Accumulated net realized gain on investment transactions 2,051,418 - -------------------------------------------------------------------------- Net unrealized appreciation on investments 44,629,713 -------------- Net Assets $ 286,320,860 ============== 13 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. STATEMENT OF ASSETS AND LIABILITIES Continued - -------------------------------------------------------------------------------- Net Asset Value Per Share Class A Shares:

  Net asset value and redemption price per share (based on net assets of $193,954,830 and 8,181,349 shares of capital stock outstanding) $23.71 Maximum offering price per share (net asset value plus sales charge of 5.75% of offering price) $25.16

- -------------------------------------------------------------------------------- Class B Shares:

  Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $55,448,722 and 2,485,081 shares of capital stock outstanding) $22.31

- -------------------------------------------------------------------------------- Class C Shares:

  Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $30,509,708 and 1,365,866 shares of capital stock outstanding) $22.34

- -------------------------------------------------------------------------------- Class N Shares:

  Net asset value, redemption price (excludes applicable contingent deferred sales charge) and offering price per share (based on net assets of $6,407,600 and 272,017 shares of capital stock outstanding) $23.56

See accompanying Notes to Financial Statements. 14 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. STATEMENT OF OPERATIONS For the Year Ended October 31, 2003 - ------------------------------------------------------------------------- Investment Income Dividends (net of foreign withholding taxes of $29,795) $ 2,570,764 - ------------------------------------------------------------------------- Interest 125,376 ------------ Total investment income 2,696,140 - ------------------------------------------------------------------------- Expenses Management fees 2,276,055 - -------------------------------------------------------------------------

        Distribution and service plan fees:

Class A 431,506 Class B 467,475 Class C 208,636 Class N 21,044 - -------------------------------------------------------------------------

        Transfer and shareholder servicing agent fees:

Class A 471,112 Class B 192,345 Class C 86,691 Class N 18,885 - ------------------------------------------------------------------------- Shareholder reports 105,696 - ------------------------------------------------------------------------- Directors' compensation 23,055 - ------------------------------------------------------------------------- Custodian fees and expenses 4,070 - ------------------------------------------------------------------------- Other 19,560 ------------ Total expenses 4,326,130 Less reduction to custodian expenses (469) Less voluntary waiver of transfer and shareholder servicing agent fees--Class A (1,987) Less voluntary waiver of transfer and shareholder servicing agent fees--Class B (33,933) Less voluntary waiver of transfer and shareholder servicing agent fees--Class C (13,965) Less voluntary waiver of transfer and shareholder servicing agent fees--Class N (4,377) ------------ Net expenses 4,271,399 - ------------------------------------------------------------------------- Net Investment Loss (1,575,259) - ------------------------------------------------------------------------- Realized and Unrealized Gain Net realized gain on investments 8,272,859 - ------------------------------------------------------------------------- Net change in unrealized appreciation on investments 46,887,264 - ------------------------------------------------------------------------- Net Increase in Net Assets Resulting from Operations $53,584,864 ============= See accompanying Notes to Financial Statements. 15 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. STATEMENTS OF CHANGES IN NET ASSETS Year Ended October 31, 2003 2002 - -------------------------------------------------------------------------------- Operations Net investment loss $ (1,575,259) $ (1,768,281) - -------------------------------------------------------------------------------- Net realized gain (loss) 8,272,859 (4,187,269) - -------------------------------------------------------------------------------- Net change in unrealized appreciation (depreciation) 46,887,264 (14,161,865) --------------------------- Net increase (decrease) in net assets resulting from operations 53,584,864 (20,117,415) - -------------------------------------------------------------------------------- Dividends and/or Distributions to Shareholders

        Distributions from net realized gain:

Class A -- (3,391,280) Class B -- (804,584) Class C -- (259,169) Class N -- (6,440) - -------------------------------------------------------------------------------- Capital Stock Transactions

  Net increase in net assets resulting from capital stock transactions:

Class A 6,104,178 12,204,180 Class B 3,216,603 13,511,982 Class C 8,915,736 8,834,017 Class N 2,367,129 3,077,772 - -------------------------------------------------------------------------------- Net Assets Total increase 74,188,510 13,049,063 - -------------------------------------------------------------------------------- Beginning of period 212,132,350 199,083,287 --------------------------- End of period [including accumulated net investment loss of $23,341 and $22,114, respectively] $286,320,860 $212,132,350 =========================== See accompanying Notes to Financial Statements. 16 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.

FINANCIAL HIGHLIGHTS


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

 Per Share Operating Data
 Net asset value, beginning of period                   $19.07     $20.91      $33.65      $33.66      $32.11
- ---------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment loss                                      (.09)      (.13)       (.11)       (.25)       (.06)
 Net realized and unrealized gain (loss)                  4.73      (1.25)      (2.59)       6.08        2.70
                                                       -------------------------------------------------------
 Total from investment operations                         4.64      (1.38)      (2.70)       5.83        2.64
- ---------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                       --         --          --          --        (.04)
 Dividends in excess of net investment income               --         --          --          --          -- 1
 Distributions from net realized gain                       --       (.46)     (10.04)      (5.84)      (1.05)
                                                       --------------------------------------------------------
 Total dividends and/or
 distributions to shareholders                              --       (.46)     (10.04)      (5.84)      (1.09)
- ---------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                         $23.71     $19.07      $20.91      $33.65      $33.66
                                                       ========================================================

- ---------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                      24.33%     (6.90)%     (9.91)%     20.63%       8.47%

- ---------------------------------------------------------------------------------------------------------------
 Ratios/Supplemental Data
 Net assets, end of period (in thousands)             $193,955   $150,161    $154,346    $177,876    $224,995
- ---------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                    $165,906   $164,479    $161,187    $181,216    $256,450
- ---------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment loss                                     (0.43)%    (0.61)%     (0.44)%     (0.73)%     (0.17)%
 Total expenses                                           1.56%      1.71%       1.67%       1.73%       1.71%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                        N/A 4,5    N/A 4,5     N/A 4       N/A 4      1.58%
- ---------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                    74%        75%         80%         77%         79%

1. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 17 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. FINANCIAL HIGHLIGHTS Continued

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

 Per Share Operating Data
 Net asset value, beginning of period                   $18.09      $19.99     $ 32.77      $33.07       $31.71
- -----------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                             (.22)       (.19)        .05        (.34)        (.19)
 Net realized and unrealized gain (loss)                  4.44       (1.25)      (2.79)       5.88         2.60
                                                        ---------------------------------------------------------
 Total from investment operations                         4.22       (1.44)      (2.74)       5.54         2.41
- -----------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions to shareholders:
 Dividends from net investment income                       --          --          --          --           --
 Dividends in excess of net investment income               --          --          --          --           -- 1
 Distributions from net realized gain                       --        (.46)     (10.04)      (5.84)       (1.05)
                                                        ---------------------------------------------------------
 Total dividends and/or
 distributions to shareholders                              --        (.46)     (10.04)      (5.84)       (1.05)
- -----------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                         $22.31      $18.09     $ 19.99      $32.77       $33.07
                                                        =========================================================

- -----------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                      23.33%      (7.53)%    (10.48)%     20.02%        7.83%

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

 Net assets, end of period (in thousands)              $55,449     $42,010     $34,278     $17,429      $15,634
- -----------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                     $46,785     $42,900     $27,144     $15,719      $14,112
- -----------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment loss                                     (1.23)%     (1.30)%     (1.13)%     (1.26)%      (0.80)%
 Total expenses                                           2.43%       2.41%       2.26%       2.27%        2.27%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                       2.36%        N/A 4,5     N/A 4       N/A 4       2.19%
- -----------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                    74%         75%         80%         77%          79%

1. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 18 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.

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

 Per Share Operating Data
 Net asset value, beginning of period                   $18.11      $20.01     $ 32.80      $33.09       $31.73
- -----------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment income (loss)                             (.14)       (.13)        .11        (.38)        (.17)
 Net realized and unrealized gain (loss)                  4.37       (1.31)      (2.86)       5.93         2.58
 Total from investment operations                         4.23       (1.44)      (2.75)       5.55         2.41
- -----------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions
 to shareholders:
 Dividends from net investment income                       --          --          --          --           --
 Dividends in excess of
 net investment income                                      --          --          --          --           -- 1
 Distributions from net realized gain                       --        (.46)     (10.04)      (5.84)       (1.05)
                                                        ---------------------------------------------------------
 Total dividends and/or distributions
 to shareholders                                            --        (.46)     (10.04)      (5.84)       (1.05)
- -----------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                         $22.34      $18.11     $ 20.01      $32.80       $33.09
                                                        =========================================================

- -----------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                      23.36%      (7.52)%    (10.50)%     20.05%        7.82%

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

 Net assets, end of period (in thousands)              $30,510     $16,979     $10,272      $5,053       $4,632
- -----------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                     $20,901     $15,323     $ 7,898      $4,969       $4,117
- -----------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment loss                                     (1.24)%     (1.30)%     (1.13)%     (1.25)%      (0.80)%
 Total expenses                                           2.43%       2.41%       2.26%       2.27%        2.26%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                       2.36%        N/A 4,5     N/A 4       N/A 4       2.18%
- -----------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                    74%         75%         80%         77%          79%

1. Less than $0.005 per share. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 19 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. FINANCIAL HIGHLIGHTS Continued

 Class N            Year Ended October 31,                                        2003        2002         2001 1
- -----------------------------------------------------------------------------------------------------------------
 Per Share Operating Data


 Net asset value, beginning of period                                           $19.00      $20.88       $23.25
- -----------------------------------------------------------------------------------------------------------------
 Income (loss) from investment operations:
 Net investment loss                                                              (.15)       (.17)        (.03)
 Net realized and unrealized gain (loss)                                          4.71       (1.25)       (2.34)
                                                                               ----------------------------------
 Total from investment operations                                                 4.56       (1.42)       (2.37)
- -----------------------------------------------------------------------------------------------------------------
 Dividends and/or distributions
 to shareholders:
 Dividends from net investment income                                               --          --           --
 Dividends in excess of net investment income                                       --          --           --
 Distributions from net realized gain                                               --        (.46)          --
                                                                               ----------------------------------
 Total dividends and/or distributions
 to shareholders                                                                    --        (.46)          --
- -----------------------------------------------------------------------------------------------------------------
 Net asset value, end of period                                                 $23.56      $19.00       $20.88
                                                                                =================================

- -----------------------------------------------------------------------------------------------------------------
 Total Return, at Net Asset Value 2                                              24.00%      (7.10)%     (10.19)%

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

 Net assets, end of period (in thousands)                                       $6,408      $2,983         $187
- -----------------------------------------------------------------------------------------------------------------
 Average net assets (in thousands)                                              $4,218      $1,475         $ 38
- -----------------------------------------------------------------------------------------------------------------
 Ratios to average net assets: 3
 Net investment loss                                                             (0.75)%     (0.88)%      (0.96)%
 Total expenses                                                                   1.97%       1.87%        1.75%
 Expenses after expense reimbursement
 or fee waiver and reduction to
 custodian expenses                                                               1.87%        N/A 4,5      N/A 4
- -----------------------------------------------------------------------------------------------------------------
 Portfolio turnover rate                                                            74%         75%          80%

1. For the period from March 1, 2001 (inception of offering) to October 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. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. 4. Reduction to custodian expenses less than 0.01%. 5. Voluntary waiver of transfer agent fees less than 0.01%. See accompanying Notes to Financial Statements. 20 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Oppenheimer Quest Capital Value Fund, Inc. (the Fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Fund's investment objective is to seek capital appreciation. The Fund's investment advisor is OppenheimerFunds, Inc. (the Manager). The Manager has entered into a sub-advisory agreement with OpCap Advisors.

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

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

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

21 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued

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

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

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

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

                                                                                     Net Unrealized
                                                                                 Appreciation Based
            Undistributed                                                     on Cost of Securities
            Net                 Undistributed              Accumulated        and Other Investments
            Investment              Long-Term                     Loss           for Federal Income
            Income                       Gain           Carryforward 1                 Tax Purposes
            ---------------------------------------------------------------------------------------

            $1,667,786               $383,631                      $--                  $44,629,713

1. During the fiscal year October 31, 2003, the Fund utilized $3,944,756 of capital loss carryforward to offset capital gains realized in that fiscal year. During the fiscal year October 31, 2002, the Fund did not utilize any capital loss carryforwards. Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of dividends and distributions made during the fiscal year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to timing of dividends and distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or net realized gain was recorded by the Fund. Accordingly, the following amounts have been reclassified for October 31, 2003. Net assets of the Fund were unaffected by the reclassifications.

            From                         From                                                   Net
            Ordinary                  Capital               Tax Return                   Investment
            Loss                       Gain 2               of Capital                         Loss
            ---------------------------------------------------------------------------------------

            $1,574,032             $1,842,983                      $--                          $--

2. $268,951, including $50,288 of long-term capital gain, was distributed in connection with Fund share redemptions. The tax character of distributions paid during the years ended October 31, 2003 and October 31, 2002 was as follows:

                                                            Year Ended                   Year Ended
                                                      October 31, 2003             October 31, 2002
- ---------------------------------------------------------------------------------------------------

 Distributions paid from:
 Long-term capital gain                                            $--                   $4,461,473

22 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.

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

Federal tax cost of securities and other investments $241,805,982 ============ Gross unrealized appreciation $ 47,110,251 Gross unrealized depreciation (2,480,538 ------------ Net unrealized appreciation $ 44,629,713 ============ - --------------------------------------------------------------------------------

  Directors’ Compensation. The Fund has adopted an unfunded retirement plan for the Fund’s independent directors. Benefits are based on years of service and fees paid to each director during the years of service. During the year ended October 31, 2003, the Fund’s projected benefit obligations were increased by $1,786 and payments of $563 were made to retired directors, resulting in an accumulated liability of $23,339 as of October 31, 2003.

  The Board of Directors has adopted a deferred compensation plan for independent directors that enables directors to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. Under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or are invested in other Oppenheimer funds selected by the Director. Deferral of directors’ fees under the plan will not affect the net assets of the Fund, and will not materially affect the Fund’s assets, liabilities or net investment income per share. Amounts will be deferred until distributed in accordance to the Plan.

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

  Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. Income and capital gain distributions, if any, are declared and paid annually.

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

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

- -------------------------------------------------------------------------------- Expense Offset Arrangement. The reduction of custodian fees represents earnings on cash balances maintained by the Fund. - -------------------------------------------------------------------------------- Security Transactions. Security transactions are recorded on the trade date. Realized gains and losses on securities sold are determined on the basis of identified cost. 23 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 1. Significant Accounting Policies Continued Other. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- 2. Shares of Capital Stock

  The Fund has authorized one billion shares of $0.0001 par value capital stock of each class. Transactions in shares of capital stock were as follows:

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

 Class A
 Sold                           2,110,627     $42,829,597          2,235,230      $47,891,615
 Dividends and/or
 distributions reinvested              --              --            104,423        2,298,369
 Redeemed                      (1,805,326)    (36,725,419)        (1,845,506)     (37,985,804)
                               ---------------------------------------------------------------
 Net increase                     305,301     $ 6,104,178            494,147      $12,204,180
                               ===============================================================


- ----------------------------------------------------------------------------------------------
 Class B
 Sold                             849,036     $16,481,174          1,385,300      $28,277,580
 Dividends and/or
 distributions reinvested              --              --             34,608          726,779
 Redeemed                        (686,631)    (13,264,571)          (812,006)     (15,492,377)
                               ---------------------------------------------------------------
 Net increase                     162,405     $ 3,216,603            607,902      $13,511,982
                               ===============================================================


- ----------------------------------------------------------------------------------------------
 Class C
 Sold                             902,743     $18,309,043            691,805      $14,002,918
 Dividends and/or
 distributions reinvested              --              --             10,995          231,241
 Redeemed                        (474,437)     (9,393,307)          (278,450)      (5,400,142)
                               ---------------------------------------------------------------
 Net increase                     428,306     $ 8,915,736            424,350      $ 8,834,017
                               ===============================================================


- ----------------------------------------------------------------------------------------------
 Class N
 Sold                             176,429     $ 3,643,164            163,175      $ 3,353,343
 Dividends and/or
 distributions reinvested              --              --                292            6,420
 Redeemed                         (61,386)     (1,276,035)           (15,463)        (281,991)
                               ---------------------------------------------------------------
 Net increase                     115,043     $ 2,367,129            148,004      $ 3,077,772
                               ===============================================================

- -------------------------------------------------------------------------------- 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 October 31, 2003, were $186,385,225 and $169,280,508, respectively.

24 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. - -------------------------------------------------------------------------------- 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. Effective June 15, 2003, the agreement provides for a fee at an annual rate of 0.90% of the first $400 million of average annual net assets of the Fund, 0.85% of the next $600 million, 0.80% of the next $2 billion, 0.70% of the next $1 billion, 0.65% of the next $1 billion and 0.60% of average annual net assets in excess of $5 billion. Prior to June 15, 2003, the annual advisory fee rate was 1.00% of the first $400 million of average annual net assets of the Fund, 0.90% of the next $400 million and 0.85% of average annual net assets in excess of $800 million.

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

  Sub-Advisor Fees. The Manager retains OpCap Advisors (the Sub-Advisor) to provide the day-to-day portfolio management of the Fund. For the year ended October 31, 2003, the Manager paid $858,498 to the Sub-Advisor for its services to the Fund.

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

  Transfer Agent Fees. OppenheimerFunds Services (OFS), a division of the Manager, acts as the transfer and shareholder servicing agent for the Fund. The Fund pays OFS a per account fee. For the year ended October 31, 2003, the Fund paid $704,495 to OFS for services to the Fund.

  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.

  The compensation paid to (or retained by) the Distributor from the sale of shares or on the redemption of shares is shown in the table below for the period indicated.

                       Aggregate           Class A      Concessions       Concessions       Concessions      Concessions
                       Front-End         Front-End       on Class A        on Class B        on Class C       on Class N
                   Sales Charges     Sales Charges           Shares            Shares            Shares           Shares
                      on Class A       Retained by      Advanced by       Advanced by       Advanced by      Advanced by
 Year Ended               Shares       Distributor    Distributor 1     Distributor 1     Distributor 1    Distributor 1
- ------------------------------------------------------------------------------------------------------------------------

 October 31, 2003       $380,381          $111,449           $7,733          $310,827           $65,110          $27,337

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

                               Class A               Class B           Class C           Class N
                            Contingent            Contingent        Contingent        Contingent
                              Deferred              Deferred          Deferred          Deferred
                         Sales Charges         Sales Charges     Sales Charges     Sales Charges
                           Retained by           Retained by       Retained by       Retained by
 Year Ended                Distributor           Distributor       Distributor       Distributor
- ------------------------------------------------------------------------------------------------

 October 31, 2003               $1,203              $119,717            $7,691            $9,966

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

  Distribution and Service Plan for Class A Shares. The Fund has adopted a Distribution and Service Plan for Class A shares. Under the plan the Fund paid an asset-based sales charge to the Distributor at an annual rate equal to 0.15% of average annual net assets

25 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS Continued - -------------------------------------------------------------------------------- 4. Fees and Other Transactions with Affiliates Continued representing Class A shares purchased before September 1, 1993 and 0.10% of average annual net assets representing Class A shares purchased on or before December 31, 2002. Beginning January 1, 2003, the Board of Directors set the annual rate at zero. The Fund also pays a service fee to the Distributor of 0.25% of the average annual net assets of Class A shares. For the year ended October 31, 2003, expense under the Class A plan totaled $431,506, all of which were paid by the Distributor to recipients, which included $3,603 retained by the Distributor and $13,443 which was paid to an affiliate of the Manager. - --------------------------------------------------------------------------------

  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 October 31, 2003, were as follows:

                                                                    Distributor's
                                                   Distributor's        Aggregate
                                                       Aggregate    Uncompensated
                                                   Uncompensated    Expenses as %
                Total Expenses   Amount Retained        Expenses    of Net Assets
                    Under Plan    by Distributor      Under Plan         of Class
- ---------------------------------------------------------------------------------

 Class B Plan         $467,475          $351,691      $1,247,483             2.25%
 Class C Plan          208,636            73,934         325,053             1.07
 Class N Plan           21,044            17,801         115,421             1.80

- -------------------------------------------------------------------------------- 5. Borrowing and Lending Arrangements

  The Fund entered into an “interfund borrowing and lending arrangement” with other funds in the Oppenheimer funds complex, to allow funds to borrow for liquidity purposes. The arrangement was initiated pursuant to exemptive relief granted by the Securities and Exchange Commission to allow these affiliated funds to lend money to, and borrow money from, each other, in an attempt to reduce borrowing costs below those of bank loan facilities. Under the arrangement the Fund may lend money to other Oppenheimer funds and may borrow from other Oppenheimer funds at a rate set by the Fund’s Board of Directors, based upon a recommendation by the Manager. The Fund’s borrowings, if any, are subject to asset coverage requirements under the Investment Company Act and the provisions of the SEC order and other applicable regulations. If the Fund borrows money, there is a risk that the loan could be called on one day’s notice, in which case the Fund might have to borrow from a bank at higher rates if a loan were not available from another Oppenheimer fund. If the Fund lends money to another fund, it will be subject to the risk that the other fund might not repay the loan in a timely manner, or at all.

        The Fund had no interfund borrowings or loans outstanding during the year ended or at October 31, 2003.

26 | OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.

                                  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. ("Moody's")

LONG-TERM RATINGS: BONDS AND PREFERRED STOCK ISSUER RATINGS

Aaa: Bonds and preferred stock 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 and preferred stock 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 risk appear
somewhat larger than that of "Aaa" securities.

A: Bonds and preferred stock 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 some
time in the future.

Baa: Bonds and preferred stock 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 and preferred stock 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
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B: Bonds and preferred stock rated "B" generally lack characteristics of the
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 and preferred stock rated "Caa" are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.








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

C:  Bonds and preferred stock 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 generic rating category; the
modifier "2" indicates a mid-range ranking; and the modifier "3" indicates a
ranking in the lower end of that generic rating category. Advanced refunded
issues that are secured by certain assets are identified with a # symbol.

PRIME RATING SYSTEM (SHORT-TERM RATINGS - TAXABLE DEBT)
- ------------------------------------------------------------------------------
These ratings are opinions of the ability of issuers to honor senior
financial obligations and contracts. Such obligations generally have an
original maturity not exceeding one year, unless explicitly noted.

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 ratios, while sound, may be more
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 Ratings Services ("Standard & Poor's"), a division of The
McGraw-Hill Companies, Inc.

LONG-TERM ISSUE CREDIT RATINGS
Issue credit ratings are based in varying degrees, on the following
considerations:
o     Likelihood of payment-capacity and willingness of the obligor to meet
      its financial commitment on an obligation in accordance with the terms
      of the obligation;
o     Nature of and provisions of the obligation; and
o     Protection afforded by, and relative position of, the obligation in the
      event of bankruptcy, reorganization, or other arrangement under the
      laws of bankruptcy and other laws affecting creditors' rights.
   The issue ratings definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority
in bankruptcy, as noted above.

AAA: An obligation  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: An obligation  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: An  obligation  rated "A" are  somewhat  more  susceptible  to the  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:  An  obligation  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.

BB, B, CCC, CC, and C
An obligation 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: An obligation  rated "BB" are less  vulnerable  to  nonpayment  than other
speculative  issues.   However,  they  face  major  ongoing  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: An obligation  rated "B" are more vulnerable to nonpayment than obligations
rated "BB",  but the obligor  currently has the capacity to meet its financial
commitment  on  the  obligation.  Adverse  business,  financial,  or  economic
conditions  will likely impair the obligor's  capacity or  willingness to meet
its financial commitment on the obligation.

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


CCC: An obligation  rated "CCC" are currently  vulnerable to  nonpayment,  and
are 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" are currently highly vulnerable to nonpayment.

C:  Subordinated  debt or preferred stock  obligations rated "C" are currently
highly  vulnerable  to  nonpayment.  The "C"  rating  may be  used to  cover a
situation where a bankruptcy  petition has been filed or similar action taken,
but  payments  on this  obligation  are  being  continued.  A "C" also will be
assigned to a preferred  stock issue in arrears on  dividends  or sinking fund
payments, but that is currently paying.

D: An obligation rated "D" are in payment default.  The "D" rating category is
used when payments on an  obligation  are not made on the date due even if the
applicable  grace period has not expired,  unless  Standard & Poor's  believes
that such payments will be made during such grace period.  The "D" rating also
will be used  upon the  filing of a  bankruptcy  petition  or the  taking of a
similar action if payments on an obligation are jeopardized.

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.

c: The `c' subscript is used to provide additional information to investors
that the bank may terminate its obligation to purchase tendered bonds if the
long-term credit rating of the issuer is below an investment-grade level
and/or the issuer's bonds are deemed taxable.
p: The letter `p' indicates that the rating is provisional. A provisional
rating assumes the successful completion of the project financed by the debt
being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the risk
of default upon failure of such completion. The investor should exercise his
own judgment with respect to such likelihood and risk.

Continuance of the ratings is contingent upon Standard & Poor's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.

r: The `r' highlights derivative, hybrid, and certain other obligations that
Standard & Poor's believes may experience high volatility or high variability
in expected returns as a result of noncredit risks. Examples of such
obligations are securities with principal or interest return indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an `r'
symbol should not be taken as an indication that an obligation will exhibit
no volatility or variability in total return.

N.R. Not rated.

Debt obligations of issuers outside the United States and its territories are
rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into
account currency exchange and related uncertainties.

Bond Investment Quality Standards

Under present commercial bank regulations issued by the Comptroller of the
Currency, bonds rated in the top four categories (`AAA', `AA', `A', `BBB',
commonly known as investment-grade ratings) generally are regarded as
eligible for bank investment. Also, the laws of various states governing
legal investments impose certain rating or other standards for obligations
eligible for investment by savings banks, trust companies, insurance
companies, and fiduciaries in general

SHORT-TERM ISSUE CREDIT RATINGS
Short-term ratings are generally assigned to those obligations considered
short-term in the relevant market. In the U.S., for example, that means
obligations with an original maturity of no more than 365 days-including
commercial paper.

A-1: A short-term obligation rated "A-1" is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity
to meet its financial commitment on these obligations is extremely strong.

A-2: A short-term obligation rated "A-2" 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: A short-term obligation rated "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: A short-term obligation rated "B" is 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: A short-term obligation rated "C" 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.

D: A short-term obligation rated "D" is in payment default. The "D" rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition or the
taking of a similar action if payments on an obligation are jeopardized.

NOTES:
A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in
making that assessment:
o     Amortization schedule-the larger the final maturity relative to other
      maturities, the more likely it will
      be treated as a note; and
o     Source of payment-the more dependent the issue is on the market for its
      refinancing, the more likely
      it will be treated as a note.

SP-1: Strong capacity to pay principal and interest. An issue with a very
strong capacity to pay debt service is given a (+) designation.

SP-2: Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

SP-3: Speculative capacity to pay principal and interest.

Fitch, Inc.
- ------------------------------------------------------------------------------
International credit ratings assess the capacity to meet foreign currency or
local currency commitments. Both "foreign currency" and "local currency"
ratings are internationally comparable assessments. The local currency rating
measures the probability of payment within the relevant sovereign state's
currency and jurisdiction and therefore, unlike the foreign currency rating,
does not take account of the possibility of foreign exchange controls
limiting transfer into foreign currency.


INTERNATIONAL LONG-TERM CREDIT RATINGS

The following ratings scale applies to foreign currency and local currency
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 rated 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

The following ratings scale applies to foreign currency and local currency
ratings. A short-term rating has a time horizon of less than 12 months for
most obligations, or up to three years for U.S. public finance securities,
and thus places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.


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.







                                     B-2
                                  Appendix B

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


Aerospace & Defense                  Household Products
Air Freight & Couriers               Industrial Conglomerates
Airlines                             Insurance
Auto Components                      Internet & Catalog Retail
Automobiles                          Internet Software & Services
Beverages                            IT Services
Biotechnology                        Leisure Equipment & Products
Building Products                    Machinery
Chemicals                            Marine
Consumer Finance                     Media
Commercial Banks                     Metals & Mining
Commercial Services & Supplies       Multiline Retail
Communications Equipment             Multi-Utilities
Computers & Peripherals              Office Electronics
Construction & Engineering           Oil & Gas
Construction Materials               Paper & Forest Products
Containers & Packaging               Personal Products
Distributors                         Pharmaceuticals
Diversified Financial Services       Real Estate
Diversified Telecommunication        Road & Rail
Services
Electric Utilities                   Semiconductors and Semiconductor

                                     Equipment

Electrical Equipment                 Software
Electronic Equipment & Instruments   Specialty Retail
Energy Equipment & Services          Textiles, Apparel & Luxury Goods
Food & Staples Retailing             Thrifts & Mortgage Finance
Food Products                        Tobacco
Gas Utilities                        Trading Companies & Distributors
Health Care Equipment & Supplies     Transportation Infrastructure
Health Care Providers & Services     Water Utilities
Hotels Restaurants & Leisure         Wireless Telecommunication Services
Household Durables












                                     C-12
                                  Appendix C

OppenheimerFunds Special Sales Charge Arrangements and Waivers
- --------------------------------------------------------------

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

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

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

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

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






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

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

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






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

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

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

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

Class A shares issued or purchased in the following transactions are not
subject to sales charges (and no concessions are paid by the Distributor on
such purchases):
|_|   Shares issued in plans of reorganization, such as mergers, asset
         acquisitions and exchange offers, to which the Fund is a party.
|_|   Shares purchased by the reinvestment of dividends or other
         distributions reinvested from the Fund or other Oppenheimer funds
         (other than Oppenheimer Cash Reserves) or unit investment trusts for
         which reinvestment arrangements have been made with the Distributor.
|_|   Shares purchased 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.7
         5) Under a Qualified Domestic Relations Order, as defined in the
            Internal Revenue Code, or, in the case of an IRA, a divorce or
            separation agreement described in Section 71(b) of the Internal
            Revenue Code.
         6) To meet the minimum distribution requirements of the Internal
            Revenue Code.
         7) To make "substantially equal periodic payments" as described in
            Section 72(t) of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.
         9) Separation from service.8
         10)      Participant-directed redemptions to purchase shares of a
            mutual fund (other than a fund managed by the Manager or a
            subsidiary of the Manager) if the plan has made special
            arrangements with the Distributor.
         11)      Plan termination or "in-service distributions," if the
            redemption proceeds are rolled over directly to an
            OppenheimerFunds-sponsored IRA.
|_|   For distributions from 401(k) plans sponsored by broker-dealers that
         have entered into a special agreement with the Distributor allowing
         this waiver.
|_|   For distributions from retirement plans that have $10 million or more
         in plan assets and that have entered into a special agreement with
         the Distributor.
|_|   For distributions from retirement plans which are part of a retirement
         plan product or platform offered by certain banks, broker-dealers,
         financial advisors, insurance companies or record keepers which have
         entered into a special agreement with the Distributor.
III.    Waivers of Class B, Class C and Class N Sales Charges of Oppenheimer
                                        Funds
- --------------------------------------------------------------------------------

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

A. Waivers for Redemptions in Certain Cases.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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









Oppenheimer Quest Capital Value Fund, Inc.SM


Internet Website
      www.oppenheimerfunds.com
      ------------------------

Investment Advisor

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


Sub-Advisor
      OpCap Advisors
      1345 Avenue of the Americas, 49th Floor
      New York, New York 10105-4800

Distributor

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


Transfer Agent
      OppenheimerFunds Services

      P.O. Box 5270
      Denver, Colorado 80217
      1.800.CALL OPP(225.5677)


Custodian Bank
      Citibank, N.A.
      111 Wall Street
      New York, New York 10005

Independent Auditors
      KPMG LLP
      707 Seventeenth Street
      Denver, Colorado 80202

Legal Counsel

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

1234




PX0835.1203


- --------

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

2 Certain waivers also apply to Class M shares of Oppenheimer Convertible
Securities Fund.
3 In the case of Oppenheimer Senior Floating Rate Fund, a
continuously-offered closed-end fund, references to contingent deferred sales
charges mean the Fund's Early Withdrawal Charges and references to
"redemptions" mean "repurchases" of shares.
4 An "employee benefit plan" means any plan or arrangement, whether or not it
is "qualified" under the Internal Revenue Code, under which Class N shares of
an Oppenheimer fund or funds are purchased by a fiduciary or other
administrator for the account of participants who are employees of a single
employer or of affiliated employers. These may include, for example, medical
savings accounts, payroll deduction plans or similar plans. The fund accounts
must be registered in the name of the fiduciary or administrator purchasing
the shares for the benefit of participants in the plan.
5 The term "Group Retirement Plan" means any qualified or non-qualified
retirement plan for employees of a corporation or sole proprietorship,
members and employees of a partnership or association or other organized
group of persons (the members of which may include other groups), if the
group has made special arrangements with the Distributor and all members of
the group participating in (or who are eligible to participate in) the plan
purchase shares of an Oppenheimer fund or funds through a single investment
dealer, broker or other financial institution designated by the group. Such
plans include 457 plans, SEP-IRAs, SARSEPs, SIMPLE plans and 403(b) plans
other than plans for public school employees. The term "Group Retirement
Plan" also includes qualified retirement plans and non-qualified deferred
compensation plans and IRAs that purchase shares of an Oppenheimer fund or
funds through a single investment dealer, broker or other financial
institution that has made special arrangements with the Distributor.
6 However, that concession will not be paid on purchases of shares in amounts
of $1 million or more (including any right of accumulation) by a Retirement
Plan that pays for the purchase with the redemption proceeds of Class C
shares of one or more Oppenheimer funds held by the Plan for more than one
year.
7 This provision does not apply to IRAs.
8 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, or to IRAs.
9 The distribution must be requested prior to Plan termination or the
elimination of the Oppenheimer funds as an investment option under the Plan.
10 This provision does not apply to IRAs.
11 This provision does not apply to loans from 403(b)(7) custodial plans and
loans from the OppenheimerFunds-sponsored Single K retirement plan.
12 This provision does not apply to 403(b)(7) custodial plans if the
participant is less than age 55, or to IRAs.