OPPENHEIMER MIDCAP FUND

497 1 sai.htm REVISED SAI OPPENHEIMER MIDCAP FUND

--------------------------------------------------------------------------------------------
Oppenheimer MidCap Fund
--------------------------------------------------------------------------------------------
6801 South Tucson Way, Centennial, Colorado 80112-3924
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. You can obtain the
Prospectus by writing to the Fund's Transfer Agent, OppenheimerFunds Services, at P.O. Box
5270, Denver, Colorado 80217, or by calling the Transfer Agent at the toll-free number
shown above, or by downloading it from the OppenheimerFunds Internet website at
www.oppenheimerfunds.com.

Contents
Page
About the Fund
Additional Information About the Fund's Investment Policies and Risks..
The Fund's Investment Policies.....................................
Other Investment Techniques and Strategies.........................
Investment Restrictions............................................
Disclosure of Portfolio Holdings ..................................
How the Fund is Managed ...............................................
Organization and History...........................................
Board of Trustees and Oversight Committees.........................
Trustees and Officers of the Fund..................................
The Manager........................................................
Brokerage Policies of the Fund.........................................
Distribution and Service Plans.........................................
Performance of the Fund................................................

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

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

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

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

ABOUT THE FUND
--------------------------------------------------------------------------------------------

Additional Information About the Fund's Investment Policies and Risks

The investment objective, the principal investment policies and the main risks of the
Fund are described in the Prospectus. This Statement of Additional Information contains
supplemental information about those policies and risks and the types of securities that
the Fund's investment adviser, OppenheimerFunds, Inc., (the "Manager") can select for the
Fund. Additional information is also provided about the strategies that the Fund may use to
try to achieve its objective.

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

|X| Cyclical Opportunities. The Fund might also seek to take advantage of changes in
the business cycle by investing in companies that are sensitive to those changes if the
Manager believes they have growth potential. For example, when the economy is expanding,
companies in the consumer durables and technology sectors might benefit and offer long-term
growth opportunities. Other cyclical industries include insurance, for example. The fund
focuses on seeking growth over the long term, but could seek to take tactical advantage of
short-term market movements or events affecting particular issuers or industries.

|X| Investments in Equity Securities. The Fund focuses its investments in equity
securities of mid-cap growth companies. Equity securities include common stocks, preferred
stocks, rights and warrants, and securities convertible into common stock. The Fund's
investments will primarily include stocks of companies having a market capitalization
between $2 billion and $11.5 billion, generally measured at the time of the Fund's
investment. However, the Fund is not required to sell securities of an issuer it holds if
the issuer's capitalization exceeds $11.5 billion.

At times, in the Manager's view, the market may favor or disfavor securities of
issuers of a particular capitalization range. Therefore although the Fund normally
invests, as a non-fundamental policy, at least 80% of its net assets (plus borrowings for
investment purposes) of its assets in equity securities of mid-cap issuers, the Fund may
change the proportion of its equity investments in securities of different capitalization
ranges, based upon the Manager's judgment of where the best market opportunities are to
seek the Fund's objective.

Growth companies might be providing new products or services that could enable them
to capture a dominant or important market position. They may have a special area of
expertise or the capability to take advantage of changes in demographic factors in a more
profitable way than larger, more established companies.

Growth companies tend to retain a large part of their earnings for research,
development or investment in capital assets. Therefore, they do not tend to emphasize
paying dividends, and may not pay any dividends for some time. They are selected for the
Fund's portfolio because the Manager believes the price of the stock will increase over the
long term.
Current income is not a criterion used to select portfolio securities. However,
certain debt securities may be selected for the Fund's portfolio for defensive purposes
(including debt securities that the Manager believes may offer some opportunities for
capital appreciation when stocks are disfavored).

In general, securities of mid-cap issuers may be subject to greater price volatility
in general than securities of large-cap companies. Therefore, to the degree that the Fund
has investments in medium capitalization companies at times of market volatility, the
Fund's share price may fluctuate more than funds holding large cap securities.

|_| Over-the-Counter Securities. Mid-cap growth companies may offer greater
opportunities for capital appreciation than securities of large, more established
companies. However, securities of mid-cap companies also involve greater risks than
securities of larger companies. Securities of mid-cap issuers may trade on securities
exchanges or in the over-the-counter market. The over-the-counter markets, both in the
United States and abroad, may have less liquidity than securities exchanges. That lack of
liquidity can affect the price the Fund is able to obtain when it wants to sell a security,
because if there are fewer buyers and less demand for a particular security, the Fund might
not be able to sell it at an acceptable price or might have to reduce the price in order to
dispose of the security.

In the United States, the principal over-the-counter market is the NASDAQ Stock
Market, Inc., which is regulated by the National Association of Securities Dealers, Inc.
It consists of an electronic quotation system for certain securities, and a security must
have at least two market makers to be included in NASDAQ. Other over-the-counter markets
exist in the United States, as well as those abroad, wherever a dealer is willing to make a
market in a particular security.

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

The value of a convertible security is a function of its "investment value" and
its "conversion value." If the investment value exceeds the conversion value, the security
will behave more like a debt security, and the security's price will likely increase when
interest rates fall and decrease when interest rates rise. If the conversion value exceeds
the investment value, the security will behave more like an equity security: 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 convertible securities are a form of debt security, in many cases their
conversion feature (allowing conversion into equity securities) causes them to be regarded
more as "equity equivalents." As a result, the credit rating assigned to the security has
less impact on the Manager's investment decision with respect to convertible securities
than in the case of non-convertible fixed-income securities. To determine whether
convertible securities should be regarded as "equity equivalents," the Manager may examine
the following factors:

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

|_| Preferred Stock. Preferred stock, unlike common stock, has a stated
dividend rate payable from the corporation's earnings. Preferred stock dividends may be
cumulative or non-cumulative. "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 can also have a negative impact on prices when interest rates
decline. Preferred stock generally has a preference over common stock on the distribution
of a corporation's assets in the event of liquidation of the corporation. The rights of
preferred stock on distribution of a corporation's assets in the event of a liquidation are
generally subordinate to the rights associated with a corporation's debt securities.

|_| Credit Risk. Convertible securities are subject to credit risk. Credit risk
relates to the ability of the issuer of a debt to make interest or principal payments on
the security as they become due. If the issuer fails to pay interest, the Fund's income
may be reduced and if the issuer fails to repay principal, the value of that bond and of
the Fund's shares may be reduced. The Manager may rely to some extent on credit ratings by
nationally-recognized ratings agencies in evaluating the credit risk of securities selected
for the Fund's portfolio. It may also use its own research and analysis. Many factors
affect an issuer's ability to make timely payments, and the credit risks of a particular
security may change over time. The Fund may invest in higher-yielding lower-grade debt
securities (that is, securities below investment grade), which have special risks. Those
are securities rated below the four highest rating categories of Standard & Poor's Rating
Service (Standard & Poor's") or Moody's Investors Service, Inc., ("Moody's") or equivalent
ratings of other rating agencies or ratings assigned to a security by the Manager.

|_| Special Risks of Lower-Grade Securities. "Lower-grade" debt securities are
those rated below "investment grade" which means they have a rating lower than "Baa" by
Moody's or lower than "BBB" by Standard & Poor's, or similar ratings by other rating
organizations. If they are unrated, and are determined by the Manager to be of comparable
quality to debt securities rated below investment grade, they are included in limitation on
the percentage of the Fund's assets that can be invested in lower-grade securities.

Among the special credit risks of lower-grade securities is the 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 insolvency. An overall decline in values in the high-yield bond market is
also more likely during a period of general economic downturn. An economic downturn or an
increase in interest rates could severely disrupt the market for high-yield bonds,
adversely affecting the values of outstanding bonds as well as the ability of issuers to
pay interest or repay principal. In the case of foreign high-yield bonds, these risks are
in addition to the special risk of foreign investing discussed in the Prospectus and in
this Statement of Additional Information. 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 and Poor's are
investment-grade and are not regarded as junk bonds, those securities may be subject to
special risks, and have some speculative characteristics.

Interest Rate Risks. In addition to credit risks, convertible debt securities are
subject to changes in value when prevailing interest rates change. When prevailing
interest rates fall, the values of outstanding debt securities generally rise, and the
bonds may sell for more than their face amount. When prevailing interest rates rise, the
values of outstanding debt securities generally decline, and the bonds may sell at a
discount from their face amount. The magnitude of these price changes is generally greater
for bonds with longer maturities. Therefore, when the average maturity of the Fund's debt
securities is longer, its share price may fluctuate more when interest rates change.

Rights and Warrants. The Fund can invest up to 5% of its net assets in warrants or
rights. That 5% limitation does not apply to warrants and rights the Fund has acquired as
part of units of securities or that are attached to other securities that the Fund buys.
Warrants basically are options to purchase equity securities at specific prices valid for a
specific period of time. Their prices do not necessarily move parallel to the prices of
the underlying securities. Rights are similar to warrants, but normally have a short
duration and are distributed directly by the issuer to its shareholders. Rights and
warrants have no voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.

|X| Portfolio Turnover. "Portfolio turnover" describes the rate at which the Fund
traded its portfolio securities during its last fiscal period. For example, if a fund sold
all of its securities during the year, its portfolio turnover rate would have been 100%.
The Fund's portfolio turnover rate will fluctuate from year to year. The Fund may have a
portfolio turnover rate of more than 100% annually.

Increased portfolio turnover creates higher brokerage and transaction costs for the
Fund, which can 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 from time
to time can 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| Foreign Securities. "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 that are traded on foreign securities exchanges or in
foreign over-the-counter markets. The Fund can purchase equity and debt securities (which
may be denominated in U.S. dollars or non-U.S. currencies) issued by foreign corporations,
or that are issued or guaranteed by certain supranational entities (described below), or
foreign governments or their agencies or instrumentalities. These include securities
issued by U.S. corporations denominated in non-U.S. currencies. In normal market
conditions the Fund does not expect to hold significant amounts of foreign debt securities.

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

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

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

o reduction of income by foreign taxes;
o fluctuation in value of foreign investments due to changes in currency rates,
currency devaluation or currency control regulations (for example, currency
blockage);
o transaction charges for currency exchange;
o lack of public information about foreign issuers;
o lack of uniform accounting, auditing and financial reporting standards in foreign
countries comparable to those applicable to domestic issuers;
o less volume on foreign exchanges than on U.S. exchanges;
o greater volatility and less liquidity on foreign markets than in the U.S.;
o less governmental regulation of foreign issuers, stock exchanges and brokers than in
the U.S.;
o greater difficulties in commencing lawsuits;
o higher brokerage commission rates than in the U.S.;
o increased risks of delays in settlement of portfolio transactions or loss of
certificates for portfolio securities;
o 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.
o foreign exchange contracts
o foreign withholding taxes on interest and dividends

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

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

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

Subject to the limits under the Investment Company Act, 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 various countries because some foreign countries limit, or prohibit, all direct
foreign investment in the securities of companies domicile 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."

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.

|X| Investing in Small, Unseasoned Companies. The Fund can invest in securities of
small, unseasoned companies. These are companies that have been in operation for less than
three (3) years, including the operations of any predecessors. Securities of these
companies may be subject to volatility in their prices. They may have a limited trading
market, which may adversely affect the Fund's ability to dispose of them and can reduce the
price the Fund might be able to obtain for them. Other investors that own a security issued
by a small, unseasoned issuer for which there is limited liquidity might trade the security
when the Fund is attempting to dispose of its holdings of that security. In that case the
Fund might receive a lower price for its holdings than might otherwise be obtained. These
are more speculative securities and can increase the Fund's overall portfolio risks.

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

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

The majority of these transactions run from day to day, and delivery pursuant to the
resale typically occurs within one to five days of the purchase. Repurchase agreements
having a maturity beyond seven days are subject to the Fund's limits on holding illiquid
investments. The Fund will not enter into a repurchase agreement that causes more than 15%
of its net assets to be subject to repurchase agreements having a maturity beyond seven (7)
days. There is no limit on the amount of the Fund's net assets that may be subject to
repurchase agreements having maturities of seven days or less.

Repurchase agreements, considered "loans" under the Investment Company Act of 1940
(the "Investment Company Act"), are collateralized by the underlying security. The Fund's
repurchase agreements require that at all times while the repurchase agreement is in
effect, the value of the collateral must equal or exceed the repurchase price to fully
collateralize the repayment obligation. However, if the vendor fails to pay the resale
price on the delivery date, the Fund may incur costs in disposing of the collateral and may
experience losses if there is any delay in its ability to do so. The Manager will monitor
the vendor's creditworthiness to confirm that the vendor is financially sound and will
continuously monitor the collateral's value.

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the
"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.

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

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

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

|X| Loans of Portfolio Securities. To raise cash for liquidity purposes, the Fund
can lend its portfolio securities to brokers, dealers and other types of financial
institutions approved by the Fund's Board of Trustees. These loans are limited to not more
than 25% of the value of the Fund's total assets. The Fund currently does not intend to
engage in loans of securities, but if it does so, such loans will not likely exceed 5% of
the Fund's total assets.

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

When it lends securities, the Fund receives amounts equal to the dividends or
interest on loaned securities. It also receives one or more of (a) negotiated loan fees,
(b) interest on securities used as collateral, and (c) interest on any short-term debt
securities purchased with such loan collateral. Either type of interest may be shared with
the borrower. The Fund may also pay reasonable finder's, custodian and administrative fees
in connection with these loans. The terms of the Fund's loans must meet applicable tests
under the Internal Revenue Code and must permit the Fund to reacquire loaned securities on
five (5) days' notice or in time to vote on any important matter.

|X| Borrowing for Leverage. The Fund has the ability to borrow for leverage up to
10% of the value of its net assets from banks on an unsecured basis to invest the borrowed
funds in portfolio securities. This speculative technique is known as "leverage." The Fund
may borrow only from banks. Currently, under the Investment Company Act, absent exemptive
relief, 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 for leverage. Additionally, the Fund's
net asset value per share might fluctuate more than that of funds that do not borrow.
Currently, the Fund does not contemplate using this technique, but if it does so, it will
not likely do so to a substantial degree.

|X| Derivatives. The Fund can invest in a variety of derivative investments to seek
income for liquidity needs or for hedging purposes. Some derivative investments the Fund
can use are the hedging instruments described below in this Statement of Additional
Information. However, the Fund does not use, and does not currently contemplate using,
derivatives or hedging instruments to a significant degree and is not obligated to use them
in seeking its objective.

Some of the derivative investments the Fund can use include "debt exchangeable for
common stock" of an issuer or "equity-linked debt securities" of an issuer. At maturity,
the debt security is exchanged for common stock of the issuer or it is payable in an amount
based on the price of the issuer's common stock at the time of maturity. Both alternatives
present a risk that the amount payable at maturity will be less than the principal amount
of the debt because the price of the issuer's common stock might not be as high as the
Manager expected.

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

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

|X| Hedging. Although the Fund does not anticipate the extensive use of hedging
instruments, the Fund can use them. It is not required to do so in seeking its objective.
To attempt to protect against declines in the market value of the Fund's portfolio, to
permit the Fund to retain unrealized gains in the value of portfolio securities which have
appreciated, or to facilitate selling securities for investment reasons, the Fund could:

o sell futures contracts,
o buy puts on such futures or on securities, or
o write covered calls on securities or futures. Covered calls can also be used to seek
income, but the Manager does not expect to engage extensively in that practice.

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

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.

Futures. The Fund can buy and sell futures contracts that relate to (1) stock
indices (these are referred to as "stock index futures") (2) an individual stock ("single
stock futures"), (3) foreign currencies (these are referred to as "forward contracts"), 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. In
some cases stock indices may 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 obligation. There
is no delivery of the underlying securities to settle the obligation.

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 future contracts. Commodity
futures may be based upon commodities within five (5) 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 payment is paid or received by the Fund on the purchase or sale of a future. Upon
entering into a futures transaction, the Fund will be required to deposit an initial margin
payment with the futures commission merchant (the "futures broker"). Initial margin
payments will be deposited with the Fund's custodian bank in an account registered in the
futures broker's name. However, the futures broker can gain access to that account only
under specified conditions. As the future is marked to market (that is, its value on the
Fund's books is changed) to reflect changes in its market value, subsequent margin
payments, called variation margin, will be paid to or by the futures broker daily.

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

Put and Call Options. The Fund can buy and sell certain kinds of put options
("puts") and call options ("calls"). The fund can buy and sell exchange-traded and
over-the-counter put and call options, including options on indices, securities,
currencies, commodities and futures.

Writing Covered Call Options. The Fund can write (that is, sell) covered
calls. If the Fund sells a call option, it must be covered. That means the Fund must own
the security subject to the call while the call is outstanding, or, for certain types of
calls, the call may be covered by segregating liquid assets to enable the Fund to satisfy
its obligations if the call is exercised. Not more than 25% of the Fund's total assets may
be subject to calls the Fund writes.

When the Fund writes a call, it receives cash (a premium). In the case of a call on
a security, the Fund agrees to sell the underlying security to a purchaser of a
corresponding call on the same security during the call period at a fixed exercise price
regardless of market price changes during the call period. The call period is usually not
more than nine months. The exercise price may differ from the market price of the
underlying security. The Fund has the risk of loss that the price of the underlying
security may decline during the call period. That risk may be offset to some extent by the
premium the Fund receives. If the value of the investment does not rise above the call
price, it is likely that the call will lapse without being exercised. In that case the
Fund would keep the cash premium and the investment.

When the Fund writes a call on an index, it receives cash (a premium). If the buyer
of the call exercises it, the Fund will pay an amount of cash equal to the difference
between the closing price of the call and the exercise price, multiplied by a specified
multiple that determines the total value of the call for each point of difference. If the
value of the underlying investment does not rise above the call price it is likely that the
call will lapse without being exercised. In that case, the Fund would keep the cash
premium.

The Fund's custodian bank, or a securities depository acting for the custodian bank,
will act as the Fund's escrow agent, through the facilities of the Options Clearing
Corporation ("OCC"), as to the investments on which the Fund has written calls traded on
exchanges or as to other acceptable escrow securities. In that way, no margin will be
required for such transactions. OCC will release the securities on the expiration of the
option or when the Fund enters into a closing transaction.

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

Writing Uncovered Call Options on Futures Contracts. The Fund may also write
calls on a futures contract without owning the futures contract or securities deliverable
under the contract. To do so, at the time the call is written, the Fund must cover the call
by segregating an equivalent dollar amount of liquid assets. The Fund will segregate
additional liquid assets if the value of the segregated assets drops below 100% of the
current value of the future. Because of this segregation requirement, in no circumstances
would the Fund's receipt of an exercise notice as to that future require the Fund to
deliver a futures contract. It would simply put the Fund in a short futures position, which
is permitted by the Fund's hedging policies.

Writing Put Options. The Fund can sell put options. A put option on a
security gives the purchaser the right to sell, and the writer the obligation to buy, the
underlying security at the exercise price during the option period. The Fund will not
write puts if, as a result, more than 50% of the Fund's net assets would have to be
segregated to cover put options.

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

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

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

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

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

The Fund can buy puts whether or not it holds the underlying investment in its
portfolio. When the Fund purchases a put, it pays a premium and, except as to puts on
indices, has the right to sell the underlying investment to a seller of a put on a
corresponding investment during the put period at a fixed exercise price.

Buying a put on 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.

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.

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

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

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

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

A call the Fund writes on a foreign currency is "covered" if the Fund owns the
underlying foreign currency covered by the call or has an absolute and immediate right to
acquire that foreign currency without additional cash consideration (or it can do so for
additional cash consideration from liquid assets identified on the Fund's books upon
conversion or exchange of other foreign currency held in its portfolio.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Fund could also use forward contracts to lock in the U.S. dollar value of
portfolio positions. This is called a "position hedge." When the Fund believes that
foreign currency might suffer a substantial decline against the U.S. dollar, it could enter
into a forward contract to sell an amount of that foreign currency approximating the value
of some or all of the Fund's portfolio securities denominated in that foreign currency.
When the Fund believes that the U.S. dollar might suffer a substantial decline against a
foreign currency, it could enter into a forward contract to buy that foreign currency for a
fixed dollar amount. Alternatively, the Fund could enter into a forward contract to sell a
different foreign currency for a fixed U.S. dollar amount if the Fund believes that the
U.S. dollar value of the foreign currency to be sold pursuant to its forward contract will
fall whenever there is a decline in the U.S. dollar value of the currency in which
portfolio securities of the Fund are denominated. That is referred to as a "cross hedge."

The Fund will cover its short positions in these cases by identifying liquid assets
on its books having a value equal to the aggregate amount of the Fund's commitment under
forward contracts. The Fund will not enter into forward contracts or maintain a net
exposure to such contracts if the consummation of the contracts would obligate the Fund to
deliver an amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets denominated in that currency or another currency that is the
subject of the hedge.

However, to avoid excess transactions and transaction costs, the Fund may maintain a
net exposure to forward contracts in excess of the value of the Fund's portfolio securities
or other assets denominated in foreign currencies if the excess amount is "covered" by
liquid securities denominated in any currency. The cover must be at least equal at all
times to the amount of that excess. As one alternative, the Fund may purchase a call
option permitting the Fund to purchase the amount of foreign currency being hedged by a
forward sale contract at a price no higher than the forward contract price. As another
alternative, the Fund may purchase a put option permitting the Fund to sell the amount of
foreign currency subject to a forward purchase contract at a price as high or higher than
the forward contact price.

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

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

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

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

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

Regulatory Aspects of Hedging Instruments. The Commodities Future 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). The exchanges also impose position limits on futures transactions. An
exchange may order the liquidation of positions found to be in violation of those limits
and may impose certain other sanctions.

Under interpretations of staff members of the Securities and Exchange Commission
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.

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 conditions are
unstable, or the Manager believes it is otherwise appropriate to reduce holdings in stocks,
the Fund can invest in a variety of debt securities for defensive purposes. The Fund can
also purchase these securities for liquidity purposes to meet cash needs due to the
redemption of Fund shares, or to hold while waiting to reinvest cash received from the sale
of other portfolio securities. The Fund can buy:

o high-quality, short-term money market instruments, including those issued by the U.S.
Treasury or other government agencies,
o commercial paper (short-term, unsecured, promissory notes of domestic or foreign
companies),
o short-term debt obligations of corporate issuers,
o certificates of deposit and bankers' acceptances of domestic and foreign banks and
savings and loan associations, 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.

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

|X| What are the Fund's Additional Fundamental Policies? The following investment
restrictions are fundamental policies of the Fund.

o The Fund cannot buy securities issued or guaranteed by any one issuer if more than 5%
of its total assets would be invested in securities of that issuer or if it would
then own more than 10% of that issuer's voting securities. That restriction
applies to 75% of the Fund's total assets. The limit does not apply to securities
issued by the U.S. government or any of its agencies or instrumentalities.
o The Fund cannot invest in physical commodities or physical commodity contracts.
However, the Fund can buy and sell hedging instruments to the extent specified in
its Prospectus and this Statement of Additional Information from time to time.
The Fund can also buy and sell options, futures, securities or other instruments
backed by, or the investment return from which, is linked to changes in the price
of, physical commodities.
o The Fund cannot lend money. However, it can invest in all or a portion of an issue
of bonds, debentures, commercial paper or other similar corporate obligations.
The Fund may also lend its portfolio securities subject to the restrictions stated
in the Prospectus and this Statement of Additional Information and can enter into
repurchase transactions.
o The Fund cannot concentrate investments. That means it cannot invest 25% or more of
its total assets in companies in any one industry.
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 in real estate or in interests in real estate. However, the
Fund can purchase readily-marketable securities of companies holding real estate
or interests in real estate.
o The Fund cannot issue "senior securities." However, that restriction does not
prohibit the Fund from borrowing money subject to the provisions set forth in this
Statement of Additional Information, or from entering into margin, collateral or
escrow arrangements permitted by its other investment policies.

|X| Non-Fundamental Investment Restrictions. The Fund has a number of other
investment restrictions that are not fundamental policies, which means that they can be
changed by vote of a majority of the Fund's Board of Trustees without shareholder approval.

o The Fund cannot invest in companies for the purpose of acquiring control or
management of them.
o The Fund cannot invest in or hold securities of any issuer if officers and Trustees
or directors of the Fund or the Manager individually or 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 purchase securities on margin. However, the Fund can make margin
deposits in connection with any of the hedging instruments permitted by any of its
other investment policies.
o The Fund cannot invest in the securities of other registered investment companies or
registered unit investment trusts in reliance on sub-paragraph (F) or (G) of
section 12(d)(1) of the Investment Company Act.
o The Fund cannot pledge, mortgage or hypothecate any of its assets. However, this
does not prohibit the escrow arrangements contemplated by writing covered call
options or other collateral or margin arrangements in connection with any of the
hedging instruments permitted by any of its other investment policies.
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 illquid
securities). The Fund need not sell securities to meet the percentage limits if the value
of the investment increases in proportion to the size of the Fund.

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

DISCLOSURE OF PORTFOLIO HOLDINGS.

Disclosure of Portfolio Holdings. The Fund has adopted policies and procedures
concerning the dissemination by employees, officers and/or directors of the
Investment 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 of 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. 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 a 15-day lag.

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

How the Fund is Managed

Organization and History. The Fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of beneficial interest. The Fund was
organized as a Massachusetts business trust in June 1997.

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

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

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

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

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

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

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

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

The Board of Trustees has an Audit Committee, a Regulatory & Oversight Committee, A
Governance Committee, and a Proxy committee. The Audit Committee is comprised solely of
Independent Trustees. The members of the Audit Committee are Paul Y. Clinton (Chairman),
Thomas W. Courtney, Robert B. Galli, Lacy B. Herrmann and Brian Wruble. The Audit
Committee held 5 meetings during the Fund's fiscal year ended October 31, 2004. The Audit
Committee provides the Board with recommendations regarding the selection of the Fund's
independent auditor. The Audit Committee also reviews the scope and results of audits and
the audit fees charged, reviews reports from the Fund's independent auditor 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 Trustees 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 Trustees
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.

Trustees and Officers of the Fund. Each of the Trustees is an "Independent Trustee" under
the Investment Company Act. The Fund's Trustees and officers and their positions held with
the Fund and length of service in such position(s) and their principal occupations and
business affiliations during the past five years are listed in the chart below. The
information for the Trustees also includes the dollar range of shares of the Fund as well
as the aggregate dollar range of shares beneficially owned in any of the Oppenheimer funds
overseen by the Trustees. All of the Trustees are also trustees or directors of the
following Oppenheimer funds (referred to as "Board III Funds"):

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

In addition to being a trustee or director of the Board III Funds, Mr. Galli is also
a director or trustee of 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 charge on Class A
shares is waived for that group because of the economies of sales efforts realized by the
Distributor.
Messrs. O'Hare, Murphy, Vottiero, Wixted, Peteresen, Miao,Gillispie, Vandehey, and
Zack and Mses. 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 March 20,
2005, the Trustees and Officers of the Fund, as a group, owned of record or beneficially
less than 1% of each class of shares of the Fund. The foregoing statement does not reflect
ownership of shares 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 Trustee (and their immediate family
members) do not own securities of either the Manager or Distributor of the Board III Funds
or any entity directly or indirectly controlling, controlled by or under common control
with the Manager or Distributor.

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

-------------------------------------------------------------------------------------
Independent Trustees
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Name, Principal Occupation(s) During Past 5 Dollar Aggregate
Dollar
Range Of
Shares
Beneficially
Owned in
Years; Range of Any of the
Position(s) Held Other Trusteeships/Directorships Held by Shares Oppenheimer
with Fund, Trustee; BeneficiallFunds
Length of Service, Number of Portfolios in Fund Complex Owned in Overseen
Age Currently Overseen by Trustee the Fund by Trustee
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
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 Trustees, Fund (private venture capital fund);
Trustee since 1997 President of Investment Counseling
Age: 71 Federated Investors, Inc. (1973-1982);
Trustee of the following open-end
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
Trustee, since Associates (1996-present) (a financial $100,000
1997 Age: 74 and venture capital consulting firm);
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 Over Over
Trustee since 1998 Oppenheimer funds. Oversees 34 portfolios $100,000 $100,000
Age: 71 in the OppenheimerFunds complex.

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

Lacy B. Herrmann, Chairman of the Board of Aquila None $10,001-$50,000
Trustee since 1997 Management Corporation, the sponsoring
Age: 75 organization and parent of the manager,
administrator, adviser and/or
sub-adviser and Chairman or Chairman
Emeritus of the Board of Trustees and
President of 11 funds in the Azuila(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. $1-$10,000 over
Trustee since 2001 since September 1995) (hedge funds in $100,000
Age: 61 distribution since January 1997);
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. O'Hare,
Murphy, Gillespie, Miao and Zack and Ms. Bloomberg, Two World Financial Center, 225 Liberty
Street, 11th Floor, New York, New York 10281-1008, for Messrs. Vandehey, Vottiero, Petersen
and Wixted and Ms. Ives, 6803 S. Tucson Way, Centennial, CO 80112-3924. 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 O'Hare, Vice Vice President of the Manager since September 2003; an
President and officer of 2 portfolios in the OppenheimerFunds complex.
Portfolio Manager Formerly Executive Vice President and Portfolio Manager
since 2003 (June 2000 - August 2003) and Portfolio Manager and Senior
Age: 47 Vice President (August 1997 - June 2000) at Geneva Capital
Management, Ltd. (an investment advisor). Mr. O'Hare holds
a BBA in Finance and Economics from the University of
Wisconsin and is a Chartered Financial Analyst.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
John V. Murphy, Chairman, Chief Executive Officer and director (since June
President since 2001 2001) and President (since September 2000) of the Manager;
Age: 55 President and a director or trustee of other Oppenheimer
funds; President and a director (since July 2001) of
Oppenheimer Acquisition Corp. (the Manager's parent holding
company) and of Oppenheimer Partnership Holdings, Inc. (a
holding company subsidiary of the Manager); a director
(since November 2001) of OppenheimerFunds Distributor, Inc.
(a subsidiary of the Manager); Chairman and a director
(since July 2001) of Shareholder Services, Inc. and of
Shareholder Financial Services, Inc. (transfer agent
subsidiaries of the Manager); President and a director
(since July 2001) of OppenheimerFunds Legacy Program (a
charitable trust program established by the Manager); a
director of the 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. Oversees 62 portfolios as
Trustee/Director and 21 additional portfolios as Officer in
the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Brian W. Wixted, Senior Vice President and Treasurer (since March 1999) of
Treasurer, Principal the Manager; Treasurer of HarbourView Asset Management
Financial and Corporation, Shareholder Financial Services, Inc.,
Accounting Officer Shareholder Services, Inc., Oppenheimer Real Asset
since 1999 Management Corporation, and Oppenheimer Partnership
Age: 45 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 83
portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Philip Vottiero, Vice President/Fund Accounting of the Manager (since March
Assistant Treasurer 2002; formerly Vice President/Corporate Accounting of the
since 2002 Manager (July 1999-March 2002). An officer of 83
Age: 41 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Mark S. Vandehey, Senior Vice President and Chief Compliance Officer (since
Vice President and March 2004) of the Manager; Vice President (since June
Chief Compliance 1983) of OppenheimerFunds Distributor, Inc., Centennial
Officer since 2004 Asset Management Corporation and Shareholder Services, Inc.
Age: 54 Formerly (until February 2004) Vice President and Director
of Internal Audit of the Manager. An officer of 83
portfolios in the Oppenheimer funds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Robert G. Zack, Executive Vice President (since January 2004) and General
Secretary since 2001 Counsel (since February 2002) of the Manager; General
Age: 56 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 83 portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Kathleen T. Ives, Vice President (since June 1998) and Senior Counsel and
Assistant Secretary Assistant Secretary (since October 2003) of the Manager;
since 2001 Vice President (since 1999) and Assistant Secretary (since
Age: 39 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 of the Manager (August 1994-October 2003)
. An officer of 83 portfolios in the OppenheimerFunds
complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Lisa I. Bloomberg, Vice President and Associate Counsel of the Manager since
Assistant Secretary May 2004; formerly First Vice President and Associate
since 2004 General Counsel of UBS Financial Services Inc. (formerly,
Age: 37 PaineWebber Incorporated) (May 1999 - April 2004. An
officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Phillip S. Gillespie, Senior Vice President and Deputy General Counsel of the
Assistant Secretary Manager since September 2004. Formerly Mr. Gillespie held
since 2004 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 74 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
Wayne Miao, Assistant Vice President and Assistant Counsel of the
Assistant Secretary Manager since June 2004. Formerly an Associate with Sidley
since 2004 Austin Brown & Wood LLP (September 1999 - May 2004). An
Age: 32 officer of 83 portfolios in the OppenheimerFunds complex.
-------------------------------------------------------------------------------------

|X| Remuneration of Trustees. The officers of the Fund who are affiliated with the
Manager receive no salary or fee from the Fund. The Trustees 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 ten 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.

---------------------------------------------------------------------------------
Trustee Name and Aggregate Retirement Estimated Total
Annual
Retirement
Benefits Compensation
Paid at From Fund and
Retirement Fund Complex For
Benefits from all Which Individual
Other Fund Compensation Accrued as Board III Serves As
Position(s) (as From Fund Part of Fund Funds Trustee/Director
applicable) 1 Expenses (10 funds)2 * (8)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------

Paul Y. Clinton $7,484 $16,170 $166,389(4)

Audit Committee $76,994

Chairman

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

Thomas W. Courtney
Chairman and Audit
Committee Member $7,694 $14,032 $78,862 $172,071(3)

---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Robert G. Galli
Audit Committee $6,973 $8,119 $80,923(5) $237,312(6)
Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Lacy B. Herrmann

Audit Committee $7,273 $12,488 $74,648 $161,071(7)

Member
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Brian Wruble
Audit Committee $22,238
Member $7,273 $3,964 $111,000
---------------------------------------------------------------------------------
---------------------------------
Management Fees Paid to OppenheimerFunds, Inc.

1. Aggregate Compensation From Fund includes fees and deferred compensation, if any, for a Trustee.
2. Estimated Annual Retirement Benefits to be Paid Upon Retirement is based on a straight life paymen
plan election with the assumption that a Trustee will retire at the age of 75 and is eligible (afte
years of service) to receive retirement plan benefits as described below under "Retirement Plan for
Trustees."
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 trust
of that fund. The Fund's former Sub-Adviser acts as the investment adviser to PIMCO.
4. Includes $50,389 ($26,500 compensation and $23,889 accrued retirement benefits) from PIMCO, with t
respect to Mr. Clinton's service as a trustee of that fund. r 7
5. Includes $43,933 estimated to be paid to Mr. Galli for serving as a trustee or director of 25 othe
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 fun
(at December 31, 2004) that are not Board III Funds. ee
7. Includes $50,071 ($25,750 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 (formerl
OCC Accumulation Trust) in accordance with the instructions for Form N-1A. The Manager does not r
consider PIMCO to be part of the OppenheimerFunds "Fund Complex" as that term may be otherwise
interpreted ds

|X| Retirement Plan for Trustees. The Fund has adopted a retirement plan that provides
payments to retired Trustees. Payments are up to 80% of the average compensation paid during a Trusty
five years of service in which the highest compensation was received. A Trustee must serve as Tru
for any of the Board III Funds listed above for at least 15 years to be eligible for the max
payment. Each Trustee's retirement benefits will depend on the amount of the Trustee's fu
compensation and length of service.

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

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

?Major Shareholders. As of February 2, 2005, the only people who owned of record or were k
by the Fund to own beneficially 5% or more of any class of the Fund's outstanding shares, and ttie
holdings of that class as of that date, were the following: e o
th
MLPF&S for the sole benefit of its customers, Attn.: Fund Admin., 4800 Deer Lake Dr. East Floo th
Jacksonville, FL 32246-6484, which owned 89,905.242 Class N shares, representing 5.55% of the Cla
shares then outstanding;
now
hei
MassMutual Life Insurance Co. Attn.: N225, Separate Investment Acct., 1295 State St., Springfield,
01111-0001, which owned 989,436.549 Class Y shares, representing 56.76% of the Class Y shares
outstanding; r 3
ss
IBT & Co. Cust., OppenheimerFunds Cap Accum., Attn.: MML037, 200 Clarendon Street, 16th Floor, Boston
02116-5021, which owned 225,111.112 Class Y shares, representing 12.91% of the Class Y shares
outstanding; r
Ms
OFI Trust Company TR, OppenheimerFunds, Inc., Deferred Compensation Plan, Attn.: Susan Cisneros, thee
Liberty Street, 11th Floor, New York, NY 10281-1024, which owned 265,060.709 Class Y shares, represen m
15.20% of the Class Y shares then outstanding; e
, M
Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield, MA 01111-0001, which othe
257,647.555 Class Y shares, representing 14.78% of the Class Y shares then outstanding. d
a
22n
tins
The Manager. The Manager is wholly-owned by Oppenheimer Acquisition Corp., a holding company controlle n
by Massachusetts Mutual Life Insurance Company, a global, diversified insurance and financial services
organization. wne
s
|X| Code of Ethics. The Fund, the Manager and the Distributor have a Code of Ethics. It is designed r
detect and prevent improper personal trading by certain employees, including portfolio managers, that e
would compete with or take advantage of the Fund's portfolio transactions. Covered persons include e
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 an n
controls. Compliance with the Code of Ethics is carefully monitored and enforced by the Manager. r
to
The Code of Ethics is an exhibit to the Fund's registration statement filed with the SEC and can
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 Cod N
of Ethics can also be viewed as part of the Fund's registration statement on the SEC's EDGAR database
the SEC's Internet website at www.sec.gov. Copies may be obtained, after paying a duplicating fee, by d
-----------
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. A
ben
|X| Portfolio Proxy Voting. The Fund has adopted Portfolio Proxy Voting Policies and Procedures und
which the Fund votes proxies relating to securities ("portfolio proxies") held by the Fund. The Fund'sde
primary consideration in voting portfolio proxies is the financial interests of the Fund and its at A
shareholders. The Fund has retained an unaffiliated third-party as its agent to vote portfolio proxies n
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 5
assets of a pension plan of a company soliciting the proxy. The Fund's Portfolio Proxy Voting Guideliner g
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 ind
election of directors nominated by management and ratification of auditors, unless circums s
indicate otherwise.
o In general, the Fund opposes anti-takeover proposals and supports elimination of anti-takeover
proposals, absent unusual circumstances. es
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. tan
o The Fund opposes re-pricing of stock options.
o The Fund generally considers executive compensation questions such as stock option plans and bon
plans to be ordinary business activity. The Fund analyzes stock option plans, paying parti
attention to their dilutive effect. While the Fund generally supports management proposals
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
ending 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 us
website at www.sec.gov. cul
-----------
, t
The Investment Advisory Agreement. The Manager provides investment advisory and management
services to the Fund under an investment advisory agreement between the Manager and the Fund. The Mana
selects securities for the Fund's portfolio and handles its day-to-day business. The portfolio manager
the Fund is employed by the Manager and is the person who is principally responsible for the day-to-da
management of the Fund's portfolio. Other members of the Manager's Equity Portfolio Department provide
the portfolio manager with counsel and support in managing the Fund's portfolio.

The agreement requires the Manager, at its expense, to provide the Fund with adequate office spa
facilities and equipment. It also requires the Manager to provide and supervise the activities of all ger
administrative and clerical personnel required to provide effective administration for the Fund. Those of
responsibilities include the compilation and maintenance of records with respect to its operations, thy
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 ce,
advisory agreement lists examples of expenses paid by the Fund. The major categories relate to interes
taxes, brokerage commissions, fees to certain Trustees, legal and audit expenses, custodian and transf ce
agent expenses, share issuance costs, certain printing and registration costs and non-recurring expense
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 ar
allocated to each class of shares based upon the relative proportion of the Fund's net assets represen
by that class. The management fees paid by the Fund to the Manager during its last three fiscal years
were: t,
er
: es,

e ar
Fiscal Year Ended 10/31: tedhe
---------------------------------
----------------------------------------------------------------
2002 $6,671,502
----------------------------------------------------------------
----------------------------------------------------------------
2003 $5,417,106
----------------------------------------------------------------
----------------------------------------------------------------
2004 $6,352,334
----------------------------------------------------------------

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

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

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

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

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

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

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

After careful deliberation, the Board, including the Independent Trustees, concluded
that it was in the best interest of shareholders to continue the investment advisory
agreement for another year. In arriving at a decision, the Board did not single out any one
factor or group of factors as being more important than other factors, but considered all
factors together. The Board judged the terms and conditions of the investment advisory
agreement, including the investment advisory fee, in light of all of the surrounding
circumstances.

Brokerage Policies of the Fund

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

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

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

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

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

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

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

In an option transaction, the Fund ordinarily uses the same broker for the purchase
or sale of the option and any transaction in the securities to which the option relates.
When possible, the Manager tries to combine concurrent orders to purchase or sell the same
security by more than one of the accounts managed by the Manager or its affiliates. The
transactions under those combined orders are averaged as to price and allocated in
accordance with the purchase or sale orders actually placed for each account.

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

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

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

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

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

Fiscal Year Ended Total Brokerage Commissions Paid by the
10/31: Fund1
------------------------------------------------------------------
------------------------------------------------------------------
2002 $1,124,331
------------------------------------------------------------------
------------------------------------------------------------------
2003 $1,629,7682
------------------------------------------------------------------
------------------------------------------------------------------
2004 $1,957,1153
------------------------------------------------------------------
1. Amounts do not include spreads or commissions on principal transactions on a net
trade basis.
2. During the fiscal year ended 10/31/03, the amount of transactions directed to
brokers for research services
was $112,058,996 and the amount of the commissions paid to broker-dealers for
those services was $151,307.
3. During the fiscal year ended 10/31/04, the amount of transactions
directed to brokers for research services was $112,058,996.
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.

-----------------------------------------------------------
Aggregate Class A
Fiscal Front-End Front-End
Year Sales Charges Sales Charges
Ended on Class A Retained by
10/31: Shares Distributor1
-----------------------------------------------------------
-----------------------------------------------------------
2002 $1,724,680 $534,240
-----------------------------------------------------------
-----------------------------------------------------------
2003 $1,153,285 $343,111
-----------------------------------------------------------
-----------------------------------------------------------
2004 $1,439,353 $438,751
-----------------------------------------------------------
1. Includes amounts retained by a broker-dealer that is an affiliate or a parent of the
Distributor.

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

Concessions Concessions Concessions Concessions
on Class A on Class B on Class C on Class N
Fiscal Shares Shares Shares Shares
Year Advanced by Advanced by Advanced by Advanced by
Ended Distributor1 Distributor1 Distributor1 Distributor1
10/31:
----------------------------------------------------------------------
----------------------------------------------------------------------
2002 $141,003 $2,277,844 $265,000 $76,769
----------------------------------------------------------------------
----------------------------------------------------------------------
2003 $110,893 $1,259,674 $178,412 $50,872
----------------------------------------------------------------------
----------------------------------------------------------------------
2004 $98,009 $1,199,893 $208,438 $68,206
----------------------------------------------------------------------
1. The Distributor advances concession payments to dealers for certain sales of Class A
shares and for sales of Class B, and Class C and Class N shares from its own resources
at the time of sale.

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

Fiscal Class A Contingent Class B Contingent Class C Class N
Year Deferred Sales Deferred Sales Contingent Contingent
Ended Charges Charges Deferred Sales Deferred Sales
10/31 Retained by Retained by Charges Charges
Distributor Distributor Retained by Retained by
Distributor Distributor
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
2002 $19,229 $1,380,533 $33,503 $17,023
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
2003 $10,288 $922,794 $17,185 $23,146
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
2004 $15,043 $767,386 $18,618 $12,823
-----------------------------------------------------------------------------------
Distribution and Service Plans. The Fund has adopted a Service Plan for Class A shares and
Distribution and Service Plans for Class B, Class C and Class N shares under Rule 12b-1 of
the Investment Company Act. Under those plans the Fund pays the Distributor for all or a
portion of its costs incurred in connection with the distribution and/or servicing of the
shares of the particular class. Each plan has been approved by a vote of the Board of
Trustees, including a majority of the Independent Trustees1, 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 Trustees and its Independent Trustees
specifically vote annually to approve its continuance. Approval must be by a vote cast in
person at a meeting called for the purpose of voting on continuing the plan. A plan may be
terminated at any time by the vote of a majority of the Independent Trustees or by the vote
of the holders of a "majority" (as defined in the Investment Company Act) of the
outstanding shares of that class.

The Board of Trustees and the Independent Trustees must approve all material
amendments to a plan. An amendment to increase materially the amount of payments to be made
under a plan must be approved by shareholders of the class affected by the amendment.
Because Class B shares of the Fund automatically convert into Class A shares 72 months
after purchase, the Fund must obtain the approval of both Class A and Class B shareholders
for a proposed material amendment to the Class A 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 Trustees at least quarterly for its review.
The reports shall detail the amount of all payments made under a plan and the purpose for
which the payments were made. Those reports are subject to the review and approval of the
Independent Trustees.

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

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

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

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 plan totaled
$1,111,508 of which $38,025 was retained by the Distributor under the arrangement
described above, regarding grandfathered retirement accounts, and included $90,787 paid to
an affiliate of the Distributor's parent company. Any unreimbursed expenses the Distributor
incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent
years. The Distributor may not use payments received under the Class A plan to pay any of
its interest expenses, carrying charges, or other financial costs, or allocation of
overhead.

|X| Class B, Class C and Class N Distribution and Service 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. The Distributor does not receive or retain
the service fee on Class B, Class C or Class N shares in accounts for which it is listed as
the broker-dealer of record.

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 Trustees may allow the Fund
to continue payments of the asset-based sales charge to the Distributor for distributing
shares before the plan was terminated.

--------------------------------------------------------------------------
Distribution Fees Paid to the Distributor in the Fiscal Year Ended
10/31/04
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Total Amount Distributor's Distributor's
Aggregate Unreimbursed
Unreimbursed Expenses as %
Payments Retained by Expenses Under of Net Assets
Under Plan Distributor Plan of Class
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Class B $3,166,513 $2,460,0842 $16,926,277 5.42%
Plan
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Class C $1,052,106 $215,2213 $3,719,875 3.38%
Plan
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Class N $94,715 $63,5194 $376,075 1.67%
Plan
--------------------------------------------------------------------------
1. Includes amounts paid to an affiliate of the Distributor's parent company: $90,787.
2. Includes amounts paid to an affiliate of the Distributor's parent company: $59,416.
3. Includes amounts paid to an affiliate of the Distributor's parent company: $53,740.
4. Includes amounts paid to an affiliate of the Distributor's parent company: $2,760.

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

Performance of the Fund

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

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

Use of standardized performance calculations enables an investor to compare the
Fund's performance to the performance of other funds for the same periods. However, a
number of factors should be considered before using the Fund's performance information as a
basis for comparison with other investments:

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

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

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

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

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

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. There is no sales charge on Class
Y shares. Each is based on the difference in net asset value per share at the beginning and
the end of the period for a hypothetical investment in that class of shares (without
considering front-end or contingent deferred sales charges) and takes into consideration
the reinvestment of dividends and capital gains distributions.

---------------------------------------------------------------------------------
The Fund's Total Returns for the Periods Ended 10/31/04
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class of Cumulative Total Average Annual Total Returns
Returns (10
years or
Shares life-of-class)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
1-Year 5-Year 10-Year
(or life of (or life of
class) 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 41.93% 50.59% 1.47% 7.66% -6.54% -5.43% 5.19% 6.10%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class B2 44.09% 44.09% 1.88% 6.88% -6.52% -6.14% 5.42% 5.42%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class C3 43.08% 43.08% 5.88% 6.88% -6.12% -6.12% 5.32% 5.32%
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class N4 -23.75% -23.75% 6.43% 7.43% -7.13% -7.13% n/a n/a
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Class Y5 55.29% 55.29% 8.08% 8.08% -5.02% -5.02% 6.57% 6.57%
---------------------------------------------------------------------------------
1. Inception of Class A: 12/01/97.
2. Inception of Class B: 12/01/97.
3. Inception of Class C: 12/01/97.
4. Inception of Class N: 03/01/01.
5. Inception of Class Y: 12/01/97.

-----------------------------------------------------------------------------
Average Annual Total Returns for Class A Shares1 (After Sales Charge)
For the Periods Ended 10/31/04
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
1-Year 5-Year 10-Year
(or life of
class)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Taxes on Distributions 1.47% -6.54% 5.19%
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
After Taxes on 0.95% -5.44% 4.50%
Distributions and
Redemption of Fund Shares
-----------------------------------------------------------------------------
1. Inception of Class A shares: 12/1/97.

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 Growth Category.

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

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

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

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

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

ABOUT YOUR ACCOUNT

--------------------------------------------------------------------------------------------
How to Buy Shares
--------------------------------------------------------------------------------------------

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

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

AccountLink. When shares are purchased through AccountLink, each purchase must be at least
$50 and shareholders must invest at least $500 before an Asset Builder Plan (described
---
below) can be established on a new account. Accounts established prior to November 1, 2002
will remain at $25 for additional purchases. Shares will be purchased on the regular
business day the Distributor is instructed to initiate the Automated Clearing House ("ACH")
transfer to buy the shares. Dividends will begin to accrue on shares purchased with the
proceeds of ACH transfers on the business day the Fund receives Federal Funds for the
purchase through the ACH system before the close of The New York Stock Exchange (the
"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 B to this Statement of Additional Information because
the Distributor or dealer or broker incurs little or no selling expenses.

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

Oppenheimer AMT-Free Municipals Oppenheimer Limited Term Municipal Fund
Oppenheimer AMT-Free New York Municipals Oppenheimer Main Street Fund
Oppenheimer Balanced Fund Oppenheimer Main Street Opportunity Fund
Oppenheimer Bond Fund Oppenheimer Main Street Small Cap Fund
Oppenheimer California Municipal Fund Oppenheimer MidCap Fund
Oppenheimer Capital Appreciation Fund Oppenheimer New Jersey Municipal Fund
Oppenheimer Capital Income Fund Oppenheimer Pennsylvania Municipal Fund
Oppenheimer Principal Protected Main
Oppenheimer Champion Income Fund Street Fund
Oppenheimer Principal Protected Main
Oppenheimer Convertible Securities Fund Street Fund II
Oppenheimer Principal Protected Main
Oppenheimer Developing Markets Fund Street Fund III
Oppenheimer Disciplined Allocation Fund Oppenheimer Quest Balanced Fund
Oppenheimer Quest Capital Value Fund,
Oppenheimer Discovery Fund Inc.
Oppenheimer Quest International Value
Oppenheimer 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 Government Trust
Oppenheimer Money Market Fund, Inc. Centennial Money Market Trust
Centennial New York Tax Exempt Trust
Centennial California Tax Exempt Trust Centennial Tax Exempt Trust

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

Letters of Intent. Under a Letter of Intent ("Letter"), 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 18th) 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 18th)
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 Appendix B to
this Statement of Additional Information. Certain special sales charge arrangements
described in Appendix B 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 purchase order of $100,000 or more for Class B shares
or a purchase order of $1 million or more to purchase Class C shares on behalf of a single
investor (not including dealer "street name" or omnibus accounts).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Special Arrangements for Repurchase of Shares from Dealers and Brokers. The Distributor is
the Fund's agent to repurchase its shares from authorized dealers or brokers on behalf of
their customers. Shareholders should contact their broker or dealer to arrange this type of
redemption. The repurchase price per share will be the net asset value next computed after
the Distributor receives an order placed by the dealer or broker. However, if the
Distributor receives a repurchase order from a dealer or broker after the close of the
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 B to this Statement of
Additional Information).
By requesting an Automatic Withdrawal or Exchange Plan, the shareholder agrees to the
terms and conditions that apply to such plans, as stated below. These provisions may be
amended from time to time by the Fund and/or the Distributor. When adopted, any amendments
will automatically apply to existing Plans.

|X| Automatic Exchange Plans. Shareholders can authorize the Transfer Agent to
exchange a pre-determined amount of shares of the Fund for shares (of the same class) of
other Oppenheimer funds automatically on a monthly, quarterly, semi-annual or annual basis
under an Automatic Exchange Plan. The minimum amount that may be exchanged to each other
fund account is $50. Instructions should be provided on the OppenheimerFunds Application or
signature-guaranteed instructions. Exchanges made under these plans are subject to the
restrictions that apply to exchanges as set forth in "How to Exchange Shares" in the
Prospectus and below in this Statement of Additional Information.

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 Money Market Trust
Centennial Government Trust Centennial New York Tax Exempt
Trust
Centennial Money Market Trust Centennial Tax Exempt Trust

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

The following funds do not offer Class Y shares:
Limited Term New York Municipal Fund Oppenheimer 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 With respect to Class B shares (other than funds listed in the next bulleted item
listed immediately below), the Class B contingent deferred sales charge is imposed on Class
B shares acquired by exchange if they are redeemed within six years of the initial purchase
of the exchanged Class B shares.

o With respect to Class B shares of Limited-Term Government Fund, Limited Term
Municipal Fund, Limited Term New York Municipal Fund,Oppenheimer Senior Floating Rate Fund,
and Cash Reserves that were initially purchased as shares of Oppenheimer Capital
Preservation Fund, the Class B contingent deferred sales charge is imposed on Class B
shares acquired by exchange if they are redeemed within 5 years of the initial purchase of
the exchanged Class B shares.

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

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

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

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

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

|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.

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

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

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

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

Dividends, Capital Gains and Taxes

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

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

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

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

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

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

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

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

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

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

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.

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

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

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

Ordinary income dividends that are paid by the Fund (and are deemed not "effectively
connected income") to foreign persons will be subject to a U.S. tax withheld by the Fund at
a rate of 30%, provided the Fund obtains a properly completed and signed Certificate of
Foreign Status. The tax rate may be reduced if the foreign person's country of residence
has a tax treaty with the U.S. allowing for a reduced tax rate on ordinary income dividends
paid by the Fund. 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 serves as the Independent
Registered Public Accounting Firm for the Fund. KPMG LLP audits the Fund's financial
statements and performs other related audit services. KPMG LLP also acts as the independent
registered public accounting firm the Manager and for certain other funds advised by the
Manager and its affiliates. Audit and non-audit services provided by KPMG LLP to the Fund
must be pre-approved by the Audit Committee.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- THE BOARD OF TRUSTEES AND SHAREHOLDERS OF OPPENHEIMER MIDCAP FUND:

We have audited the accompanying statement of assets and liabilities of Oppenheimer MidCap Fund, 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 Funds 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 MidCap Fund 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 19 | OPPENHEIMER MIDCAP FUND STATEMENT OF INVESTMENTS October 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- COMMON STOCKS--98.0% -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY--23.4% -------------------------------------------------------------------------------- AUTO COMPONENTS--1.5% Gentex Corp. 433,700 $14,316,437 -------------------------------------------------------------------------------- AUTOMOBILES--1.5% Harley-Davidson, Inc. 258,200 14,864,574 -------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE--4.7% P.F. Chang's China Bistro, Inc. 1 243,000 12,354,120 -------------------------------------------------------------------------------- Ruby Tuesday, Inc. 510,900 12,619,230 -------------------------------------------------------------------------------- Starbucks Corp. 1 392,714 20,766,716 ----------- 45,740,066 -------------------------------------------------------------------------------- HOUSEHOLD DURABLES--0.9% Harman International Industries, Inc. 68,700 8,256,366 -------------------------------------------------------------------------------- LEISURE EQUIPMENT & PRODUCTS--2.1% Brunswick Corp. 433,900 20,358,588 -------------------------------------------------------------------------------- MEDIA--1.7% Getty Images, Inc. 1 287,300 16,988,049 -------------------------------------------------------------------------------- SPECIALTY RETAIL--8.6% Bed Bath & Beyond, Inc. 1 424,600 17,319,434 -------------------------------------------------------------------------------- Chico's FAS, Inc. 1 387,600 15,515,628 -------------------------------------------------------------------------------- O'Reilly Automotive, Inc. 1 499,300 21,499,858 -------------------------------------------------------------------------------- PetsMart, Inc. 620,100 19,830,798 -------------------------------------------------------------------------------- Urban Outfitters, Inc. 1 237,100 9,721,100 ----------- 83,886,818 -------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS--2.4% Coach, Inc. 1 494,183 23,043,753 -------------------------------------------------------------------------------- CONSUMER STAPLES--2.3% -------------------------------------------------------------------------------- FOOD & STAPLES RETAILING--2.3% Whole Foods Market, Inc. 268,800 21,888,384 -------------------------------------------------------------------------------- ENERGY--6.3% -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES--3.4% BJ Services Co. 285,200 14,545,200 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES Continued Smith International, Inc. 1 314,800 $18,283,584 ----------- 32,828,784 -------------------------------------------------------------------------------- OIL & GAS--2.9% Apache Corp. 361,800 18,343,260 -------------------------------------------------------------------------------- XTO Energy, Inc. 297,300 9,923,874 ----------- 28,267,134 -------------------------------------------------------------------------------- FINANCIALS--10.6% -------------------------------------------------------------------------------- COMMERCIAL BANKS--2.2% Commerce Bancorp, Inc. 363,900 21,557,436 -------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES--5.4% Chicago Mercantile Exchange (The) 84,400 14,831,612 -------------------------------------------------------------------------------- Investors Financial Services Corp. 422,400 16,258,176 -------------------------------------------------------------------------------- Legg Mason, Inc. 342,900 21,846,159 ----------- 52,935,947 -------------------------------------------------------------------------------- INSURANCE--3.0% AMBAC Financial Group, Inc. 270,500 21,115,230 -------------------------------------------------------------------------------- Brown & Brown, Inc. 184,500 7,704,720 ----------- 28,819,950 -------------------------------------------------------------------------------- HEALTH CARE--18.7% -------------------------------------------------------------------------------- BIOTECHNOLOGY--4.1% Celgene Corp. 1 243,200 7,203,584 -------------------------------------------------------------------------------- Gen-Probe, Inc. 1 208,600 7,309,344 -------------------------------------------------------------------------------- Gilead Sciences, Inc. 1 728,000 25,210,640 ----------- 39,723,568 -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES--7.4% Bard (C.R.), Inc. 265,100 15,057,680 -------------------------------------------------------------------------------- Cooper Cos., Inc. (The) 173,500 12,205,725 -------------------------------------------------------------------------------- Idexx Laboratories, Inc. 1 99,200 4,944,128 20 | OPPENHEIMER MIDCAP FUND VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES Continued Stryker Corp. 181,900 $ 7,838,071 -------------------------------------------------------------------------------- Thermo Electron Corp. 1 530,700 15,390,300 -------------------------------------------------------------------------------- Varian Medical Systems, Inc. 1 424,252 17,033,718 ----------- 72,469,622 -------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES--7.2% Coventry Health Care, Inc. 1 381,250 15,593,125 -------------------------------------------------------------------------------- Health Management Associates, Inc., Cl. A 1,036,000 21,403,760 -------------------------------------------------------------------------------- Lincare Holdings, Inc. 1 290,500 10,678,780 -------------------------------------------------------------------------------- Patterson Cos., Inc. 1 593,200 22,245,000 ----------- 69,920,665 -------------------------------------------------------------------------------- INDUSTRIALS--14.3% -------------------------------------------------------------------------------- AEROSPACE & DEFENSE--2.2% L-3 Communications Holdings, Inc. 180,600 11,906,958 -------------------------------------------------------------------------------- Rockwell Collins, Inc. 262,700 9,317,969 ----------- 21,224,927 -------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS--2.8% Expeditors International of Washington, Inc. 472,000 26,951,200 -------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES--3.8% Apollo Group, Inc., Cl. A 1 889 58,674 -------------------------------------------------------------------------------- Corporate Executive Board Co. 313,200 19,935,180 -------------------------------------------------------------------------------- Stericycle, Inc. 1 383,900 17,402,187 ----------- 37,396,041 -------------------------------------------------------------------------------- MACHINERY--1.5% Donaldson Co., Inc. 479,700 14,247,090 -------------------------------------------------------------------------------- ROAD & RAIL--1.8% C.H. Robinson Worldwide, Inc. 323,600 17,454,984 VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- TRADING COMPANIES & DISTRIBUTORS--2.2% Fastenal Co. 397,300 $21,942,879 -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY--22.4% -------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT--1.6% Comverse Technology, Inc. 1 741,900 15,312,816 -------------------------------------------------------------------------------- ITF Optical Technologies, Inc. 1,2 384,000 265,805 ----------- 15,578,621 -------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT & INSTRUMENTS--2.0% CDW Corp. 322,700 20,017,081 -------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES--1.3% VeriSign, Inc. 1 468,100 12,559,123 -------------------------------------------------------------------------------- IT SERVICES--5.4% Affiliated Computer Services, Inc., Cl. A 1 404,400 22,060,020 -------------------------------------------------------------------------------- Alliance Data Systems Corp. 1 281,700 11,910,276 -------------------------------------------------------------------------------- Fiserv, Inc. 1 520,400 18,495,016 ----------- 52,465,312 -------------------------------------------------------------------------------- OFFICE ELECTRONICS--1.8% Zebra Technologies Corp., Cl. A 1 323,750 17,155,513 -------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--1.8% Linear Technology Corp. 453,900 17,193,732 -------------------------------------------------------------------------------- SOFTWARE--8.5% Adobe Systems, Inc. 500,600 28,048,618 -------------------------------------------------------------------------------- Amdocs Ltd. 1 593,700 14,931,555 -------------------------------------------------------------------------------- Electronic Arts, Inc. 1 299,400 13,449,048 -------------------------------------------------------------------------------- Intuit, Inc. 1 106,800 4,844,448 -------------------------------------------------------------------------------- Symantec Corp. 1 386,200 21,990,228 ----------- 83,263,897 ----------- Total Common Stocks (Cost $791,157,725) 953,316,541 21 | OPPENHEIMER MIDCAP FUND STATEMENT OF INVESTMENTS Continued -------------------------------------------------------------------------------- VALUE SHARES SEE NOTE 1 -------------------------------------------------------------------------------- PREFERRED STOCKS--0.0% -------------------------------------------------------------------------------- Axsun Technologies, Inc., Cv., Series C 1,2,3 771,208 $ 252,802 -------------------------------------------------------------------------------- Centerpoint Broadband Technologies, Inc., Cv., Series D 1,2 556,586 -- ----------- Total Preferred Stocks (Cost $14,999,994) 252,802 PRINCIPAL VALUE AMOUNT SEE NOTE 1 -------------------------------------------------------------------------------- JOINT REPURCHASE AGREEMENTS--1.8% --------------------------------------------------------------------------------

Undivided interest of 2.89% in joint repurchase agreement (Principal Amount/ Value $595,058,000, with a maturity value of $595,147,755) with UBS Warburg LLC, 1.81%, dated 10/29/04, to be repurchased at $17,215,596 on 11/1/04, collateralized by Federal National Mortgage Assn., 5.50%, 1/1/34--4/1/34, with a value of $607,720,116 (Cost $17,213,000) $ 17,213,000 $ 17,213,000

-------------------------------------------------------------------------------- TOTAL INVESTMENTS, AT VALUE (COST $823,370,719) 99.8% 970,782,343 -------------------------------------------------------------------------------- OTHER ASSETS NET OF LIABILITIES 0.2 2,116,180 ------------------------------ NET ASSETS 100.0% $972,898,523 ============================== FOOTNOTES TO STATEMENT OF INVESTMENTS 1. Non-income producing security. 2. Illiquid or restricted security. See Note 5 of Notes to Financial Statements. 3. Affiliated company. Represents ownership of at least 5% of the voting securities of the issuer, and is or was an affiliate, as defined in the Investment Company Act of 1940, at or during the period ended October 31, 2004. The aggregate fair value of securities of affiliated companies held by the Fund as of October 31, 2004 amounts to $252,802. Transactions during the period in which the issuer was an affiliate are as follows:


                           SHARES                                 SHARES
                         OCT. 31,       GROSS        GROSS      OCT. 31,     UNREALIZED      REALIZED    DIVIDEND
                             2003   ADDITIONS   REDUCTIONS          2004   DEPRECIATION          GAIN      INCOME
-----------------------------------------------------------------------------------------------------------------

PREFERRED STOCKS
Axsun Technologies,
Inc., Cv., Series C       771,208          --           --       771,208     $8,747,195    $       --         $--
fusionOne, Inc.,
8% Non-Cum
Cv., Series D           1,675,894          --    1,675,894            --             --     8,736,100          --
ITF Optical
Technologies,
Inc., Cv., Series A       200,000     184,000*     384,000            --             --            --          --
                                                                             ------------------------------------
                                                                             $8,747,195    $8,736,100         $--
                                                                             ====================================

*Issued as the result of a stock split.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 22 | OPPENHEIMER MIDCAP FUND STATEMENT OF ASSETS AND LIABILITIES October 31, 2004 --------------------------------------------------------------------------------


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

Investments, at value--see accompanying statement of investments:
Unaffiliated companies (cost $814,370,722)                          $   970,529,541
Affiliated companies (cost $8,999,997)                                      252,802
                                                                    ----------------
                                                                        970,782,343
------------------------------------------------------------------------------------
Cash                                                                        717,908
------------------------------------------------------------------------------------
Receivables and other assets:
Investments sold                                                          2,994,769
Shares of beneficial interest sold                                          911,061
Interest and dividends                                                      126,232
Other                                                                         8,312
                                                                    ----------------
Total assets                                                            975,540,625

------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------
Payables and other liabilities:
Shares of beneficial interest redeemed                                    1,797,157
Transfer and shareholder servicing agent fees                               242,376
Shareholder communications                                                  205,253
Distribution and service plan fees                                          194,819
Trustees' compensation                                                      167,850
Other                                                                        34,647
                                                                    ----------------
Total liabilities                                                         2,642,102

------------------------------------------------------------------------------------
NET ASSETS                                                          $   972,898,523
                                                                    ================

------------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS
------------------------------------------------------------------------------------
Paid-in capital                                                     $ 1,951,582,203
------------------------------------------------------------------------------------
Accumulated net investment loss                                            (165,364)
------------------------------------------------------------------------------------
Accumulated net realized loss on investments                         (1,125,929,940)
------------------------------------------------------------------------------------
Net unrealized appreciation on investments                              147,411,624
                                                                    ----------------
NET ASSETS                                                          $   972,898,523
                                                                    ================

23 | OPPENHEIMER MIDCAP FUND STATEMENT OF ASSETS AND LIABILITIES Continued --------------------------------------------------------------------------------


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

Class A Shares:
Net asset value and redemption price per share (based on net assets
of $504,291,744 and 33,529,515 shares of beneficial interest outstanding)                  $15.04
Maximum offering price per share (net asset value plus sales charge of 5.75%
of offering price)                                                                         $15.96
--------------------------------------------------------------------------------------------------
Class B Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $312,315,072 and 21,853,772 shares of beneficial interest outstanding)                  $14.29
--------------------------------------------------------------------------------------------------
Class C Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $110,018,329 and 7,700,461 shares of beneficial interest outstanding)                   $14.29
--------------------------------------------------------------------------------------------------
Class N Shares:
Net asset value, redemption price (excludes applicable contingent
deferred sales charge) and offering price per share (based on net assets
of $22,487,917 and 1,509,089 shares of beneficial interest outstanding)                    $14.90
--------------------------------------------------------------------------------------------------
Class Y Shares:
Net asset value, redemption price and offering price per share (based
on net assets of $23,785,461 and 1,533,205 shares of beneficial interest outstanding)      $15.51

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 24 | OPPENHEIMER MIDCAP FUND STATEMENT OF OPERATIONS For the Year Ended October 31, 2004 -------------------------------------------------------------------------------- ---------------------------------------------------------------------- INVESTMENT INCOME ---------------------------------------------------------------------- Dividends (net of foreign withholding taxes of $7,200) $ 2,456,436 ---------------------------------------------------------------------- Interest 149,776 ------------- Total investment income 2,606,212 ---------------------------------------------------------------------- EXPENSES ---------------------------------------------------------------------- Management fees 6,352,334 ----------------------------------------------------------------------

Distribution and service plan fees:

Class A 1,111,508 Class B 3,166,513 Class C 1,052,106 Class N 94,715 ----------------------------------------------------------------------

Transfer and shareholder servicing agent fees:

Class A 2,025,128 Class B 1,704,643 Class C 546,056 Class N 110,995 Class Y 56,539 ---------------------------------------------------------------------- Shareholder communications: Class A 106,621 Class B 161,154 Class C 33,303 Class N 305 ---------------------------------------------------------------------- Trustees' compensation 54,773 ---------------------------------------------------------------------- Custodian fees and expenses 11,839 ---------------------------------------------------------------------- Other 115,006 ------------- Total expenses 16,703,538 Less reduction to custodian expenses (1,380) Less payments and waivers of expenses (1,207,102) ------------- Net expenses 15,495,056 ---------------------------------------------------------------------- NET INVESTMENT LOSS (12,888,844) ---------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ---------------------------------------------------------------------- Net realized gain on: Investments: Unaffiliated companies 84,566,296 Affiliated companies 8,736,100 Net increase from payment by affiliate 36,160 ------------- Net realized gain 93,338,556 ---------------------------------------------------------------------- Net change in unrealized appreciation on investments (17,276,110) ---------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 63,173,602 ============= SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 25 | OPPENHEIMER MIDCAP FUND STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------


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

OPERATIONS
--------------------------------------------------------------------------------------
Net investment loss                                    $ (12,888,844)   $ (10,614,521)
--------------------------------------------------------------------------------------
Net realized gain (loss)                                  93,338,556      (67,296,474)
--------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)     (17,276,110)     233,645,940
                                                       -------------------------------
Net increase in net assets resulting from operations      63,173,602      155,734,945

--------------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS
--------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
beneficial interest transactions:
Class A                                                   41,101,126        2,926,569
Class B                                                  (36,309,315)     (20,575,816)
Class C                                                     (222,383)       2,421,302
Class N                                                    4,493,365        5,137,432
Class Y                                                    5,221,032        6,801,730

--------------------------------------------------------------------------------------
NET ASSETS
--------------------------------------------------------------------------------------
Total increase                                            77,457,427      152,446,162
--------------------------------------------------------------------------------------
Beginning of period                                      895,441,096      742,994,934
                                                       -------------------------------
End of period (including accumulated net investment
loss of $165,364 and $146,500, respectively)           $ 972,898,523    $ 895,441,096
                                                       ===============================

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 26 | OPPENHEIMER MIDCAP FUND FINANCIAL HIGHLIGHTS --------------------------------------------------------------------------------


CLASS A    YEAR ENDED OCTOBER 31,               2004         2003         2002         2001           2000
------------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period        $  13.97     $  11.43     $  14.42     $  30.41     $    19.88
------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment income (loss)                    (.17)        (.12)        (.13)        (.02)           .04
Net realized and unrealized gain (loss)         1.24         2.66        (2.86)      (15.97)         10.49
                                            ----------------------------------------------------------------
Total from investment operations                1.07         2.54        (2.99)      (15.99)         10.53
------------------------------------------------------------------------------------------------------------
Net asset value, end of period              $  15.04     $  13.97     $  11.43     $  14.42     $    30.41
                                            ================================================================

------------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1              7.66%       22.22%      (20.74)%     (52.58)%        52.97%
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)    $504,292     $430,514     $351,983     $532,338     $1,055,967
------------------------------------------------------------------------------------------------------------
Average net assets (in thousands)           $457,926     $366,050     $460,797     $718,814     $  728,168
------------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)                   (1.05)%      (1.01)%      (1.06)%      (0.09)%         0.28%
Total expenses                                  1.42%        1.61%        1.68%        1.33%          1.16%
Expenses after payments and waivers
and reduction to custodian expenses             1.33%        1.32%        1.47%        1.32%           N/A 3
------------------------------------------------------------------------------------------------------------
Portfolio turnover rate                          114%          76%          51%          84%            23%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 27 | OPPENHEIMER MIDCAP FUND FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------


CLASS B     YEAR ENDED OCTOBER 31,              2004         2003         2002         2001         2000
-----------------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------
Net asset value, beginning of period        $  13.37     $  11.02     $  14.02     $  29.79     $  19.62
-----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                             (.30)        (.23)        (.30)        (.15)        (.07)
Net realized and unrealized gain (loss)         1.22         2.58        (2.70)      (15.62)       10.24
                                            ---------------------------------------------------------------
Total from investment operations                 .92         2.35        (3.00)      (15.77)       10.17
-----------------------------------------------------------------------------------------------------------
Net asset value, end of period              $  14.29     $  13.37     $  11.02     $  14.02     $  29.79
                                            ===============================================================

-----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1              6.88%       21.33%      (21.40)%     (52.94)%      51.83%
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)    $312,315     $327,880     $291,397     $438,962     $874,830
-----------------------------------------------------------------------------------------------------------
Average net assets (in thousands)           $316,748     $291,209     $385,917     $592,096     $594,390
-----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss                            (1.83)%      (1.75)%      (1.85)%      (0.84)%      (0.48)%
Total expenses                                  2.30%        2.51%        2.48%        2.08%        1.91%
Expenses after payments and waivers
and reduction to custodian expenses             2.12%        2.06%        2.27%        2.07%          N/A 3
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate                          114%          76%          51%          84%          23%


CLASS C     YEAR ENDED OCTOBER 31,              2004         2003         2002         2001         2000
-----------------------------------------------------------------------------------------------------------
PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------------------------

Net asset value, beginning of period        $  13.37     $  11.02     $  14.02     $  29.78     $  19.60
-----------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                             (.25)        (.20)        (.30)        (.15)        (.07)
Net realized and unrealized gain (loss)         1.17         2.55        (2.70)      (15.61)       10.25
                                            ---------------------------------------------------------------
Total from investment operations                 .92         2.35        (3.00)      (15.76)       10.18
-----------------------------------------------------------------------------------------------------------
Net asset value, end of period              $  14.29     $  13.37     $  11.02     $  14.02     $  29.78
                                            ================================================================

-----------------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1              6.88%       21.33%      (21.40)%     (52.92)%      51.94%
-----------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)    $110,018     $103,271     $ 83,351     $128,230     $247,566
-----------------------------------------------------------------------------------------------------------
Average net assets (in thousands)           $105,285     $ 87,528     $112,436     $170,129     $161,221
-----------------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment loss                            (1.81)%      (1.77)%      (1.84)%      (0.85)%      (0.48)%
Total expenses                                  2.26%        2.49%        2.47%        2.08%        1.91%
Expenses after payments and waivers
and reduction to custodian expenses             2.10%        2.08%        2.26%        2.07%         N/A 3
-----------------------------------------------------------------------------------------------------------
Portfolio turnover rate                          114%          76%          51%          84%          23%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 29 | OPPENHEIMER MIDCAP FUND FINANCIAL HIGHLIGHTS Continued --------------------------------------------------------------------------------


CLASS N    YEAR ENDED OCTOBER 31,              2004        2003        2002      2001 1
-----------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
-----------------------------------------------------------------------------------------
Net asset value, beginning of period        $ 13.87     $ 11.38     $ 14.40     $ 19.54
-----------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                            (.18)       (.17)       (.14)       (.05)
Net realized and unrealized gain (loss)        1.21        2.66       (2.88)      (5.09)
                                            ---------------------------------------------
Total from investment operations               1.03        2.49       (3.02)      (5.14)
-----------------------------------------------------------------------------------------
Net asset value, end of period              $ 14.90     $ 13.87     $ 11.38     $ 14.40
                                            =============================================

-----------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 2             7.43%      21.88%     (20.97)%    (26.31)%
-----------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------
Net assets, end of period (in thousands)    $22,488     $16,606     $ 8,846     $ 2,268
-----------------------------------------------------------------------------------------
Average net assets (in thousands)           $18,969     $11,846     $ 6,576     $ 1,250
-----------------------------------------------------------------------------------------
Ratios to average net assets: 3
Net investment loss                           (1.28)%     (1.34)%     (1.28)%     (0.94)%
Total expenses                                 1.80%       1.86%       1.87%       1.73%
Expenses after payments and waivers
and reduction to custodian expenses            1.57%       1.64%       1.66%       1.72%
-----------------------------------------------------------------------------------------
Portfolio turnover rate                         114%         76%         51%         84%

1. For the period from March 1, 2001 (inception of offering) to October 31, 2001. 2. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 3. Annualized for periods of less than one full year. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 30 | OPPENHEIMER MIDCAP FUND


CLASS Y    YEAR ENDED OCTOBER 31,              2004        2003          2002        2001     2000
----------------------------------------------------------------------------------------------------

PER SHARE OPERATING DATA
----------------------------------------------------------------------------------------------------
Net asset value, beginning of period        $ 14.35     $ 11.71       $ 14.69     $ 30.86   $20.07
----------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss                            (.13)       (.19)         (.08)       (.08)    (.02)
Net realized and unrealized gain (loss)        1.29        2.83         (2.90)     (16.09)    10.81
                                            --------------------------------------------------------
Total from investment operations               1.16        2.64         (2.98)     (16.17)    10.79
----------------------------------------------------------------------------------------------------
Net asset value, end of period              $ 15.51     $ 14.35       $ 11.71     $ 14.69    $30.86
                                            =========================================================

----------------------------------------------------------------------------------------------------
TOTAL RETURN, AT NET ASSET VALUE 1             8.08%      22.55%       (20.29)%    (52.40)%   53.76%
----------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
----------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands)    $23,785     $17,171       $ 7,419     $ 4,759    $  115
----------------------------------------------------------------------------------------------------
Average net assets (in thousands)           $19,540     $11,928       $ 6,449     $ 2,720    $   33
----------------------------------------------------------------------------------------------------
Ratios to average net assets: 2
Net investment income (loss)                  (0.69)%     (0.80)%       (0.39)%     (0.12)%   0.60%
Total expenses                                 0.98%       1.11%         0.83%       1.07%    0.74%
Expenses after payments and waivers
and reduction to custodian expenses             N/A 3       N/A 3,4       N/A 3      1.02%     N/A 3
----------------------------------------------------------------------------------------------------
Portfolio turnover rate                         114%         76%           51%         84%      23%

1. Assumes an investment on the business day before the first day of the fiscal period, with all dividends and distributions reinvested in additional shares on the reinvestment date, and redemption at the net asset value calculated on the last business day of the fiscal period. Sales charges are not reflected in the total returns. Total returns are not annualized for periods of less than one full year. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 2. Annualized for periods of less than one full year. 3. Reduction to custodian expenses less than 0.01%. 4. Voluntary waiver of transfer agent fees less than 0.01%. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 31 | OPPENHEIMER MIDCAP FUND NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES

Oppenheimer MidCap Fund (the Fund) is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Funds investment objective is to seek capital appreciation. The Funds investment advisor is OppenheimerFunds, Inc. (the Manager).

        The Fund offers Class A, Class B, Class C, Class N and Class Y shares. Class A shares are sold at their offering price, which is normally net asset value plus a front-end sales charge. Class B, Class C and Class N shares are sold without a front-end sales charge but may be subject to a contingent deferred sales charge (CDSC). Class N shares are sold only through retirement plans. Retirement plans that offer Class N shares may impose charges on those accounts. Class Y shares are sold to certain institutional investors without either a front-end sales charge or a CDSC, however, the institutional investor may impose charges on accounts. All classes of shares have identical rights and voting privileges with respect to the Fund in general and exclusive voting rights on matters that affect that class alone. Earnings, net assets and net asset value per share may differ due to each class having its own expenses, such as transfer and shareholder servicing agent fees and shareholder communications, directly attributable to that class. Class A, B, C and N have separate distribution and/or service plans. No such plan has been adopted for Class Y shares. Class B shares will automatically convert to Class A shares six years after the date of purchase.

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

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

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

32 | OPPENHEIMER MIDCAP FUND

maturities of sixty days or less are valued at amortized cost (which approximates market value).

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

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

        Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds 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 Funds Statement of Operations.

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

JOINT REPURCHASE AGREEMENTS. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other affiliated funds advised by the Manager, may transfer uninvested cash balances into joint trading accounts on a daily basis. These balances are invested in one or more repurchase agreements. Securities pledged as collateral for repurchase agreements are held by a custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. In the event of default by the other party to the agreement, retention of the collateral may be subject to legal proceedings.

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

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

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

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

33 | OPPENHEIMER MIDCAP FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued

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 OTHER INVESTMENTS NET INVESTMENT LONG-TERM ACCUMULATED LOSS FOR FEDERAL INCOME INCOME GAIN CARRYFORWARD 1,2,3 TAX PURPOSES ------------------------------------------------------------------------- $-- $-- $1,125,748,750 $146,969,773 1. As of October 31, 2004, the Fund had $1,125,748,750 of net capital loss carryforwards available to offset future realized capital gains, if any, and thereby reduce future taxable gain distributions. As of October 31, 2004, details of the capital loss carryforwards were as follows: EXPIRING

2008 $ 54,968,709 2009 765,251,646 4 2010 237,892,098 2011 67,636,297

Total $ 1,125,748,750 =============== 2. During the fiscal year ended October 31, 2004, the Fund utilized $93,361,075 of capital loss carryforward to offset capital gains realized in that fiscal year. 3. During the fiscal year ended October 31, 2003, the Fund did not utilize any capital loss carryforward. 4. Includes $260,660 of capital loss carryforwards acquired in the September 4, 2003 merger of Oppenheimer Select Managers Gartmore Millennium Growth Fund II.

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.

INCREASE TO REDUCTION TO ACCUMULATED NET REDUCTION TO ACCUMULATED NET REALIZED LOSS PAID-IN CAPITAL INVESTMENT LOSS ON INVESTMENTS -------------------------------------------------------------- $12,833,820 $12,869,980 $36,160

No distributions were paid during the years ended October 31, 2004 and October 31, 2003.

        The aggregate cost of securities and other investments and the composition of unrealized appreciation and depreciation of securities and other investments for federal income tax purposes as of October 31, 2004 are noted below. The primary difference between

34 | OPPENHEIMER MIDCAP FUND

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 $ 823,812,570 ============= Gross unrealized appreciation $ 181,681,734 Gross unrealized depreciation (34,711,961) ------------- Net unrealized appreciation $ 146,969,773 ============= --------------------------------------------------------------------------------

TRUSTEES COMPENSATION. The Fund has adopted an unfunded retirement plan for the Funds independent trustees. Benefits are based on years of service and fees paid to each trustee during the years of service. During the year ended October 31, 2004, the Funds projected benefit obligations were increased by $15,651 and payments of $3,871 were made to retired trustees, resulting in an accumulated liability of $158,276 as of October 31, 2004.

        The Board of Trustees has adopted a deferred compensation plan for independent trustees that enables trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Fund. For purposes of determining the amount owed to the Trustee under the plan, deferred amounts are treated as though equal dollar amounts had been invested in shares of the Fund or in other Oppenheimer funds selected by the Trustee. The Fund purchases shares of the funds selected for deferral by the Trustee in amounts equal to his or her deemed investment, resulting in a Fund asset equal to the deferred compensation liability. Such assets are included as a component of Other within the asset section of the Statement of Assets and Liabilities. Deferral of trustees fees under the plan will not affect the net assets of the Fund, and will not materially affect the Funds 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.

35 | OPPENHEIMER MIDCAP FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Continued 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 BENEFICIAL INTEREST

The Fund has authorized an unlimited number of no par value shares of beneficial interest of each class. Transactions in shares of beneficial interest were as follows:


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

CLASS A
Sold                       12,246,136    $ 177,432,418     8,268,487    $ 100,143,126
Acquisition-Note 6                 --               --       317,478        4,460,569
Redeemed                   (9,541,964)    (136,331,292)   (8,568,434)    (101,677,126)
                           -----------------------------------------------------------
Net increase                2,704,172    $  41,101,126        17,531    $   2,926,569
                           ===========================================================

--------------------------------------------------------------------------------------
CLASS B
Sold                        3,400,008    $  46,414,529     4,126,736    $  48,252,675
Acquisition-Note 6                 --               --        38,399          517,234
Redeemed                   (6,061,337)     (82,723,844)   (6,086,687)     (69,345,725)
                           -----------------------------------------------------------
Net decrease               (2,661,329)   $ (36,309,315)   (1,921,552)   $ (20,575,816)
                           ===========================================================

--------------------------------------------------------------------------------------
CLASS C
Sold                        2,068,251    $  28,190,122     2,083,749    $  24,228,356
Acquisition-Note 6                 --               --        33,708          453,714
Redeemed                   (2,092,647)     (28,412,505)   (1,956,908)     (22,260,768)
                           -----------------------------------------------------------
Net increase (decrease)       (24,396)   $    (222,383)      160,549    $   2,421,302
                           ===========================================================

--------------------------------------------------------------------------------------
CLASS N
Sold                          849,973    $  12,080,873       680,615    $   8,317,381
Acquisition-Note 6                 --               --        11,483          160,308
Redeemed                     (538,064)      (7,587,508)     (271,906)      (3,340,257)
                           -----------------------------------------------------------
Net increase                  311,909    $   4,493,365       420,192    $   5,137,432
                           ===========================================================

--------------------------------------------------------------------------------------
CLASS Y
Sold                          908,690    $  13,499,650       896,395    $  11,097,195
Acquisition-Note 6                 --               --            52              743
Redeemed                     (571,650)      (8,278,618)     (333,575)      (4,296,208)
                           -----------------------------------------------------------
Net increase                  337,040    $   5,221,032       562,872    $   6,801,730
                           ===========================================================

36 | OPPENHEIMER MIDCAP FUND -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES

The aggregate cost of purchases and proceeds from sales of securities, other than short-term obligations, for the year ended October 31, 2004, were $1,042,594,551 and $1,040,932,136, 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 which provides for a fee at an annual rate of 0.75% of the first $200 million of average annual net assets of the Fund, 0.72% of the next $200 million, 0.69% of the next $200 million, 0.66% of the next $200 million, 0.60% of the next $700 million, 0.58% of the next $1 billion, and 0.56% of average annual net assets in excess of $2.5 billion.

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

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 $3,161,855 to OFS for services to the Fund.

        Additionally, Class Y shares are subject to minimum fees of $10,000 for assets of $10 million or more. The Class Y shares are subject to the minimum fees in the event that the per account fee does not equal or exceed the applicable minimum fees. OFS may voluntarily waive the minimum fees.

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

SERVICE PLAN FOR CLASS A SHARES. The Fund has adopted a Service Plan for Class A shares. It reimburses the Distributor for a portion of its costs incurred for services provided to accounts that hold Class A shares. Reimbursement is made quarterly at an annual rate of up to 0.25% of the average annual net assets of Class A shares of the Fund. The Distributor currently uses all of those fees to pay dealers, brokers, banks and other financial institutions quarterly for providing personal services and maintenance of accounts of their customers that hold Class A shares. Any unreimbursed expenses the Distributor incurs with respect to Class A shares in any fiscal year cannot be recovered in subsequent years. Fees incurred by the Fund under the Plan are detailed in the Statement of Operations.

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

DISTRIBUTION AND SERVICE PLANS FOR CLASS B, CLASS C AND CLASS N SHARES. The Fund has adopted Distribution and Service Plans for Class B, Class C and Class N shares to compensate the Distributor for its services in connection with the distribution of those shares and servicing accounts. Under the plans, the Fund pays the Distributor an annual asset-based sales charge of 0.75% per year on Class B and Class C shares and 0.25% per year

37 | OPPENHEIMER MIDCAP FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Continued

on Class N shares. The Distributor also receives a service fee of up to 0.25% per year under each plan. If either the Class B, Class C or Class N plan is terminated by the Fund or by the shareholders of a class, the Board of Trustees and its independent trustees must determine whether the Distributor shall be entitled to payment from the Fund of all or a portion of the service fee and/or asset-based sales charge in respect to shares sold prior to the effective date of such termination. The Distributors aggregate uncompensated expenses under the plan at October 31, 2004 for Class B, Class C and Class N shares were $16,926,277, $3,719,875 and $376,075, 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            $438,751          $15,043       $767,386        $18,618        $12,823

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

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 Funds Manager terminated that practice in July 2003. Subsequently, the Manager paid the Fund $36,160, 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 $404,191, $586,665, $172,572 and $43,674 for Class A, Class B, Class C and Class N shares, respectively. This undertaking may be amended or withdrawn at any time.

-------------------------------------------------------------------------------- 5. ILLIQUID OR RESTRICTED SECURITIES

As of October 31, 2004, investments in securities included issues that are illiquid or restricted. Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and are valued under methods approved by the Board of Trustees as reflecting fair value. A security may also be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. The Fund will not invest more than 15% of its net assets (determined at the time of purchase and reviewed periodically) in

38 | OPPENHEIMER MIDCAP FUND

illiquid or restricted securities. Certain restricted securities, eligible for resale to qualified institutional investors, are not subject to that limitation. The aggregate value of illiquid or restricted securities subject to this limitation as of October 31, 2004 was $518,607, which represents 0.05% of the Funds net assets, all of which are considered restricted. Information concerning restricted securities is as follows:


                                                                              VALUATION
                                           ACQUISITION                            AS OF        UNREALIZED
SECURITY                                         DATES             COST   OCT. 31, 2004      DEPRECIATION
---------------------------------------------------------------------------------------------------------
STOCKS AND/OR WARRANTS

Axsun Technologies, Inc., Cv., Series C       12/13/00      $ 8,999,997        $252,802        $8,747,195
Centerpoint Broadband Technologies, Inc.,
Cv., Series D                                 10/23/00        5,999,997              --         5,999,997
ITF Optical Technologies, Inc.                  4/7/00        5,000,000         265,805         4,734,195

-------------------------------------------------------------------------------- 6. ACQUISITION OF OPPENHEIMER SELECT MANAGERS GARTMORE MILLENNIUM GROWTH FUND II

On September 4, 2003, the Fund acquired all of the net assets of Oppenheimer Select Managers Gartmore Millennium Growth Fund II, pursuant to an Agreement and Plan of Reorganization approved by the Oppenheimer Select Managers Gartmore Millennium Growth Fund II shareholders on August 29, 2003. The Fund issued (at an exchange ratio of 0.525672 for Class A, 0.537854 for Class B, 0.538216 for Class C, 0.524906 for Class N and 0.515156 for Class Y of the Fund to one share of Oppenheimer MidCap Fund 317,478; 38,399; 33,708; 11,483 and 52 shares of beneficial interest for Class A, Class B, Class C, Class N and Class Y, respectively, valued at $4,460,569, $517,234, $453,714, $160,308 and $743 in exchange for the net assets, resulting in combined Class A net assets of 430,352,457, Class B net assets of $328,027,097, Class C net assets of $102,832,057, Class N net assets of $15,671,309 and Class Y net assets of $16,967,112 on September 4, 2003. The net assets acquired included net unrealized appreciation of $858,837 and an unused capital loss carryforward of $1,913,251, potential utilization subject to tax limitations. The exchange qualified as a tax-free reorganization for federal income tax purposes.

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

39 | OPPENHEIMER MIDCAP FUND NOTES TO FINANCIAL STATEMENTS Continued -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 7. LITIGATION Continued

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.

40 | OPPENHEIMER MIDCAP FUND



                                            A-1
                                         Appendix A

                                  Industry Classifications

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






B-14


                                         Appendix B

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

In certain cases, the initial sales charge that applies to purchases of Class A shares1 of
the Oppenheimer funds or the contingent deferred sales charge that may apply to Class A,
Class B or Class C shares may be waived.2  That is because of the economies of sales
efforts realized by OppenheimerFunds Distributor, Inc., (referred to in this document as
the "Distributor"), or by dealers or other financial institutions that offer those shares
to certain classes of investors.

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

For the purposes of some of the waivers described below and in the Prospectus and Statement
of Additional Information of the applicable Oppenheimer funds, the term "Retirement Plan"
refers to the following types of plans:
         1) plans qualified under Sections 401(a) or 401(k) of the Internal Revenue Code,
         2) non-qualified deferred compensation plans,
         3) employee benefit plans3
         4) Group Retirement Plans4
         5) 403(b)(7) custodial plan accounts
         6) Individual Retirement Accounts ("IRAs"), including traditional IRAs, Roth IRAs,
            SEP-IRAs, SARSEPs or SIMPLE plans

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

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








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

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

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








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

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

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

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

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

      Shares purchased 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.2
         5) Under a Qualified Domestic Relations Order, as defined in the Internal Revenue
            Code, or, in the case of an IRA, a divorce or separation agreement described in
            Section 71(b) of the Internal Revenue Code.
         6) To meet the minimum distribution requirements of the Internal Revenue Code.
         7) To make "substantially equal periodic payments" as described in Section 72(t)
            of the Internal Revenue Code.
         8) For loans to participants or beneficiaries.
         9) Separation from service.3
         10)      Participant-directed redemptions to purchase shares of a mutual fund
            (other than a fund managed by the Manager or a subsidiary of the Manager) if
            the plan has made special arrangements with the Distributor.
         11)      Plan termination or "in-service distributions," if the redemption
            proceeds are rolled over directly to an OppenheimerFunds-sponsored IRA.
      For distributions from 401(k) plans sponsored by broker-dealers that have entered
         into a special agreement with the Distributor allowing this waiver.
      For distributions from retirement plans that have $10 million or more in plan assets
         and that have entered into a special agreement with the Distributor.
      For distributions from retirement plans which are part of a retirement plan product
         or platform offered by certain banks, broker-dealers, financial advisors,
         insurance companies or record keepers which have entered into a special agreement
         with the Distributor.

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

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

A. Waivers for Redemptions in Certain Cases.

The Class B, Class C and Class N contingent deferred sales charges will be waived for
redemptions of shares in the following cases:
      Shares redeemed involuntarily, as described in "Shareholder Account Rules and
         Policies," in the applicable Prospectus.
      Redemptions from accounts other than Retirement Plans following the death or
         disability of the last surviving shareholder. The death or disability must have
         occurred after the account was established, and for disability you must provide
         evidence of a determination of disability by the Social Security Administration.
      The contingent deferred sales charges are generally not waived following the death or
         disability of a grantor or trustee for a trust account. The contingent deferred
         sales charges will only be waived in the limited case of the death of the trustee
         of a grantor trust or revocable living trust for which the trustee is also the
         sole beneficiary. The death or disability must have occurred after the account was
         established, and for disability you must provide evidence of a determination of
         disability by the Social Security Administration.
      Distributions from accounts for which the broker-dealer of record has entered into a
         special agreement with the Distributor allowing this waiver.
      Redemptions of Class B shares held by Retirement Plans whose records are maintained
         on a daily valuation basis by Merrill Lynch or an independent record keeper under
         a contract with Merrill Lynch.
      Redemptions of Class C shares of Oppenheimer U.S. Government Trust from accounts of
         clients of financial institutions that have entered into a special arrangement
         with the Distributor for this purpose.
      Redemptions 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.
      Distributions4 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.5
         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.6
         9) On account of the participant's separation from service.7
         10)      Participant-directed redemptions to purchase shares of a mutual fund
            (other than a fund managed by the Manager or a subsidiary of the Manager)
            offered as an investment option in a Retirement Plan if the plan has made
            special arrangements with the Distributor.
         11)      Distributions made on account of a plan termination or "in-service"
            distributions, if the redemption proceeds are rolled over directly to an
            OppenheimerFunds-sponsored IRA.
         12)      For distributions from a participant's account under an Automatic
            Withdrawal Plan after the participant reaches age 59 1/2, as long as the aggregate
            value of the distributions does not exceed 10% of the account's value, adjusted
            annually.
         13)      Redemptions of Class B shares under an Automatic Withdrawal Plan for an
            account other than a Retirement Plan, if the aggregate value of the redeemed
            shares does not exceed 10% of the account's value, adjusted annually.
         14)      For distributions from 401(k) plans sponsored by broker-dealers that have
            entered into a special arrangement with the Distributor allowing this waiver.
      Redemptions of Class B shares or Class C shares under an Automatic Withdrawal Plan
         from an account other than a Retirement Plan if the aggregate value of the
         redeemed shares does not exceed 10% of the account's value annually.

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

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








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

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

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

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

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

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







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

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

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

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

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

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

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

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

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

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

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

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

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

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







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

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

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

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

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

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

Shareholders of Oppenheimer 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%.

 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.



      Sales Charge Waivers Brochure -070604






Oppenheimer MidCap Fund

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

Investment Advisor
     OppenheimerFunds, Inc.
     Two World Financial Center
     225 Liberty Street, 11th Floor
     New York, New York 12081-1008

Distributor
     OppenheimerFunds Distributor, Inc.
     Two World Financial Center
     225 Liberty Street, 11th Floor
     New York, New York 12081-1008

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
     1675 Broadway
     New York, New York 10019

PX745.001.0205


--------


1 In accordance with Rule 12b-1 of the Investment Company Act, the term "Independent
Trustees/Director" in this Statement of Additional Information refers to those Trustees who
are not "interested persons" of the Fund and who do not have any direct or indirect
financial interest in the operation of the distribution plan or any agreement under the
plan.
2 This provision does not apply to IRAs.
3 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..
4 The distribution must be requested prior to Plan termination or the elimination of the
Oppenheimer funds as an investment option under the Plan.
5 This provision does not apply to IRAs.
6 This provision does not apply to loans from 403(b)(7) custodial plans and loans from the
OppenheimerFunds-sponsored Single K retirement plan.
7 This provision does not apply to 403(b)(7) custodial plans if the participant is less
than age 55, nor to IRAs.