Oppenheimer
Quest Capital Value Fund, Inc.

6803 South Tucson Way, Centennial, Colorado 80112
1.800.225.5677

Statement of Additional Information dated February 28, 2005, revised March
31, 2005

This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectus dated February 28, 2005. 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                                                                 Page

About the Fund
Additional Information About the Fund's Investment Policies and Risks....  2
    The Fund's Investment Policies.......................................  2
    Other Investment Techniques and Strategies...........................  9
    Other Investment Restrictions........................................  24
    Disclosure of Portfolio Holdings.....................................  25
How the Fund is Managed .................................................  29
    Organization and History.............................................  29
    Board of Directors and Oversight Committees..........................  30
    Directors and Officers of the Fund...................................  30
    The Manager..........................................................  37
    The Sub-Advisor......................................................  40
Brokerage Policies of the Fund...........................................  42
Distribution and Service Plans...........................................  44
Performance of the Fund..................................................  49

About Your Account
How To Buy Shares........................................................  54
How To Sell Shares.......................................................  64
How To Exchange Shares...................................................  68
Dividends, Capital Gains and Taxes.......................................  72
Additional Information About the Fund....................................  76

Financial Information About the Fund
Independent Registered Public Accounting Firm's Report...................  78
Financial Statements.....................................................  79

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

ABOUT THE FUND

Additional Information About the Fund's Investment Policies and Risks

The investment objective, the principal investment policies and the main
risks of the Fund are described in the Prospectus. This Statement of
Additional Information contains supplemental information about those policies
and risks and the types of securities that the Fund's Sub-Advisor,
Oppenheimer Capital LLC, 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.

|X|   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.

o     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.

|X|   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.

o     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., 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.

o     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.

o     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.

o     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, Inc., 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, Inc. are investment grade and are not regarded as junk bonds, those
securities may be subject to special risks, and have some speculative
characteristics.

|X|   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.

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

o     Bank Obligations. The Fund 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.

o     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.

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

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

      The Fund has no limitations on the type of issuer from whom these notes
will be purchased. However, in connection with such purchases and on an
ongoing basis, the 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.

|X|   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.

o     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.

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

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

o     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 byss.954 of the
Internal Revenue Code.

      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.

|X|   Portfolio Turnover. "Portfolio turnover" describes the rate at which
the Fund traded its portfolio securities during its last fiscal year. For
example, if a fund sold all of its securities during the year, its portfolio
turnover rate would have been 100% 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.

|X|   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 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. 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. At the same time, the Fund would bear its own management fees and
other expenses. The Fund does not anticipate investing a substantial amount
of its net assets in shares of other investment companies.

|X|   "When-Issued" and "Delayed-Delivery" Transactions. The Fund can invest
in securities on a "when-issued" basis and can purchase or sell securities on
a "delayed-delivery" 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.

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

      In a repurchase transaction, the Fund buys a security from, and
simultaneously resells it to, an approved vendor for delivery on an
agreed-upon future date. The resale price exceeds the purchase price by an
amount that reflects an agreed-upon interest rate effective for the period
during which the repurchase agreement is in effect. Approved vendors include
U.S. commercial banks, U.S. branches of foreign banks, or broker-dealers that
have been designated as primary dealers in government securities. They must
meet credit requirements set by the Fund's 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.

|X|   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.

o     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:
o     sell futures contracts,
o     buy puts on such futures or on securities, or
o     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:
o     buy futures, or
o     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.

o     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.

o     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.

o     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.

o     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.

o     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.

o     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.

o     Risks of Hedging with Options and Futures. The use of hedging
instruments requires special skills and knowledge of investment techniques
that are different than what is required for normal portfolio management. If
the 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.

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

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

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

      When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, or when it anticipates receiving
dividend payments in a foreign currency, the Fund might desire to "lock-in"
the U.S. dollar price of the security or the U.S. dollar equivalent of the
dividend payments. To do so, the Fund 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.

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

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

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

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

|X|   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

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

      The Fund's investment 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.

o     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.

o     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.

|X|   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.

o     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.

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

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

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

      A list of the top 10 or more portfolio securities holdings (based on
invested assets), listed by security or by issuer, as of the end of each
month may be disclosed to third parties (subject to the procedures below) no
sooner than 15 days after month-end. The top 10 or more holdings also shall
be posted on the OppenheimerFunds' website at www.oppenheimerfunds.com in the
"Fund Profiles" section no sooner than 15 days after month-end. Other general
information about a Fund's portfolio investments, such as portfolio
composition by asset class, industry, country, currency, credit rating or
maturity, may also be posted with the same minimum lag time.

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

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

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

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

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

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

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

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

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

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

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.

|X|   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.

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

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

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 members of the Audit Committee are Paul Y.
Clinton (Chairman), Thomas W. Courtney, Robert G. Galli, Lacy G. Herrmann and
Brian Wruble. The Audit Committee met 4 times during the Fund's fiscal year
ended October 31, 2004. The Audit Committee furnishes 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 Audit Committee's functions include selecting and nominating, to
the full Board, nominees for election as Directors and selecting and
nominating Independent Directors for election. The Audit Committee may, but
need not, consider the advice and recommendation of the Manager and its
affiliates in selecting nominees. The full Board elects new Directors except
for those instances when a shareholder vote is required.

      To date, the Committee has been able to identify from its own resources
an ample number of qualified candidates. Nonetheless, shareholders may submit
names of individuals, accompanies by complete and properly supported resumes,
for the Audit Committee's consideration by mailing such information to the
Committee in care of the Fund. The Committee may consider such persons at
such time as it meets to consider possible nominees. The Committee, however,
reserves sole discretion to determine the candidates to present to the Board
and/or shareholders when it meets for the purpose of considering potential
nominees.

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"):

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

      In addition to being a trustee or director of the Board III Funds, Mr.
Galli is also a director or trustee of 24 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, Vottiero, Wixted, Petersen, Miao, Gillespie, Vandehey
and Zack and Mss. Bloomberg 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 January 31, 2005, 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 their immediate 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
                                                                         Any of the
                   Years;                                     Range of   Oppenheimer
                   Other Trusteeships/Directorships Held by   Shares     Funds
Position(s) Held   Director;                                  BeneficiallOverseen
with Fund, Length  Number of Portfolios in Fund Complex       Owned in   by
of Service, Age    Currently Overseen by Director             the Fund   Director
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
                                                                As of December 31,
                                                                       2004
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Thomas W.          Principal of Courtney Associates, Inc.     None       $10,001-$50,000
Courtney,          (1982-Present) (venture capital firm);
Chairman of the    former General Partner of Trivest Venture
Board of           Fund (private venture capital fund);
Directors,         President of Investment Counseling
Director since     Federated Investors, Inc. (1973-1982);
1985               Trustee of the following open-end
 Age:  71          investment companies: Cash Assets Trust,
                   PIMCO Advisors VIT, Tax Free Trust of
                   Arizona and four 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 (1996-present) (a financial                $100,000
1983               and venture capital consulting firm);
Age: 73            Trustee of PIMCO Advisors VIT (open-end
                   investment company); former director or
                   trustee of the following open-end
                   investment companies: OCC Cash Reserves,
                   Inc. (1989-December 2002), Capital Cash
                   Management Trust (1979-December 2004),
                   Prime Cash Fund and Narragansett Insured
                   Tax-Free Income Fund (1996-December
                   2004). Oversees 10 portfolios in the
                   OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert G. Galli,   A trustee or director of other             None       Over
Director since     Oppenheimer funds. Oversees 34 portfolios             $100,000
1998               in the OppenheimerFunds complex.
Age: 71
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Lacy B. Herrmann,  Chairman of the Board of Aquila            None       $10,001-$50,000
Director since     Management Corporation, the sponsoring
1984               organization and parent of the manager,
Age: 75            administrator, adviser and/or sub-adviser
                   and Chairman or Chairman Emeritus of the
                   Board of Trustees and President of 11
                   funds in the Aquila(sm) fund complex;
                   Chairman of Aquila Investment Management
                   (since 2004) and Chief Executive Officer
                   (1986-2004) (sub-adviser and
                   administrator of funds in the Aquila(sm)
                   fund complex; Director of Aquila
                   Distributors, Inc., (since 1981) and
                   formerly President and Secretary
                   (distributor of the above funds); Trustee
                   PIMCO Advisors VIT; Trustee Emeritus of
                   Brown University and the Hopkins School.
                   Oversees 10 portfolios in the
                   OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Brian Wruble,      General Partner of Odyssey Partners, L.P.  $10,001-$50Over
Director since     (since September 1995) (hedge funds in                $100,000
2001               distribution since January 1997);
Age:  61           Director of Special Value Opportunities
                   Fund, LLC (since September 2004);
                   Investment Advisory Board of Zurich
                   Financial Services (since October 2004);
                   Board of Governing Trustees of The
                   Jackson Laboratory (since August 1990)
                   (non profit); Trustee of Institute for
                   Advanced Study (since May 1992)
                   (educational institute); Special Limited
                   Partner (January 1999-September 2004) and
                   Managing Principal (through December
                   1998) of Odyssey Investment Partners, LLC
                   (private equity investment); Trustee of
                   Research Foundation of AIMR  (2000-2002)
                   (investment research, non-profit);
                   Governor, Jerome Levy Economics Institute
                   of Bard College (August 1990-September
                   2001) (economics research); Director of
                   Ray & Berendtson, Inc. (May 2000-April
                   2002) (executive search firm). Oversees
                   10 portfolios in the OppenheimerFunds
                   complex.
- -------------------------------------------------------------------------------------

      The address of the Officers in the chart below is as follows: for
Messrs. Murphy, Gillespie, Miao and Zack and Ms. Bloomberg, Two World
Financial Center, 225 Liberty Street, New York, NY 10281, for Messrs.
Vandehey, Vottiero, Petersen and Wixted and Ms. Ives, 6803 S. Tucson Way,
Centennial, CO 80112. Each Officer serves for an annual term or until his or
her earlier resignation, death or removal.

- -------------------------------------------------------------------------------------
                                Officers of the Fund
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Name,                      Principal Occupation(s) During Past 5 Years
Position(s) Held with Fund
Length of Service,
Age
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
John V. Murphy,            Chairman, Chief Executive Officer and director (since
President and Principal    June 2001) and President (since September 2000) of the
Executive Officer since    Manager; President and a director or trustee of other
2001                       Oppenheimer funds; President and a director (since July
Age:  55                   2001) of Oppenheimer Acquisition Corp. (the Manager's
                           parent holding company) and of Oppenheimer Partnership
                           Holdings, Inc. (a holding company subsidiary of the
                           Manager); a director (since November 2001) of
                           OppenheimerFunds Distributor, Inc. (a subsidiary of the
                           Manager); Chairman and a director (since July 2001) of
                           Shareholder Services, Inc. and of Shareholder Financial
                           Services, Inc. (transfer agent subsidiaries of the
                           Manager); President and a director (since July 2001) of
                           OppenheimerFunds Legacy Program (a charitable trust
                           program established by the Manager); a director of the
                           following investment advisory subsidiaries of the
                           Manager: OFI Institutional Asset Management, Inc.,
                           Centennial Asset Management Corporation, Trinity
                           Investment Management Corporation and Tremont Capital
                           Management, Inc. (since November 2001), HarbourView
                           Asset Management Corporation and OFI Private
                           Investments, Inc. (since July 2001); President (since
                           November 1, 2001) and a director (since July 2001) of
                           Oppenheimer Real Asset Management, Inc.; Executive Vice
                           President (since February 1997) of Massachusetts Mutual
                           Life Insurance Company (the Manager's parent company); a
                           director (since June 1995) of DLB Acquisition
                           Corporation (a holding company that owns the shares of
                           Babson Capital Management LLC); a member of the
                           Investment Company Institute's Board of Governors
                           (elected to serve from October 3, 2003 through September
                           30, 2006). Formerly, Chief Operating Officer (September
                           2000-June 2001) of the Manager; President and trustee
                           (November 1999-November 2001) of MML Series Investment
                           Fund and MassMutual Institutional Funds (open-end
                           investment companies); a director (September 1999-August
                           2000) of C.M. Life Insurance Company; President, Chief
                           Executive Officer and director (September 1999-August
                           2000) of MML Bay State Life Insurance Company; a
                           director (June 1989-June 1998) of Emerald Isle Bancorp
                           and Hibernia Savings Bank (a wholly-owned subsidiary of
                           Emerald Isle Bancorp). Oversees 62 portfolios as
                           Trustee/Director and 20 additional portfolios as Officer
                           in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Mark S. Vandehey,          Senior Vice President and Chief Compliance Officer
Vice President and Chief   (since March 2004) of the Manager; Vice President (since
Compliance Officer since   June 1983) of OppenheimerFunds Distributor, Inc.,
2004                       Centennial Asset Management Corporation and Shareholder
Age:  54                   Services, Inc. Formerly (until February 2004) Vice
                           President and Director of Internal Audit of the Manager.
                           An officer of 82 portfolios in the Oppenheimer funds
                           complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Brian W. Wixted,           Senior Vice President and Treasurer (since March 1999)
Treasurer since 1999       of the Manager; Treasurer of HarbourView Asset
Age:  45                   Management Corporation, Shareholder Financial Services,
                           Inc., Shareholder Services, Inc., Oppenheimer Real Asset
                           Management Corporation, and Oppenheimer Partnership
                           Holdings, Inc. (since March 1999), of OFI Private
                           Investments, Inc. (since March 2000), of
                           OppenheimerFunds International Ltd. and OppenheimerFunds
                           plc (since May 2000), of OFI Institutional Asset
                           Management, Inc. (since November 2000), and of
                           OppenheimerFunds Legacy Program (a Colorado non-profit
                           corporation) (since June 2003); Treasurer and Chief
                           Financial Officer (since May 2000) of OFI Trust Company
                           (a trust company subsidiary of the Manager); Assistant
                           Treasurer (since March 1999) of Oppenheimer Acquisition
                           Corp. Formerly Assistant Treasurer of Centennial Asset
                           Management Corporation (March 1999-October 2003) and
                           OppenheimerFunds Legacy Program (April 2000-June 2003);
                           Principal and Chief Operating Officer (March 1995-March
                           1999) at Bankers Trust Company-Mutual Fund Services
                           Division. An officer of 82 portfolios in the
                           OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Brian Petersen,            Assistant Vice President of the Manager since August
Assistant Treasurer since  2002; formerly Manager/Financial Product Accounting
2004                       (November 1998-July 2002) of the Manager. An officer of
Age: 34                    82 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Philip Vottiero,           Vice President/Fund Accounting of the Manager since
Assistant Treasurer since  March 2002. Formerly Vice President/Corporate Accounting
2002                       of the Manager (July 1999-March 2002) prior to which he
Age:  41                   was Chief Financial Officer at Sovlink Corporation
                           (April 1996-June 1999). An officer of 82 portfolios in
                           the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Robert G. Zack,            Executive Vice President (since January 2004) and
Secretary since 2001       General Counsel (since February 2002) of the Manager;
Age:  56                   General Counsel and a director (since November 2001) of
                           the Distributor; General Counsel (since November 2001)
                           of Centennial Asset Management Corporation; Senior Vice
                           President and General Counsel (since November 2001) of
                           HarbourView Asset Management Corporation; Secretary and
                           General Counsel (since November 2001) of Oppenheimer
                           Acquisition Corp.; Assistant Secretary and a director
                           (since October 1997) of OppenheimerFunds International
                           Ltd. and OppenheimerFunds plc; Vice President and a
                           director (since November 2001) of Oppenheimer
                           Partnership Holdings, Inc.; a director (since November
                           2001) of Oppenheimer Real Asset Management, Inc.; Senior
                           Vice President, General Counsel and a director (since
                           November 2001) of Shareholder Financial Services, Inc.,
                           Shareholder Services, Inc., OFI Private Investments,
                           Inc. and OFI Trust Company; Vice President (since
                           November 2001) of OppenheimerFunds Legacy Program;
                           Senior Vice President and General Counsel (since
                           November 2001) of OFI Institutional Asset Management,
                           Inc.; a director (since June 2003) of OppenheimerFunds
                           (Asia) Limited. Formerly Senior Vice President (May
                           1985-December 2003), Acting General Counsel (November
                           2001-February 2002) and Associate General Counsel (May
                           1981-October 2001) of the Manager; Assistant Secretary
                           of Shareholder Services, Inc. (May 1985-November 2001),
                           Shareholder Financial Services, Inc. (November
                           1989-November 2001); and OppenheimerFunds International
                           Ltd. (October 1997-November 2001). An officer of 82
                           portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Kathleen T. Ives,          Vice President (since June 1998) and Senior Counsel and
Assistant Secretary since  Assistant Secretary (since October 2003) of the Manager;
2001                       Vice President (since 1999) and Assistant Secretary
Age:  39                   (since October 2003) of the Distributor; Assistant
                           Secretary (since October 2003) of Centennial Asset
                           Management Corporation; Vice President and Assistant
                           Secretary (since 1999) of Shareholder Services, Inc.;
                           Assistant Secretary (since December 2001) of
                           OppenheimerFunds Legacy Program and of Shareholder
                           Financial Services, Inc.. Formerly an Assistant Counsel
                           (August 1994-October 2003) and Assistant Vice President
                           of the Manager (August 1997-June 1998). An officer of 82
                           portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Lisa I. Bloomberg,         Vice President and Associate Counsel of the Manager
Assistant Secretary since  since May 2004; formerly First Vice President and
2004                       Associate General Counsel of UBS Financial Services Inc.
Age:  37                   (formerly, PaineWebber Incorporated) (May 1999 - April
                           2004) prior to which she was an Associate at Skaden,
                           Arps, Slate, Meagher & Flom, LLP (September 1996 - April
                           1999). An officer of 82 portfolios in the
                           OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Phillip S. Gillespie,      Senior Vice President and Deputy General Counsel of the
Assistant Secretary since  Manager since September 2004. Formerly Mr. Gillespie
2004                       held the following positions at Merrill Lynch Investment
Age:  41                   Management: First Vice President (2001-September 2004);
                           Director (from 2000) and Vice President (1998-2000). An
                           officer of 82 portfolios in the OppenheimerFunds complex.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
Wayne Miao,                Assistant Vice President and Assistant Counsel of the
Assistant Secretary since  Manager since June 2004. Formerly an Associate with
2004                       Sidley Austin Brown & Wood LLP (September 1999 - May
Age:  32                   2004). An officer of 82 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, 2004. 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, 2004.

- ---------------------------------------------------------------------------------
Director Name and        Aggregate   Retirement   Estimated          Total
                                                                 Compensation
                                                                 From Fund and
                                                                 Fund Complex
                                     Benefits       Annual         Including
                                     Accrued      Retirement        Accrued
Other Fund                           as Part     Benefits to      Retirement
Position(s)            Compensation  of Fund     be Paid Upon  Benefits Paid to
(as applicable)         From Fund1    Expenses   Retirement2      Directors*
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Thomas W. Courtney        $5,308       $8,708      $78,862         $172,0713
Chairman and Audit
Committee Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Paul Y. Clinton           $5,235      $10,034      $76,994         $166,3894
Audit Committee
Chairman
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Robert G. Galli           $4,862       $5,038      $80,9235        $237,3126
Audit Committee Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Lacy B. Herrmann          $5,162       $7,750      $74,648         $161,0717
Audit Committee Member
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Brian Wruble              $5,162       $2,460      $22,238         $111,000
Audit Committee 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 $51,071 ($26,750 compensation and $24,321 accrued retirement
benefits) from one open-end investment company, PIMCO Advisors VIT ("PIMCO")
with respect to Mr. Courtney's service as a trustee of that fund. The Fund's
Sub-Advisor acts as the investment advisor to PIMCO.
4. Includes $50,389 ($26,500 compensation and $23,889 accrued retirement
benefits) from PIMCO, with respect to Mr. Clinton's service as a trustee of
that fund.
5. Includes $43,933 estimated to be paid to Mr. Galli for serving as a
trustee or director of 25 other Oppenheimer funds (at December 31, 2004) that
are not Board III Funds.
6. Includes $129,312 paid to Mr. Galli for serving as trustee or director of
25 other Oppenheimer funds (at December 31, 2004) that are not Board III
Funds.
7. Includes $50,071 ($25,7508 compensation and $24,321 accrued retirement
benefits) from PIMCO, with respect to Mr. Herrmann's service as a trustee of
that fund.
* For purposes of this section only, "Fund Complex" includes the Oppenheimer
funds and PIMCO (formerly OCC Accumulation Trust) in accordance with the
instructions for Form N-1A. The Manager does not consider PIMCO 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.

      |X| Major Shareholders. As of January 31, 2005 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:

      Fidelity Investments Institutional Operations Co Inc, Certain Employee
      Benefit Plans, 100 Magellan Way #KW1C, Covington, KY 4101501987, which
      owned for the benefit of its clients 684,701.767 Class A shares
      (representing 6.19% 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 905,584.771 Class A shares (representing
      8.19% of the Class A shares then outstanding).

      GE Financial Trust co, FBO Omnibus/GE PVT Asset Management, 3200 N
      Central Ave. #MS612, Phoenix, AZ 85012-2425, which owned for the
      benefit of its clients 584,702.207 Class A shares (representing 5.29%
      of the Class A 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 duplicating
           -----------
fee, by electronic request at the following E-mail address:
publicinfo@sec.gov., or by writing to the SEC's Public Reference Section,
- -------------------
Washington, D.C. 20549-0102.

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

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

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

|X|   The Investment Advisory Agreement.  The Manager provides investment
advisory and management services to the Fund under an investment advisory
agreement between the Manager and 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 advisers 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 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 investment 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 years were:

- -------------------------------------------------------------------------------
   Fiscal Year ended 10/31:    Management Fees Paid to OppenheimerFunds, Inc.1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
             2002                                $2,241,431
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
             2003                                $2,276,055
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
             2004                                $2,941,882
- -------------------------------------------------------------------------------
1. The Manager, not the Fund, pays the Sub-Advisor an annual sub-advisory
fee. For fiscal years ended 2002, 2003 and 2004 this sub-advisory fee was
$892,561, $858,498 and $1,154,356, respectively. The advisory fee rate was
reduced as of January 1, 2005, as described on page 40, below.

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

    The agreement permits the Manager to act as investment adviser for any
other person, firm or corporation and to use the names "Oppenheimer" and
"Quest For Value" in connection with other investment companies for which it
may act as investment adviser or general distributor. If the Manager shall no
longer act as investment adviser to the Fund, the Manager may withdraw the
right of the Fund 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 approve sub-advisory agreement.
Among other factors, the Board considered:
o     The nature, cost, and quality of the services provided to the Fund and
            its shareholders;
o     The profitability of the Fund to the Manager 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
            and Sub-Advisor;
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 received
            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 agreement for
another year and approve the sub-advisory agreement. 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, 2005, the Fund pays the Manager
an advisory fee at an annual rate that declines as the Fund's assets grow:
0.85% of the first $400 million of average annual net assets of the Fund,
0.80% of the next $400 million, 0.75% of the next $400 million, 0.65% of the
next $400 million, 0.60% of the next $400 million and 0.50% of average annual
net assets in excess of $2 billion. From January 1, 2004 through December 31,
2004, 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 $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. As of January 1, 2005, the Fund's Sub-Advisor is Oppenheimer
Capital LLC, a registered investment advisor. The Sub-Advisor 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 Allianz Dresdner Asset Management of America 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 has operated as an investment advisor to investment
companies and other investors since its organization in 1969. As of September
30, 2004, the Sub-Advisor advised accounts having assets in excess of $24
billion. The Sub-Advisor is located at 1345 Avenue of the Americas, 49th
Floor, New York, New York 10105-4800.

      Prior to January 1, 2005, the Fund's Sub-Advisor was OpCap Advisors
("OpCap"), a wholly-owned subsidiary of the Sub-Advisor. From the Fund's
inception on April 30, 1980 until February 28, 1997, OpCap (which was then
named Quest for Value Advisors) served as the Fund's investment advisor. On
February 28, 1997, the Manager retained OpCap to provide day-to-day portfolio
management for the Fund.

|X|   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 same fee was paid by the Manager to OpCap
prior to January 1, 2005.

      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 the Manager thinks, in its best judgment
based on all relevant factors, will implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" of the Fund's portfolio
transactions. "Best execution" means prompt and reliable execution at the
most favorable price obtainable.

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

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

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

      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.

      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
reasonably related to the value or benefit of such services.

- -------------------------------------------------------------------------------
    Fiscal Year Ended 10/31:    Total Brokerage Commissions Paid by the Fund 1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
             2002                                  $471,847
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
             2003                                  $465,008
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
             2004                                 $439,9372
- -------------------------------------------------------------------------------
1. Amounts do not include spreads or commissions on principal transactions on
a net trade basis.
2. In the fiscal year ended 10/31/04, the amount of transactions directed to
brokers for research services was $27,171,189 and the amount of the
commissions paid to broker-dealers for those services was $33,185.

Distribution and Service Plans

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

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

- -------------------------------------------
Fiscal       Aggregate         Class A
                              Front-End
Year      Front-End Sales   Sales Charges
Ended        Charges on      Retained by
 10/31:    Class A Shares   Distributor1
- -------------------------------------------
- -------------------------------------------
  2002        $557,052        $163,592
- -------------------------------------------
- -------------------------------------------
  2003        $380,381        $111,449
- -------------------------------------------
- -------------------------------------------
  2004        $703,510        $204,395
- -------------------------------------------
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
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2002        $34,981         $566,717         $98,063          $27,328
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2003         $7,733         $310,827         $65,110          $27,337
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
  2004        $17,382         $295,355         $74,562          $30,053
- -----------------------------------------------------------------------------
1. The  Distributor  advances  concession  payments  to dealers  for certain
sales of  Class A shares  and for  sales  of  Class B,  Class C and  Class N
shares from its own resources at the time of sale.

- ------------------------------------------------------------------------------
Fiscal        Class A          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
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
  2002         $5,460         $113,843          $5,740             $885
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
  2003         $1,203         $119,717          $7,691            $9,966
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
  2004         $1,323         $101,232          $9,922            $4,636
- ------------------------------------------------------------------------------

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

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

      Unless a plan is terminated as described below, the plan continues in
effect from year to year but only if the Fund's Board of 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" 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. 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 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 of Directors has set
that rate. The Distributor does not receive or retain the service fee on
Class A shares in accounts for which the Distributor has been listed as the
broker-dealer of record. While the plan permits the Board to authorize
payments to the Distributor to reimburse itself for services under the plan,
the Board has not yet done so, except in the case of the special arrangement
described below, regarding grandfathered retirement accounts. The Distributor
makes payments to 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 0.15% 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, 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, 2004 payments under the Class A
distribution and service plan totaled $538,041, of which $8,646 was service
fee payments retained by the Distributor in connection with the grandfathered
retirement accounts, described above, and included $16,214 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.

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

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

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

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

      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 10/31/04
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 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    $604,097        $471,751         $948,764          1.48%
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Class C Plan    $320,463        $82,736          $375,150          1.09%
 ------------------------------------------------------------------------------
 ------------------------------------------------------------------------------
 Class N Plan     $43,569        $29,123          $139,319          1.32%
 ------------------------------------------------------------------------------
1. Includes amounts paid to an affiliate of the Distributor's parent company:
$8,291 (Class B); $8,059 (Class C); and $1,642 (Class N).

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

Performance of the Fund

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

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

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

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

      In calculating total returns for Class A shares, the current maximum
sales charge of 5.75% (as a percentage of the offering price) is deducted
from the initial investment ("P" in the formula below) (unless the return is
shown without sales charge, as described below). For Class B shares, payment
of the applicable contingent deferred sales charge is applied, depending on
the period for which the return is shown: 5.0% in the first year, 4.0% in the
second year, 3.0% in the third and fourth years, 2.0% in the fifth year, 1.0%
in the sixth year and none thereafter. For Class C shares, the 1.0%
contingent deferred sales charge is deducted for returns for the one-year
period. For Class N shares, the 1.0% contingent deferred sales charge is
deducted for returns for the one-year period, and total returns for the
periods prior to 03/01/01 (the inception date for Class N shares) are based
on the Fund's Class A returns, adjusted to reflect the higher Class N 12b-1
fees.

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

ERV   l/n - 1  Average Annual Total
               Return
  P

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

           - 1 = Average Annual Total Return (After Taxes on
ATVD   l/n     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 10/31/04
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
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  178.05%  195.00%   7.65%    14.22%   6.25%    7.52%   10.77%   11.42%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class B2   91.07%   91.07%   8.22%    13.22%   6.53%    6.77%    8.82%   8.82%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class C3   88.18%   88.18%   12.20%   13.20%   6.77%    6.77%    8.60%   8.60%
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Class N4   17.68%   17.68%   12.75%   13.75%   4.54%    4.54%     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 10/31/04
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
                                 1-Year          5-Year          10-Year
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
After Taxes on Distributions     7.41%           3.50%           7.75%1
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
After Taxes on                   4.98%           4.02%           7.85%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.

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

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

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

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

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

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


ABOUT YOUR ACCOUNT

How to Buy Shares

Additional information is presented below about the methods that can be used
to buy shares of the Fund. Appendix 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.

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

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

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

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

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

And the following money market funds:

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

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

Letters of Intent. Under a Letter of Intent ("Letter"), you can reduce the
sales charge rate that applies to your purchases of Class A shares if you
purchase Class A, Class B or (effective March 18, 2005) Class C shares of the
Fund or other Oppenheimer funds during a 13-month period. The total amount of
your purchases of Class A, Class B and (effective March 18, 2005) Class C
shares will determine the sales charge rate that applies to your Class A
share purchases during that period. You can choose to include purchases made
up to 90 days before the date of the Letter. Class A shares of Oppenheimer
Money Market Fund, Inc. and Oppenheimer Cash Reserves fund on which you did
not pay a sales charge and any Class N shares you purchase, or may have
purchased, will not be counted towards satisfying the purchases specified in
a Letter.

      A Letter is an investor's statement in writing to the Distributor of
his or her intention to purchase a specified value of Class A, Class B and
(effective March 18, 2005)Class C shares of the Fund and other Oppenheimer
funds during a 13-month period (the "Letter period"). At the investor's
request, this may include purchases made up to 90 days prior to the date of
the Letter. The Letter states the investor's intention to make the aggregate
amount of purchases of shares which, 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 capital gains
distributions and purchases made at net asset value (i.e. without a sales
charge) do not count toward satisfying the amount of the Letter.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Retirement Plans. Certain types of retirement plans are entitled to purchase
shares of the Fund without sales charges or at reduced sales charge rates, as
described in an Appendix to this Statement of Additional Information. Certain
special sales charge arrangements described in that Appendix apply to
retirement plans whose records are maintained on a daily valuation basis by
Merrill Lynch Pierce Fenner & Smith, Inc. ("Merrill Lynch") or an independent
record keeper that has a contract or special arrangement with Merrill Lynch.
If on the date the plan sponsor signed the Merrill Lynch record keeping
service agreement the plan has less than $1 million in assets invested in
applicable investments (other than assets invested in money market funds),
then the retirement plan may purchase only Class C shares of the Oppenheimer
funds. If on the date the plan sponsor signed the Merrill Lynch record
keeping service agreement the plan has $1 million or more in assets but less
than $5 million in assets invested in applicable investments (other than
assets invested in money market funds), then the retirement plan may purchase
only Class N shares of the Oppenheimer funds. If on the date the plan sponsor
signed the Merrill Lynch record keeping service agreement the plan has $5
million or more in assets invested in applicable investments (other than
assets invested in money market funds), then the retirement plan may purchase
only Class A shares of the Oppenheimer funds.

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

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

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

      The availability of different classes of shares permits an investor to
choose the method of purchasing shares that is more appropriate for the
investor. That may depend on the amount of the purchase, the length of time
the investor expects to hold shares, and other relevant circumstances. Class
A shares normally are sold subject to an initial sales charge. While Class B,
Class C and Class N shares have no initial sales charge, the purpose of the
deferred sales charge and asset-based sales charge on Class B, Class C and
Class N shares is the same as that of the initial sales charge on Class A
shares - to compensate the Distributor and brokers, dealers and financial
institutions that sell shares of the Fund. A salesperson who is entitled to
receive compensation from his or her firm for selling Fund shares may receive
different levels of compensation for selling one class of shares rather than
another. The Distributor will not accept an order in an amount greater than
$100,000 to purchase Class B shares or more than $1 million to purchase Class
C shares on behalf of a single investor (not including dealer "street name"
or omnibus accounts).

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

      |X|   Class B Conversion. Under current interpretations of applicable
federal income tax law by the Internal Revenue Service, the conversion of
Class B shares to Class A shares 72 months after purchase is not treated as a
taxable event for the shareholder. If those laws or the IRS interpretation of
those laws should change, the automatic conversion feature may be suspended.
In that event, no further conversions of Class B shares would occur while
that suspension remained in effect. Although Class B shares could then be
exchanged for Class A shares on the basis of relative net asset value of the
two classes, without the imposition of a sales charge or fee, such exchange
could constitute a taxable event for the shareholder, and absent such
exchange, Class B shares might continue to be subject to the asset-based
sales charge for longer than six years.

      |X|   Availability of Class N Shares. In addition to the description of
the types of retirement plans which may purchase Class N shares contained in
the prospectus, Class N shares also are offered to the following:
o     to all rollover IRAs (including SEP IRAs and SIMPLE IRAs),
o     to all rollover contributions made to Individual 401(k) plans,
            Profit-Sharing Plans and Money Purchase Pension Plans,
o     to all direct rollovers from OppenheimerFunds-sponsored Pinnacle and
            Ascender retirement plans,
o     to all trustee-to-trustee IRA transfers,
o     to all 90-24 type 403(b) transfers,
o     to Group Retirement Plans (as defined in Appendix 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).

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

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

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

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

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

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

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

|X|   Securities Valuation. The Fund's Board of 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(R), as applicable, on that day, or
(2)   if last sale information is not available on a valuation date, they are
               valued at the last reported sale price preceding the valuation
               date if it is within the spread of the closing "bid" and
               "asked" prices on the valuation date or, if not,  at the
               closing "bid" price on the valuation date.
o     Equity securities traded on a foreign securities exchange generally are
valued in one of the following ways:
(1)   at the last sale price available to the pricing service approved by the
               Board of 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 New York foreign exchange market on a
particular business day that are provided to the Manager by a bank, dealer or
pricing service that the Manager has determined to be reliable are used to
value foreign currency, including forward contracts, and to convert to U.S.
dollars securities that are denominated in foreign currency.

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

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

How to Sell Shares

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

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

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

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

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

How to Exchange Shares

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

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

   The following funds only offer Class A shares:
   Centennial California Tax Exempt Trust    Centennial New York Tax Exempt
                                             Trust
   Centennial Government Trust               Centennial Tax Exempt Trust
   Centennial Money Market Trust

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dividends, Capital Gains and Taxes

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.

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

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


KPMG LLP

Denver, Colorado
December 16, 2004


OPPENHEIMER QUEST CAPITAL VALUE FUND, INC.
STATEMENT OF INVESTMENTS  October 31, 2004
- --------------------------------------------------------------------------------

VALUE
                                                          SHARES      SEE
NOTE 1
- --------------------------------------------------------------------------------
COMMON STOCKS--93.0%
- --------------------------------------------------------------------------------
CONSUMER DISCRETIONARY--17.3%
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS & LEISURE--3.6%
Ruby Tuesday, Inc.                                       239,700   $
5,920,590
- --------------------------------------------------------------------------------
Yum! Brands, Inc.                                        165,700
7,207,950

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

13,128,540

- --------------------------------------------------------------------------------
MEDIA--9.5%
Lamar Advertising
Co., Cl. A 1                                             327,900
13,581,618
- --------------------------------------------------------------------------------
Omnicom Group, Inc.                                      164,121
12,949,147
- --------------------------------------------------------------------------------
WPP Group plc,
Sponsored ADR                                            154,600
7,770,196

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

34,300,961

- --------------------------------------------------------------------------------
MULTILINE RETAIL--1.2%
Dollar General Corp.                                     215,200
4,142,600
- --------------------------------------------------------------------------------
SPECIALTY RETAIL--2.0%
Ross Stores, Inc.                                        277,300
7,284,671
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS--1.0%
Columbia
Sportswear Co. 1                                          61,000
3,681,960
- --------------------------------------------------------------------------------
CONSUMER STAPLES--0.7%
- --------------------------------------------------------------------------------
FOOD PRODUCTS--0.7%
Dean Foods Co. 1                                          90,500
2,701,425
- --------------------------------------------------------------------------------
ENERGY--9.9%
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT & SERVICES--4.2%
Nabors Industries
Ltd. 1                                                   142,800
7,014,336
- --------------------------------------------------------------------------------
National-Oilwell, Inc. 1                                 241,800
8,151,078

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

15,165,414

- --------------------------------------------------------------------------------
OIL & GAS--5.7%
Anadarko Petroleum
Corp.                                                    141,100
9,517,195
- --------------------------------------------------------------------------------
BP plc, ADR                                              156,700
9,127,775
- --------------------------------------------------------------------------------
ConocoPhillips                                            23,100
1,947,561

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

20,592,531

- --------------------------------------------------------------------------------
FINANCIALS--15.0%
- --------------------------------------------------------------------------------
COMMERCIAL BANKS--3.6%
M&T Bank Corp.                                            45,300
4,665,900
Trustmark Corp.                                          119,800
3,777,294
- --------------------------------------------------------------------------------
Zions Bancorp                                             68,400
4,526,028

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

12,969,222

- --------------------------------------------------------------------------------
CONSUMER FINANCE--0.6%
MoneyGram
International, Inc.                                      121,700
2,263,620
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES--5.1%
American Express Co.                                      63,000
3,343,410
- --------------------------------------------------------------------------------
Ameritrade
Holding Corp. 1                                          310,000
4,036,200
- --------------------------------------------------------------------------------
Citigroup, Inc.                                          248,800
11,039,256

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

18,418,866

- --------------------------------------------------------------------------------
INSURANCE--2.0%
Nationwide Financial
Services, Inc., Cl. A                                    133,200
4,608,720
- --------------------------------------------------------------------------------
Platinum Underwriters
Holdings Ltd.                                             89,000
2,603,250

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

7,211,970

- --------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE--3.7%
Freddie Mac                                               79,800
5,314,680
- --------------------------------------------------------------------------------
MGIC Investment
Corp.                                                    126,300
8,122,353

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

13,437,033

- --------------------------------------------------------------------------------
HEALTH CARE--11.0%
- --------------------------------------------------------------------------------
BIOTECHNOLOGY--1.0%
Amgen, Inc. 1                                             64,000
3,635,200
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES--1.8%
Millipore Corp. 1                                        144,332
6,637,829
- --------------------------------------------------------------------------------
HEALTH CARE PROVIDERS & SERVICES--6.2%
Community Health
Systems, Inc. 1                                          286,300
7,678,566
- --------------------------------------------------------------------------------
DaVita, Inc. 1                                           115,100
3,409,262
- --------------------------------------------------------------------------------
Laboratory Corp. of
America Holdings 1                                       243,100
11,133,980

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

22,221,808


VALUE
                                                          SHARES      SEE
NOTE 1
- --------------------------------------------------------------------------------
PHARMACEUTICALS--2.0%
Barr Pharmaceuticals,
Inc. 1                                                   140,500   $
5,289,825
- --------------------------------------------------------------------------------
Par Pharmaceutical
Cos., Inc. 1                                              46,200
1,822,590

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

7,112,415

- --------------------------------------------------------------------------------
INDUSTRIALS--26.8%
- --------------------------------------------------------------------------------
AEROSPACE & DEFENSE--4.4%
Alliant Techsystems,
Inc. 1                                                   226,726
13,034,478
- --------------------------------------------------------------------------------
General Dynamics
Corp.                                                     26,500
2,706,180

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

15,740,658

- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES--2.2%
Aramark Corp., Cl. B                                     359,700
8,111,235
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT--3.1%
AMETEK, Inc.                                             133,400
4,391,528
- --------------------------------------------------------------------------------
Roper Industries, Inc.                                   112,000
6,905,920

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

11,297,448

- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES--1.7%
General Electric Co.                                     185,100
6,315,612
- --------------------------------------------------------------------------------
MACHINERY--8.9%
Actuant Corp., Cl. A 1                                   151,100
5,994,137
- --------------------------------------------------------------------------------
Eaton Corp.                                              171,100
10,941,845
- --------------------------------------------------------------------------------
Oshkosh Truck Corp.                                      203,000
11,956,700
- --------------------------------------------------------------------------------
Wabash National
Corp. 1                                                  132,000
3,244,560

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

32,137,242

- --------------------------------------------------------------------------------
ROAD & RAIL--6.5%
Canadian National
Railway Co.                                              259,050
14,001,653
- --------------------------------------------------------------------------------
Pacer International,
Inc. 1                                                   533,300
9,466,075

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

23,467,728

- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY--6.3%
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT & INSTRUMENTS--3.9%
Arrow Electronics,
Inc. 1                                                   257,300
6,164,908
- --------------------------------------------------------------------------------
Diebold, Inc.                                            135,800
6,498,030
- --------------------------------------------------------------------------------
Jabil Circuit, Inc. 1                                     60,200
1,463,462

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

14,126,400

- --------------------------------------------------------------------------------
IT SERVICES--0.2%
Unisys Corp. 1                                            91,500
971,730
- --------------------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--2.2%
Freescale
Semiconductor, Inc.,
Cl. A 1                                                  248,000
3,853,920
- --------------------------------------------------------------------------------
Intel Corp.                                              180,000
4,006,800

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

7,860,720

- --------------------------------------------------------------------------------
MATERIALS--3.9%
- --------------------------------------------------------------------------------
METALS & MINING--3.9%
Alcan, Inc.                                              173,500
8,036,519
- --------------------------------------------------------------------------------
Inco Ltd. 1                                              167,400
5,925,960

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

13,962,479

- --------------------------------------------------------------------------------
UTILITIES--2.1%
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES--2.1%
Cinergy Corp.                                            188,300
7,441,616

- -------------
Total Common Stocks
(Cost $284,236,912)
336,338,933

                                                       PRINCIPAL
                                                          AMOUNT
- --------------------------------------------------------------------------------
SHORT-TERM NOTES--5.9%
- --------------------------------------------------------------------------------
American Express
Credit Corp., 1.73%,
11/3/04                                              $ 6,000,000
5,999,423
- --------------------------------------------------------------------------------
Federal Home
Loan Bank:
1.69%, 11/1/04                                         9,334,000
9,334,000
1.72%, 11/17/04                                        6,000,000
5,995,413

- -------------
Total Short-Term Notes
(Cost $21,328,836)
21,328,836


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

                                                      PRINCIPAL
VALUE
                                                         AMOUNT      SEE NOTE
1
- --------------------------------------------------------------------------------
Total Investments,
at Value (excluding
investments purchased
with cash collateral
from securities loaned)
(Cost $305,565,748)                                               $
357,667,769
- --------------------------------------------------------------------------------

INVESTMENTS PURCHASED WITH CASH COLLATERAL
FROM SECURITIES LOANED--2.1%
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS--2.1%
Greenwich Capital 2
(Cost $7,540,000)                                  $  7,540,000
7,540,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS,
AT VALUE
(COST $313,105,748)                                       101.0%
365,207,769
- --------------------------------------------------------------------------------
LIABILITIES IN EXCESS
OF OTHER ASSETS                                            (1.0)
(3,508,754)

- -----------------------------
NET ASSETS                                                100.0%  $
361,699,015

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

FOOTNOTES TO STATEMENT OF INVESTMENTS

1. Non-income producing security.

2. The security has been segregated to satisfy the forward commitment to
return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 6 of Notes to Financial
Statements.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


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

Investments, at value (including securities loaned of $7,287,700)
(cost $313,105,748)--see accompanying statement of
investments                           $   365,207,769
- ---------------------------------------------------------------------------------------------------------
Cash
160,014
- ---------------------------------------------------------------------------------------------------------
Receivables and other assets:
Investments
sold
3,275,529
Shares of capital stock
sold
1,037,623
Interest and dividends
                                    258,264
Other
27,444

- ----------------
Total
assets
369,966,643

- ---------------------------------------------------------------------------------------------------------
LIABILITIES
- ---------------------------------------------------------------------------------------------------------
Return of collateral for securities
loaned                                                     7,540,000
- ---------------------------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of capital stock
redeemed
471,350
Distribution and service plan
fees                                                                73,280
Transfer and shareholder servicing agent
fees                                                     72,086
Shareholder
communications
46,328
Directors' compensation
                                                                  34,106
Other
30,478

           ----------------
Total
liabilities
8,267,628

- ---------------------------------------------------------------------------------------------------------
NET ASSETS
                                                                         $
361,699,015

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

- ---------------------------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
- ---------------------------------------------------------------------------------------------------------
Par value of shares of capital stock
           $         1,372
- ---------------------------------------------------------------------------------------------------------
Additional paid-in
capital
280,343,212
- ---------------------------------------------------------------------------------------------------------
Accumulated net investment
loss                                                                  (32,742)
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency
transactions                29,285,152
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation on
investments                                                    52,102,021

- ----------------
NET ASSETS
                                           $   361,699,015

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


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
$252,661,282 and
9,395,635 shares of capital stock
outstanding)                                                    $ 26.89
Maximum offering price per share (net asset value plus sales charge of 5.75%
of offering price)   $ 28.53
- ---------------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge)
and offering price per share (based on net assets of $64,069,242 and
2,555,344 shares
of capital stock outstanding)
                                                          $ 25.07
- ---------------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge)
and offering price per share (based on net assets of $34,414,347 and
1,371,125 shares
of capital stock
outstanding)
$ 25.10
- ---------------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent deferred
sales charge)
and offering price per share (based on net assets of $10,554,144 and 396,648
shares
of capital stock
outstanding)
$ 26.61


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


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

- --------------------------------------------------------------------------------
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $29,416)           $
3,161,239
- --------------------------------------------------------------------------------
Interest
224,128
- --------------------------------------------------------------------------------
Portfolio lending fees
8,304

- --------------
Total investment income
3,393,671

- --------------------------------------------------------------------------------
EXPENSES
- --------------------------------------------------------------------------------
Management fees
2,941,882
- --------------------------------------------------------------------------------
Distribution and service plan fees:
Class A
538,041
Class B
604,097
Class C
320,463
Class N
43,569
- --------------------------------------------------------------------------------
Transfer and shareholder servicing agent fees:
Class A
480,385
Class B
185,435
Class C
103,604
Class N
65,202
- --------------------------------------------------------------------------------
Shareholder communications:
Class A
33,145
Class B
35,455
Class C
17,149
Class N
1,782
- --------------------------------------------------------------------------------
Directors' compensation
33,990
- --------------------------------------------------------------------------------
Custodian fees and expenses
3,862
- --------------------------------------------------------------------------------
Other
79,013

- --------------
Total expenses
5,487,074
Less reduction to custodian expenses
(1,430)
Less payments and waivers of expenses
(35,194)

- --------------
Net expenses
5,450,450

- --------------------------------------------------------------------------------
NET INVESTMENT LOSS
(2,056,779)

- --------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN
- --------------------------------------------------------------------------------
Net realized gain on:
Investments
35,014,419
Foreign currency transactions
880
Net increase from payment by affiliate
179,218

- --------------
Net realized gain
35,194,517
- --------------------------------------------------------------------------------
Net change in unrealized appreciation on investments
7,472,308

- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS              $
40,610,046

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

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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

YEAR ENDED OCTOBER 31,
2004              2003
- ---------------------------------------------------------------------------------------------

OPERATIONS
- ---------------------------------------------------------------------------------------------
Net investment loss                                        $    (2,056,779)
$    (1,575,259)
- ---------------------------------------------------------------------------------------------
Net realized gain
35,194,517         8,272,859
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
7,472,308        46,887,264

- ----------------------------------
Net increase in net assets resulting from operations
40,610,046        53,584,864

- ---------------------------------------------------------------------------------------------
DIVIDENDS AND/OR DISTRIBUTIONS TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------
Distributions from net realized gain:
Class A
(1,407,511)               --
Class B
(421,504)               --
Class C
(234,513)               --
Class N
(47,778)               --

- ---------------------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting
 from capital stock transactions:
Class A
31,831,708         6,104,178
Class B
1,735,308         3,216,603
Class C
144,639         8,915,736
Class N
3,167,760         2,367,129

- ---------------------------------------------------------------------------------------------
NET ASSETS
- ---------------------------------------------------------------------------------------------
Total increase
75,378,155        74,188,510
- ---------------------------------------------------------------------------------------------
Beginning of period
286,320,860       212,132,350

- ----------------------------------
End of period (including accumulated net investment loss
of $32,742 and $23,341, respectively)                      $   361,699,015
$   286,320,860

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


SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


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 subadvisory 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 with respect to the Fund in
general and exclusive voting rights on matters that affect that class alone.
Earnings, net assets and net asset value per share may differ due to each
class
having its own expenses, such as transfer and shareholder servicing agent fees
and shareholder communications, directly attributable to that class. Class A,
B,
C and N have separate distribution and/or service plans. Class B shares will
automatically convert to Class A shares six years after the date of purchase.

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

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

NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

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

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

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

- --------------------------------------------------------------------------------
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 ON COST OF
                                                              SECURITIES AND
    UNDISTRIBUTED    UNDISTRIBUTED         ACCUMULATED     OTHER INVESTMENTS
    NET INVESTMENT       LONG-TERM                LOSS    FOR FEDERAL INCOME
    INCOME                    GAIN    CARRYFORWARD 1,2          TAX PURPOSES
    ------------------------------------------------------------------------
       $ 7,499,783    $ 21,785,369                $ --         $  52,102,021

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

2. During the fiscal year ended October 31, 2003, the Fund utilized $3,944,756
of capital loss carryforward to offset capital gains realized in that fiscal
year.

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

                                                           REDUCTION TO
                                     REDUCTION TO       ACCUMULATED NET
           INCREASE TO            ACCUMULATED NET         REALIZED GAIN
           PAID-IN CAPITAL        INVESTMENT LOSS      ON INVESTMENTS 3
           ------------------------------------------------------------
           $  3,802,099              $  2,047,378          $  5,849,477

3. $3,802,099, including $2,828,400 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,
2004
and October 31, 2003 was as follows:

                                           YEAR ENDED        YEAR ENDED
                                     OCTOBER 31, 2004  OCTOBER 31, 2003
           ------------------------------------------------------------
           Distributions paid from:
           Ordinary income              $   1,717,729            $   --
           Long-term capital gain             393,577                --
                                        -------------------------------
           Total                        $   2,111,306            $   --
                                        ===============================

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, 2004 are noted below. The
primary
difference between book and tax appreciation or depreciation of securities and
other investments, if applicable, is attributable to the tax deferral of
losses
or tax realization of financial statement unrealized gain or loss.

           Federal tax cost of securities      $  313,105,748
                                               ===============

           Gross unrealized appreciation       $   56,077,802
           Gross unrealized depreciation           (3,975,781)
                                               ---------------
           Net unrealized appreciation         $   52,102,021
                                               ===============

NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES Continued

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, 2004, the Fund's projected benefit obligations were increased by
$5,112 and payments of $563 were made to retired directors, resulting in an
accumulated liability of $27,888 as of October 31, 2004.

      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.
For purposes of determining the amount owed to the under the plan, deferred
amounts are treated as though equal dollar amounts had been invested in shares
of the Fund or in other Oppenheimer funds selected by the Director. The Fund
purchases shares of the funds selected for deferral by the Director in amounts
equal to his or her deemed investment, resulting in a Fund asset equal to the
deferred compensation liability. Such assets are included as a component of
"Other" within the asset section of the Statement of Assets and Liabilities.
Deferral of 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.

- --------------------------------------------------------------------------------
CUSTODIAN FEES. Custodian Fees and Expenses in the Statement of Operations may
include interest expense incurred by the Fund on any cash overdrafts of its
custodian account during the period. The Fund pays interest to its custodian
on
such cash overdrafts at a rate equal to the Federal Funds Rate plus 0.50%. The
Reduction to Custodian Expenses line item, if applicable, represents earnings
on
cash balances maintained by the Fund during the period. Such interest expense
and other custodian fees may be paid with these earnings.

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

- --------------------------------------------------------------------------------
OTHER. The preparation of financial statements in conformity with U.S.
generally
accepted accounting principles requires management to make estimates and
assumptions that 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
in
the aggregate to be apportioned among each class of shares. Transactions in
shares of capital stock were as follows:



                            YEAR ENDED OCTOBER 31, 2004     YEAR ENDED
OCTOBER 31, 2003
                                SHARES           AMOUNT
SHARES           AMOUNT
- ----------------------------------------------------------------------------------------

CLASS A
Sold                         2,915,233   $   75,259,490      2,110,627   $
42,829,597
Dividends and/or
distributions reinvested        49,931        1,200,855             --
             --
Redeemed                    (1,750,878)     (44,628,637)    (1,805,326)
(36,725,419)

- ------------------------------------------------------------
Net increase                 1,214,286   $   31,831,708        305,301   $
6,104,178

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

- ----------------------------------------------------------------------------------------
CLASS B
Sold                           778,873   $   18,762,947        849,036   $
16,481,174
Dividends and/or
distributions reinvested        17,259          390,238
- --               --
Redeemed                      (725,869)     (17,417,877)      (686,631)
(13,264,571)

- ------------------------------------------------------------
Net increase                    70,263   $    1,735,308        162,405   $
3,216,603

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

- ----------------------------------------------------------------------------------------
CLASS C
Sold                           495,377   $   11,909,650        902,743   $
18,309,043
Dividends and/or
distributions reinvested         8,074          182,716
- --               --
Redeemed                      (498,192)     (11,947,727)      (474,437)
(9,393,307)

- ------------------------------------------------------------
Net increase                     5,259   $      144,639        428,306   $
8,915,736

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

- ----------------------------------------------------------------------------------------
CLASS N
Sold                           208,517   $    5,296,582        176,429   $
3,643,164
Dividends and/or
distributions reinvested         1,999           47,770
- --               --
Redeemed                       (85,885)      (2,176,592)       (61,386)
(1,276,035)

- ------------------------------------------------------------
Net increase                   124,631   $    3,167,760        115,043   $
2,367,129

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


- --------------------------------------------------------------------------------
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, 2004, were
$215,239,234 and $187,788,551, respectively.

- --------------------------------------------------------------------------------
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 January 1, 2004, the
agreement


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

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

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 $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 through 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.

- --------------------------------------------------------------------------------
ADMINISTRATION SERVICES. The Fund pays the Manager a fee of $1,500 per year
for
preparing and filing the Fund's tax returns.

- --------------------------------------------------------------------------------
SUB-ADVISOR FEES. The Manager retains OpCap Advisors (the Sub-Advisor) to
provide the day-to-day portfolio management of the Fund. The Manager pays the
Sub-Advisor a monthly fee based on the fee schedule set forth in the Fund's
prospectus. For the year ended October 31, 2004, the Manager paid $1,154,356
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, 2004, the Fund paid
$788,496 to OFS for services to the Fund.

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

- --------------------------------------------------------------------------------
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
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 those fees to pay
dealers,
brokers, banks and other financial institutions quarterly for providing
personal
services and maintenance of accounts of their customers that hold Class A
shares. Under the Plan, the Fund may also pay an asset-based sales charge to
the
Distributor. The Board of Directors has set the annual asset-based sales
charge
rate at zero. Fees incurred by the Fund under the Plan are detailed in the
Statement of Operations.

- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The
Fund
has adopted Distribution and Service Plans for Class B, Class C and Class N
shares to compensate the Distributor for its services in connection with the
distribution of those shares and servicing accounts. Under the plans, the Fund
pays the Distributor an annual asset-based sales charge of 0.75% per year on
Class B and Class C shares and 0.25% per year on Class N shares. The
Distributor
also receives a service fee of up to 0.25% per year under each plan. If either
the Class B, Class C or Class N plan is terminated by the Fund or by
the shareholders of a class, the Board of Directors and its independent
directors must determine whether the Distributor shall be entitled to payment
from the Fund of all or a portion of the service fee and/or asset-based sales
charge in respect to shares sold prior to the effective date of such
termination. The Distributor's aggregate uncompensated expenses under the plan
at October 31, 2004 for Class B, Class C and Class N shares were $948,764,
$375,150 and $139,319, respectively. Fees incurred by the Fund under the plans
are detailed in the Statement of Operations.

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



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

October 31, 2004         $ 204,395         $ 1,323       $ 101,232        $
9,922        $ 4,636


- --------------------------------------------------------------------------------
PAYMENTS AND WAIVERS OF EXPENSES. Following a review of its use of brokerage
commissions for sales that is permitted under its investment advisory
agreement,
the Fund's Manager terminated that practice in July 2003. Subsequently, the
Manager paid the Fund $179,218, an amount equivalent to certain of such
commissions incurred in prior years.

      OFS has voluntarily agreed to limit transfer and shareholder servicing
agent fees for all classes to 0.35% of average annual net assets per class.
During the year ended October 31, 2004, OFS waived $689, and $34,505 for
Class A
and Class N shares, respectively. This undertaking may be amended or withdrawn
at any time.

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

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

      The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund and the resulting unrealized appreciation or
depreciation are determined using prevailing foreign currency exchange rates.
Unrealized appreciation and depreciation on foreign currency contracts are
reported in the Statement of Assets and Liabilities as a receivable or payable
and in the Statement of Operations with the change in unrealized appreciation
or
depreciation.

      The Fund may realize a gain or loss upon the closing or settlement of
the
foreign transaction. Contracts closed or settled with the same broker are
recorded as net realized


NOTES TO FINANCIAL STATEMENTS  Continued
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. FOREIGN CURRENCY CONTRACTS Continued

gains or losses. Such realized gains and losses are reported with all other
foreign currency gains and losses in the Statement of Operations.

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

- --------------------------------------------------------------------------------
6. SECURITIES LENDING

The Fund lends portfolio securities from time to time in order to earn
additional income. In return, the Fund receives collateral in the form of US
Treasury obligations or cash, against the loaned securities and maintains
collateral in an amount not less than 100% of the market value of the loaned
securities during the period of the loan. The market value of the loaned
securities is determined at the close of business of the funds and any
additional required collateral is delivered to the Fund on the next business
day. If the borrower defaults on its obligation to return the securities
loaned
because of insolvency or other reasons, the Fund could experience delays and
cost in recovering the securities loaned or in gaining access to the
collateral.
Cash collateral is invested in cash equivalents. The Fund retains a portion of
the interest earned from the collateral. The Fund also continues to receive
interest or dividends paid on the securities loaned. As of October 31, 2004,
the
Fund had on loan securities valued at $7,287,700. Cash of $7,540,000 was
received as collateral for the loans, and has been invested in approved
instruments.

- --------------------------------------------------------------------------------
7. LITIGATION

Six complaints have been filed as putative derivative and class actions
against
the Manager, OFS and the Distributor (collectively, "OppenheimerFunds"), as
well
as 51 of the Oppenheimer funds (collectively, the "Funds") including this
Fund,
and nine Directors/ Trustees of certain of the Funds other than this Fund
(collectively, the "Directors/Trustees"). The complaints allege that the
Manager
charged excessive fees for distribution and other costs, improperly used
assets
of the Funds in the form of directed brokerage commissions and 12b-1 fees to
pay
brokers to promote sales of the Funds, and failed to properly disclose the use
of Fund assets to make those payments in violation of the Investment Company
Act
of 1940 and the Investment Advisers Act of 1940. The complaints further allege
that by permitting and/or participating in those actions, the
Directors/Trustees
breached their fiduciary duties to Fund shareholders under the Investment
Company Act of 1940 and at common law. By order dated October 27, 2004, these
six actions, and future related actions, were consolidated by the U.S.
District
Court for the Southern District of New York into a single consolidated
proceeding in contemplation of the filing of a superseding consolidated and
amended complaint.

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

FEDERAL INCOME TAX INFORMATION  Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
In early 2005, if applicable, shareholders of record will receive information
regarding all dividends and distributions paid to them by the Fund during
calendar year 2004. Regulations of the U.S. Treasury Department require the
Fund
to report this information to the Internal Revenue Service.

      Distributions of $0.1703 per share were paid to Class A, Class B, Class
C,
and Class N shareholders, on December 10, 2003, of which $0.0317 was
designated
as a "capital gain distribution" for federal income tax purposes. Whether
received in stock or in cash, the capital gain distribution should be treated
by
shareholders as a gain from the sale of the capital assets held for more than
one year (long-term capital gains).

      Dividends, if any, paid by the Fund during the fiscal year ended October
31, 2004 which are not designated as capital gain distributions should be
multiplied by 28.07% to arrive at the amount eligible for the corporate
dividend
received deduction.

      A portion, if any, of the dividends paid by the Fund during the fiscal
year ended October 31, 2004 which are not designated as capital gain
distributions are eligible for lower individual income tax rates to the extent
that the Fund has received qualified dividend income as stipulated by recent
tax
legislation. $2,986,334 of the Fund's fiscal year taxable income may be
eligible
for the lower individual income tax rates. In early 2005, shareholders of
record
will receive information regarding the percentage of distributions that are
eligible for lower individual income tax rates.

      The foregoing information is presented to assist shareholders in
reporting
distributions received from the Fund to the Internal Revenue Service. Because
of
the complexity of the federal regulations which may affect your individual tax
return and the many variations in state and local tax regulations, we
recommend
that you consult your tax advisor for specific guidance.


PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES; UPDATES TO STATEMENTS OF
INVESTMENTS  Unaudited
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. A description of the Fund's Portfolio Proxy Voting Policies and
Procedures
is available (i) without charge, upon request, by calling the Fund toll-free
at
1.800.525.7048, (ii) on the Fund's website at www.oppenheimerfunds.com, and
(iii) on the SEC's website at www.sec.gov. In addition, the Fund is 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 Fund's Form N-PX
filing is available (i) without charge, upon request, by calling the Fund
toll-free at 1.800.525.7048, and (ii) on the SEC's website at www.sec.gov.

      The Fund files its complete schedule of portfolio holdings with the SEC
for the first quarter and the third quarter of each fiscal year on Form N-Q.
The
Fund's Form N-Q filings are available on the SEC's website at www.sec.gov.
Those
forms may 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 1-800-SEC-0330.

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

                                  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

                                  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
         6) Individual Retirement Accounts ("IRAs"), including traditional
            IRAs, Roth IRAs, SEP-IRAs, SARSEPs or SIMPLE plans

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

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

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

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

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

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

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

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

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

Class A shares issued or purchased in the following transactions are not
subject to sales charges (and no concessions are paid by the Distributor on
such purchases):
|_|   Shares issued in plans of reorganization, such as mergers, asset
         acquisitions and exchange offers, to which the Fund is a party.
|_|   Shares purchased by the reinvestment of dividends or other
         distributions reinvested from the Fund or other Oppenheimer funds
         (other than Oppenheimer Cash Reserves) or unit investment trusts for
         which reinvestment arrangements have been made with the Distributor.
|_|   Shares purchased by the reinvestment of loan repayments by a
         participant in a Retirement Plan for which the Manager or an
         affiliate acts as sponsor.
|_|   Shares purchased in amounts of less than $5.

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

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

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

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

A. Waivers for Redemptions in Certain Cases.

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

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

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


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

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

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

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

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

A. Reductions or Waivers of Class A Sales Charges.

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

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

- --------------------------------------------------------------------------------
                      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. Individuals who
qualify under this arrangement for reduced sales charge rates as members of
Associations also may purchase shares for their individual or custodial
accounts at these reduced sales charge rates, upon request to the Distributor.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

   VII. Sales Charge Waivers on Purchases of Class M Shares of Oppenheimer
                            Convertible Securities Fund
- ------------------------------------------------------------------------------

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

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
      Openheimer Capital LLC
      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 Registered Public Accounting Firm
      KPMG LLP
      707 Seventeenth Street
      Denver, Colorado 80202

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

1234


PX0835.0205